The bank that gave Five Rivers Community Development Corp. money to buy land for a proposed community center is foreclosing on the property because the defunct nonprofit agency isn't making the mortgage payments.
BB&T filed a lawsuit last week in Georgetown County to foreclose on 3.03 acres of land Five Rivers bought in August 2003 near the intersection of U.S. 521 and U.S. 17 Alternate, commonly known as Nine Mile Curve.
Five Rivers had said it wanted to build a community center for low-income residents on the land, but the center was never built.
Five Rivers went out of business Nov. 10 after a series of reports in The Sun News detailed questionable financial and management practices at the agency, including the misappropriation of public money that had been set aside for the community center.
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Beulah White, the agency's executive director, and Dayo Smith, the agency's chief financial officer, could not be reached for comment.
In addition to the foreclosure, Five Rivers continues to ignore the federal government's demand that it repay $418,180 in grants the agency's executives misappropriated, according to Brian Sullivan, a spokesman for the U.S. Department of Housing and Urban Development.
Five Rivers was supposed to repay the money by Dec. 31. Sullivan said HUD, which administered the grants, has turned the case over to its inspector general, which handles criminal investigations.
Meanwhile, White has paid off two mortgages since mid-January totaling $142,400 for her personal residence in the Belle Isle Forest subdivision in Georgetown.
White paid off a $97,400 mortgage Jan. 16, according to Georgetown County property records. White paid off a $45,000 second mortgage on Jan. 25.
There had been no additional mortgages filed against the property as of Wednesday, giving White clear title to the home.
White had put her home up for sale in September but took it off the market a month later, according to the Coastal Carolinas Association of Realtors' Multiple Listing Service.
White had an asking price of $239,500 for her home, according to the MLS.
Smith, who is White's daughter, has moved to suburban Atlanta, according to a public records database and telephone records that show Smith has a nonpublished number for a residence in Buford, Ga.
Georgetown County property records show Smith refinanced her home in The Arbors subdivision twice between June 23 and Nov. 8, getting payments totaling $124,000 before moving to Buford.
Smith bought the Georgetown home for $190,000 in May 2005 and now has mortgages totaling $314,000.
The Georgetown home still is in Smith's name, although Smith told Five Rivers' board of directors in an Oct. 16 letter that she and her husband were planning to divorce.
Also in that letter, Smith told board members that Five Rivers had no assets and no money to pay its debts, including its mortgage on the Nine Mile Curve land.
Five Rivers borrowed $30,000 to buy the land, and court records show the agency still owes $28,199.48 on its mortgage with BB&T.
Richard Smith, a lawyer representing BB&T, said Five Rivers had offered to sign the land back over to the bank but BB&T chose to foreclose on the land to make sure there were no future questions about the property's title.
The S.C. Nonprofit Corporations Act says nonprofit agencies must get board approval before disposing of assets. Five Rivers' board members resigned Oct. 19, before White offered to give the land back to the bank.
"They didn't have the number of directors they needed for approval, and we didn't feel comfortable with that," Richard Smith said. "We didn't want a possible cloud on the title."
The foreclosure is the latest legal problem for White and Dayo Smith.
Each woman could face up to five years in prison and $250,000 fines if they are convicted of fraudulently using the HUD grant money. Each woman also could face civil fines of up to $10,000 and restitution of three times the amount of money the government says it lost.
The state's 15th Judicial Circuit Solicitor's office also is conducting a criminal investigation of Five Rivers' executives to see whether other public money was misspent. That investigation is still in the early stages.
The $418,180 that Five Rivers must repay was supposed to be used for construction of a community center, but HUD says White and Smith spent the money on salaries, travel and other management and operating expenses.
The money is part of a $994,100 grant Five Rivers received in 2004 for construction of the community center.
Five Rivers had spent $617,000 of that grant by Aug. 26, when HUD officials froze the nonprofit's access to the money after reading reports about Five Rivers in The Sun News.
Only 20 percent of the $994,100 grant - or $198,820 - was supposed to be spent on planning, management and operating expenses, according to terms of the grant. HUD's review found that Five Rivers spent all of the $617,000 on planning, management and operating expenses.
HUD sent a letter to Five Rivers on Nov. 30 telling the nonprofit to repay all of the money in excess of the 20 percent allowed for management expenses.
That amount - $418,180 - was due by the end of December.
Five Rivers did not repay the money or communicate with HUD about repayment, Sullivan said.
The Sun News' reports that prompted HUD's investigation showed a pattern of questionable spending practices at Five Rivers including executive salaries that far exceed the state average, annual pay raises of as much as 29.5 percent for White and 40.8 percent for Smith, regular use of the agency's Volvo for personal reasons and expense reimbursements for travel that appears unrelated to the nonprofit's stated purpose of providing job training and affordable homes.
Dayo Smith has moved to suburban Atlanta, according to a public records database and telephone records that show she has a nonpublished number for a residence in Buford, Ga.