The Bank of New York Mellon Trust Co. wants a federal judge to appoint a receiver for the Warren and Tulane Apartments owned by Global Ministries Foundation citing “an appearance of fraud” by GMF in a memorandum filed with the call for a receiver.

GMF CEO and President Rev. Richard Hamlet denied even an appearance of fraud.

“BONY knows we spent the insurance monies on the site repairs,” Hamlet said in a written statement. “Our auditors and attorneys know it. HUD approved it. And we funded millions more for site work last year.”

Hamlet also said while Global Ministries denies the allegations in the complaint, “We are supporting the appointment of the receiver because it is in the best interest of the property and of the residents.”

The bank bought $11.8 million in bonds issued by the Memphis Health, Educational and Housing Facility Board in 2011 that enabled GMF to buy the two apartment complexes.

A year ago this month, the federal department of Housing and Urban Development declared a default on the two properties – specifically to provide “decent, safe and sanitary housing.”

The default notice on the rental assistance contract with HUD didn’t immediately cut off the rent subsidies. It gave GMF 60 days to correct the problem

After both complexes failed their second HUD inspection this past January, HUD cut off its Housing Assistance Payments (HAP) contracts that subsidize the rent of all of the tenants who live in Warren and Tulane.

Residents in both complexes are in the process of moving out as a result of HUD ending the rent subsidies.

“The poor condition of the Mortgaged Property requires the immediate appointment of a receiver,” reads an accompanying memorandum of law and facts filed Friday, May 6, with the complaint and motion by the bank. “Despite repeated requests, the Borrower (GMF) has not rehabilitated the Mortgaged Property to a status where HUD would consider rescinding its abatement. The Trustee (Bank of New York) has been told by HUD that the HAP Contracts will continue to be abated as long as the Borrower is in possession and can determine the direction or sale of the Mortgaged Property.”

The action also names LEDIC Realty Co. LLC, which manages both complexes for Global Ministries.

Bank of New York suggests Donald Shapiro of Foresite Realty Management LLC as the receiver based on their experience in similar cases.

The complaint has been assigned to U.S. District Judge Sheryl H. Lipman.

The memo with the Bank of New York motion specifically claims there is “an appearance of fraud” by Global Ministries.

“The borrower (GMF) has misappropriated the proceeds of the insurance check and failed to turn over to the trustee (Bank of New York) proceeds received from the operation of the collateral,” the memo reads, adding that Global Ministries didn’t tell the bank about its default for nine months.

The bank also claims irreparable harm if Global Ministries remains in control of the two apartment complexes.

“Further absent the appointment of a receiver over the collateral, the borrower will be permitted to continue misappropriating collateral to the borrower’s own use and not provide the basic upkeep necessary for the safety and habitability of the mortgaged property,” the memo says. “The borrower does not have the wherewithal to generate proceeds separately from the mortgaged property to pay the bonds.

GMF has said it intends to sell both complexes.