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One of Berkeley’s largest affordable housing developers has been stripped of its federal funding amid charges that it has engaged in nepotism and misallocated funds. 

A monitoring report, released Tuesday, by the federal Department of Housing and Urban Development has cited Jubilee Restoration Inc. for spending federal funds earmarked to hire three full-time workers for its Supportive Housing Program on ineligible projects and random office expenses including a luncheon.  

HUD also questioned if Jubilee’s family-run hierarchy constituted a conflict of interest. Until recently the organization was headed by Berkeley Pastor Gordon Choyce and his son, Gordon Choyce II, who served concurrently as executive director and deputy director and also maintained seats on the board of directors.  

At HUD’s demand, they and another family member recently resigned from the nine-member board. 

Jubilee, which did not return phone calls for this story, has until Nov. 19 to respond to the charges. 

If HUD is unsatisfied with Jubilee’s response, the nonprofit could pay a heavy price. HUD can require Jubilee to return the estimated $200,000 in funding for the program it has received over the past two years and could disqualify Jubilee from receiving future funding for all of its activities.  

Already the investigation has jeopardized Jubilee Village, a proposed 110-unit affordable housing development. City staff was set to recommend Tuesday that the City Council guarantee up to $3 million in HUD-sponsored loans for Jubilee to purchase the property at 2612 San Pablo Ave. for the project. However, according to a city manager’s report, HUD advised the city not to provide funds to Jubilee while the organization was under investigation. 

The City Council heeded the advisory and chose not to guarantee the loan, putting the project on hold. Berkeley has thus far contributed $75,000 towards the development, of which $28,960 has been spent. 

Jubilee, the city’s third largest affordable housing developer, got its start 12 years ago rehabilitating single family homes along San Pablo Avenue in West Berkeley, where its founder Gordon Choyce is pastor of the Missionary Church of God in Christ.  

The organization now concentrates on social service work and new infill developments including the 71-unit Acton Courtyard Apartments, built in partnership with for-profit developer Panoramic Interests.  

In an Oct. 5 letter to Jubilee, HUD wrote that it initiated a conflict of interest review based on its observation that, contrary to HUD rules, Jubilee’s executive director and deputy director are father and son and that they both serve on the board of directors.  

HUD rules prohibit an employee from directly supervising a family member, and prohibit anyone from sitting on a board of directors of an organization where a family member is employed. 

Jubilee is requesting a waiver from HUD to allow Gordon Choyce II to remain as deputy director under his father, who does not receive an income as executive director. 

In addition to reshuffling its board of directors, Jubilee will have to answer to additional conflict of interest questions that emerged from the investigation. HUD found that the organization disbursed $1,400 from the Youth Checking Account to Kara Choyce-Palmer, another family member employed by the organization. HUD also questioned the relationship between Charles Lightfoot, the board’s treasurer, and Charlton Lightfoot, the adult program coordinator, who was paid $4,782 from May 2003 through January 2004. 

In monitoring Jubilee’s expenditures, HUD also uncovered evidence that the organization misallocated funds for the HUD-subsidized Supportive Housing Program (SHP). 

The HUD grant earmarked $100,000 annually—about one-third of Jubilee’s total budget—specifically to pay for three full-time homeless counselors beginning in 2002. However, HUD found no evidence that any of the positions were filled until October 2003.  

At the same time, HUD found unspecified transfers were withdrawn from the SHP and Community Development Block Grant checking accounts without adequate explanation. Both accounts were found to have paid for ineligible costs including insufficient fee charges, overdraft charges and the luncheon. 

HUD also found evidence that Jubilee made duplicate salary payments. The organization made regular withdrawals to the payroll account, HUD concluded, but at the same time individual checks were written to the same employees in the same month. HUD demanded that the duplicate payments be returned unless Jubilee could substantiate them. 

Jubilee isn’t the first Berkeley non-profit to potentially suffer from a HUD monitoring. Last year, Building Opportunities for Self-Sufficiency was found to owe HUD over $600,000 in ineligible requests for payment and the Jobs Consortium for the Homeless is still fighting for survival after HUD ordered it to pay back over $1 million after determining that the organization was not eligible for a federal matching grant that it had previously received. 

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