Employees disclosed the weekly pay deductions last month. The suit, however, alleges for the first time that the nonprofit was established as a fund to lobby against funding cuts by the U.S. Department of Housing and Urban Development.
Such lobbying would violate HUD regulations, which prohibit housing authorities from using federal money to lobby Congress. The complaint alleges that by "unlawfully taking" pay from employees, PHA was indirectly using federal money to pay for lobbying.
HUD, which provided most of PHA's funding, declined to comment on the suit.
Michael Pileggi, attorney for the plaintiff, said he was seeking class-action status for the lawsuit. About 300 nonunion employees were contributing to the nonprofit until earlier this month, when the board stepped in.
Nichole Tillman, a spokeswoman for PHA, declined to address the allegations. "PHA has not been served with the complaint and therefore does not have a comment," she said.
At the center of the allegations is the Pennsylvania Institute of Affordable Housing Professionals, a nonprofit created by Greene and his senior staff in 2006. In a subpoena that signaled the start of a federal investigation, the U.S. Attorney's Office three weeks ago demanded records from several entities controlled by PHA, the institute among them.
Kirk Dorn, a former PHA spokesman and former president of the institute, acknowledged in an interview that lobbying was always a goal of the nonprofit.
However, Dorn said the funding for the nonprofit came from "employee donations, not federal funds," and so did not violate the federal regulations.
Moreover, Dorn said, the intended lobbying against proposed cuts in 2007 never took place.
