FEDS TO FOCUS ON DALLAS STATE REP. TERRI HODGE'S RENT ARRANGEMENT WITH DEVELOPER

DALLAS DISTRICT ATTORNEY BILL HILL'S OFFICE TOLD TO DEFER STATE INVESTIGATION OF HODGE

Nov 10, 2005 10 pm US/Central
By Todd Bensman and Robert Riggs, Investigation Unit, CBS-11 News

The U.S. Attorney's office in Dallas and the FBI will investigate whether any federal crimes occurred when Dallas State Rep. Terri Hodge accepted at least $32,000 in unreported rent and utilities from a developer and then provided her political support to his projects, two sources have told CBS-11 News.

The government's new focus in a pre-existing FBI corruption investigation centering on an affordable housing boom in Dallas came shortly after CBS-11 disclosed that Southwest Housing Development Company CEO Brian Potashnik arranged for Hodge to live in one of his apartment complexes since April 2002 and has since paid most of her monthly $1,000 rent and utilities there. The CBS-11 report also cited state public records that showed how Hodge used her elected position to provide critical political support that helped Potashnik gain federal subsidies for his developments - before and after she began accepting his financial support.

After seeing a CBS-11 report published Nov. 3, the office of Dallas County District attorney Bill Hill wanted to open a criminal investigation into whether Hodge violated state income disclosure requirements, or other laws, according to a knowledgeable source in Hill's office. Hodge has never reported any of Potashnik's rent subsidies on personal finance disclosure forms as either income or gifts, records from 2002 through 2005 show.

But the source said U.S. Attorney Richard Roper and the FBI directed that any state investigation by his state counterpart's public corruption division be put on hold pending a federal probe into the rent arrangement between Potashnik and Hodge.

A source in U.S. Attorney Richard Roper's office confirmed that Hill's office was told to stand down until the FBI could investigate the matter.

In addition, a source in the office of Travis County District Attorney Ronnie Earle, which enforces laws for state legislators, said the CBS-11 report about Hodge's living arrangements also prompted a decision to determine whether Hodge violated state law. It remained unclear Thursday whether the Dallas-based U.S. Attorney's office also directed Earle's office in Austin to hold off.

At the time of the CBS-11 report, the FBI was already investigating Potashnik and his company as part of a wide-ranging bribery, extortion and money laundering sting centering on a host of Dallas city officials, contractors and non-profit groups involved in an affordable housing boom. A primary issue has been whether developers were extorted to pay council members, planning commissioners and contractors for permission to build affordable housing in southern Dallas. Hodge's District 100 encompasses a broad swath of an area targeted by affordable housing developers like Potashnik.

In August, Hodge's name surfaced among many in a broad FBI subpoena for public records at Dallas City Hall, which turned up no documents bearing her name.

But there was no indication that the FBI was specifically interested in the financial and political relationship between Potashnik and Hodge until CBS-11 aired two reports about them in August and then published a Nov. 3 report disclosing the free rent and utilities. The Nov. 3 report quoted three former Southwest Housing employees and cited internal rent records.

None of the three former employees had ever been approached by the FBI, and Hodge's attorney Mike Snipes said his client was not approached by the FBI for an interview until after CBS-11 aired its first reports in August. In addition, Potashnik discontinued his rent payments to Hodge but only until after the CBS-11 reports.

Hodge has refused to cooperate with the FBI, and no subpoena has been issued to compel her to testify before a grand jury.

On Thursday, Snipes, a former federal prosecutor, reiterated that his client was innocent of any state or federal law violation. In previous interviews, Snipes has acknowledged the free rent to his client but said the state lawmaker and Potashnik believed the arrangment was not improper.

"My client is innocent," he said.

Potashnik's attorneys have declined to comment on the CBS-11 stories about his relationship with Hodge.

Public records show Hodge lent crucial political support, both in official correspondence under her State Representative letterhead and in public testimony to a half dozen Potashnik projects before and after she began accepting $700 monthly rent and an estimated $100 monthly utilities payments. The records show in some cases she lent Potashnik this support despite strong opposition from her own constituents and for Potashnik projects that were not in her Dallas District 100.

One development she supported that generated heated neighborhood opposition was the complex in which she now lives, the Rosemont at Arlington Park near Parkland Memorial Hospital. In 2000, residents submitted opposition petitions they said represented 97 percent of the area's homeowners to the Texas Department of Housing and Community Development. Hodge, according to transcripts, testified in favor of the project.

Neighborhood activists said they had always been aware that Hodge later moved into the complex they had fought. This week, they said they felt angered and betrayed by Hodge after CBS-11 revealed her free rent and utilities arrangement with the developer, as well as how she lent Potashnik her political muscle in Austin.

SeGwen Tyler, an Arlington Park area leader, said the residents of her working class neighborhood deserve a full criminal investigation - and justice if their elected representative is found to have gone against them for the price of rent money.

"Everyone knew this neighborhood was against those apartments. Everyone at the City of Dallas. Everyone knew," Tyler said. "Yet it still got built. It still got built."

Tyler said she recalls Potashnik himself spoke to a group of residents at the time and, in a tone she described as arrogant, boasted to them the affordable housing project would be approved despite their unanimous opposition.

"I think it should be investigated from the very beginning. Not just starting with the state representative," Tyler said. "I want it to be investigated from the very beginning with the school district, the city council, everyone needs to be investigated at this point in time."

To comment on this story, email: Todd Bensman and Robert Riggs