A raffle intended to raise $1 million on behalf of a tax-exempt housing group in Baltimore has been canceled by its organizers amid an investigation by the city state's attorney's office.
Jonathan Seamon, a lawyer for the Center For Affordable Housing, of the 500 block of Cathedral St., acknowledged last week that Assistant State's Attorney Gary Honick has requested a meeting with Charles Jeffries, executive director of the housing center, to discuss possible irregularities in the conduct of the raffle and other activities of the group.
Mr. Honick, a prosecutor in the office's economic crimes unit, refused to comment on the investigation. "It's the policy of this office not to comment about any investigations or inquiries made," he said.
Mr. Jeffries denied any wrongdoing. "The investigation is unfounded, and the center has done nothing wrong," he said.
He said yesterday that refunds for the raffle tickets have been mailed to 500 people and that the rest would receive their money by the first week of May.
Mr. Seamon said about 5,000 tickets had been sold and insisted that the center has all the money required to pay refunds -- about $25,000.
On Feb. 20, the center, which Mr. Jeffries says helps poor people establish credit and purchase homes, placed a full-page advertisement in The Sun announcing the raffle. Called the "Haffle Raffle," it offered a top prize of $100,000 -- money that had to be used toward the purchase of a home in Maryland.
The center said it hoped to raise $1 million by Dec. 31, the date of the drawing. At a cost of $5 a ticket, the center would have had to sell 200,000 tickets to reach its goal.
The advertisement also claimed that "Four dollars out of the five dollars is tax deductible."
The advertisement immediately attracted the attention of Maryland's secretary of state. All charitable organizations soliciting donations from the public must register with the secretary of state, providing financial and organizational information. The Center for Affordable Housing, started in 1991, was not registered. (The center was accorded tax-exempt status by the Internal Revenue Service in 1992.)
Alicia Moran, a spokeswoman for the secretary of state, said that Mr. Jeffries had been informed of the state's requirements shortly after the advertisement appeared and had been given until today to satisfy those requirements.
As of Friday, Ms. Moran said, her office had not received the materials and was preparing to notify the Maryland attorney general officially. Because of the investigation, she said, the Baltimore state's attorney's office was already aware of the situation.
There were other problems with the raffle. The center failed to get the required permits in all the counties where the advertisement ran, Mr. Seamon said.
Some who sent money for the raffle said they never received tickets, and others who requested a refund said they never received one, despite assurances that they would.
The center never appeared to have a firm procedure in place for
the conduct of the raffle, according to William Henry, an aide to City Council President Mary Pat Clarke, who in March began investigating complaints coming to his office.
Mr. Jeffries, he said, provided no reassurance.
"He couldn't give me any details about the raffle and how it was working," Mr. Henry said. "He said they were in a process of restructuring. He said that I had to understand that this was a $1.2 million raffle and these things were subject to change."
Mr. Henry said he passed his concerns on to Mr. Honick, who he learned had already started his investigation.
Last week, in response to a telephone call from The Sun, Mr. Jeffries announced that the raffle was over because of "low demand."
Mr. Seamon, the attorney, blamed The Sun, claiming that the newspaper projected a certain response to the advertisement which never materialized. A spokesman for The Sun said on Friday that the newspaper never guarantees a response to its advertising.
After the first advertisement, there was no other publicity. Initially, the center had planned to air commercials on WBAL radio and television, but in March it informed the station that it couldn't afford the spots, even at a reduced rate offered nonprofit organizations.
The raffle is not the only item Mr. Honick is reviewing. According to Mr. Seamon and state officials, Mr. Honick is also interested in some housing transactions involving at least two of the center's clients who were to be beneficiaries of low-interest mortgage rates provided through a state bond. Fees paid to the Center for Affordable Housing were added at settlement -- $700 in one case and $1,500 in the other -- which state officials say may have been improper and now endanger the low-interest loans.
The mortgages were handled through NationsBank and Maryland National Bank -- which are now the same. Under the program, banks provide low-interest mortgages and then sell the mortgages to the state.
In these two instances, the banks prepared settlement sheets and sent them off to a title company for closing. In both cases, the settlement sheets left the bank with no charges to the Center for Affordable Housing. When the sheets were returned to the bank after closing, however, they showed the additional charges.
"There was no information that there would someday be [fees paid] to the Center for Affordable Housing," said Barry Blumberg, a NationsBank officer who handles its low-interest programs. "To see something this large added later is very vTC unusual."
The state thought so, too. On Friday, officials in the home ownership office in the Department of Housing and Community Development said that the state may refuse to buy these mortgages from NationsBank because of the charges.
Mr. Jeffries insisted that the additional charges were appropriate fees paid to the center for counseling and other support services. But Mr. Blumberg said most nonprofit housing agencies charge nothing for similar services.