Aug. 13--LEWISTON -- The city will take a deal offered by two federal agencies to pay penalties for fraudulent loans in 2007 and 2008 to Lewiston developer Travis Soule.
"I think this will allow us to bring the situation to a conclusion," City Administrator Ed Barrett said. "We've changed our process so it does not happen again, and we are much more careful. We've improved overall monitoring of our federal grant programs through some organizational changes."
City councilors voted 7-0 to accept both settlement offers Tuesday.
According to the agreement, the city will pay $140,000 in reimbursements to the Housing and Urban Development Department's HOME program and $40,000 to the Department of Justice.
The HUD claim will be paid by reducing the city's HOME grant by $46,000 per year for three years. The city gets about $175,000 each year to promote building and renovating affordable housing.
Barrett said the Department of Justice could seek up to three times the amount of money the city loaned to Soule -- about $540,000 in penalties to the city. Instead, it offered a $40,000 penalty.
"From a risk analysis point-of-view, we could allow the Department of Justice to take civil action against us," Barrett said. "We'd be risking the potential for a much higher eventual judgment against the city."
The city agreed in 2007 to loan Soule $200,000 in HOME funds to his company, Pine Properties LLC, to help him renovate three Pine Street apartment buildings.
According the agreement, Soule was supposed to submit contractor invoices for the work after it was finished. The city issued Soule $180,000 in two-party checks -- requiring signatures from both Soule and his contractor before the checks could be cashed -- but never inspected the properties.
The city learned in 2008 that much of the work Soule had submitted claims for had not been completed. The developer was accused of forging the contractors' signatures and he pleaded guilty to charges of fraud and embezzlement in federal court in 2011.
"The city itself was the victim in this case," Barrett said. "The funds were embezzled or misused from the city's grants and should have been used for rehabilitating housing."
No charges have been filed against any city employees in the matter.
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