‘There’s a lot of lies being told at Rolling Hills’

For months, the residents at the Rolling Hills Apartment complex in Winston-Salem have been complaining about desperate conditions: mold festering under carpets, stovetop burners that catch fire, black mold and mildew fed by leaking windows, sewage backups, holes in walls and broken air-conditioning units.

Since June 1, the city of Winston-Salem has documented 645 housing code violations in 94 out of the 110 units in the apartment complex — in some cases, as many as 20 violations per unit. That means only 16 of the units have had no reported violations.

“The mold is living in the attic of many of the units,” said Gene A. Smith, who served as maintenance supervisor for the apartments from late May until Aug. 17. “It’s molded so much it’s gray hairs. The mold on the lower part is from sewage.

“There’s old wiring in the buildings,” he continued. “We had a couple units that caught fire. The wiring is not up to code. If they had a professional come in and inspect it, it would be condemned.”

The former maintenance supervisor, a man named Rick, was still working at Rolling Hills when Smith was hired. Rick, whose last name Smith never learned, had a premonition that his days at Rolling Hills were numbered.

“What position did they hire you for?” Smith recalls his predecessor asking.

“Maintenance supervisor,” Smith had replied.

“That’s my position,” Rick said.

Smith said Rick advised him to quit, but he stayed on, nurturing the hope that he could make a difference.

“When he left the bottom fell out,” Smith said. “Sewage started coming out. Raw sewage.”

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The conditions at Rolling Hills, a private complex owned by New Jersey-based Aspen Companies where 100 percent of the units are subsidized by the federal government, drew the attention of US Rep. Alma Adams, who visited in late July and passed residents’ complaints on to the US Department of Housing & Urban Development, or HUD. Three HUD representatives, including Eileen R. Wooten, a senior account executive from the HUD field office in Greensboro, visited the apartment complex on Aug. 12, Smith said. While Wooten came with a handwritten list of 10 units that needed repairs, Smith said the primary reason for the visit was a litany of complaints by tenants about power outages, caused by a utility company turning off the power while the Aspen Companies installed security cameras to deter drug dealing, littering and fighting.

During the visit Wooten raised another issue, Smith said, inquiring as to how many of the units were vacant. The question is critical, considering that the Aspen Companies receives a monthly payment from HUD to subsidize rent — the difference between fair market value and 30 percent of adjusted household income. In Winston-Salem, fair market value for a one-bedroom apartment is $569 per month and $974 for a three-bedroom, according to the Housing Authority of Winston-Salem. Any false statement or misrepresentation to HUD regarding a housing-assistance payment contract constitutes a default by the owner, according to federal guidelines. In the event of default, HUD may reduce, suspend or terminate payments, or take steps to recover overpayments.

“I didn’t want to get caught in a lie and get in trouble with the government,” Smith recalled during an interview with Triad City Beat.

Tursha Ellis, who had been hired as the property manager less than a month earlier, was not as reticent, and Smith said she told the HUD representatives that there were only two vacant units.

Smith said he didn’t say anything to contradict Ellis at the time, but he knew immediately that the number she had cited was a significant undercount. It had to be at least 10, he thought, although he didn’t know the specifics. Ellis disappeared into the management office, according to Smith, leaving him to give the HUD representatives a tour of the complex.

“I told the lady: ‘I could get fired for this,’” Smith recalled. “She said, ‘I wouldn’t worry about it.’ I said, ‘You wouldn’t worry about it because it’s not you, but I have to worry about it.”

After the HUD representatives left, Smith said he took it upon himself to conduct a manual count of the vacant units. Not including two unoccupied demonstration apartments that are used by residents who need to take showers or get water while their own units are under repair, Smith said he counted 13 vacant units. Adding the two figures together, the total number of vacant units accounts for all but one of the remaining apartments once the 94 units in violation reported since June 1 are subtracted.

Smith said he warned Ellis: “Tursha, when they find out you’re lying, you could get in trouble.”

He estimated that during the period he worked at Rolling Hills, the company was routinely underreporting seven to 10 vacancies. The average subsidy for the Housing Choice Voucher Program in July — an equivalent program administered by the Housing Authority of Winston-Salem — was $496 per unit. Based on that figure, the Aspen Companies could potentially be pulling in $3,500 to $5,000 in illegitimate subsidies from the federal government every month.

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The Aspen Companies said through a spokesperson on Monday that Smith’s claim is “categorically false.”

In spite of Smith’s apprehensions during the HUD visit, Avraham Derhy, the regional manager responsible for Rolling Hills, was apparently pleased by what Ellis conveyed to him about his interactions with Wooten and her colleagues — at least initially. Early the next week Derhy texted Smith on his cell phone: “Tursha said you did a good job with them on Friday. Thanks. Is 750-11 vacant?”

The meeting is confirmed in an Aug. 15 email from Wooten to Smith that was reviewed by TCB.

“Thanks for meeting with us on such short notice Friday,” Wooten wrote. “Per our conversation can you please provide the work orders for the units we provided?”

The email restated the list of 10 units, adding detail about the deficiencies that needed to be corrected. “Can you provide as soon as possible today?” Wooten asked. “Headquarters requested status of the units.”

Smith responded two days later: “Yes, I was fired for helping you guys out. They’re not a good company. Anyways, I expected it but it was very nice meeting you all.”

The official reason given for his termination was insubordination.

“I came in Wednesday morning, and she said today was gonna be my last day,” Smith recalled. “I said, ‘What?’ She said, ‘Every time I tell you to do something, you have a problem with it.’”

Smith said he believes the Aspen Companies is manipulating Ellis, suggesting that the company will likely let her take the fall for any improprieties that come to light.

“She’s playing the nice person and covering up at the same time,” Smith said. “She’s in a position where she doesn’t have a lot of money. They’re basically using her, and they’ll probably fire her once she’s served their purpose.”

Ellis declined to comment for this story.

Smith said Ellis came to North Carolina from New Jersey to take the job of property manager at Rolling Hills. Based on what she told him, Smith said Ellis had expected the company to put her up at a hotel while she got established in Winston-Salem, but once she arrived Derhy told her that wasn’t their responsibility.

“She didn’t have no money; she didn’t have no car,” Smith said. “Her mother lives in Charlotte, and she drove her up here. She had to stay with the lady at the community center who comes to feed. Now, she’s staying with her brother. She still gets a ride to work from the community volunteer.”

The Aspen Companies suggested in an Aug. 9 statement to TCB that Ellis’ hiring was part of a proactive response to Rolling Hills’ troubles.

In addition to clearing dozens of housing-code violations, a spokesperson for the company said, “We have taken significant measures to immediately improve the onsite management of Rolling Hills. We have hired a new property manager (as of mid-July), who has been working closely with both residents and with the city, and has met Councilman [Derwin] Montgomery and his community liaison to ensure their satisfaction with the work that is being done.”

On Aug. 24, a week after he was fired, Smith sent a series of texts to Derhy, the Aspen Companies’ regional manager.

“OK, now I got your things back to you,” he wrote at 8:26 p.m. “I will send you and Tursha [Ellis] my last three days of time worked. I guess I’ll have to forget about gas and petty cash payment.”

Then, alluding to the fraud he is alleging to TCB, Smith added for good measure: “And thanks for the uplift, bro. Good thing there’s more to life than you and your scams, Mr. Avraham.”

At 9:22 p.m., he followed up with another text, using capital letters to emphasize the intensity of his feelings: “DO THE RIGHT THING and we’re good.”

Three hours later, Smith was still vexed over the way his employment with the Aspen Companies had come to an end, and his mind turned to an unresolved tension with one of the maintenance workers, a man named Antonio, over an uncollected debt. At 12:35 a.m., Smith sent his third and final text to Derhy: “Antonio owes me money. If he threatens my family again or where I live it’s not going to go well. Just giving you a heads up.”

At 9:22 the next morning, Derhy replied, declining to respond to Smith’s slight against his personal integrity or to defend the company’s reputation. He merely wrote: “I will speak to Tursha to make sure she puts in for mileage you are owed. I will definitely speak to Antonio as well.”

The Aspen Companies said Smith’s claims, including that he “was terminated without cause, and for reasons other than insubordination,” are “categorically false,” but did not elaborate.

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The Aspen Companies was founded in 2009 as a subsidiary of Treetop Development by Azi Mandel and Adam Mermelstein, combining their experience in real-estate development, investor relations and managing HUD properties. The company went on a buying spree in 2013, building a portfolio of 1,067 units in Tennessee, Georgia and South Carolina, according to a timeline posted on the company website.

Mandel and Mermelstein’s company snapped up Rolling Hills in February 2014 from a California investor named Gregory Perlman. The apartment complex had once been owned by the Housing Authority of Winston-Salem. Then, as now, it was plagued with code violations, along with drug dealing, and the housing authority’s efforts to unload the property in 2010 unsettled residents. When the housing authority eventually closed a deal with Perlman in December 2011, the apartment complex’s Section 8 voucher stayed with the buildings.

The Aspen Companies website boasts of upholding “a standard of excellence,” while highlighting its purported practice of “acquiring mismanaged apartment communities and upgrading them” through renovations, new amenities and social service programs.

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By its own estimate, the company doubled its portfolio to 10,000 units spread across 15 states from 2014 to 2016. Based on an early 2015 prospectus for an initial public offering on the Tel Aviv Stock Exchange and recent press accounts, a conservative estimate puts the number of total HUD properties owned by the company at about 36. A chart created to illustrate the Aspen Companies’ holdings indicates that Rolling Hills is part of a portfolio, one of four such funds based on HUD properties that the company was offering as an opportunity to Israeli investors.

Speaking to the company’s growing status as a Section 8 provider, Mermelstein described one acquisition move to AL.com in July 2015 as “playing an important role as we solidify our position as one of the most active HUD property owners nationwide.”

The Aspen Companies said “each of the claims” made by Gene Smith is “categorically false,” without specifically addressing why Derhy didn’t respond to Smith’s slight against his personal integrity, or the allegation made to TCB that the company is manipulating the current property owner and left her in the lurch when she moved to Winston-Salem.

The Aspen Companies has publicly highlighted its relationship with HUD, boasting on its website of possessing “a strong working relationship” while being “held in high regard by HUD national and field offices throughout the country.”

After informing Eileen R. Wooten, the senior account executive at HUD’s Greensboro field office, that he had been fired, Gene Smith followed up with a brief email on Aug. 17, stating, “There’s a lot of lies being told at Rolling Hills by management.”

He said he has received no response from Wooten. Reached by TCB last week, Wooten said she is not allowed to speak to the media, while promising to forward a request for comment to a public affairs person at the agency’s Atlanta regional office.

Smith said that while Wooten never responded to his disclosure that he had been fired and his allegation of deception by the Aspen Companies management, he received a phone call from Wooten’s supervisor over the following weekend. The supervisor, who identified herself only as “Dottie,” asked Smith “not to mention her name,” he said. A personnel list for the Greensboro field office lists Dottie Troxler as a senior account executive and senior advisor to the AE Division. Troxler could not be reached for comment for this story.

Joseph J. Phillips, a spokesperson with the Atlanta regional office, said in an email on Tuesday that “HUD continues to closely monitor Rolling Hills Apartments.” Phillips went on to say that the federal agency “takes allegations of fraud seriously,” adding that Smith could contact the HUD Office of the Inspector General to report his concerns.

In statements to TCB, the Aspen Companies said Rolling Hills received a passing score of 80 from HUD, with 100 being the highest possible score. The reported score is perplexing, considering that the city of Winston-Salem has documented nearly 650 violations in 94 out of 110 units at Rolling Hills since early June. HUD did not respond to a question about how the site could have passed the most recent inspection considering the extensive violations that have been reported.

Rep. Alma Adams, whose district currently includes part of Winston-Salem, said her office continues to monitor the situation at Rolling Hills. She said in a prepared statement on Tuesday that on Aug. 16 she requested a timeline from HUD “for a second inspection of the property given the deplorable conditions still present at the Rolling Hills Apartment complex.” She added that she planned to speak with department representatives by phone in the coming days. Phillips, the HUD spokesperson, followed up on Tuesday afternoon with a pledge that the federal agency will a new inspection of Rolling Hills Apartments in late September.

In the same statement, which also touted the hiring of Tursha Ellis as being part of a turnaround strategy, the Aspen Companies also told TCB that “the property’s onsite maintenance staff has been increased from two to seven professionals.”

Not true, according to Gene Smith.

“It’s a lie,” he said. “They didn’t hire seven maintenance workers. They hired two extra. It was only me, Terry, George and Antonio. The rest were contractors. Some of the people they hired off the street were druggies. They buy drugs at Rolling Hills. One of the tenants told me: ‘I don’t want him in my house. I just saw him out there doing drugs.’”

Aspen Companies did not specifically address the allegation, but asserted that each of Smith’s claims to TCB was “categorically false.”

Smith said he took the job with the Aspen Companies in the hopes that he could earn quick money to buy an investment property. While he was employed as maintenance supervisor at Rolling Hills, he was also working side jobs in the evenings to earn additional money. Getting fired by the Aspen Companies won’t ruin him financially, he said: He contracts jobs installing and repairing skylights, and putting in ADA-compliant bathrooms, and “if I keep myself busy” he said he can earn as much as $40,000 in six months.

All the same, he feels a twinge of regret about the way things turned out at Rolling Hills.

“I really wanted to show them what I could do,” Smith said. “I wanted them to spend the money and get the materials.”

Residents interviewed by TCB in early August complained that the Aspen Companies’ efforts to address the extensive violations have only superficially addressed problems, and that the city’s code inspector signed off on repairs that were inadequate.

“They did a Band-Aid fix,” resident Veronica Campbell told TCB. “The city inspector came in and signed off on it. I said, ‘Why would you sign off?’ The most serious violation they didn’t do anything about — the mold coming up from underneath my carpet.”

Smith confirmed the residents’ concerns.

“When I walked through with the architect and the contractors, none of them were talking about removing the mold,” he said. “I said, ‘This is like a scam on top of a scam.’ There was one lady who was sick. I went in myself and ripped the mold out of her closet. You’re not really supposed to do that if you’re not certified. I know the mold was making her sick.”

Smith charges that the city code inspector assigned to the Rolling Hills case has been signing off on repairs that are not adequate. As an example, Smith said the inspector didn’t make any effort to confirm that mold-damaged drywall and insulation were removed.

“If it’s a crack and water leak, they’ll let them plaster it with mold inside and say it’s okay,” Smith said.

Smith provided a list of four units where he said the inspector signed off without requiring the Aspen Companies to make adequate repairs.

Ritchie Brooks, the city’s director of housing and community development, said to his knowledge the inspections are being handled appropriately.

“This is the first time I’m hearing of an inspector signing off on work that’s not been done,” he said.

Smith provided four cases where he said the inspector signed off on inadequate work. In one, at Building 720 Apt. 2, the city cited the unit with 17 violations, and eventually signed off on 12 repairs, including repairing defective light fixtures, cleaning carpet, clearing a kitchen sink drain and replacing smoke detectors. But five other violations remained unresolved, including two coded as “unfit” — defective locks on the front door and defective electrical outlets. Two other violations on the list also remained unresolved because some of the violations have not been corrected, while Brooks said he could not find any paperwork for the fourth case alleged by Smith.

Aspen Companies said in a prepared statement on Monday: “We are fully committed to ensuring quality conditions at Rolling Hills by taking all necessary measures to immediately address residents’ concerns. Over the past several months, we have taken significant steps to improve the onsite management and maintenance of the property, and we’ll continue to do so.”

Smith said the city inspector eventually said he couldn’t “let it slide anymore with the Band-Aid fixes” because Rolling Hills’ troubles were “in the news.”

“When you got a contractor coming to you,” Smith said, “and saying, ‘Are we really fixing it or putting a Band-Aid on it?’ it’s like, Wow.”