Rev. Leon Finney Jr.’s free fall

The Rev. Leon Finney Jr. spent the last half-century building a real estate empire on Chicago’s South Side while amassing political power and hobnobbing with politicians like Barack Obama, Rahm Emanuel, Richard M. Daley and Toni Preckwinkle.

Now in his twilight years, Finney’s fiefdom teeters on the brink of collapse.

Once revered for his community work, Finney, 81, stands accused of fraud, self-dealing and mismanagement after his nonprofit, the Woodlawn Community Development Corporation, filed for bankruptcy in October and the curtains were pulled back on its finances.

Finney has been ousted at the organization he helped create. And, in a rare step, a federal judge appointed a trustee in April to take control of Woodlawn, a move the nonprofit fought. Piece by piece, its real estate holdings are being sold off.

After the bankruptcy came more financial blows. Woodlawn’s main source of revenue — lucrative contracts to manage more than 4,300 apartments for the Chicago Housing Authority, bringing in about $170,000 a month in management fees — was canceled in June after the CHA accused Woodlawn of mismanagement resulting in nearly $400,000 in damages.

Finney’s personal finances are in tatters, too, with the bank going after his church and his home.

And his wife has filed for divorce.

Investigations into allegations of wrongdoing and mismanagement have dogged Finney for decades. But the troubles he now faces represent the gravest threat to his legacy.

Earlier this year, the judge in the bankruptcy case said she was “appalled” by Finney’s conduct at Woodlawn and threatened a referral to federal prosecutors as she began to unravel its tangled finances and what Finney knew of them. At a court hearing in February, U.S. Bankruptcy Judge Carol A. Doyle accused the organization in one instance of “at least malfeasance.”

“You could call it fraud,” the judge said, according to a transcript of the hearing. “You could call it dishonesty. You could call it gross mismanagement. You could call it incompetence.

“It is all of those things.”

It’s a stunning fall from grace for Finney, who cut his teeth fighting slumlords and the University of Chicago’s expansion plans in the 1960s. Finney once garnered praise from politicians and appointments to powerful government boards, including spots on the Chicago Plan Commission, Chicago State University and the CHA.

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On his church website, Finney has claimed responsibility for $190 million in real estate investments. In the past decade, his nonprofits have collected more than $20 million in taxpayer money while managing about a quarter of all public housing units in Chicago.

After a spokesman initially indicated Finney would make himself available for an interview, Finney declined to talk about the Woodlawn Community Development Corporation bankruptcy and the allegations he faces. Finney also declined through a spokesman to answer questions the Chicago Sun-Times submitted in writing. In a written statement, his spokesman only cited Finney’s recent health problems.

But the story of his fall is laid out in hundreds of pages of court filings that include a 121-page transcript of a deposition Finney gave in February.

“He knew exactly . . . what happened”

Setting all of this in motion was Woodlawn’s bankruptcy filing last Oct. 24, revealing a $1.8 million debt to the IRS. The same day, Finney filed a declaration that said “management was completely surprised” to learn Woodlawn had not been paying its payroll taxes.

At his deposition, though, Finney made clear that he deliberately chose not to pay those taxes — for one quarter, he said.

“We were having severe problems meeting all of our obligations,” Finney said. “And so I figured that if we could delay the payments, it would ease the cash flow” of Woodlawn.

Finney said in his deposition he hoped to free up $150,000 to pay the Local Initiatives Support Corporation, which lends to nonprofits like Woodlawn, to forestall foreclosure on a Woodlawn property at 63rd Street and Woodlawn Avenue.

Woodlawn took out two loans from LISC in 2006 and 2007 for $2.4 million, records show. In 2016, after Woodlawn failed to repay the loans, LISC sued and was awarded a $3 million judgment in March 2017. By the time of the bankruptcy filing, the debt had ballooned to $3.3 million.

Court records show Woodlawn missed three quarterly payroll-tax payments to the IRS between June 2017 and April 2018.

“Let me put it this way,” Finney said in his deposition. “I had no idea that more than one quarter was ever interrupted, and my idea, what my thinking was, is that we would be a quarter behind, but we would be always paying.”

Finney was asked during his deposition whether he was aware that, “if money is withheld from someone’s paycheck, it must be for withholding. You must actually pay it to the IRS and not use it for other purposes?”

He answered, “Yes, I am.”

In July, Woodlawn got even worse news. The IRS updated its claim against the nonprofit, now seeking $4.2 million in taxes, interest and penalties.

LISC representatives did not respond to requests seeking comment.

Finney’s claim of complete “surprise” at the unpaid payroll taxes caught the bankruptcy judge’s attention. Doyle said she was “basically obligated” to inform federal prosecutors of Finney’s contradicting statements.

“He knew exactly . . . what happened to the payroll taxes,” she said.

Finney took responsibility for that in his deposition.

“I’m responsible for the taxes not being paid, and I’m responsible for moving the company forward to make sure that we get something going, all right? I’ll say that under oath, all right?”

The U.S. attorney’s office wouldn’t comment.

The judge had her own take on it during a court hearing, saying, “These actions are, to me, the equivalent of theft of the employees’ wages.”

Strip mall blues

The bankruptcy case also exposed allegations of self-dealing against Finney involving his control of a strip mall in the 1500 block of East 63rd Street near Jackson Park. Woodlawn owns the strip mall but began leasing it to Lincoln South Central Real Estate Corporation in 2013.

At the time, Finney led Woodlawn and controlled Lincoln South Central. He signed the lease as both lessor and lessee, records show.

The deal called for Lincoln South Central to manage the shopping center, sublease its retail spaces and pay Woodlawn Community Development Corporation $7,000 a month in rent.

Few, if any, rent payments were ever made to Woodlawn, according to records in the bankruptcy case. Woodlawn staff acknowledged in a meeting with creditors in February that there was no attempt to collect rent from Finney.

In court, Doyle accused Finney of “pocketing the rents” from Lincoln South Central’s subtenants rather than pay the nonprofit he headed.

In May, a professional services firm hired by the trustee, attorney Gina Krol, sued Finney and Lincoln South Central in Cook County circuit court for more than $400,000 in back rent.

On July 18, Cook County Judge Joel Chupack ruled in favor of the Woodlawn Community Development Corporation, ordering Finney, its now-departed chief, to vacate the property and pay about $180,000 in damages, attorneys’ fees and other costs.

How Woodlawn came to be the owner of the strip mall isn’t clear.

In his deposition, Finney said the property had been “donated” by an organization led by Elzie Higginbottom, another high-powered real estate developer on the South Side. Questioned by an attorney, Finney appeared to get irritated when Higginbottom’s name came up and declined to answer several questions about the arrangement.

Higginbottom, who is an investor in the Sun-Times, did not respond to calls seeking comment.

“I’m going to say for the 15th time,” Finney said. “I’m 80 years old, and you’re asking me for details, if I see something or whatever. I cannot remember all of this.”

Public housing, private gains

This isn’t the first time Finney has been accused of misappropriating taxpayers’ money. In 1969, Finney’s first nonprofit, The Woodlawn Organization, was a key player in constructing a 27-building, 504-unit development called Woodlawn Gardens at 63rd Street and Cottage Grove Avenue.

The project, financed with a loan by the federal government, opened in 1971.

But the developers ran into financial problems and stopped paying the mortgage after March 1972, the Sun-Times reported then. The project eventually was $15 million in debt, and, though Finney denied it, an audit by the U.S. Department of Housing and Urban Development found that more than $800,000 in income from Woodlawn Gardens had been improperly diverted.

In the 1980s, Finney was on the Chicago Housing Authority’s board. When the agency began tearing down high-rises and subcontracting out its services in the 2000s, his nonprofits were some of the first to be given those contracts.

In 2003, the CHA’s inspector general found that a Finney nonprofit was billing the agency for work done on his church by city workers, according to The Chicago Reporter.

The CHA ended up recovering $50,000 in lost wages. The Sun-Times asked the CHA for a copy of the 2003 report. The agency said it could not produce it.

The inspector general’s report didn’t deter the CHA from handing more deals to the Woodlawn Community Development Corporation. By 2009, the nonprofit oversaw nearly a quarter of all public housing units in Chicago, taking in more than $170,000 a month in management fees.

But tenants living at Finney-managed buildings often protested the decrepit state of their buildings with stories of broken-down elevators and cold radiators. In February 2010, then-Mayor Richard M. Daley ordered city inspectors to look at properties managed by Finney. Nothing came of that.

In a 2011 federal lawsuit, Virgil Savage, the former chief financial officer of the Woodlawn Community Development Corporation, accused the nonprofit of taking part in a ghost-payrolling scheme. That suit ultimately was thrown out.

Records show that, from 2008 until Finney stepped down as head of the nonprofit last November, he collected salary payments totaling nearly $2 million.

Burst pipes, ruined boilers

In April, as bankruptcy proceedings were in full gear, the CHA asked the judge for permission to sever ties with Woodlawn. The housing agency cited two incidents during last winter’s polar vortex, when the temperature in Chicago fell to as low as 21 degrees below zero.

On Jan. 30, the CHA said the Woodlawn Community Development Corporation told the agency that “all” of its units “were at a normal living temperature.”

Two days later, a CHA official “recorded actual temperatures in the 50s” inside many units at one of the buildings in Washington Park managed by the nonprofit, causing “several pipes to freeze” and burst, causing more than $116,000 in damage.

Then, early on Feb. 1, after a fire sprinkler head ruptured at a building managed by the nonprofit in Oakland on the South Side, the CHA said “it took approximately an hour” for workers to arrive at the site. Once there, according to the CHA, the staff couldn’t find the shutoff valve for the sprinkler head, “so it turned off the water and opened a two-inch drain valve . . . to relieve the pressure.”

The workers later found the valve, turned off the sprinkler head and turned the water back on — but forgot to plug the two-inch drain, according to the CHA.

“As a result,” it said, “water began to fill the boiler room . . . destroying the boilers, fire pumps, domestic water pump and systems that control them.”

The CHA said it was “forced to relocate the residents of the 140-unit building” for three days to fix the boiler room. The cost: $277,000.

The public housing agency also said “it was not previously or timely notified” that the Woodlawn Community Development Corporation stopped paying its insurance premiums for three months before declaring bankruptcy. Last November, the nonprofit’s fire insurance was canceled, and it had to pay close to $32,000 to keep other insurance from being canceled, records show.

In May, the bankruptcy court judge approved the CHA’s motion. In June, the agency terminated the contracts.

By then, the CHA had paid the Woodlawn Community Development Corporation more than $20 million since November 2009.

A CHA spokeswoman said properties formerly under Woodlawn’s control have been assigned to The Habitat Company and East Lake Management, which is headed by Higginbottom.

In a statement in response to questions by the Sun-Times, the CHA did not address why the Finney-led nonprofit continued to be given management contracts despite its problems with the agency.

Church, home in jeopardy

Finney’s dire financial situation extends to his personal life. Three lawsuits filed in just two weeks in July are seeking to foreclose on his Metropolitan Apostolic Community Church, his former home at 649 E. Groveland Park and another residential property he owns with his estranged wife at 4058 S. Dr. Martin Luther King Jr. Drive.

Finney’s daughter and a company they control are named as co-defendants in the lawsuit related to the property on Groveland Park. His wife is named with him in the suit seeking the other residence.

The bank is seeking nearly $600,000 for the property on Groveland Park and more than $300,000 for the other residence, according to the suits. In all, Finney and his family members owe Lakeside Bank more than $1.4 million.

His wife, Georgette Greenlee, filed for divorce in April, citing irreconcilable differences and seeking a split of the couple’s assets and liabilities. That includes “an equitable and just portion” of the building at 4058 S. Dr. Martin Luther King Jr. Drive, as well as other property they own.

The relationship between Finney and the bank wasn’t always so strained.

In a 2011 documentary about Finney’s life, Victor Cacciatore, the late philanthropist and former chairman and chief executive officer of Lakeside Bank, said the bank was “happy to be involved” with The Woodlawn Organization, the defunct forebear to the Woodlawn Community Development Corporation.

“If you go through the areas in which The Woodlawn Organization has developed and maintained properties and given places for people in which to live respectfully [and] beautifully,” Cacciatore said in the documentary, “you can see Lakeside Bank is really benefiting with The Woodlawn Organization and the people who live there.

“It’s win-win for everybody,” he said.

A spokeswoman for the bank wouldn’t comment. Lakeside’s lawyer didn’t respond to interview requests.

Judge: ‘Really pretty astonishing’

Amid the Woodlawn Community Development Corporation’s bankruptcy hearings, Finney devised a plan to sell two low-income apartment buildings owned by nonprofits he controlled. Edwin Berry Manor and the Father Martin Farrell House were expected to fetch a total of $2.8 million, and Finney planned to donate the proceeds to Woodlawn to “fund the plan for reorganization,” his attorney said at a June 20 hearing.

The bankruptcy judge scoffed at that, saying she was “concerned” to hear Finney still had anything to do with the Woodlawn Community Development Corporation or any similar organization.

“The fact that he’s still in charge of other nonprofits when he orchestrated this is really pretty astonishing to me,” Doyle said. “That’s really unbelievable to me.”

Contributing: Rachel Hinton, Mitchell Armentrout, Matthew Hendrickson

Carlos Ballesteros is a corps members of Report for America, a not-for-profit journalism program that aims to bolster Sun-Times coverage of Chicago’s South Side and West Side.