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Originally published Friday, August 9, 2013 at 7:26 PM

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Housing agency settles challenge to ‘sham entity’

The King County Housing Authority has settled part of lawsuit by a resident over a nonprofit organization it set up to obtain more subsidies from the federal government.

Seattle Times staff reporter

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The King County Housing Authority says it got bad legal advice when it held unannounced meetings of a nonprofit it formed in 2009.

The housing authority set up the nonprofit, Moving King County Residents Forward, as a separate organization to get a better deal on federal housing subsidies for 22 properties around King County.

The authority wanted to make repairs to the units, it said, but couldn’t afford to without transferring the properties to a separate entity. That allowed the authority to qualify for a different, higher subsidy from the federal government, authority spokeswoman Rhonda Rosenberg said.

The new entity, approved by the federal Department of Housing and Urban and Development, received the properties under a long-term lease for $1 a year, Rosenberg said.

The problem emerged when a resident happened upon an unannounced meeting of Moving King County Residents Forward at the housing authority offices in Tukwila. The nonprofit had the same board, staff and address as the King County Housing Authority, but it was behaving as a private entity instead of a public one.

The resident, Cindy Ference, of Shoreline, sued. This month, she reached a settlement with the housing authority and Moving King County Residents Forward, formalizing the organization’s promise to make its meetings, minutes and documents public and transparent.

The National Freedom of Information Coalition in Columbia, Mo., which helped fund Ference’s lawsuit, said the nonprofit was essentially a “sham entity.”

“Setting up a supposedly private entity to do the public’s business in secret is a shameful practice that should not be tolerated by the public or the courts,” said Ken Bunting, the executive director of the organization.

Rosenberg said the authority didn’t intend to hide anything. The authority consulted an attorney at the time, who said the nonprofit wasn’t subject to open-meetings laws, she said.

“There was absolutely never any intent not to be open and above board,” she said. “This was really just a mechanism for swapping the subsidy so that we could generate enough cash so that we could make the necessary repairs to the 22 properties.”

Almost as soon as the lawsuit was filed, the nonprofit started advertising its meetings and voted again on all the legislation it had passed in meetings that had been unannounced, she said.

“The public was always invited,” Rosenberg said, noting that the nonprofit’s meetings were always held right after the housing authority board meetings, so the same people could just stay afterward and see what the nonprofit was doing.

Using the nonprofit to increase the amount of money the organizations can get from the federal government will allow the housing authority to make $18 million in needed repairs on the 22 properties involved, she said.

The King County Housing Authority, based in Tukwila, houses about 50,000 people in Seattle’s suburbs and collects money through federal programs, grants, local governments and resident rent payments.

Ference settled the open-meetings portion of her lawsuit, but she is still in litigation over public records she said the housing authority wouldn’t give her.

Emily Heffter: 206-464-8246 or eheffter@seattletimes.com. On Twitter: @EmilyHeffter

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