Some time during the 1990s, the Department of Housing and Urban Development decided to debar a client of mine and the property management company that he owned. My client, whom I will refer to as Ben (because that was his name), if debarred, would be prohibited from engaging in any business activities with any branch of the federal government for a period of three years.

Ben was then in his late fifties, lived in suburban DC, and served as the general partner of six or seven limited partnerships, each of which owned a multifamily housing property, all but one or two receiving HUD subsidies under the Section 8 program so that they could house lower income families. The majority of the properties were in Virginia, several in cities located just off I-81. All of the properties were fully tenanted, kept in excellent condition, scoring high on all HUD inspections.

But Ben did have a problem. You know what a hale fellow, well met is? Well, Ben was not one of those. He was stubborn, rarely respectful, and often belligerent. He was just the type of guy whose income should not depend on interactions with the federal government. There was no way that he was going to obey a HUD bureaucrat just because their job was to regulate his activities. If you asked representatives of HUD’s Richmond VA area office, or the HUD Philadelphia Regional Office (which had oversight over Richmond) what they thought of Ben, they would probably tell you that he was one of the most difficult and unpleasant owner or manager of HUD-assisted properties that they had to deal with, and that they did not like him at all, in spite of the fact that he ran such good properties.

I think that several HUD officials were out to get Ben. They were just looking for a way to do it. One day, in reviewing the annual financial reports of his properties, they thought that they might have found it. Each of the properties was owned by a separate limited partnership, with Ben the sole general partner of each. The limited partners were individual investors, who provided the majority of the equity required for the development of the property. In return, they received general tax write-offs under various provisions of the Internal Revenue Code designed to encourage necessary investment in properties, whose values were kept low by virtue of the restrictions placed on the properties by the government. These tax benefits were so lucrative, that the investors really didn’t mind foregoing significant cash distributions and, in fact, under HUD regulations, annual distributions were very limited.

Most general partners did, however, distribute these limited funds to their investor limited partners, but Ben (sometimes to the consternation of the limited partners) never did. He kept the amount of otherwise distributable cash in a special account which he termed a “rainy day account”, an emergency amount of funds ready to be expended if necessary, but only if necessary. Over a period of time (the buildings were probably then at least 20 years old), these accounts grew to large amounts.

The existence of these accounts on the projects’ financial reports confused and therefore worried HUD. Something must be wrong for this amount of money to be held by the properties. As was often the case with HUD staff, they refused to listen to the obvious explanation, especially since the general partner was Ben, a man they believed to be inherently evil.

They were simply blinded by their dislike and their determination to find something that Ben did wrong that they needed to press further. Although obviously I was not involved in their internal discussions, I believe that their inability to find for themselves the source of these rainy day funds led them to believe that, in a debarment proceeding, the illegal sources would be found. And they would be able to get Ben out of their hair.

As you might imagine, Ben was the wrong person for HUD to pick on. He was determined to to fight tooth and nail. And, he had a special advantage. In his partnership agreements, there was a provision that said he could use partnership funds to defend himself for any costs that he incurred as a result of his partnership activities.

Do you get where I am going? Ben had the rainy day funds, a very large amount of money when you added them together and, because they were made up of cash eligible under HUD rules for distribution, they were beyond HUD’s power to regulate. He was therefore able to mount a total defense without spending a penny of his own money.

He hired me and one other attorney (someone who had worked for him for years and years) as his two man defense team and gave us carte blanche. I bet no HUD debarment case ever had so much pre-hearing discovery. We had document discovery and we had deposition after deposition, some held in DC, some in Richmond, some in Philadelphia. Throughout all of this, it was clear not only that HUD had no case, but that some of the HUD personnel were so blinded by their loathing of Ben, that they did not even realize that they had no case.

But we were dealing with a HUD administrative judge, and debarment cases can be notoriously hard to defend against. So we could not let our guard down.

If I remember correctly, we had about two weeks of hearings, with sworn witnesses testifying. Only more lax rules of evidence made it any different from a judicial trial. At the end of the hearing, we waited for our decision. And waited, and waited.

Finally, and I don’t remember how many weeks later, the decision came. Ben was not debarred, and the administrative judge and his staff took the trouble to write a 90+ page opinion, raking HUD over the coals, criticizing them for every aspect of their treatment of Ben. The judge, who was HUD’s chief administrative law judge, even suggested that a charge of prosecutorial misconduct by HUD officials would be far from a frivolous one.

This case went on for more than a year, and it was by far the most time consuming of anything I was doing. Ben and I got along and he was a great client (by that I mean he always paid his bills on time), although when the rainy day funds were running out, he was clear to advise me that payment of my bills might not be so forthcoming. That didn’t surprise me. Ben was Ben, after all. But it was this case, more than anything else, that put my daughters through college.

Of course, the limited partners felt that Ben was being debarred by HUD only because he was such a continual jerk and that they shouldn’t have to pay his defense fees out of the rainy day funds which would otherwise one day belong to them. As soon as we were finished with the HUD litigation, we were served with more papers, this time for arbitration hearings. The limited partners were looking for a determination that Ben would have to pay back to them an amount equal to the rainy day funds that he had used for legal fees. This didn’t really worry me that much, because the limited partners, who had never complained that they hadn’t gotten any cash year to years, and who were operating under very clear partnership agreement terms, didn’t really have a case. I frankly (and yes this does surprise me) don’t remember exactly how these proceedings ended, although I know we prevailed over the limited partners. And I know I got paid for handling this case as well, which must mean that there were still sufficient rainy day funds held by the partnerships to pay me.

Ben and I stayed in contact only for a while after all of this excitement abated. He sold his management company, his wife died a difficult death, and he moved to Florida. He passed away some years ago. As far as I know, he had not maintained regular contact with anyone from his life in Washington.

But the HUD officials who were involved in this, many of whom I know? They remember it all.

The moral of the story? If you have the law and facts on your side, and unlimited money, you will do okay.