The former executive director of the Martin Luther King Housing Development Association on Wednesday disputed recent claims made by the nonprofit’s board of directors that he improperly managed agency finances and misspent funds without board approval.

“I recognize that it’s important for them to push the blame onto someone else,” Felix Flannigan said. “But as far as me being some Lone Ranger that was off spending all this money on my own, that’s entirely untrue.”

During a telephone interview with The News Tribune, Flannigan challenged recent allegations by board president Jeffrey Bruce, who previously told the newspaper the board had fired Flannigan and the agency’s former chief financial officer in late July due to their “lack of financial controls and oversight.”

Among other things, Bruce claimed Flannigan had misspent agency money, did not pay contractors, insurance premiums and other bills, and conducted unauthorized business without the board’s consent, including putting up an apartment building as collateral for a property loan that the agency later defaulted on.

By all accounts, the nonprofit association, which provides, manages and develops affordable housing in Tacoma, faces about $1 million in standing debt.

Board members are conducting an investigation of the agency’s finances, including whether Flannigan and former CFO Val Tiller improperly managed them, Bruce said. The agency is also seeking about $6,000 from the city to hire an outside accountant to audit its books. Board members will meet with a city panel today to update them on the agency’s finances.

Until Wednesday morning, Flannigan, the affordable housing agency’s charismatic front-man for nearly a decade, had not returned telephone calls seeking comment.

Flannigan said he has been at his parents’ home in Georgia and only recently became aware that the newspaper was trying to contact him.

He denied Bruce’s claims about mismanagement, blaming the agency’s financial crisis on a number of external factors. The economic downturn, the loss of city funding orchestrated by his rivals and the agency’s takeover of a homeless shelter all contributed in recent years to draining the agency’s finances, Flannigan contends.

“I have never in my 10 years in the organization even cut a check,” Flannigan added, saying he largely separated himself from financial management. “That was always done by the finance department with the proper paperwork and authorization from the board.”

Bruce said Tiller and Flannigan were fired on July 31 after neither could address pressing financial questions or fully explain how the association’s funds had been spent.

Flannigan denied the board “fired” him.

“I was laid off,” he said. “They simply didn’t have the money to pay me anymore, period.”

Tiller also has said he hadn’t been paid and so demanded to be laid off.

Formal letters provided to both men, read aloud to The News Tribune by Bruce, cite “today’s economic conditions” and specifically say each was being “laid off” and could seek unemployment benefits. But Bruce said those letters were carefully worded on the advice of the board’s attorney, adding that board members truly were firing Flannigan and Tiller for their financial mismanagement.

For years, financial problems have dogged the housing development association. A scathing 2002 program audit, commissioned by the city and led by nonprofit consultant Elizabeth Heath, found rampant financial control and oversight problems existed within the agency.

Among other things, the audit – based on a review of financial records and 56 interviews with employees, board members, city officials and others – recommended Flannigan immediately “be requested to resign.”

On Wednesday, Flannigan called the audit “a tool” purchased by his detractors to be used against him. He claimed the board later hired forensic accountants, who concluded Heath’s audit wasn’t credible.

“There was nothing there that the board found, when they went in and audited it,” Flannigan said. “We were being messed with politically.”

City records show a different finance audit issued by the certified public accounting firm of Johnson, Stone and Pagano in October, 2002 that found the agency had “complied, in all material respects, to requirements” of federal funding programs in the previous year’s financial statements.

But that audit also “noted certain immaterial matters involving the internal control structure and other operational matters” and recommended some changes.

Mayor Bill Baarsma said this week that a draft report of Heath’s audit inappropriately was released to the public at the behest of then-City Manager Ray Corpuz, prior to the association’s board having a chance to review and consider the document.

“This is not the practice professionally, and it sullied the validity of Liz’s work and put the board on the defensive,” Baarsma said in an e-mail.

In a recent interview, Heath said every finding in her 2002 report can be backed up by records or interviews.

“The board circled the wagons around Felix,” Heath recalled. “They accused us as being out to get him. There was nothing further from the truth.”

Still, Flannigan insisted Wednesday that the audit, combined with what he described as a vendetta carried out against him by former City Councilman Tom Stenger, dramatically sapped the association of needed funding from the city over the next several years.

“He spent all of his waking hours trying to screw this organization over,” Flannigan said of Stenger, a former employee of the association who Flannigan had fired.

“Hence the reason that we didn’t get any type of development funding for the city for the four years while (Stenger) was there (on the council).”

Stenger, who served on the City Council from 2004 through 2007, called Flannigan’s statements “lies.”

Flannigan “got a lot more money (from the city) after (Heath’s) audit was completed,” Stenger added. “That’s also untrue.”

City records show that since Heath’s audit, a city-appointed panel directed about $952,000 in federal “pass-through” funds to the association in at least six different loans from 2003 to 2005. The association still owes the city more than $915,000 on those loans, the records show.

City housing manager Ric Teasley said he believed the city had only approved one loan – in 2003 – since the audit. He was still trying to determine Wednesday whether the loans on record dated after 2003 were approved then or simply distributed during those years from prior appropriations.

Along with his claimed lack of city funding, Flannigan said he inherited nearly $400,000 in debt when he took over the association after longtime executive director Alberta Canada died in 1999.

Flannigan added that the city and the association’s board members then “pressured” the association to take over the failing King Center’s homeless shelter, which he said was facing $410,000 in unpaid back taxes.

“We had to pay those off,” Flannigan said. “The IRS was preparing to personally lien board members.”

“They told me to keep my mouth shut and take over the shelter,” added Flannigan, explaining that the agency’s own board members and city officials, including Corpuz, put “lots of pressure on us” to take over shelter operations.

“There was an additional $200,000 per year that we had to make up for that shortfall,” Flannigan said. “The city never adequately funded (the shelter). That’s why we said over a year ago, we couldn’t go on any longer with the shelter.”

After Catholic Community Services took over the shelter last year, Flannigan contends, the city began “funding the shelter fully.”

“So what does that tell you,” he asked, claiming the shelter drained about $1.2 million from the association’s finances. “They’ve been politically messing with us for years.”

The association “would be able to (continue to) operate if the city is supportive,” he added. “That’s all it takes – the support from the city.”

But Flannigan seemed publicly supportive of the association taking on the shelter at the time of the merger, telling The News Tribune in 2001 “it feels right.”

“I know what the King Center represents to the community,” he said then. “There’s not a whole lot of difference between us.”

City manager Eric Anderson, who was hired in 2005, said Wednesday that the city appropriated nearly $164,000 for the shelter in 2008. After CCS took it over in 2009, Anderson said, the city gave $188,000.

“That’s less than a 10 percent difference,” said Anderson, noting such year-after-year differences aren’t unusual. “The numbers speak for themselves.”

Even though Flannigan said city funding was drying up and contributing to the agency’s financial problems, the association still largely flourished under his direction, he said – until, that is, the economy turned.

“When the market took a hit a couple of years ago, that’s when we knew things were going to get tough,” Flannigan said.

Along with mounting bills, the agency couldn’t close an investment fund it planned to establish – which Bruce has said cost the agency $1 million.

To compensate, Flannigan said, he began cutting expenses, laying off staff, cutting pay and taking other steps. All the while, he said, he and Tiller kept the board informed about the dire financial picture.

Board members gave him permission to use the Charlesbee apartment building – a 39-unit low-income complex – as collateral to obtain a loan to purchase land near the Tacoma Mall, added Flannigan.

That directly disputes Bruce’s contention that the board was unaware of that deal until the agency had defaulted on the property loan and ultimately lost both properties to foreclosure. The board is now seeking legal options to take back ownership of the Charlesbee, Bruce said.

“We can’t do a transaction without the board’s approval,” Flannigan said. “Absolutely, we discussed all of the risks during board meetings.”

Flannigan, who said he plans to return to Tacoma next week, said he has no plans yet for his future.

Since his departure, Flannigan has continued to speak with remaining agency staff by phone, he said, trying to help with the ongoing financial review.

“The reality is, we put our hearts and souls into running that agency and did a lot of good things for the community,” Flannigan said.

“We needed all the help that we could get. There was a lot going on, a lot at stake. Look at what Hilltop was like during the 1990s, and look what it’s like today. We’re directly responsible for that change.”

Lewis Kamb: 253-597-8542

lewis.kamb@thenewstribune.com