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Five Rivers barred from using HUD fund

Five Rivers Community Development Corp. no longer has access to $377,100 in federal grant money while the U.S. Department of Housing and Urban Development investigates the Georgetown nonprofit agency's finances.

Meanwhile, Five Rivers Executive Director Beulah White has sold at least two of the agency's four lots in the Lincolnshire subdivision. Those lots were supposed to be used for an affordable housing program.

Sam Livingston, who resigned last week as president of Five Rivers' board of directors, said he thinks White is selling the land to raise money.

The frozen HUD grant combined with little income from other sources, few assets and the resignation last week of three board members calls into question the viability of Five Rivers, which was formed in 1995 to serve Georgetown County's low- to moderate-income residents.

HUD froze the grant on Aug. 26 when it learned about questionable financial and management practices at Five Rivers from a series of reports in The Sun News.

"Their line of credit has been suspended and will remain as such until we clear up these other issues," HUD spokesman Brian Sullivan said Friday.

HUD has given Five Rivers until Oct. 29 to explain how it spent $617,000 of a $994,100 grant the nonprofit received in 2004. The money was supposed to be spent on construction of a community center, but no construction has taken place.

White has not responded to repeated telephone calls and e-mails from The Sun News in recent weeks and could not be reached for comment.

It is not clear how much money Five Rivers made from selling the Lincolnshire property because a deed to the new owner has not been filed with Georgetown County's register of deeds.

Wayne Hardee, an agent with Georgetown Realty, said he represents the owner who bought the land from Five Rivers. Hardee would not identify the new owner, who already is reselling the property through Georgetown Realty.

The new owner has reduced the per-lot sale price to $14,900 from $17,900 since Georgetown Realty listed the property on Oct. 13.

Each of the four lots has an assessed value of $8,000, according to Georgetown County property records.

Hardee would not say how many lots were sold, except that Five Rivers sold "more than one" and there are multiple lots available for resale.

First Federal bank donated the Lincolnshire land to Five Rivers about five years ago so the agency could build affordable housing for its clients. Five Rivers never built homes on the property.

Livingston and two other board members - Treasurer David Hamilton and Darren Holmes - resigned from the agency last week. It is not clear if Marjorie Hemingway, the fourth board member, has resigned. Hemingway did not respond to several telephone calls from The Sun News last week.

The board members resigned after their investigation showed White and her daughter, Dayo Smith, the agency's chief financial officer, spent money and sold the agency's assets without board approval, Livingston said.

The board's investigation and a subsequent criminal investigation by 15th Circuit Solicitor Greg Hembree were prompted by The Sun News' reports.

Five Rivers' former board members gave Hembree their findings last week and said they will cooperate in the criminal investigation.

Missing a board

Last week's resignations leave Five Rivers without a board of directors, which violates the state's Nonprofit Corporations Act and could give state regulators a reason to shut down the agency, according to Columbia lawyer and nonprofit expert Jeanne Born.

"If they are operating without a board, then the attorney general's office could file an action in circuit court seeking a judicial dissolution of the nonprofit agency," Born said.

Operating without a board of directors also violates Five Rivers' bylaws, which require at least five board members. Five Rivers had been operating with four board members since May.

Mark Plowden, spokesman for the S.C. Attorney General's office, said that agency probably would not get involved in legal action involving Five Rivers unless Hembree requests help with his investigation.

The S.C. Secretary of State's office is conducting an administrative investigation of Five Rivers' finances and might turn its findings over to the Internal Revenue Service for further investigation, Secretary of State Mark Hammond has said.

Melissa Dunlap, spokeswoman for the S.C. Secretary of State's office, said Friday the agency is waiting for Five Rivers to provide financial information before taking further action. Five Rivers has until Nov. 15 to send that information to the state and file its 2005 federal tax return.

Livingston said last week he doubts Five Rivers will be able to survive because of financial mismanagement.

"I don't know too many agencies that would want to do business with them in light of what has taken place," Livingston said.

The U.S. Department of Agriculture is holding up a $50,000 grant that Five Rivers initially qualified for in June because the nonprofit has not provided enough information about how the money would be used, according to USDA spokesman William Furman.

Five Rivers has no other pending grants, according to the nonprofit and announcements from state and federal agencies.

Little income, high costs

Aside from the Lincolnshire property, Five Rivers' assets include: a 2000 Ford Econoline van with an assessed valued of $12,200, according to county records; office equipment and furniture; and three acres of land on S.C. 521 where the community center was supposed to have been built.

Five Rivers owes $28,000 on the S.C. 521 property, which it purchased for $45,000 in 2003.

Five Rivers also leases a 2003 Volvo automobile, which White uses full time for personal and business reasons. The agency also leases its office space on Front Street in Georgetown.

Five Rivers' financial records show the agency's operating costs are about $30,000 per month. Most of that money has gone toward salaries, travel and other benefits for White and Smith.

Before the HUD grant was frozen, White and Smith had been withdrawing an average of $30,000 per month from the account, federal records show.

Aside from that money, Five Rivers had income of just $5,818.65 through the first six months of this year, according to the agency's financial reports. Expenses such as salaries and travel totaled $187,453.88 for the six-month period, according to the reports.

HUD also wants Five Rivers to document how it spent a $357,660 grant the agency received in 2003.

That grant was supposed to be used to provide affordable housing, jobs and economic development opportunities for Georgetown County's low- to moderate-income residents.

Five Rivers spent all of the money in one year, according to HUD records.

Documents show more than half of the 2003 grant - $180,500 - went toward salaries for White, Smith and other Five Rivers employees. Another $75,000 was spent on employee benefits, insurance, training and office costs.

The salaries paid to White and Smith were supposed to have been reduced by 50 percent last month following an order from the agency's board of directors. It is not clear if White and Smith complied with that order and cut their own pay.

The salaries paid to White and Smith have been one focus of the secretary of state's investigation because the IRS forbids excessive compensation packages for directors of nonprofits.

White, who helped found Five Rivers and has served as its only executive director, received a 91 percent salary increase from $43,500 to $83,039 between 2000 and 2004, the most recent year for which data is available.

Smith's salary, which is approved by her mother, has increased 87.5 percent since she joined the agency - from $26,000 in 2000 to $48,755 this year.

It is not clear whether White and Smith will start paying themselves their full salaries again now that the board members have resigned.

On the Net

To read the Investigating Five Rivers series, visit

What it does | The nonprofit agency is supposed to provide job training and affordable housing for Georgetown County's low- to moderate-income residents. The agency's current programs include a seven-day class about starting a business, which is taught four times a year; a four-day class about buying a home, which is taught twice a year; one-day credit counseling sessions offered three times a year; and a $50,000 revolving loan account for small-business owners.

Salaries | Beulah White, who helped found Five Rivers in September 1995, received a 91 percent salary increase - from $43,500 to $83,039 - between 2000 and 2004, the most recent data available.

Dayo Smith, White's daughter and the agency's chief financial officer, has had salary increases of 87.5 percent since she joined the agency in 2000 - from $26,000 to $48,755 this year.

Travel | White, Smith and other Five Rivers employees have spent $102,496 on travel since 1996, including $70,937 in travel-related expenses between 2001 and 2004. For many of those trips, there is no documentation showing how the travel related to the nonprofit's purpose.

Other expenses | White and Smith receive health insurance paid by Five Rivers and White is allowed full-time use of the agency's Volvo automobile.

Lack of oversight | White and Smith regularly write checks to each other from Five Rivers' bank account, with no apparent independent oversight. White and Smith also approve each other's expense reimbursements.