Brian Sharp

@SharpRoc

Finding a conflict of interest does exist in City Councilman Adam McFadden leading the Rochester Housing Authority, a federal official on Thursday directed the local board to terminate his contract effective immediately.

"In light of this determination that RHA and you as commissioners have violated HUD's procurement and conflict of interest regulations ... we direct the board to take immediate action in terminating this (interim director) contract because it is void," Lisa Pugliese, director of HUD's Buffalo office, wrote in a letter to the RHA board.

The RHA board has a regularly scheduled meeting on Tuesday, and will discuss the matter in closed session, said H. Todd Bullard, who is the RHA's employment counsel.

In the meantime, the board is moving forward in its search for a permanent director, having recently gotten Civil Service Commission sign-off on the job description. There is an avenue to appeal, he said, but the extended timetable for such action would be part of any decision on how to proceed.

The RHA board fired Alex Castro on Oct. 14 and immediately voted to hire McFadden on an interim basis. Questions about what led to the action, and potential conflicts, fueled controversy about the shakeup. Mayor Lovely Warren later called for McFadden to step down. He declined, but said he would not seek a permanent appointment. McFadden will be paid about $12,000 per month for what has been described as a three-month contract. Castro was paid roughly $140,000 per year.

Earlier this week, the city's Board of Ethics found no conflict from the city's perspective, as McFadden could recuse himself from any discussion or voting items before City Council. For his part, McFadden said he had not yet seen the letter and therefore could not comment but said he has two legal opinions stating he does not have a conflict under the federal regulations.

In her letter, Pugliese cites a federal regulation that prohibits any employee, officer or agent from participating in the selection, award or administration of a contract supported by federal funds if a conflict of interest, real or apparent, is involved.

She continues that it appears federal funds were involved in the selection of McFadden, but whether federal funds were paid to him as part of his interim contract remains under investigation. And she goes on to cite a prohibition against "entering into a contract with (sic) member of the local governing body, who exercises functions or responsibilities with respect to public housing and who has an interest, direct or indirect."

"We find that there is a conflict of interest ... in the appointment of Mr. McFadden because he is serving as a City Councilman and has been awarded a contract as an interim director," Pugliese writes.

"We remind you that should a review determine that federal funds are being spent in violation of our contractual and regulatory parameters, RHA will be responsible for reimbursing federal funds," Pugliese wrote to the board, most of whom are newly appointed this year by Warren.

Said Bullard: "At this juncture, my understanding is the funds that we have can properly be used for overhead expenses. We gave (HUD) a response with respect to that before. ... We sent them what we thought was sufficient data."

BDSHARP@DemocratandChronicle.com

Twitter.com/sharproc