County audit: Homestead nonprofit misused funds
03/12/2013 5:37 PM
03/14/2013 11:36 AM
Miami-Dade budget officials have given a Homestead nonprofit organization a Friday deadline to submit a plan to meet its financial obligations, after a county Inspector General’s Office audit found mismanagement of grant funds.
Homestead-based Galata provided free transportation, affordable housing and social services, mostly to the Haitian migrant community in South Miami-Dade. The city of Homestead and the county has given several grants to Galata, including $500,000 in 2008 to pay down the mortgage on a warehouse to be used for an “intergenerational recreational community center.”
But Miami-Dade Inspector General Christopher Mazzella found in a Jan. 8 report that Galata used the money for impermissible purposes and misled the county about its financial condition. Joseph “Billy” G. Louis, who founded Galata nearly 13 years ago, did not return phone calls from The Miami Herald.
The center at 916 N. Flagler Ave. is “partially open but it is not providing services,” Galata’s project manager Luis Dilan said last week.
Neighbors said Galata’s cream colored building with a green awning has been mostly empty for the last few months. An apologetic sign at the door said the hours of operation were from 9 a.m. to noon. Galata’s phone was disconnected.
To the rear of the property, behind a fence, were two cars without license plates – a black Saturn and an orange Mercedes-Benz C230 Kompressor. Galata’s fleet — a white van and three shuttles labeled “Senior Center Social Services” with county logos — sat idle in the parking lot Tuesday.
Here’s what went wrong according to Mazzella’s report:
In 2006, Galata purchased the 5,500-square-foot warehouse from Zeelandia Music for about $590,000 and obtained a $442,230 mortgage from 1st National Bank of South Florida.
A year after the warehouse purchase, Galata had a $531,000 mortgage from Community Development Transportation Lending Services and a $30,000 balloon mortgage from Florida Community Loan Fund.
Mazzella said that while seeking county funds in 2007, Galata misled the county by claiming to have no legal liabilities when it actually had three outstanding mortgages on the warehouse.
Less than two months after depositing the county check in 2008, Galata refinanced the property with Regions Bank for $355,000 to pay off the other two mortgages.
Louis used about $330,000 to reduce the mortgage’s principal, and about $70,000 for attorney’s fees, interest, late charges and penalties.
He later told officials he used what was left of the grant for operating expenses including to pay off about $89,000 in Internal Revenue Service payroll tax liens that had accumulated from 2005 to 2007. A county grant coordinator determined this was an impermissible use of county funds.
During an 18-month period, Galata had five different mortgages on the property. As of June 2012, the mortgage balance on Galata’s property was about $319,000.
Court records show that Louis filed for bankruptcy in 2008. Galata paid Louis about $69,000 in 2008 and about $49,000 in 2009 and 2010, according to Galata’s tax returns.
In a July 24, 2009, letter to a county official, Louis said renovations to the warehouse would cost $600,000, and so far he had $255,000 in government funding.
The county funding “has not only afforded Galata the ability to more than double the amount of clients served on a daily basis,” Louis said. “But has opened the door for us to receive additional funds for the renovations of our building.”
Officials visited the property in December, and the renovations had not been completed. And the audit report said the center’s mortgage will be due June 2nd.
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