98. Copies of the Barrington Plaza rental receipts No. 1614 and

936 dated March 2, 1966, and April 6, 1966, respec-

tively, showing that Harry Brevis paid $300 cash for his

rent on each of those dates..

99. Copy of Barrington Plaza tenant account card for Diane

Cabeen, apartment B-1013_ .

100. Copy of Diane Cabeen's canceled check dated February 22,
1966, for $500 made payable to Barrington Plaza for
rent__

101. Affidavit of Diane Cabeen dated June 17, 1966, in which

she attests that she paid the Barrington Plaza $500 by

her check dated February 22, 1966, for her rent...

102. Affidavit of Barbara Snett, BPE bookkeeper, dated

August 19, 1966, in which she attests that she was

instructed to "enter adjustments" on tenants' room

ledger cards._

103. Copies of Barbara Snett's notes on which are listed names

of certain tenants whose cards "were adjusted" per in-

struction from Crouse, Karnes, and Riker__

104. Summary of Barrington Plaza Enterprises deals whereby

apartments were reportedly given for consideration

other than cash....

105. Letter dated January 31, 1966, addressed to Walnut

Manor, Inc., Los Angeles, Calif., Louis Herson, presi-

dent, from D. D. Karnes, Barrington Plaza, providing

for Karnes to give Herson two Barrington Plaza apart-

ments for a 1-year period in exchange for one apartment

by Herson at another location_.

106. Copies of subleases between Louis Herson and the tenants

of Barrington Plaza apartments B-605 and B-712__

107. Copy of letter dated June 20, 1966, addressed to J. E.

Benton Management Corp., agent for FHA in charge

of the Barrington Plaza project, from Miss M. J. Benja-

min stating that she intends to continue paying her rent

to Mr. Herson per her sublease.......

108. Copy of Barrington Plaza tenant account card for Felix

Mendelson, apartment A-2309_

109. Affidavit of Felix Mendelson dated July 5, 1966-

110. Affidavit of Mike Sherman dated June 16, 1966-

111. Copy of invoices for color TV set purchased by Karnes

with Barrington Plaza funds from Sherman's TV and Hi-

Fi Store. One invoice is fictitious, charging the cost to

repairs of the Barrington Plaza antenna system, and the

other is a true copy for Sherman's records.

112. Copy of Barrington Plaza check No. 1333 dated May 9,
1966, in the amount of $655.20 paid to Sherman TV
service for a color TV set. Check was drawn by
D. Karnes on the Barrington Plaza operating account
No. 4517 at the Crocker-Citizens National Bank..

113. Copies of canceled checks drawn by Joseph Warshauer

totaling $4,228 and made payable to Donovan Karnes

114. Copies of schedules from Barrington Plaza Enterprises

monthly reports to FHA (FHA form 3480) for the

months of February, March, and April 1966, showing

disbursements of project funds to Joseph Warshauer... –

115. Copies of canceled checks dated May 11 and May 12,

1966, payable to J. Warshauer and signed by D. Karnes

drawn on the BP operating account in the Crocker-

Citizens National Bank...

116. Copies of five notes alleged by Mr. Warshauer to show

moneys owed by him to D. Karnes__

117. Letter dated July 7, 1961, addressed to Louis Lesser

Enterprises, Ltd., from Norman M. Lyon, Director,

FHA, Los Angeles, re Barrington Plaza____

*Will be found in the files of the subcommittee.

118. Letter dated May 31, 1961, addressed to T. M. Fresneda,

assistant vice president, Security First National Bank,

Head Office, Los Angeles, from Norman M. Lyon,

Director, FHA, re Barrington Plaza..

119. Letter of agreement dated December 13, 1965, between

BPE and Louis Lesser Enterprises relative to Louis

Lesser waiver of all rights to interests in Barrington

Plaza Enterprises under promissory note and collateral

agreement of April 7, 1965..

120. A brochure entitled "The Barrington Plaza Story" show-

ing the blight area of Barrington Plaza before the com-

mencement of the project----

121. Letter dated October 18, 1963, addressed to C. Franklin

Daniels, assistant commissioner for multifamily housing

operations, from James Berry, Director, FHA, Los

Angeles, re Barrington Plaza-disapproving Mr. Lesser's

request of October 10, 1963_

122. Memorandum to files dated December 11, 1963, from

Raymond Lewis, chief property manager,

re tele-

phone call with C. F. Daniels, Assistant Commis-

sioner, FHA, and Stanley Berman, Washington__

123. Letter dated October 10, 1963, addressed to James Berry,

Director, from C. Franklin Daniels, assistant commis-

sioner for multifamily housing operations, re agreeing

to modification agreement through April 1964.

124. Letter dated December 13, 1963, addressed to C. Franklin

Daniels, director, multifamily division, from James

Berry, Director, re requesting an operation audit of

Barrington Plaza__

125. Letter dated April 14, 1964, addressed to C. Franklin Dan-

iels, assistant commissioner for multifamily housing op-

erations, from James Berry, Director, FHA, recommend-

ing that no modification be granted after April 15, 1964.-

126. Letter dated July 14, 1965, addressed to Raymond Lewis,

chief property manager, through R. C. Magnusson,

chief of operations, from Ralph A. Seidler, acting as-

sistant chief appraiser, showing two estimates of the

market value of Barrington Plaza in the amount of

$15,100,000 and $16,900,000 - - -

127. Letter of transmittal of the estimate of the value of Bar-

rington Plaza_.

128. Letter dated April 29, 1964, addressed to James H. Berry,
Director, from C. F. Daniels, assistant commissioner for
multifamily housing operations, overruling Berry's
recommendation of April 14, 1964_..

129. Letter dated July 2, 1964, addressed to C. Franklin Daniels
from James Berry, Director, FHA, recommending that
Lesser Development Corp. not be given any further mod-
ification agreements---

130. Letter dated July 8, 1964, addressed to James H. Berry,
Director, FHA, from C. Franklin Daniels, advising of
conference with mortgagee re serious status of Barring-
ton Plaza___

131. Letter dated August 6, 1964, addressed to City Mortgage

Department, John Hancock Mutual Life Insurance Co.,

Boston, Mass., from John Irvine, vice president, Wallace

Moir Co., reporting conference held August 6, 1964, with

representatives of FHA, John Hancock, and Lesser En-

terprises, Inc___

132. Memorandum dated April 6, 1965, addressed to James H.

Berry, Director, FHA, from C. F. Daniels, granting pre-

liminary approval to proposed sale of Barrington Plaza to

Barrington Plaza Enterprises - -

133. Rough draft memorandum to files by R. D. Cunningham,

re meetings with FHA officials and members of "Ohio

Group" and Lesser representatives.--.

*Will be found in the files of the subcommittee.

133A-N. Correspondence concerning Barrington Plaza pertain-

ing to or transmitted to Stanley Berman, Deputy

Commissioner, FHA..

134. Retainer agreement dated April 1, 1964, by The Kratter
Corp. for service of Stanley Berman of Pearce, Mayer &
Greer..

135. Eleven checks dated from June 1964 through April 1965,
payable to Pearce, Mayer & Greer from The Kratter Corp.
drawn on Chase Manhattan Bank, New York, for
services of Stanley Berman_.

136. Schedule of earnings from Stanley Berman's individual

deals, 1964 and 1965..

137. Letter dated March 31, 1965, addressed to Stanley Berman

Esq., New York, from Ferdinand Roth, vice president,

The Kratter Corp., re discontinuance of retainer agree-

ment_.

138. Letter dated May 20, 1966, addressed to U.S. Senate

Committee on Investigations, Foley Square, New York,

from Henry Pearce of Pearce, Mayer & Greer, rearrange-

ment with Stanley Berman showing Berman receiving

60 percent of earnings from The Kratter Corp.--.

139A. Letter dated May 14, 1964, addressed to James Berry, Dis-
trict Director, FHA, Los Angeles, with copy to C. F.
Daniels, Washington, D.C., from Richard L. Bloch, vice
president, The Kratter Corp., re agreement for the pur-
chase of Lesser Development Corp. with reference to
Barrington Plaza__

139B. Letter dated May 14, 1964, addressed to John Hancock
Mutual Life Insurance Co. from Richard L. Bloch, vice
president, The Kratter Corp., quoting section 7 of the agree-
ment purchase of Kratter from Lesser Corp., Barrington
Plaza, dated April 29, 1964--

140. Memorandum dated May 19, 1964, addressed to C. O.

Christenson, Director, Urban Renewal Division, FHA,

from R. D. Cunningham, re meeting on May 16, 1964,

with Stanley Berman representing The Kratter Corp., and

C. F. Daniels, Morton W. Schomer, and R. D. Cunning-

ham, FHA, re purchase of Barrington Plaza_ -

141. Memorandum dated June 17, 1964, signed by F. A. Rees,

assistant treasurer, John Hancock Mutual Life Insurance

Co. of Boston, re meeting with The Kratter Corp, in company

of representatives and Stanley Berman..

142. Letter dated December 9, 1964, addressed to Hugh Crouse,

Mansfield, Ohio, from Stanley Berman, Director, FHA

Department, of Pearce, Mayer & Greer, re retainer

agreement by Barrington Plaza Enterprises for services

of Stanley Berman of Pearce, Mayer & Greer__

143. Letter dated December 29, 1964, addressed to George

Bradner, Assistant Director of FHA, Los Angeles, from

Donovan D. Karnes, general partner, Barrington Plaza

Enterprises, re conversation of Stanley Berman and

Donovan Karnes with Bradner and Lewis of FHA, Los

Angeles, re purchase of Barrington Plaza_.

144. Memorandum dated January 21, 1965, addressed to Dear

Jack and signed Stan_pertaining to Stanley Berman's

efforts on behalf of Barrington Plaza Enterprises at

FHA for purchase of Barrington Plaza..

145. Letter dated September 29, 1965, addressed to Pearce,

Mayer & Greer, New York, from Robert N. Richland of

Persion, Richland & Margolis requesting details of

services rendered by Pearce, Mayer & Greer through

Stanley Berman for Barrington Plaza Enterprises___.

146. Letter dated October 8, 1965, addressed to Robert N.

Richland, Esq., Persion, Richland & Margolis, Beverly

Hills, Calif., from Stanley Berman in reply to letter of

September 29, 1965__.

*Will be found in the files of the subcommittee.

147. Memorandum from Henry Pearce to Jules Mayer dated

October 29, 1965, re Barrington Plaza with regard to

the Stanley Berman deal...

148. Copy of title 18, section 207 of the United States Code,

entitled Crimes and Criminal Procedure__

149. Letter dated August 23, 1966, addressed to "Whom It May

Concern" from Donald C. Mathews, accountant-

auditor, Mansfield, Ohio, advising that client Donovan D.

Karnes will file amended income tax return for 1965 in

the near future___.

150. Statement attached to and made a part of Federal income
tax return for the year ended June 30, 1965, for Louis
Lesser Enterprises, Inc., and subsidiaries_

151. Audit report by FHA on Partnership Mortgagor, Barring-

ton Plaza Enterprises, for the period April 15, 1965, to

February 28, 1966-

152. Memorandum dated March 8, 1965, addressed to C. F.

Daniels from James Berry disapproving transfer of

physical assets_

on

Proceedings of—

August 24, 1966-

August 25, 1966.

August 30, 1966..

* Will be found in the files of the subcommittee.

INVESTIGATION INTO FHA MULTIPLE DWELLING

PROJECTS

WEDNESDAY, AUGUST 24, 1966

U.S. SENATE,

PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

OF THE COMMITTEE ON GOVERNMENT OPERATIONS,

Washington, D.C.

The subcommittee met at 10 a.m., in room 3302, New Senate Office Building, pursuant to Senate Resolution 183, agreed to February 17, 1966, Senator John L. McClellan (chairman of the subcommittee) presiding.

Present: Senator John L. McClellan, Democrat, Arkansas; Senator Fred R. Harris, Democrat, Oklahoma; Senator Karl E. Mundt, Republican, South Dakota; and Senator Jacob K. Javits, Republican, New York.

Also present: Jerome S. Adlerman, general counsel; Philip W. Morgan, chief counsel to the minority; Alphonse Calabrese, investigator; and Mrs. Ruth Colquitt, acting chief clerk.

The CHAIRMAN. The subcommittee will be in order.

(Members of the subcommittee present at time of convening: Senators McClellan, Harris, and Mundt.)

The CHAIRMAN. I will make a brief opening statement. Senate Resolution 183, 89th Congress, 2d session, imposes the duty and the authority upon the Government Operations Committee, or any subcommittee thereof, as authorized by section 134 of the Legislative Reorganization Act of 1964, and in accordance with its jurisdiction under rule XXV of the Standing Rules of the Senate, to make investigations into the efficiency and economy of all branches of the Govern ment and to ascertain whether there is need for further legislation or change in regulations of the executive agency involved.

This subcommittee has received information from various sources which raises questions concerning the insurance by FHA of multifamily projects and specifically those multifamily projects financed under section 220 of the Housing Act of 1954.

The Federal Housing Administration was created by the National Housing Act in 1934 (12 U.S.C. 1701). Its purpose was to insure banks, building and loan associations, and so forth, previously held eligible, against losses which they may sustain as a result of making real estate loans. The Housing Act of 1954 (42 U.S.C. 1441 et seq.) amended the National Housing Act by adding section 220 thereto, which section authorized the Commissioner, FHA, to insure mortgages on property which is designed for the elimination of slums and blighted areas (12 U.S.C. 1715k (a) to (g)) (urban renewal).

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