Evening star. [volume] (Washington, D.C.) 1854-1972, 1954-08-29
FILA Recovery
Of ,'WindfaII'
Profits Planned
Housing Corporations
To Be Token Over
Pending Repayment
By Hector Mcleon

AAC ccUcIhl housing AQml01s
strarion moved yesterday to take
over apartment house corpora
tons which have laid out
"windfall" profits in dividends
and to hold them until the money
is repaid.
This surprise pattern of de-
cislve action" was announced BY
Albert M. Cole, administrator Of
the Housing and Home Finance
Agency-FHA's parent agency
as move to protect the govern.
ment and the public interest.
"Windfall" profits were those
made by apartment house
builders who completed construc-
ton for less than the value Of
FHA-insured mortgages under
Section sos of the National Hous-
Ing Act which expired in 1850.
Occurred in 1900 Projects.
They occurred in at least 1000
out Of 1000 projects and Chair
man Capehart of the Senate
Banking Committee has esti-
mated they may total $500 mil
lion.
The FILA campaign began. Mr..
Cole disclosed. with orders to
Sidney Sarrer. president of Is
large rental housing corporations
in Fort Lee. N. j.. to call meet
ings Of the holders of preferred"
stock within the next 10 days to
remove the present corporation
directors and elect new ones.
Since the FILA owns all the
preferred stock in the corpora
tions. Mr.. Cole said. the new
stockholders will be elected by
the FILA and will remain In con-
troll until windfall dividends are
paid back to the corporations.
Reached at his Fort Lee office
for comment Mr.. Sarner said.
Il will defend my rights in this
matter"
mo Ofiicial Notification"
He said, II have no Official
notification" OF Mr.. Coles di-
receive and added:
"Cole does not even give cour-
tesy in the slightest degree to q
citizen before a charge, and is
assuming victory is gained before
even a charge is made. What
makes his direction q require-
ment? We are governed by a
charter and his direction won't
interfere with our rights under
the charter"
Mr.. Cole said the program is
the result OF investigation and
study of available legal remedies
made under william F. McKenna,
deputy HHFA administrator in
charge of the current FILA in
vestigation.
MIR. McKenna said the new
boards OF directors may sue to
recover funds taken improperly
from the corporations. and that
recipients Of windfalls may be
obliged by court action to re-
turn such funds.
Charges Charter Violations.
Mr.. Cole charged that any
windfalls paid out in dividends
were violations of the charters
OF corporations created under
Section sos. The charters, he
said. provide that only earned
income" may be distributed to
stockholders.
Several Washington area build
ers have made windfall profits
and may be affected by the new
policy. but Mr.. Cole said action
in other cases will be based on
the particular facts involved.
He said action will be aimed
at corporations which have vio-
lated charter provisions or which
have violated other regulations.
Such action, he said, will be an.
nounced as it is taken.
The new policy was based on
the fact that FILA mortgage in
surance was limited to specially.
created corporations in which
the FILA held up To $10O in pre-.
ferred stock.
Permits FILA Regulation.
This token investment was
designed to let the FILA COMMITS
sioner regulate or restrict rents,
sales, charges. capital structure,
rate Of return and methods Of
operation.
Senate housing investigators,
expressing surprise at disclosures
of wiridfall profits, have asked
repeatedly why the FILA did not
take action under these powers
to stop windfalls at the time.
They got no answers which salts
fed them.
Under the corporate charters,
tsee HOUSING, Page A-3.)