Petition for Writ of Certiorari — Bailes v. United States

Ol-107g

NO.

IN THE SUPREME COURT

OF

THE UNITED STATES OF AMER

OCTOBER TERM 1991

GEORGE LEWIS BAILES, R.,

PETITIONER,

VS.

UNITES STATES OF AMERICA,

RESPONDENT .

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

ELEVENTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

ROY M. WEST, COUNSEL OF RECORD

MANLY & MANLY ATTYS.

FRANK NELSON BUILDING

205 20TH STREET NO., STE. 833

BIRMINGHAM, ALABAMA. 35203

(205) 251-8151

RALPH J. BOLEN,

STE. 423 FRANK NELSON BUILDING

205 20TH STREET NO., STE. 423

BIRMINGHAM, ALABAMA 35203

(205) 322-2463

ATTORNEYS FOR PETITIONER

QUESTIONS FOR REVIEW

1. WHETHER A CONGRESSIONAL STATUTE THAT

IS SILENT AS TO CONGRESSIONAL INTENT FOR ITS

RETROACTIVE APPLICATION SHOULD BE PRESUMED

TO HAVE RETROACTIVE EFFECT.

LIST OF ALL PARTIES

Gorge Lewis Bailes, Jr.

Suite 126

#10 Office Park Circle

Birmingham, Alabama 35223

United States of America

Linda S. Trippe

Frank Donaldson

U. S. Attorney's Office

200 Federal Building

Birmingham, Alabama 35203

TABLE OF CONTENTS

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REFERENCE TO OFFICIAL AND UNOFFICIAL REPORTS

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TABLE OF AUTHORITIES

Bowen v. Georgetown University Hosptital, 488 U.S.

EET EL RSD ey AC nt ORD cape eR MM» AAA Ne Pe 13

Bradley v. School Board of Richmond, 416 U.S. 696

RIE Gis cides dideeechikinatikeihk duane thie Cuneeaeeaheaeeeeeen 72. ta

a Re a >; een 17

C.E.K. Industrial Mechanical Contractors v. N.L.R.B,

See ee SE CINE Gas. PEMEED acdc ondcccneacicseseonecenccenn 15

DeVaraas v. Mason, et al., 911 F2d 1377, (10th Cir.

FDIC v. Wright, 942 F2d 1089 (7th Cir. 1991) ......... 14

Kaiser Aluminum v. Bonjorno, 110 S.Ct. 1570 (1990) 13

Lehman v. Burnley, 866 F2d 33 (2nd Cir. 1989) ....... i5

Leland v. Federal ins. Adm'r., 934 F2d 524, (4th Cir.

tL wanes ca neuorens eke Rac omnaieeaein aa 15

Orrego v. 833 West Buena Joint Venture, 943 F2d |

pe Me SS Be. | enn nee rere 14

Simmons v. Lockhart, 931 F2d 1226, (8th Cir. 1991)16

U.S. v. Peppertree Apartments, 942 F2d 1555, (11th

Seis SINT iiccan cece anunndahmunsaessceekoesabceancesiuanneonesceeenas 14

Waaner Seed Company v. Bush, 946 F2d 918 (D.C.

aoe et ae nS oa

Eats: SEND cdedcndecesascsnpewnkancnndhsnnakccncinkhisaqpeasneeenennee 15

Walker v. U.S. Dept. of Housing and Urban Develop-

ment, 912 F2d 819 (5th Cir. 1990)

eee eee eee eee eee eee eeeeee

Wright v. Director of FEMA, 913 F2d 1566 (11th Cir.

ee

REFERENCE TO OFFICIAL AND UNOFFICIAL REPORTS

OF OPINIONS

The opinions and orders rendered by the Federal

District Court for the Northern District of Alabama, and

by the United States Court of Appeals for the Eleventh

Circuit, are reproduced and contained within the ap-

pendix attached hereto and made a part of this petition.

STATEMENT OF JURISDICTION

1. Date of entry of the judgment or decree sought

to be reviewed: September 30, 1991.

2. Date of any order respecting a rehearing and

date of any order and the date and terms of any order

granting an extension of time within which to file the

petition for a writ of certiorari: December 6, 1991.

3. The Judgment of the United States Court of Ap-

peals for the Eleventh Circuit was rendered on Septem-

ber 30, 1991. A suggestion for Rehearing En Banc was

timely filed and denied on December 6, 1991, and this

petition for certiorari was filed within 90 days from Sep-

tember 30, 1991. This Court's jurisdiction is invoked

under the provisions of 28 U.S.C. § 1254(1).

STATUTES INVOLVED IN THE CASE |

Title 12 U.S.C 1715z-4a. Double Damages for un-

authorized use of multifamily housing project assets and

income

(a) Action to recover assets or income

(1) The Secretary of Housing and Urban Develop-

ment (referred to in this section as “Secretary") may re-

quest the Attorney General to bring an action in a

United States district court to recover any assets or in-

come used by any person in violation of (A) a

regulatory agreement that applies to a multifamily pro-

ject whose mortgage is insured or held by the Secretary

under Title ll of the National Housing Act [section 1707

et seq. of this title]; or (B) any applicable regulation. For

purposes of this section, a use of assets or income in

violation of the regulatory agreement or any application

regulation shall include any use for which the docu-

mentation in the books and accounts does not establish

that the use was made for a reasonable operating ex-

pense or necessary repair of the project and has not

been maintained in accordance with the requirements of

the Secretary and in reasonable condition for proper

audit.

(2) For purposes of a mortgage insured or held by

the Secretary under Title Il of the National Housing Act

[12 U.S.C.A. § 1707 et seq.], the term “any person"

shall mean any person or entity which owns a project,

as identified in the regulatory agreement, including but

not limited to any stockholder holding 25 percent or

more interest of a corporation that owns the project;

any beneficial owner under any business or trust; any

officer, director, or partner of an entity owning the pro-

ject; and any heir, assignee, successor in interest, or

agent of any owner.

(b) Initiation of proceedings and temporary relief

The Attorney General, upon request of the Secre-

tary, shall have the exclusive authority to authorize the

initiation of proceedings under this section. Pending

final resolution of any action under this section, the

court may grant appropriate temporary or preliminary

relief, including restraining orders, injunctions, and ac-

ceptance of satisfactory performance bonds, to protect

the interests of the Secretary and to prevent us@2 of as-

sets or income in violation of the regulatory agreement

and applicable regulation and to prevent loss of value of

the realty and personalty involved.

7

(c) Amounts recoverable

In any judgment favorable to the United States en-

tered under this section, the Attorney General may

recover double the value of the assets and income of

the project that the court determines to have been used

in violation of the regulatory agreement or any ap-

plicable regulation, plus all costs relating to the action,

including but not limited to reasonable attorney and

auditing fees. Notwithstanding any other provision of

law, the Secretary may apply the recovery, or any por-

tion of the recovery, to the project or to the applicable

insurance fund under the National Housing Act [12

U.S.C.A. § 1701 et seq.]

(d) Time limitation

Notwithstanding any other statute of limitations,

the Secretary may request the Attorney General to

bring an action under this section at any time up to and

including 6 years after the latest date that the Secretary

discovers any use of project assets and income in viola-

tion of the regulatory agreement or any applicable

regulation.

(e) Continued availability of other remedies

8

The remedy provided by this section is in addition

to any other remedies available to the Secretary or the

United States.

STATEMENT OF THE CASE

Starting in October, 1979, through February,

1981, the Petitioner secured several loans for the pur-

pose of constructing multifamily housing units, which

loans were insured against default by the Secretary of

Housing and Urban Development (HUD) pursuant to

Section 221(d)(4) of the National Housing Act, 12

U.S.C. 17151(d)(4).

Each of the aforementioned loans were ac-

companied by a regulatory agreement with HUD, which

provided that income must be used for normal operating

expense and necessary repairs, unless, inter alia, the

projects had surplus cash as defined in paragraph 16(f)

of the agreements. These agreements further provided

that in the event of violation by the borrower, HUD may

seek relief in any court, either state or federal, for an in-

junction or other relief for a violation of said agreement.

HUD's Office of Inspector General (OGI) in Au-

gust, 1986, issued an audit report asserting that certain

monies had not been expended within the guidelines as

prescribed by the regulatory agreement. On May 14,

10

1987, HUD issued a notice of proposed disbarment to

George L. Bailes, Jr., upon which, hearing was held in

November of 1988. After hearing the evidence, the ad-

ministrative judge entered an order of disbarment.

On May 5, 1989, the United States of America,

filed a complaint seeking double damages under 12

U.S.C. 1715z-4a(c), a statute not even in existence at

the time of the complained of expenditures. On June 6,

1989, the United States of America filed a motion for

summary judgment and memorandum in support there-

of. The United States contended that Bailes was col-

laterally estopped from relitigating the findings of the

administrative judge.

Bailes filed an affidavit in response to the motion

for summary judgment, expressly disputing the issue

that the funds were improperly disbursed. The District

Court entered an order and opinion on July 12, 1989,

granting summary judgment to the United States, and

applied 12 U.S.C.1715z-4a(c) retroactively, awarding

double damages with leave to prove attorney fees and

costs as provided by the newly enacted statute.

After a variety of post judgment matters, George

L. Bailes, Jr., filed a notice of appeal on November Q,

11

1989. On September 30, 1991, the Eleventh Circuit

Court of Appeals affirmed the judgment of the District

Court, agreeing that Bradley v. School Board of Rich-

mond, 416 U.S. 696 (1974) mandated retroactive ap-

plication of the statute. On December 6, 1991, the

Suggestion of Rehearing En Banc was denied, and

hence, this petition.

12

ae a a rE La Sk

ARGUMENT

A STATUTE THAT IS SILENT AS TO CONGRESSIONAL

INTENT FOR ITS RETROACTIVE APPLICATION SHOULD

NOT BE PRESUMED TO APPLY RETROACTIVELY.

This Court has recognized an apparent tension be-

tween the rule of presumed statutory retroactivity an-

nounced in Bradley v. School Board of Richmond, 416

U.S. 696 (1974) and the rule of presumed statutory

prospectivity announced in Bowen v. Georgetown Uni-

versity Hospital, 488 U.S. 204. In Kaiser Aluminum v.

Bonjorno, 110 S.Ct. 1570 (1990), this Court stated:

“We need not in this case, however, reconcile the

two lines of precedent represented by Bradley, supra,

and Georgetown, supra, because under either view,

where the congressional intent is clear, it governs.” Id.

at 1577.

The instant case presents this Court with the op-

portunity not available in Kaiser, to wit: resolution of

the issue of the presumption of statutory retroactivity in

an instance where Congressional intent is silent.

13

The Court below recognized that the “text and

legislative history of section 1715z-4a(c) are silent on

this issue [of retrospective or prospective application)".

U.S. v. Peppertree Apartments, 942 F2d 1555, 1561,

(11th Cir. 1991). In light of this finding, the Court in-

dulged the Bradley presumption that “a court is to apply

the law in effect at the time that it renders a decision,"

Id., and decided that the Circuit was “bound by prece-

dent to apply Bradley,” unless otherwise directed by

this Court. See Id. at fn. 3.

The Eleventh Circuit stands virtually alone among

its companion Circuits by declaring Bradley to govern in

situations of undiscernible legislative intent. The

Seventh Circuit has recognized that the facts of one

case dictate application of the Bradley presumption.

See FDIC v. Wright, 942 F2d 1089, 1095, n.6 (7th Cir.

1991). But see Orrego v. 833 West Buena Joint Ven-

ture, 943 F2d 730, 734-35 (7th Cir. 1991) (holding

that Georgetown prohibits administrative agencies from

promulgating retroactive rules).

The First Circuit has seemingly charted a new

course on the issue by declaring: “...{T]he touchstone

14

for deciding the question of retroactivity is whether

retroactive application of a newly announced principal

wouid alter substantive rules of conduct and disappoint

private expectations." See C.E.K. Industrial Mechanical

Contractors v. N.L.R.B, 921 F2d 350, 358 fn.7 (1st Cir.

1990).

But the remainder of the Circuits that have ad-

dressed the issue, have in one fashion or another, as-

sumed that this Court's decision in Bowen controls

when there is Legislative silence on retroactivity. The

Second Circuit has followed the rule in Bowen: “Even

where some substantial justification for retroactive ap-

plication...is presented, courts should be reluctant to

find such authority...absent an express statutory

grant." (citing Bowen.) See Lehman v. Burnley, 866

F2d 33 (2nd Cir. 1989). The Fourth Circuit has

likewise followed the rule in Bowen, See Leland v. Fed-

eral Ins. Adm'r., 934 F2nd 524, at 527 (4th Cir. 1991),

as has the D.C. Circuit; see Wagner Seed Company v.

Bush, 946 F2d 918, at 924 (D.C. Cir. 1991).

Three additional Circuits have squarely confronted

the apparent strain between the two lines of cases, and

15

resolved the confrontation in favor of Bowen. In Sim-

mons v. Lockhart, 931 F2d 1226, (8th Cir. 1991), the

Eighth Circuit recognized and decided: "...one must

choose between the Bradley and Georgetown Hospital

presumptions. The better rule is that of Georgetown

Hospital: we will not retroactively apply statutes or

regulations without a clear indication that the legislature

or administrative agency intends to diverge from the

norm of acting prospectively." Id. at 1230. In like fash-

ion, the Tenth Circuit met the two lines of cases head

on: "Forced to elect between these contradictory

presumptions, we choose Bowen. We find that the

Bowen line of cases is well entrenched in the history of

Supreme Court jurisprudence, whereas Bradley is large-

ly unsupported by its cited authorities.” DeVargas v.

Mason, et al., 911 F2d 1377, at 1389 (10th Cir. 1990).

The third of the three Circuits that has squarely

addressed the two lines of cases, resolving the conflict

in favor of Bowen, recognizes a limited role that Bradley

should play: "...Bradley expresses no presumption of

statutory retroactivity; rather, it binds courts, with

some exceptions, to apply legislation enacted while

16

cases are pending decision, not those already decided,

or those, as here, that may evade decision completely."

Walker v. U.S. Dept. of Housing and Urban Develop-

ment, 912 F2d 819, at 831 (5th Cir. 1990).

Finally, the Ninth Circuit managed to elicit the rule

of prospectivity without the assistance of Bowen, but

by relying on past precedent of this Court antedating

both Bowen and Bradley, "As a general rule, legislative

enactments, including constitutional amendments, apply

Only prospectively." (citing Bruner v. U.S., 343 U.S.

112, 117 (1952)).

The Eleventh Circuit is still wed to the concept of

Bradley, even though there is authority within the

Eleventh Circuit itself to the contrary. In Wright v.

Director of FEMA, 913 F2d 1566 (11th Cir. 1990), the

Eleventh Circuit recognized: “The principal affirmed in

Bradley has generated some confusion in the Federal

Courts, since it appears to conflict with the aforemen-

tioned long standing rule of statutory construction

restated in Bowen, that favors the prospective applica-

tion of statutes and regulations." (citations omitted.)

As shown from the above survey of Circuits, per-

haps the most confusion visited upon the Federal

17

Courts because of the opposing principles has been

within the Eleventh Circuit itself. Despite authority from

this Court, and from authority from other Federal Cir-

cuits, the Eleventh Circuit will not divorce itself from

the rule of Bradley, unless this Court so decrees.

The question at Bar has been addressed by several

Circuits. The Second, Fourth, Fifth, Eighth, Ninth,

Tenth, and D.C. Circuits have followed the long ac-

cepted rule of prospective application. However, the

Eleventh Circuit seems to be the only true "Bradley Cir-

cuit" left in the Federal system, though to a lesser ex-

tent the Seventh Circuit also has followed Bradley. The

First Circuit appears to have its own rule. This Court

has the opportunity to either set the Eleventh Circuit,

Seventh Circuit and First Circuit on the proper path, or

to correct the seven other Circuits that have strayed.

Lastly, the problems that Peppertree has generated

becomes obvious in the context of the retroactive ap-

plication of the 1991 Civil Rights Act. At least one

Judge of the Federal District Court for the Northern Dis-

trict of Alabama has noted:

“Fresh from it's victory in Peppertree, the same United

States which there fought for and obtained retroactive

18

application of a statute doubling the damages to be paid

by a violator, filed a brief in Van Meter v. Barr, Civil Ac-

tion No. 91-0027 (GAG), in the United States District

Court for the District of Columbia, stating at consider-

able length the Department of Justice's position, entire-

ly inconsistent with the exemplary victory it won in

Peppertree, that no provision of the Civil Rights Act of

1991 applies to any case pending prior to November

21, 1991." See King v. Shelby Medical Center, 91-AR-

2258-S, memorandum opinion entered Dec. 18, 1991,

Northern District of Alabama, Southern Division.

CONCLUSION

The writ of certiorari should issue to correct and

clarify the expressly unresolved issue raised by this

Court in Kaiser, concerning the presumption of

statutory retroactivity or prospectivity. This Court's de-

cision can then clarify to all of the Circuits the proper

presumption, and afford uniformity where conflict now

exists.

Respectfully Submitted,

fo. fo o bit en

ROY M.“WEST, COUNSEL OF RECORD

MANLY & MANLY ATTYS.

AAANKOMELSON BUILDING

205 20TH ST. N., STE. # 423

BIRMINGHAM, ALA. 35203

19

APPENDICES

APPENDIX A

UNITED STATES of America,

Plaintiff-Appellee,

¥.

PEPPERTREE APARTMENTS,

City Court IT Apartments,

et al., Defendants,

George Bailes Jr., Defendant-Appellant.

No. 89-7850.

United States Court of Appeals,

Eleventh Circuit.

September 30, 1991.

Appeal from the United States District Court for

the Northern District of Alabama.

Before BIRCH, Circuit Judge, DYER, Senior

Circuit Judge and MOYE! , Senior District Judge.

BIRCH, Circuit Judge:

Appellants George Bailes, Jr. ("Bailes"), Bailes

Realty Company, Peppertree Apartments, City Court

1* Honorable Charles A. Moye, Jr., Senior U.S. District

Judge for the Northern District of Georgia, sitting

by designation.

A-Il

II, Rainbow Apartments Company, and College Manor

Ltd. appeal from an order of the United States District

Court for the Northern District of Alabama. We agree

with the district court's decisions to apply collateral

estoppel to the findings of the administrative law

judge, grant the motion of the United States for sum-

mary judgment, and award the United States damages

in the amount provided by 12 U.S.C. section 1715z-

4a(c). Accordingly, we AFFIRM the district court's

order.

I. BACKGROUND

A. Factual Background

Peppertree Apartments, City Court II Apart-

ments, Rainbow Apartments, and College Manor

Apartments are multifamily housing projects located in

Alabama. Each of the projects was built with the pro-

ceeds of a loan which was insured against default by

the Secretary of Housing and Urban Development

("HUD") under authority granted by 12 U.S.C. section

1715l(b). HUD provides such mortgage insurance "to

assist private industry in providing housing for low and

moderate income families and displaced families." 12

U.S.C. section 1715l(a).

A-Ill

Each of these four housing projects is owned by a

separate partnership entity. However, Bailes is a

managing or general partner in each of the entities. At

all times relevant to this action, Bailes Realty Compa-

ny, Of which Bailes is the sole owner, was the manag-

ing agent for the bank accounts of each of the projects.

In consideration for the mortgage insurance pro-

vided by HUD, each of the housing projects entered

into an identical regulatory agreement with HUD.

Each of the agreements was signed by Bailes, on be-

half of the project owners, as managing partner, or

general partner. The agreements prohibit project

owners from using project income or other assets for

any purpose other than “reasonable operating expenses

and necessary repairs" without the prior written ap-

proval of HUD. RI1-4-Ex.A 8(b). The agreements

further provide that the expenditure of project funds

that the expenditure of project funds is prohibited un-

less the project has “surplus cash" and certain other

conditions are met. R1-4-Ex.A 8(e). In the event the

project owners violate any provision of these agree-

ments, the agreements provide that HUD may

A-IV

[a]pply to any court, State or Federal, for specific

performance of this Agreement, for an injunction

against any violation of this Agreement, for the ap-

pointment of an receiver to take over and operate the

project in accordance with the terms of the Agreement,

or for such other relief as may be appropriate, since

the injury to [HUD] arising from a default under any

of the terms of this Agreement would be

irreparable and the amount of damage would be dif-

ficult to ascertain.

R1-4-Ex.A 14(d).

B. Procedural Background

Claiming that Bailes had made expenditures in

violation of the regulatory agreements, HUD

determined that Bailes should be debarred from partici-

pation in HUD programs for a period of five years.

After receiving notice of his proposed debarment,

Bailes requested a hearing before HUD's Board of

Contract Appeals. An Administrative judge of HUD's

Board of Contract Appeals conducted a quasi-judicial

proceeding, including an evidentiary hearing, after

which she ruled from the bench. The administrative

A-V

judge found that Bailes had made a net distribution of

$90,311 in project funds to money market accounts in

his name and that he had not replaced that money

despite knowing that those distributions violated the

regulatory agreements. The adminis .ative judge fur-

ther found that as of the date of the hearing Bailes had

not accounted for or repaid interest earned on these

money market accounts. Accordingly, Bailes and his

affiliate, Bailes Realty Company, were debarred from

participation in HUD programs for five years.

The United States filed suit in the district court,

seeking to recover from Bailes and the other project

owners the $90,311 that had not been returned to the

projects’ accounts as well as statutory damages. The

United States the filed a motion for summary judg-

ment, contending that collateral estoppel barred the

relitigation of issues raised in the administrative pro-

ceeding. The district court granted the government's

motion for summary judgment, and awarded the

government double damages and costs as authorized by

12 U.S.C. section 1715z-4a(c).

Bailes filed a motion in the district court, request-

ing that court reconsider the award of double damages.

A-VI

Bailes noted that 12 U.S.C. section 1715z-4a(c), the

authority pursuant to which the district court awarded

double damages, was passed in 1987, while the viola-

tions of the regulatory agreements took place in 1985

and earlier. Bailes contended that this statutory provi-

sion for double damages was not to be applied retroac-

tively. The district court disagreed, and denied

Bailes's motion.

Bailes now challenges the district court's use of

collateral estoppel, grant of summary judgment in fa-

vor of the United States and award of double damages.

II. DISCUSSION

A. Collateral Estoppel

[1,2] "‘The doctrine of collateral estoppel

precludes a party from relitigating an issue that was

fully litigated in a previous action.'" Palciauskas v.

United States, 939 F.2d 963 (11th Cir.1991) (quoting

Deweese v. Town of Palm Beach, 688 F.2d 731, 733

(11th Cir.1982)). Collateral estoppel may prevent the

relitigation in a judicial action of issues of fact pre-

viously decided in an administrative proceeding.

Pantex Towing Corp. v. Glidewell, 763 F.2d 1241,

1245 (11th Cir.1985).

A-VII

nae

[W]hen an administrative body has acted in a judi-

cial capacity and has issued a valid and final decision

on disputed issues of fact properly before it, collateral

estoppel will apply to preclude relitigation of fact is-

sues only if: (1) there is identity of the parties or their

privies; (2) there is identity of issues; (3) the parties

had an adequate opportunity to litigate the issues in the

administrative proceeding; (4) the issues to be estopped

were actually litigated and determined in the adminis-

trative proceeding; and (5) the findings on the issues to

be estopped were necessary to the administrative deci-

sion.

Id. The district court properly applied the doctrine of

collateral estoppel to preclude the relitigation of the is-

sues of fact determined by the administrative judge of

HUD 's Board of Contract Appeals.

1. Identity of the Parties

The first part of the Pantex Towing test clearly

has been met. The parties involved in the administra-

tive proceeding before HUD's Board of Contract Ap-

peals were Bailes, Bailes Realty Company and the

government. The parties to this action are Bailes,

A-VIII

Bailes Realty Company, the four housing projects, and

the government. Bailes is a general partner of each of

the partnership owners of the housing projects. Ac-

cordingly, the parties involved in this action are either

the parties involved in the administrative action or the

privies of Bailes, a party to the original action. Fur-

thermore, the district court's order granting the

government's motion for summary judgment and dou-

ble damages provides that “the United States shall have

and recover from George L. Bailes, Jr., the sum of ...

$180,622 and costs." R1-9 (emphasis added). Thus,

parties affected by the administrative proceeding and

the events in the district court are the same.

2. Identity of the Issues

The issue addressed by both the administrative

judge and the district court was whether Bailes distrib-

uted project funds in violation of the regulatory agree-

ments. The complaint filed by HUD with the Board of

Contract Appeals charged Bailes with making dis-

bursements from project funds in violation of the

regulatory agreements. R1-4-Ex.E-2 at 5. The admin-

istrative judge recognized that this was an issue at the

A-IX

administrative hearing. R1-4-Ex.E-4 at 538 ("HUD

charged as grounds for debarment, that George Bailes

violated the Regulatory Agreement ... [by] making un-

allowable distribution[s] of project funds ..."). The

claim filed by the United States in the district court al-

leged that the regulatory agreements had been violated

by the prohibited disbursement of project funds. Thus,

the factual issue to be addressed by the district court

was the same issue previously before the administra-

tive judge.

3. Adequate Opportunity

Bailes had an adequate opportunity to litigate the

relevant issue in the administrative hearing, i.e.,

whether he disbursed project funds in violation of the

regulatory agreements. The proceedings before the

administrative judge were quasi-judicial in nature and

included an evidentiary hearing. Furthermore, Bailes

stipulated that numerous disbursements of project

funds were made to money market accounts. Thus,

Bailes had an adequate opportunity to litigate the issue

of whether he distributed project funds in violation of

the regulatory agreements.

A-X

4. Actually Litigated

The issue of whether Bailes disbursed project

funds in violation of the regulatory agreements actually

was litigated and determined in the administrative

hearing. The administrative judge stated that “[t]he

most serious charge [against Bailes] involves the

movement of project operating funds into money

market accounts where they were commingled with

non-project monies in violation of the Regulatory

Agreement." R1-4-Ex.E-4 at 550-51. The administra-

tive judge then determined that more than $90,000 of

that money had not been placed and that “interest

earned by those project funds has not been accounted

for or replaced." Id. at 551. She further described

Bailes's transfer of project funds into money market

accounts as “wholesale violations of ... the Regulatory

Agreement." Id. Accordingly, the issue of whether

Bailes violated the regulatory agreements clearly was

litigated and determined in the administrative proceed-

ing.

5. Necessary to the Administrative Decision

The administrative judge's determination that

Bailes had disbursed project funds in violation of the

A-X]

regulatory agreement was necessary to the administra-

tive decision to debar Bailes from further participation

in HUD programs for five years. The administrative

judge found the charge against Bailes of wrongful dis-

bursement of project funds to be the most serious

charge against him. Id. at 552. Furthermore, the ad-

ministrative judge stated that her decision to debar

Bailes from further participation in HUD programs for

five years was based on the financial violation of the

regulatory agreements. Id. at 553, 554. Thus, the ad-

ministrative judge's finding that Bailes had made un-

authorized use of project funds was essential to her ad-

ministrative decision.

The district court properly applied the five-part

Pantex Towing test. Accordingly, the district court

correctly determined that the doctrine of collateral

estoppel precluded the relitigation of the factual issues

before HUD's Board of Contract Appeals.

B. Summary Judgment

[3,4] When reviewing a district court's grant of a

motion for summary judgment, we employ the stan-

dard applied by the district court when that court con-

A-XIl

sidered the motion. Martin v. Commercial Union Ins.

Co., 935 F.2d 235, 238 (11th Cir.1991). Thus, we ex-

amine the evidence in the light most favorable to the

non-moving party, and determine whether there exist

any genuine issues of material fact which would

preclude the grant of summary judgment. Id. As dis-

cussed above, the doctrine of collateral estoppel

precluded the relitigation of factual issues determined

by HUD's Board of Contract Appeals. The district

court recognized that the administrative judge consid-

ered and resolved the material fact issues in this case:

The Administrative Judge found that Bailes had

made a net distribution of $90,311.00 to his money

market accounts and that he had not replaced that

money despite knowing that these distributions violated

the regulatory agreements. The Administrative Judge

also found that as of the date of the hearing Bailes had

not accounted for or repaid interest earned on these ac-

counts.

R1-8-2 (footnotes and citation omitted.) Thus, the dis-

trict court properly granted the government's motion

for summary judgment.

A-XIII

C. Retroactive Application of 12 U.S.C. section

1715z-4a(c)

[5] Pursuant to 12 U.S.C. section 1715z-4a(c),2

the district court awarded the united States damages in

the amount of $180,622 -- double the amount of pro-

ject funds disbursed in violation of the regulatory

agreements. Because Bailes's violations of the

regulatory agreements occurred before section 1715z-

4a(c) was enacted, Bailes contends that the district

court should not have awarded the government double

damages. We disagree.

2. Section 1715z-4a(c) provides:

In any judgment favorable to the United States entered

under this section [entitled “Double damages remedy

for unauthorized use of multifamily housing project

assets and income"], the Attorney General may

recover double the value of the assets and income of

the project that the court determines to have been

used in violation of the regulatory agreement or any

applicable regulation, plus costs relating to the ac-

tion, including but not limited to reasonable attorney

and auditing fees. Notwithstanding any other provi-

sion of law, the Secretary may apply the recovery,

or any portion of the recovery, to the project or to

the applicable insurance fund under the National

Housing Act.

3. Bailes also claims that section 1715z-4a(c) does not app-

ly to him because he is not a “person” within the

meaning of that section. This claim is without

merit. Section 1715z-4a(a)(2) defines “person” as

any person or entity which owns a project, as identi-

fied by the regulatory agreement, including but not

limited to any stockholder holding 25 percent or

more interest of a corporation that owns the project;

A-XIV

[6,7] First, the change in section 1715z-4a(c) was

remedial in nature. The statutory change provided that

the government's remedy for the unauthorized use of

housing project funds was the recovery of double

damages, i.e., damages equal to double the value of

the assets distributed in violation of the regulatory

agreement. Statutory changes that are remedial in na-

ture apply retroactively. Lussier v. Dugger, 904 F.2d

661, 665 (11th Cir.1990)(quoting United States v.

Vanella, 619 F.2d 384, 386 (Sth Cir.1980)); see also

United States v. Fernandez-Toledo, 749 F.2d 703, 705

(11th Cir.1985)("“[C]ases in this circuit have held that

new Statutes ... that affect only ... remedy will apply

retroactively.").

[8] Second, “a court is to apply the law in effect

at the time it renders its decision, unless doing so

any beneficial owner under any business or trust;

any officer, director, or partner of an entity owning

the project; and any heir, assignee, successor in in-

terest, or agent of any owner. Bailes was a partner

of each of the partnerships owning the projects and

the owner of Bailes Realty Company, the manager

of each of the projects. He clearly is a “person

within the meaning of section 1715z-4a(a)(2).

A-XV

would result in manifest injustice or there is statutory

direction or legislative history to the contrary." Brad-

ley v. School Board of Richmond, 416 U.S. 696, 711,

94 S.Ct. 2006, 2016, 40 L.Ed.2d 476 (1974).4 To

determine whether retroactive application of section

1715z-4a(c) would result in manifest injustice, Bradley

requires that we review three factors: “(a) the nature

4. We recognize that there exists some confusion as to the

applicability of this Bradley analysis. See Wright v.

Director, Federal Emergency Management Agency,

913 F.2d 1566, 1573 (11th Cir. 1990)("[T]he princi-

ple affirmed in Bradley has generated some confu-

sion in the federal courts, since it appears to conflict

with the...long-standing rule of statutory construc-

tion, restated in Bowen [v. Georgetown Univ.

Hosp., 488 U.S. 204, 208, 109 S.Ct. 468, 471, 102

L.Ed.2d 493 (1988)], that favors the prospective ap-

plication of statutes and regulations."). The

Supreme Court has declined to clarify this confu-

sion. See Kaiser Aluminum & Chemical Corp. v.

Bonjorno, 494 U.S. 827, —, 110 S.Ct. 1570, 1577,

108 L.Ed.2d 842 (1990)("We need not in this case

... reconcile the two lines of precedent represented

by Bradley ... and [Bowen]..."). This circuit has

relied upon the Bradiey analysis to determine the

retroactive application of statutory changes. See

Federal Deposit Ins. Corp. v. 232, Inc., 920 F.2d

815, 818 n. 4(11th Cir.1991)(The court provided

several examples of this circuit's utilization of the

Bradley analysis.). Thus, unless otherwise directed

by the United States Supreme court or the Eleventh

Circuit en banc, we are bound by precedent to apply

the Bradley analysis. See United States v. Thomas,

916 F.2d 647, 652 n. 6 (11th Cir. 1990).

A-XVI

requires that we review three factors: "(a) the nature

and identity of the parties, (b) the nature of their

rights, and (c) the nature of the impact of the change int

law upon those rights." Id. at 717, 94 S.Ct. at 2019.

Our review of these factors leads us to the conclusion

that manifest injustice would not result from the

retroactive application of section 1715z-4a(c).

"The first consideration, the nature of the parties,

arises from the distinction ... between private disputes

and ‘great national concerns.'" United States v.

Marengo County Comm'n, 731 F.2d 1546, 1554 (11th

Cir.1984). This case is not merely the result of a dis-

pute between two private individuals. Rather, it in-

volves HUD, an administrative agency of the federal

government, and an issue of national concern, the

utilization of private industry for the provision of hous-

ing for low and moderate income families and dis-

placed families. Thus, consideration of the first Brad-

ley factor supports the retroactive application of the

double damages penalty of section 1715z-4a(c).

We next consider the nature of the parties’ rights.

“The Court has refused to apply an intervening change

A-XVII

to a pending action where it has concluded that to do

so would infringe upon or deprive a person of a right

that had matured or become unconditional." Bradley,

416 U.S. at 720, 94 S.Ct. at 2020. Section 1715z-

4a(c) does not affect any substantive right of Bailes.

The change in the statute was remedial. As discussed

above, the remedial nature of the statutory change sup-

ports the retroactive application of section 1715z-4a(c).

Furthermore, the regulatory agreements provide that

HUD may seek any “relief as may be appropriate. "

R1-4-Ex.A par. 14(d).

The third Bradley factor requires us to consider

whether “a new and unanticipated obligation [][would

be] imposed upon a party without notice or an op-

portunity to be heard." Bradley, 416 U.S. at 720, 94

S.Ct. at 2021. Section 1715z-4a(c) does not impose a

new obligation upon Bailes. Instead, it imposes an ad-

ditional remedy on already proscribed conduct. As

stated by the district court, "[t]he statute imposed no

new obligation; it merely reinforced an existing one."

R1-14 at 3. Thus, after consideration of the factors set

forth in Bradley, we determine that the application of

A-X VIII

section 1715z-4a(c) to this case does not result in

“manifest injustice."

Under Bradley, we also must determine from the

statute itself and its legislative history whether Con-

gress intended the statute to apply prospectively only.

The text and legislative history of section 1715z-4a(c)

are silent on this issue. Accordingly, we hold that the

district court correctly held Bailes responsible for dou-

ble damages as provided by section 1715z-4a(c).

AFFIRMED.

A-XIX

APPENDIX B

THE UNITED STATE COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 89-7850

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

PEPPERTREE APARTMENTS

CITY COURT II APARTMENTS, et al.,

Defendants,

GEORGE BAILES, JR.,

Defendant-Appellant.

On Appeal from the Mer = States District Court for

the

Northern District of Alabama

i

ON PETITION(S) FOR REHEARING AND SUG-

GESTION(S) OF REHEARING EN BANC

Sg rere , 11th Cir., 19 , 942

.2d 1555).

Before: BIRCH, Circuit Judge, DYER, Senior Circuit

- Judge and MOYE®%, Senior District Judge.

PER CURIAM:

B-XX —

[X) The Petition(s) for Rehearing are DENIED and no

member of this panel nor other Judge in regular active

service on the Court having requested that the Court be

polled on rehearing en banc (Rule 35, Federal Rule of

Appellate Procedure; Eleventh Circuit Rule 35-5), the

Suggestion(s) of Rehearing En Banc are DENIED.

{ ] The Petition(s) for Rehearing are DENIED and the

Court having been polled at the request of one of the

members of the Court and a majority of the Circuit

Judges who are in regular active service not having

voted in favor of it (rule 35, Federal Rules of Appel-

late Procedure; Eleventh Circuit Rule 35-5), the Sug-

gestion(s) of Rehearing En Banc are also DENIED.

{ ] A member of the Court in active service having re-

quested a poll on the reconsideration of this cause en

banc, and a majority of the judges in active service not

having voted in favor of it, Rehearing En Banc is

DENIED.

ENTERED FOR THE COURT:

B-XX]

UNITED STATES CIRCUIT JUDGE

*Honorable Charles A. Moye, Jr., Senior U.S. Dis-

trict Judge for the Northern District of Georgia, sitting

by designation.

Entered December 6, 1991.

B-XXII

APPENDIX C

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

Southern Division

Case No. 89-P-0794-S

THE UNITED STATES OF AMERICA,

Plaintiff,

vs.

PEPPERTREE APARTMENTS; CITY

COURT Il; RAINBOW APARTMENTS

COMPANY; COLLEGE MANOR LTD.;

BAILES REALTY COMPANY; GEORGE

L. BAILES, JR.,

Defendants.

ORDER

Pursuant to the Opinion filed herewith, the court OR-

DERS as follows:

Defendants’ motion to dismiss is DENIED.

Plaintiff's motion for summary judgment is

GRANTED. The court FURTHER ORDERS that the

United States shall have and recover from George L.

Bailes, Jr., the sum of One Hundred Eighty Thousand

Six Hundred Twenty-Two Dollars ($180,622.00) and

costs. Any costs other than taxable costs shall be

C-XXIIl

determined under Northern District Rule 11 and not

delay the finality of this judgment.

This the 12th day of July, 1989.

_/S/ Sam Pointer

United States District Judge

C-XXIV

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

Southern Division

Case No. 89-P-0794-S

THE UNITED STATES OF AMERICA,

Plaintiff,

vs.

COURT Il; RAINBOW APARTMENTS

COMPANY; COLLEGE MANOR LTD.;

BAILES REALTY COMPANY; GEORGE

)

)

)

)

)

PEPPERTREE APARTMENTS; CITY )

)

)

)

L. BAILES, JR., )

)

)

Defendants.

OPINION

The United States of America ("United States")

brings this action pursuant to Section 221 of the Na-

tional Housing Act, 12 U.S.C. section 1715(1), alleg-

ing defendants have taken and retained $90,311

from four housing projects in violation of this con-

tractual obligations. Peppertree Apartments, City

Court Il Apartments, Rainbow Apartments, and Col-

lege Manor Apartments are multifamily housing

projects, each built with proceeds of a loan which is

insured against default by the Secretary of Housing

and Urban Development ("HUD"). Each of the

projects is owned by a separate partnership entity.

C-XXV

George L. Bailes is a managing or general partner in

each of these entities and is the sole owner of Bailes

Realty Company which, at all times relevant to this

action, was the managing agent for each of the

projects’ bank accounts. Each of the owners entered

into an identical Regulatory Agreement contract with

HUD. Among the provisions in this agreement was a

provision which prohibited owners from using project

rents and income for any purpose other that "rea-

sonable operating expenses and necessary repairs."

Para.8(b).! Among the remedies available should

the owner violate the regulatory agreement is a provi-

sion that the government “may recover double the

value of the assets and income of the project that [a]

court determines to have been used in violation of

the regulatory agreement. 12 U.S.C. 1715z-4a(c)."

The government may also recover the reasonable

costs it incurs in bringing the action, including rea-

sonable attorney and auditing fees. Id.

1. Paragraph 8(e) provides that funds can be used for other

purposes when the project has “surpluss cash" or

when the owner has HUD's pnor wnitten approval

for an otherwise unauthorized expenditure.

C-XXVI

Defendants move to have this complaint dis- —._

missed, asserting that the sum made the basis of this

suit were used for "the necessary and reasonable ex-

penses incurred for operating the projects.” (Bailes

Affidavit). Plaintiff United States moves for summary

judgment against the defendant. Plaintiff's motion is

based on findings of an Administrative Judge of

HUD's Board of Contract Appeals made after a quasi-

judicial proceeding, including an evidentiary hearing,

in which the issues now raised by the plaintiff in this

case were fully adjudicated. (In the Matter of George

L. Bailes, Jr., HUDBCA No. 88-3412-D27; Docket

No. 88-1214-DB.) (Debarment Hearing held on No-

vember 1-4, 1988). The Administrative Judge found

that Bailes had made a net distribution of

$90,311.00 to his money market accounts! and

that he had not replaced that money despite knowing

that these distributions violated the regulatory agree-

1. The diversions totalled $1,519,711.00. Following an

audit by HUD's Office of Inspector General, Bailes

returned $1,414,800.00; following the administra-

tive proceeding, Bailes returned an additional

$14,600.00.

C-XXVII

ments.! (Plaintiff's Exhibit E-4 at 541-543, 550-

552). The Administrative Judge also found that as

of the date of the hearing Bailes had not accounted

for or repaid interest earned on these accounts. The

United States now seeks to recover the amount that

has not been returned to the projects, $90,311.00,

and statutory damages.

Under the doctrine of collateral estoppel, the

defendants may not relitigate the issues raised in the

administrative proceeding and may not dispute the

findings made by the Administrative Judge after the

proceeding. Pantex Towing Corp. v. Glidewell, 763

F.2d 1241 (11th Cir. 1985). The court is of the

opinion that these findings fully support the relief re-

quested. Accordingly plaintiff's motion for summary

judgment is due to be GRANTED. Defendants’ mo-

tion to dismiss is due to be DENIED.

This the 12th day of July, 1989.

/S/ Sam Pointer

1. HUD'‘s complaint alleged that Bailes had distributed

$1,519,711.00 in project funds in violation of the

Regulatory Agreements.

C-XXVIII

United States District Judge

C-XXIX

APPENDIX D

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

Southern Division

Case No. 89-P-0794-S

THE UNITED STATES OF AMERICA,

Plaintiff,

vs.

COURT Il; RAINBOW APARTMENTS

COMPANY; COLLEGE MANOR LTD.;

BAILES REALTY COMPANY; GEORGE

)

)

)

)

)

PEPPERTREE APARTMENTS; CITY )

)

)

)

L. BAILES, JR., )

)

)

Defendants.

ORDER

For the reasons expressed in the accompanying

opinion, the motion to reconsider of defendant

George L. Bailes, Jr., is hereby DENIED, and the mo-

tion of plaintiff United States of America to dismiss

the counterclaim is DENIED.

This the 10th day of October, 1989.

/S/ Sam Pointer

United States District Judge

D-XXX

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

Southern Division

Case No. 89-P-0794-S

THE UNITED STATES OF AMERICA,

Plaintiff,

VS.

PEPPERTREE APARTMENTS; CITY

COURT Il; RAINBOW APARTMENTS

COMPANY; COLLEGE MANOR LTD.;

BAILES REALTY COMPANY; GEORGE

L. BAILES, JR.,

Defendants.

OPINION

This case grows out of agreements between

defendants and the Secretary of Housing and Urban

Development (HUD), involving the construction by

defendants of multifamily housing projects with loans

insured by HUD. In return for the loan insurance,

HUD restricted the rents which defendants could

charge and the uses to which the defendants could

put income from the projects. In this action, the

United States charged that the defendants, in viola-

tion of the agreements, retained $90,311.00 from

project rents and income. On July 12, 1989, this

court granted summary judgment in favor of the

D-XXxXI

United States, and entered a judgment against

defendant George L. Bailes, Jr., of $180,622.00,

double the amount retained.

The case is now before the court on a motion by

defendant Bailes to reconsider the award of double

damages, as well as a motion by plaintiff United

States of America to dismiss Bailes’ counterclaim on

jurisdictional grounds. This court concludes that the

award of double damages was appropriate, and that

the counterclaim is not to be dismissed.

2. Defendant's Motion to Reconsider

This court awarded double damages pursuant to

12 U.S.C. section 1715z-4a(c), which explicitly pro-

vides for such awards. Defendant points out that

this section was passed in 1987, and that the

defendants’ violations of the agreements took place

in 1985 and earlier. Defendant contends that the

Statutory provision for double damages ought not be

applied retroactively. This court, however, dis- |

agrees.

The leading case in this area is Bradley v. Rich-

mond School Board, 416 U.S. 696 (1974), in which

D-XXxXIl

the Supreme Court discussed the retroactive effect of

a statute authorizing awards of attorney's fees in

certain cases. Bradley invoked “the principle that a

court is to apply the law in effect at the time it

renders its decision, unless doing so would result in

mani‘2st injustice or there is statutory direction or

legislative history to the contrary." Id. at 711. While

Bradley's holding focussed on appellate courts’ ap-

plication of newly passed statutes to pending cases,

Bradley's analysis is equally applicable here.

There is no indication that Congress intended

that 12 U.S.C. section 1715z-4a(c) should apply only

prospectively. Nor do the statute's purposes imply

such an intent. Accordingly, the statute is to be ap-

plied retroactively in this case, absent “manifest in-

justice." Of the three factors identified in Bradley as

relevant to "manifest injustice"; all lead to the con-

clusion that retroactive application is appropriate

here. First, this is not "a routine private lawsuit,"

416 U.S. at 718. Like Bradley, this case involves a

“great national concern." Id. at 719. Second, the

Statute in question does not affect a “matured or un-

D-XXxXiIll

conditional right" of the defendant, id. at 729. Third,

the statute cannot be said to have imposed “new and

unanticipated obligations" on the defendant “without

notice or an opportunity to be heard.” Id. The

- Statute imposed on new obligation; it merely rein-

forced an existing one. If the defendant was relying

on a scheme which threatened only single damages,

that reliance was unjustified.

In short, the statute in question is to be applied

retroactively, as are most statutes “that affect only

procedure or remedy.” United States v. Fernandez-

Toledo, 749 F.2d 703, 705 (11th Cir. 1985). Ac-

cordingly, defendant's motion to reconsider is to be

denied.

3. Plaintiff's Motion to Dismiss Counterclaim

The counterclaim charges that the United States

wrongly denied the defendants rent increases and

surplus cash from the housing projects. Each count

is styled as a breach of contract claim. Defendants

seek injunctive and declaratory relief, and monetary

relief of more than two million dollars. The United

States moves to dismiss the counterclaim, arguing

that this court has no jurisdiction.

D-XXXIV

The United States directs this court's attention to

28 U.S.C. section 1346(a)(2), sometimes known as

the Tucker Act. That section grants jurisdiction to

the Claims Court over breach of contract claims

against the United States. It also grants jurisdiction

to the district court over contract claims not exceed-

ing $10,000.00. This court knows of no statute

which confers jurisdiction on the district courts for

contract claims exceeding $10,000.00. Accordingly,

the Claims Court's jurisdiction over such claims is ex-

clusive, notwithstanding defendants’ arguments that

judicial economy supports a contrary rule.

Yet this court cannot, at this early stage, con-

clude that the counterclaim falls within that exclusive

jurisdiction of the Claims Court. First, defendants

seek, inter alia, non-munetary equitable relief. The

Claims Court may not have the power to grant that

relief. Bowen v. Massachusetts, 108 S.Ct 2722,

2737 (1988). Second, if the counterclaim is in sub-

stance, a request for judicial review of adverse action

by an administrative agency, this court may have

jurisdiction pursuant to 5 U.S.C. section 702 and 28

U.S.C. section 1331.

D-XXXV

This court's jurisdiction under 5 U.S.C. section

702 and 28 U.S.C. section 1331 may extend even to

the granting of the monetary relief which defendants

seek. Bowen v. Massachusetts, supra, and Esch v.

Yeutter, 876 F.2d 976 (D.C.Cir. 1989) hold that dis-

trict courts Can in Certain cases order the United

States to pay sums greater that $10,000, the Tucker

Act notwithstanding. Though Bowen v. Massachu-

setts and Esch involved jurisdiction over complaints,

their reasoning is equally applicable to counterclaims.

This court Cannot yet determine whether it has

jurisdiction over all or part of the counterclaim.

Given that uncertainty, it is proper to retain jurisdic-

tion until the substance of the claim can be

determined. Accordingly, the motion by the United

States to dismiss the counterclaim is to be denied,

with the understanding that this court may at some

time revisit the issue.

This the 10th day of October, 1989.

_/S/ Sam Pointer

United States District Judge

D-XXXVI

APPENDIX E

UNITED STATES OF AMERICA

DEPARTMENT OF HOUSING

AND URBAN DEVELOPMENT

BOARD OF CONTRACT APPEALS

WASHINGTON, D. C.

GEORGE LEWIS BAILES, JR.,)

Respondent JHUDBAC NO.

)88-3412-D27

)

)DOCKET NO.

)88-1214-DB

(Transcipt excerpt, taken on November 4, 1988)

DECISION

The purpose of debarment is to assure the

Government that it only does business with

responsible contractors and grantees. Responsibility

is a term of art in government contract law, and it

means the integrity and honesty of a contractor, as

much as his ability to perform a contract properly.

The test for the need for debarment is present

responsibility. However, a finding of present lack of

responsibility may be on past acts.

George Bailes, Jr. has been charged with

serious repetitive and pervasive deficiencies in his

E-XXXVII

role as general partner and management agent for

the four HUN projects. The most serious charge in-

volves the movement of project operating funds into

money market accounts where the were commingled

with non-project monies in violation of the Regulatory

Agreement. And over $90,000‘has still not been re-

placed.

Mr. Bailes knew the money was not surplus

cash. He is law trained and certainly understands

the provisions of the various contracts he signed. |

hold him to those contract provisions.

As he acknowledged in testimony, two wrongs

don't make a right. Ant dispute over rental increases

have no bearing and in no way justify or mitigate the

wholesale violations of Paragraph 8 of the Regulatory

Agreement.

Funds of the project were not handled by Mr.

Bailey as a trustee should have handled funds, even

if they were to his mind held in trust. They were, in

fact, converted to the use of the partnerships to pay

partnership debts. | find this outrageous, inexcusable

and shocking in its disregard for the financial sanctity

E-XXXVIII

of the projects as opposed to the financial sanctity of

the partnerships and its partners.

It is conduct totally lacking in responsibility. It

went on after it's after its allowability was brought to

Mr. Bailey attention by his own CPA. Despite

promises to repay, | find little actual performance of

such promises to repay.

Paying $14,000 on a $115,000 bill, without

taking interest due into consideration, is so insuffi-

cient to call the entire promise to repay into question.

Likewise, payment of notes and construction

expenses are not allowed out of project operating

funds. The agreements are clear on that fact. Any

construction of development expenses not covered

by escrow must be paid out of personal fund or sur-

plus cash only. This was a Clear violation of Para-

graph 8 of the Regulatory Agreement, and ! find that

the disregard of that requirement showed a lack of

responsibility, if it was due to negligence or a

deliberate violation.

The other charges are less serious than this,

but taken in their entirety form a pattern of stubborn-

E-XXXIX

ness, refusal to give heed to well-substantiated, doc-

uments and warranted requests and demands by

HUN for replacement of project management. | do

see improvements in these areas, but only after im-

position of a Temporary Denial of Participation and a

freezing of rent increases to obtain contract com-

pliance.

Some of the deficiencies were not easy to

solve, particularly at City Court Il, and some were

solved and corrected in due course, but the overall

picture is of a contractor lacking responsibility in the

overall refusal to comply.

The present attitude of Mr. Bailey, as he stated

to me right here in this courtroom, on the most |

serious Charges to me, standing alone, without con-

sidering any of the other charges, merits and, indeed,

demands a five year sanction.

Taking into consideration the time for which

calculation of those five years is to begin, | find the

debarment of George L. Bailey, Jr. and his affiliate,

Bailey Reality Company, is warranted and necessary,

up to and including August 15, 1992. The financial

E-XL

violations alone cause me to take this action. This is

the end of my decision.

E-XLI

CERTIFICATE OF SERVICE

! Roy Manly West do hereby further certify

that | have complied with the Supreme Court Rule

29.4. (a) by mailing a copy of this petition to Solicitor

General, Department of Justice, Washington D.C.

20530 and | have served three copies of the at-

tached petition upon the United States of America by

placing three copies of same in the United States

Mail properly addressed and first class postage

prepaid to Linda S. Trippe Assistant U. S. Attorney

1800 5th Avenue North Suite 200, Birmingham, Ala-

bama 35203 telephone number (205) 731-1785 on

this the 2p day otf weet _, 1991.

he Ju. —

oy Ww West, and Ralph J. Bolen

Attorneys for Petitioner

423 Frank Nelson Building

Birmingham, Alabama 35203

Telephone: (205) 322-2463

E-XLII