Ola Properties Inc. v. United States Department of Housing & Urban Development
Docket: No. 08-60510
Court: Court of Appeals for the Fifth Circuit; June 22, 2009; Federal Appellate Court
Ola Properties, Inc. and its President, Afisu Olabimtan, sought judicial review of a decision by the U.S. Department of Housing and Urban Development (HUD) that imposed civil monetary penalties under 12 U.S.C. § 1735f-15(e) for failing to timely file audited financial statements from fiscal years 1999-2003. Ola, which purchased Wynnewood Gardens Apartments with HUD loan proceeds, had signed a regulatory agreement requiring annual financial statements to be audited. HUD's administrative complaint led to a summary judgment against Ola and Olabimtan, resulting in penalties of $70,000 for Ola and $40,000 for Olabimtan, which were upheld by HUD's Secretary Designee.
The court has jurisdiction to review this matter under 12 U.S.C. § 1735f-15(e) and 5 U.S.C. § 706, which allows for setting aside agency actions that lack substantial evidence or are arbitrary and capricious. Olabimtan contended that the ALJ incorrectly determined that he knowingly failed to file the required audited statements. He argued that his reports, although unaudited, complied with the statute as they were prepared by a certified public accountant and certified by him. However, HUD interprets the statute as mandating audited statements. The court concluded that HUD's interpretation aligns with the statute’s provisions and is permissible, affirming that failure to file audited financial statements constitutes a violation subject to penalties.
Olabimtan contends that HUD did not prove that his failure to timely file audited reports was 'knowing,' citing deficiencies in HUD's evidence and lack of notification regarding electronic filing requirements. The definition of 'knowingly' under 12 U.S.C. 1735f-15 encompasses actual knowledge or deliberate ignorance. However, Olabimtan did not attempt to file the reports, and the ALJ found that his lack of understanding of obligations did not excuse his non-compliance. The regulatory agreement mandated that the financial report adhere to HUD's requirements, which include audit and electronic submission as per 24 C.F.R. 5.801(b)(2). The ALJ determined that Olabimtan acted with reckless disregard for these obligations.
Olabimtan also argued that the assessed penalty was excessive, particularly given his reported ability to pay due to an income exceeding $100,000 and a capacity to secure a $2 million loan. The ALJ chose not to impose the maximum penalty after considering various factors under 24 C.F.R. 30.80. Olabimtan's income and financial capabilities were deemed substantial evidence of his ability to pay.
Ola claims it could have presented compelling evidence of insolvency if represented by counsel, requesting a remand to the Secretary based on 12 U.S.C. 1735f-15(e)(2). Ola's previous attorney ceased communication, leading to Olabimtan's representation, which raised questions about the validity of that representation as he is not a licensed attorney. However, the relevant regulation permits representation by a non-attorney, and Ola was aware of its right to counsel but chose to remain with Olabimtan. Thus, it failed to establish 'reasonable grounds' for not presenting its insolvency evidence.
The court ultimately denied the petition for review, stating that prior to 2002, the civil penalty statute applied only to mortgagors, which meant Olabimtan was not penalized for pre-2002 violations. Ola did not demonstrate 'extraordinary circumstances' that would excuse its failure to present certain arguments before HUD. Any objections not raised during the hearing will not be considered unless such circumstances are shown. The court opted not to publish this opinion as precedent.
