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FRAUD IN THE HUD HOME PROGRAM 

JOINT HEARING 

BEFORE THE

SUBCOMMITTEE ON 

OVERSIGHT AND INVESTIGATIONS 

AND THE

SUBCOMMITTEE ON 

INSURANCE, HOUSING AND 

COMMUNITY OPPORTUNITY 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

NOVEMBER 2, 2011 

Printed for the use of the Committee on Financial Services 

Serial No. 112–81 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

SPENCER BACHUS, Alabama, Chairman 

JEB HENSARLING, Texas, Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

ROBERT HURT, Virginia 

ROBERT J. DOLD, Illinois 

DAVID SCHWEIKERT, Arizona 

MICHAEL G. GRIMM, New York 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

BARNEY FRANK, Massachusetts, Ranking 

Member 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

LARRY C. LAVENDER, Chief of Staff 

(III) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

RANDY NEUGEBAUER, Texas, Chairman 

MICHAEL G. FITZPATRICK, Pennsylvania, 

Vice Chairman 

PETER T. KING, New York 

MICHELE BACHMANN, Minnesota 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEPHEN LEE FINCHER, Tennessee 

MICHAEL E. CAPUANO, Massachusetts, 

Ranking Member 

STEPHEN F. LYNCH, Massachusetts 

MAXINE WATERS, California 

JOE BACA, California 

BRAD MILLER, North Carolina 

KEITH ELLISON, Minnesota 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

(IV) 

SUBCOMMITTEE ON INSURANCE, HOUSING AND COMMUNITY OPPORTUNITY

JUDY BIGGERT, Illinois, Chairman 

ROBERT HURT, Virginia, Vice Chairman 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

PATRICK T. MCHENRY, North Carolina 

LYNN A. WESTMORELAND, Georgia 

SEAN P. DUFFY, Wisconsin 

ROBERT J. DOLD, Illinois 

STEVE STIVERS, Ohio 

LUIS V. GUTIERREZ, Illinois, Ranking 

Member 

MAXINE WATERS, California 

NYDIA M. VELA ́ ZQUEZ, New York 

EMANUEL CLEAVER, Missouri 

WM. LACY CLAY, Missouri 

MELVIN L. WATT, North Carolina 

BRAD SHERMAN, California 

MICHAEL E. CAPUANO, Massachusetts 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

November 2, 2011 ............................................................................................. 1 

Appendix: 

November 2, 2011 ............................................................................................. 67 

WITNESSES 

WEDNESDAY, NOVEMBER 2, 2011 

Beaudette, James M., Deputy Director, Departmental Enforcement Center, 

Office of General Counsel, U.S. Department of Housing and Urban Development ...................................................................................................................... 41 

Donohue, Kenneth M., former Inspector General, U.S. Department of Housing 

and Urban Development ...................................................................................... 39 

Handelman, Ethan, Vice President for Policy and Advocacy, National Housing 

Conference ............................................................................................................ 43 

McCarty, John P., Acting Deputy Inspector General, Office of Inspector General, U.S. Department of Housing and Urban Development ............................ 38 

‘‘Smith, Jane’’, convicted of defrauding organizations that received funds from 

the U.S. Department of Housing and Urban Development’s HOME Investment Partnerships Program ................................................................................ 8 

Truax, Timothy, convicted of defrauding organizations that received funds 

from the U.S. Department of Housing and Urban Development’s HOME 

Investment Partnerships Program ..................................................................... 12 

APPENDIX 

Prepared statements: 

Beaudette, James M. ........................................................................................ 68 

Donohue, Kenneth ............................................................................................ 72 

Handelman, Ethan ........................................................................................... 77 

McCarty, John P. .............................................................................................. 80 

‘‘Smith, Jane’’ .................................................................................................... 87 

Truax, Timothy ................................................................................................. 92 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Biggert, Hon. Judy: 

Letter from a coalition of housing industries ................................................. 102 

Letter from Enterprise Community Partners, Inc. ........................................ 104 

Letter from Enterprise Community Partners, Inc. ........................................ 106 

Letter from The Housing Trust of Santa Clara County ................................ 108 

Letter from SWJ Housing ................................................................................ 109 

Biggert, Hon. Judy; and Gutierrez, Hon. Luis: 

Letter from Daniel Solomon Design Partners ................................................ 110 

Written statement of Deborah DeSantis, Corporation for Supportive 

Housing .......................................................................................................... 112 

Letter from LINC Housing .............................................................................. 115 

Letter from MidPen Housing ........................................................................... 117 

Letter from the National Housing Conference ............................................... 119 

Letter from Resources for Community Development .................................... 123 

Gutierrez, Hon. Luis: 

Letter from the National Association of Home Builders (NAHB) ................ 125 

Letter from the National Council of State Housing Agencies (NCSHA) ...... 126 

(1) 

FRAUD IN THE HUD HOME PROGRAM 

Wednesday, November 2, 2011 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT

AND INVESTIGATIONS, AND

SUBCOMMITTEE ON INSURANCE, HOUSING

AND COMMUNITY OPPORTUNITY, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittees met, pursuant to notice, at 2:38 p.m., in room 

2128, Rayburn House Office Building, Hon. Randy Neugebauer 

[chairman of the Subcommittee on Oversight and Investigations] 

presiding. 

Members present from the Subcommittee on Oversight and Investigations: Representatives Neugebauer, Fitzpatrick, Posey, 

Renacci, Canseco; Capuano, Waters, Baca, and Miller of North 

Carolina. 

Members present from the Subcommittee on Insurance, Housing 

and Community Opportunity: Representatives Biggert, Hurt, Capito, Garrett, McHenry, Westmoreland, Dold, Stivers; Gutierrez, 

Waters, Cleaver, Velazquez, Watt, and Sherman. 

Also present: Representatives Royce, Huizenga, and Green. 

Chairman NEUGEBAUER. Good afternoon. This joint hearing of 

the Subcommittee on Oversight and Investigations and the Subcommittee on Insurance, Housing and Community Opportunity of 

the Committee on Financial Services will come to order. 

I would let all of of the Members know that all Members’ opening 

statements will be made a part of the record. Each side has agreed 

to limit themselves to 10 minutes. And with that, I will yield to 

myself for an opening statement. 

We had a hearing on the HOME Program in the past, back in 

the summer. I think from the conversations I have had with a 

number of Members, it left more questions than answers because 

it still appears to us as, we have done more investigation, that 

there is not a sufficient amount of oversight going on for this particular program. And hopefully, this is not indicative of what is 

going on with other programs. 

Now let me be clear, because I think there has been some confusion about the purpose of these hearings. These hearings are not 

about the worthiness of the HOME Program. These hearings are 

about oversight, and accountability. When we take American taxpayers’ money, they expect us to spend it in an appropriate way. 

2 

They also expect us to guard and make sure that those funds are 

expended in the appropriate way, and more importantly, that none 

of that money is lost to fraud. 

What we are going to hear today—we have two witnesses who 

have actually been convicted of fraud in these programs. And unfortunately, that is a crime, and they are going to pay the price for 

that. 

But the other issue is, is they are going to detail how easy it was 

for these particular programs to be defrauded, and they are also 

going to detail that very little oversight about HUD was made for 

these programs. For me, personally, and I think for members of 

this committee, we find that troubling. 

And so our purpose today for this hearing is to ascertain what 

happened and hopefully stop it from happening in the future, but 

also, I think, more importantly, to send a message to the Administration that when you are spending American taxpayers’ money, 

there is accountability that goes with that, and if the procedures 

are not in place, they need to be put in place to prevent this kind 

of behavior in the future. 

I think one of the other things we are going to ascertain is that 

very little due diligence has been performed when these monies are 

granted to certain entities. We are going to hear that people who 

got some of this money were probably as surprised as anybody that 

their grant was actually awarded, because they didn’t have the 

background or the experience to, in many cases, execute these programs. 

So I look forward to the hearing today, and to our witnesses. And 

with that, I yield to the distinguished ranking member of the Subcommittee on Oversight and Investigations, Mr. Capuano. 

Mr. CAPUANO. Thank you, Mr. Chairman. Mr. Chairman, I would 

like to start out by saying that I have not been happy with what 

has led up to this hearing. Up until now, I think that the Democratic side of this subcommittee has been incredibly cooperative on 

every hearing thus far. I have shared your general goals and your 

general approach to various issues, including this one. 

I totally agree that oversight is an important thing, and that we 

want to make sure that every tax dollar is well accounted for, to 

the best of our ability. 

Nonetheless, I believe that our side has been treated unfairly, 

and I think especially, up until this point, to my knowledge, we 

have not done anything to deserve it. And I kind of hope that this 

is the last time that this happens. 

As far as the witnesses go, my hope is that we will be swearing 

in these witnesses. Even though there is a law on the books that 

says you cannot lie to Congress, I think it is appropriate when we 

have people who have been convicted of serious crimes, that they 

understand very clearly and unequivocally that they can’t lie in 

court. I know they know that. They can’t lie here either. 

And the other aspect of it, I would like to make sure that the 

witnesses know that if they intend to use this as some sort of attempt or forum to say, I didn’t do it, the dog ate my lunch, or I 

was forced to do it or whatever their other reason was, this is not 

the place and that is not why we are here. 

3 

First of all, it is the wrong forum. Second of all, we are the 

wrong people. They need to understand very clearly that they are 

here for the specific purposes that the chairman has outlined, 

which I agree with. And that is it. If they intend to use any other 

names, our own rules call for those names to be subjected in public. 

They need to be done in executive session. So I am hoping that we 

can avoid all that. 

As far as the substance of the hearing goes, again, I think everyone here—you won’t find anybody who thinks oversight is not an 

important thing, and that we don’t need to protect our tax dollars. 

We all want that, particularly those of us who actually think that 

these programs are important. 

The worst possible thing that can happen to people like me is to 

have these programs abused by anyone, for any reason, because it 

then empowers people who don’t like the programs in the first 

place to say, let us shut down the program or let us dramatically 

reduce the program. 

So, in fact, I have always been the person who wants more oversight and more accountability, and I welcome this hearing, and I 

thank the chairman for calling it. 

Chairman NEUGEBAUER. And I thank the gentleman. Now, I 

would like to yield to the chairman of the Subcommittee on Insurance, Housing and Community Opportunity, the gentlewoman from 

Illinois, Mrs. Biggert. 

Chairwoman BIGGERT. Thank you, Mr. Chairman, and good 

afternoon. 

I would like to welcome today’s witnesses. Today’s hearing is a 

continuation of the committee’s work to examine HUD’s oversight 

of the HOME Program. HOME is the government’s largest affordable housing construction program. HUD is in charge of the program, and ultimately accountable to the Congress and taxpayers 

for the program’s outcome. 

In June, the full Financial Services Committee held the first 

hearing on HUD’s HOME oversight. During that hearing, what we 

learned was extremely troubling: inaccurate and incomplete information in HUD’s database, as well as insufficient monitoring of 

participating jurisdictions, projects and individuals in charge of 

HOME funds which allow waste, fraud, and abuse. 

Millions and possibly billions of taxpayer dollars intended to fund 

affordable housing for people in need may have been loosely expended, or worse, swindled by criminals. We have uncovered that, 

in some cases, individuals and organizations readily took taxpayerfunded HOME dollars, but never actually built a unit of housing, 

or only built a few units where many units had been pledged. 

For example, my staff recently took pictures of a Chicago property that was funded with HOME dollars. HUD’s database reported 

that 65 units of housing were built with the funds of this project. 

The pictures clearly indicate that there are not even close to 65 

units of housing at this location. In fact, it looked more like four 

units. 

So that begs the questions: who has the money; where are the 

units that were promised; has HUD demanded repayment for the 

units that were not built; and has the developer been cited or sanctioned by HUD for not completing the job? 

4 

Today, we will examine what steps HUD must take to close the 

door on any further abuse of taxpayer dollars. HUD’s current 

‘‘Trust but don’t verify’’ approach to oversight is unacceptable. Taxpayers who are paying for this program deserve better. And families in need of housing, whom the program was intended to help, 

deserve better too. 

With that, I look forward to hearing from today’s witnesses, and 

to holding future hearings on this and other HUD programs as we 

do the oversight. I yield back. 

Chairman NEUGEBAUER. I thank the gentlewoman. 

Mr. Gutierrez is recognized. 

Mr. GUTIERREZ. Thank you, Chairman Neugebauer, Chairwoman 

Biggert, and Ranking Member Capuano for working to organize 

this joint hearing today. This is indeed a very unusual hearing, because, in my 20 years in Congress, I have never had the primary 

first witnesses who come before the committee be two convicted felons. 

I have certainly never had testimony from a felon, who donated 

more than $5,000 to the National Republican Congressional Campaign Committee during the height of the embezzlement and the 

fraud that she committed to the Federal program. 

I am going to ask the witness about that donation. I am going 

to ask her if embezzling from the HOME Program helped to free 

up extra cash to help Republicans in Congress. And I am going to 

ask whether my Republican colleagues have looked into this, and 

made sure those funds have been returned to the proper source. 

I think the absurdity of this hearing speaks to the difficulty the 

Majority is having in making the points they seem determined to 

make about the HUD HOME Program, whether the facts support 

those points or not. The embezzlement that we are going to hear 

about from the convicted felons began under George Bush’s Administration, while he was President of the United States, and when 

my colleagues who are in the Majority, were in the Majority. 

It is highly irregular to send and to need convicted felons to explain how the HOME Program is susceptible to fraud. Usually, we 

have experts or law enforcement come to speak before us. 

I have seen whistleblowers testify, honest Americans who are 

concerned about potential abuse, who risk their well-being to help 

us fix programs. I have listened intently to community organizers, 

advocates, consumers, academics—these are credible witnesses who 

help us to improve our programs. 

I have 11 letters in support of the HOME Program, and I ask 

unanimous consent to submit them for the record, Mr. Chairman. 

Chairman NEUGEBAUER. Without objection, it is so ordered. 

Mr. GUTIERREZ. One of the letters is signed by 23 different organizations, including Habitat for Humanity, the National Association of REALTORS®, the U.S. Conference of Mayors, and even the 

YMCA. These groups have experience implementing HOME honestly. 

Why didn’t we ask any of them to come and testify before us? I 

am really not here today to blame the witnesses. That is up to the 

legal system. And while I am sure that both of these individuals 

are very knowledgeable regarding the crimes they have committed, 

5 

I can’t help but wonder what the Majority hopes we will learn from 

them. 

It seems to me that a logical explanation of their presence is that 

the witnesses are here as examples of how our system works. Two 

people broke the law, violated the rules of the HOME Program for 

personal gain, and they got caught. 

They were prosecuted. One has been sent to jail. The other one 

will certainly soon go to jail. It seems to me the system worked. 

We can and should make sure every Federal program is run well, 

and that anyone who abuses the system or breaks the law is 

caught and punished. 

However, we can’t hope to stop people from attempting to break 

the law. We can strengthen and improve our efforts to catch people 

who break the law. If that were the purpose of today’s hearing, 

then I would happily and willingly participate. 

Any weaknesses or vulnerabilities in the HOME Program should 

be addressed. But let us not be fooled. One way to judge the 

strength of the accusations against the HOME Program is to judge 

the quality of the witnesses. 

I believe the way this hearing is being conducted makes clear 

that the purpose today is to score political points and generate exciting headlines. I hope in the future we can do better. Now, let us 

talk about what the HOME Program really is. In my district in 

Chicago, the HOME Program has created 15,000 new housing units 

for low-income households. It has helped low-income families stay 

in their homes and preserved the only real financial asset that 

many of them have, and I certainly hope that we will delve into 

those issues. 

Chairman NEUGEBAUER. I thank the gentleman. 

Mr. Fitzpatrick is recognized for 1 minute. 

Mr. FITZPATRICK. Thank you, Mr. Chairman, for reconvening on 

this important issue of taxpayer protection and congressional oversight. 

In my county, Bucks County, Pennsylvania, HOME funds have 

been used to complete worthy projects. The local Department of 

Community Development has leveraged the funds with other private and public resources to provide needed affordable housing. 

This is how the system is supposed to work, and it is probably the 

rule and not the exception. 

However, in this environment, with the deficit crisis and the 

kinds of fiscal restraints that we are under, no program can be immune from examination, especially where there are reports of 

waste and examples of fraud. 

In this day and age, with the technological capabilities becoming 

more user-friendly and more adaptive, there is no excuse for a lack 

of monitoring and reporting with these projects. We saw examples 

during the last hearing of other Departments that have managed 

to develop a way of tracking their projects, so I think it is a reasonable expectation that HUD can figure it out as well. 

We should be able to track the actual progress of HOME projects 

and not simply the money that is being spent. Part of our job as 

Representatives is to ensure that every dollar that is sent down 

here—that constituents are receiving value. 

6 

We are not here today to debate the merits of the HOME Program, but rather we are here to make sure that the necessary internal controls are in place and that they guarantee a good return 

on the investments. 

Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. 

The gentleman from Virginia, Mr. Hurt, is recognized for 1 

minute. 

Mr. HURT. Thank you, Mr. Chairman. I want to thank Chairwoman Biggert and you, Mr. Chairman, for holding today’s hearing 

and for your continued commitment to conducting rigorous oversight of the programs within the committee’s jurisdiction. 

Today’s hearing is a continuation of this committee’s effort to improve the management of HUD’s HOME Program. As we learned 

at our last hearing on this subject in June, HUD is not taking the 

steps necessary to hold HOME grantees sufficiently accountable for 

the funds that they receive. 

We also discovered that HUD is not utilizing the best available 

management practices and that the agency lacks sufficient internal 

controls to stop fraud and abuse in the HOME Program. 

Today, we will hear from witnesses who understand how flawed 

this program is and have exploited the Program’s weaknesses at 

the expense of the American taxpayer. With our Nation over $14 

trillion in debt, the citizens of my district, Virginia’s 5th district, 

will not accept mismanagement of taxpayer resources. My constituents expect Congress to closely scrutinize Federal programs to 

identify and eliminate waste, fraud, and abuse. 

Again, I want to thank Chairwoman Biggert and Chairman 

Neugebauer for holding this hearing today, and I look forward to 

the testimony from our witnesses. And I yield back the balance of 

my time. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman, Mr. Westmoreland, is recognized for 1 

minute. 

Mr. WESTMORELAND. Thank you, Mr. Chairman, and I, too, want 

to thank you and Chairwoman Biggert for having the hearing. And 

I want to compliment you on the witnesses, because I don’t think 

there is any better way to find out the holes in a program than to 

have people who have found those holes, and know how the system 

works, give us a better idea of what we can do to prevent this type 

of fraud. 

There are instances where HUD does not even have the complete 

addresses for some of the HOME projects. Even if it is new construction projects and they haven’t even been assigned an address, 

completed projects should have an address. We should know where 

these projects are located so we can at least have the ability to ride 

by and to see the progress of it rather than having the supervisor 

give us all the files. I hope the committee will continue this tough 

oversight into this and all the HUD programs and continue to 

bring about the best witnesses possible who can testify as to where 

these holes are. I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman, Mr. Dold, is recognized for 1 minute. 

Mr. DOLD. Thank you, Mr. Chairman. 

7 

Clearly, this hearing is not about terminating or defunding 

HUD’s HOME Program. As my colleague from Illinois aptly pointed 

out, the HOME Program does actually fund some very important 

projects. And I would just simply say that if we are able to root 

out some of the waste and the fraud, think about how many more 

programs we would actually be able to fund, to the benefit of the 

taxpayers. 

When I look at—as a small business owner, one thing I do know 

is that those who manage an organization, those who spend other’s 

money must create and maintain adequate systems and controls, 

checks and balances if we are going to have these types of programs succeed. 

The witnesses that we have today—Congressman Westmoreland 

noted that one of the best ways to do it is to identify the holes. 

These witnesses have identified the holes. 

If we look at our credit cards, we look at our checks, the people 

who helped devise these security systems that we have in place 

today were not law enforcement; in fact, they averted law enforcement for years and years. They were the criminals who actually got 

around those systems. 

So I think we, as Congress, need to use this oversight authority 

to be able to find out how we can strengthen this program for the 

taxpayers, because surely the American people, the taxpayers and 

Congress will demand no less. I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from Texas, Mr. Canseco, for 1 minute. 

Mr. CANSECO. Thank you, Mr. Chairman. Our Nation has a debt of just over $14.9 trillion; over $126,700 

per American household on average. This is a spending-driven debt 

crisis that has us borrowing approximately 40 cents of every dollar. 

And every time the Federal Government spends a dollar on its priorities, that is a dollar that could have been spent on priorities of 

the American people, such as purchasing a home, starting a small 

business, or sending a kid to college. 

When we are deficit spending, we are borrowing it from the future opportunities of our children and our grandchildren, thus we 

must ensure that each and every dollar that the Federal Government spends is not needlessly spent. The purpose of today’s hearing is as a follow-up on an earlier hearing that we had with the 

full committee, and it is to look at whether or not HUD has in 

place policies and procedures to ensure that precious taxpayer dollars are not being wasted on the HOME Program. 

Serious allegations of waste, fraud, and abuse have been leveled 

against the HOME Program, and given our Nation’s serious fiscal 

challenges, we cannot afford to allow wasteful spending to occur. I 

look forward to hearing from our witnesses today, as we attempt 

to discover answers to the serious questions that have been raised 

by the HOME Program. Thank you. 

Chairman NEUGEBAUER. I thank the gentleman. 

Chairwoman BIGGERT. Mr. Chairman? 

Chairman NEUGEBAUER. The gentlewoman is recognized. 

Chairwoman BIGGERT. Mr. Chairman, I ask unanimous consent 

to insert the following material into the record: a November 1, 

2001, letter from SWJ Housing Development and Consulting; a NoVerDate Nov 24 2008 11:21 Jun 21, 2012 Jkt 072622 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 K:\DOCS\72622.TXT TERRIE
8 

vember 1st letter from a coalition of housing industries, a November 1st letter from the LINC Housing Corporation; a November 1st 

letter from MidPen Housing; an October 31, 2011, letter from the 

National Housing Conference; a November 1st letter from Daniel 

Solomon Design Partners; a November 1st letter from Enterprise 

Community Partners; a November 1st letter—a second letter from 

Enterprise Community Partners; a November 1st letter from the 

Housing Trust of Santa Clara County; written testimony of Deborah DeSantis, president and CEO, Corporation for Supportive 

Housing; and a November 1st letter from Resources for Community 

Development. 

Chairman NEUGEBAUER. Without objection, it is so ordered. 

We will now go to our first panel. The first witness will be ‘‘Ms. 

Smith.’’ She will be joining us remotely, and I don’t know if she 

is—or do we have her—‘‘Ms. Smith’’, are you there? We will see if 

we can fix that. 

The second witness will be Mr. Truax. 

And, Mr. Truax, I would ask you a question. Were you promised 

anything in order to induce you to testify today and are you here 

of your own free will and volition? 

Mr. TRUAX. I am here of my own free will. 

Chairman NEUGEBAUER. Yes. But you were not promised anything in return for your testimony, is that correct? 

Mr. TRUAX. No. 

Chairman NEUGEBAUER. Thank you. 

Do we know if we have ‘‘Ms. Smith?’’ Okay, I think we have ‘‘Ms. 

Smith.’’ 

Can you hear me, ‘‘Ms. Smith?’’ ‘‘Ms. Smith’’, can you hear me? 

Ms. SMITH. Yes, sir, I can hear you. 

Chairman NEUGEBAUER. Thank you very much for being here. 

‘‘Ms. Smith’’, I need to ask you a few questions before you give 

your testimony. 

Are you voluntarily testifying today? 

Ms. SMITH. Yes, sir, I am. 

Chairman NEUGEBAUER. Can you tell us why you are testifying 

today? 

Ms. SMITH. Yes, sir. One of the things that you experience, especially from—I hear a little feedback. 

Chairman NEUGEBAUER. And were you promised anything to induce you to testify to this committee today? 

Ms. SMITH. No, I was not. 

Chairman NEUGEBAUER. Thank you for making yourself available. ‘‘Ms. Smith’’, your written testimony will be made a part of 

the record. 

At this time, the committee will recognize you to give your oral 

testimony. And you may begin now. You have 5 minutes. 

STATEMENT OF ‘‘JANE SMITH’’, CONVICTED OF DEFRAUDING 

ORGANIZATIONS THAT RECEIVED FUNDS FROM THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT’S 

HOME INVESTMENT PARTNERSHIPS PROGRAM 

Ms. SMITH. Thank you, sir. 

Thank you, everyone on the committee for allowing me the opportunity to speak to you today. 

9 

As I said in my written testimony, I started working for a nonprofit not because I sought out the work. It was actually something 

that I kind of tripped into, and was actually promoted to the executive director position about a year, maybe 21⁄2 years after getting 

there. 

I was not necessarily formally trained on how to do it, but the 

organization was— 

Chairman NEUGEBAUER. ‘‘Ms. Smith’’, I am going to ask you to 

suspend just for a minute. We are going to work on a little technical detail here. 

Ms. SMITH. Yes, sir. 

Chairman NEUGEBAUER. ‘‘Ms. Smith’’, this is the first time we 

have done this, and so I am kind of winging this a little bit. But 

I need to swear you in as a witness. 

Do you mind me doing that? 

Ms. SMITH. No, sir. 

[Witness sworn.] 

Chairman NEUGEBAUER. Thank you very much. 

And Mr. Truax, let’s go ahead and get this out of the way with 

you as well. 

[Witness sworn.] 

Chairman NEUGEBAUER. Thank you. 

‘‘Ms. Smith’’, I apologize for that. You can now resume your testimony. Thank you. 

Ms. SMITH. Okay. As I was saying, I started working for a nonprofit. I definitely was not necessarily equipped to run a nonprofit. 

I didn’t have a lot of knowledge on what it was a nonprofit was to 

do. 

I was afforded to go to a couple of conferences there in Washington, D.C., for community development work, and actually got a 

chance to see what nonprofits were doing in terms of workforce development and community development work. I then went back to 

my respective community and started working on that. 

Our board at the time was not equipped either to understand 

what it was that community development was all about. But we 

started doing some really good work in terms of workforce development, and then we kind of moved into housing. And, again, we 

were not equipped at all to be in housing, but we got started. And 

we actually rehabbed a lot of houses, and we also had an opportunity to develop a residential property from the ground up of affordable housing. 

But there are a lot of things that did not happen well on our part 

in making that a reality. One of the things that did happen well 

was that we were able to help a lot of young people get job training 

and actually get work in the construction field. Some of the things 

that I encountered were a lot of bumps and holes in the road as 

it relates to doing development in a community and a lot of political things that kind of hindered the process from going the way 

it should have. 

[The prepared statement of ‘‘Ms. Smith’’ can be found on page 87 

of the appendix.] 

Chairman NEUGEBAUER. I thank you, ‘‘Ms. Smith.’’ And we will 

come back to you in just a few minutes with some questions. 

10 

We are now going to recognize Mr. Truax for 5 minutes for your 

summary of your testimony. 

Mr. TRUAX. Chairwoman Biggert, Chairman Neugebauer— 

Mr. CAPUANO. Mr. Chairman, could we swear Mr. Truax in first? 

Chairman NEUGEBAUER. We already did. 

Mr. CAPUANO. He has been sworn in, as well? 

Chairman NEUGEBAUER. Yes. 

Mr. CAPUANO. All right. 

Mr. Chairman, I would like to make a motion that we strike 15 

different paragraphs of the 30 paragraphs Mr. Truax submitted in 

his written testimony. I did not do this with the other witness because the other witness only had a few things. 

Of the 30 paragraphs of testimony, 15 of them have no pertinence whatsoever to this. It is a litany of: ‘‘I am sorry I did this; 

I didn’t mean it; I won’t do it again; I didn’t have any intent to do 

any wrongdoing,’’ which is all well and good, but my fear is that 

this gentleman has not yet been sentenced, to my knowledge. 

My fear is that if this goes into the hearing record as written, 

the next thing that will happen is we will see this at a sentencing 

hearing that somehow Congress approved that he didn’t mean it, 

he—and I am not saying whether he did or he didn’t. I have no 

opinion on the matter. I just don’t think that this hearing record 

should be used by anyone to build their record relative to whatever 

sentence they may or may not get out of the prisons. 

It has nothing to do with the pertinent information that Mr. 

Truax may or may not be able to give us. But 15 of these written 

paragraphs have nothing to do with the items that you personally 

stated—and I agree with—are the purpose of this hearing. 

I am not here to determine whether Mr. Truax did or did not 

commit a crime. I am not here to determine whether he meant to, 

what his intent was, whether he is sorry, or any of those other 

items. That is for the courts; that is for the people who are going 

to sentence him; and that is the appropriate place. 

So I would make a motion that we strike these 15 irrelevant 

paragraphs. And I have a list here if you would like to see it. 

Chairman NEUGEBAUER. There was a unanimous consent request? 

Mr. CAPUANO. That is fine by me. 

Chairman NEUGEBAUER. I am going to object. I hear what the 

gentleman is saying, but I think it is a dangerous precedent for 

this committee to start determining what parts that they like about 

witnesses’ testimony and what they don’t like about witnesses’ testimony. 

We ask witnesses to submit their testimony, and then they will 

have a chance to summarize it. 

The gentleman will have an opportunity to question Mr. Truax. 

If he wants to question his motives for being here, that is certainly 

his prerogative. 

But I find it definitely a dangerous precedent for us to start 

ascertaining what parts of someone’s testimony we are going to 

make a part of the record and what we are not going to make a 

part of the record. 

11 

Mr. CAPUANO. Mr. Chairman, I respect that. That is why I did 

not make the same motion, though I thought there were parts of 

the previous witness’s testimony. 

But on this particular case of the entire 30 paragraphs: ‘‘I felt I 

wasn’t doing anything really wrong’’; ‘‘It was never my intent to defraud or steal from anyone’’; ‘‘I was hoping that contractor number 

two would honor the arrangement’’; ‘‘I repeatedly told them both 

that I had realized what I was doing in the terms was wrong’’; ‘‘I 

was sincerely sorry for getting involved’’; ‘‘I am truly sorry for what 

I did’’; ‘‘I truly and sincerely regret my’’—all of which may be true, 

and I don’t suggest that they are not. But I don’t see how they shed 

an ounce of light onto this or relate to his testimony on the relevant matter. 

And the only thing I am asking is that this Congress not be used 

as a tool for someone else to, at a later time, use the testimony that 

they submitted that suggests that somehow Congress thinks that 

they were right. That is all I am suggesting. 

It has nothing to do with the substance of what we will hear. It 

has simply to do with, that is not what the Congress does. We don’t 

determine intent by someone who is about to be sentenced. That 

is not our role. That is not our purpose here today, at least not as 

I understand it. 

Chairman NEUGEBAUER. No, the purpose here of this hearing is 

to ascertain where the holes are in the system; that appear to continue to be in this program— 

Mr. CAPUANO. I agree. 

Chairman NEUGEBAUER. —and it is not to ascertain the motives 

of why the witnesses are coming. These witnesses have both stated 

they came here freely, of their own will. They were promised nothing in return. 

We asked them to come and share with this committee how easy 

it was for them to game this system, which I find troubling, and 

I know the gentleman finds troubling. It is much like the counterfeit—when the FBI wants to figure out who is producing the best 

counterfeit bills, they go to the people who have produced counterfeit money. 

And when you go—we have gone to the crime scene here, and we 

found that there was a crime being committed— 

Mr. CAPUANO. Mr. Chairman, that has nothing to do with my 

motion. My motion is simply to strike impertinent, irrelevant testimony. 

Chairman NEUGEBAUER. And the Chair rules that we will not accept the gentleman’s— 

Mr. WESTMORELAND. Would the Chair yield? 

Chairman NEUGEBAUER. Gentleman? 

Mr. WESTMORELAND. Mr. Chairman, I think that when somebody 

goes through—and I have read the testimony—goes through it, I 

think the good point is to be made— 

Chairman NEUGEBAUER. Does the gentleman have a point of 

order? 

Mr. WESTMORELAND. No—I just had a comment. 

Mr. GUTIERREZ. Mr. Chairman? 

Chairman NEUGEBAUER. Yes. 

12 

Mr. GUTIERREZ. Continuing with the point of order, on page 4, 

the second paragraph—or the first paragraph at the beginning of— 

‘‘Before I continue, I would like to state in my’’—I am listening to 

the chairman what the purpose of the hearing is, and then I am 

reading the testimony. 

And it says, ‘‘Before I continue, I would like to state in my defense’’—it is not for them to come and state what their defense is. 

This is to come and learn about the program. He is going to have 

a chance as a convicted felon to go before a judge and to plead 

clemency or in his defense. We are not a jury here. We are not 

judges. We are just a congressional hearing. 

It says, ‘‘My original intent through all my criminal activity was 

to simply get a few dollars as compensation for helping them get 

work. It was my intent to manage the individual—but finally the 

payment would come to me and would absorb that during a later 

time. The concept was at the time that we would have enough work 

to be’’—in other words, he is excusing himself. I just think this 

should be stricken from the record. It is not pertinent. 

Ms. WATERS. Will the gentleman yield? 

Mr. GUTIERREZ. Surely. 

Ms. WATERS. Has this witness been convicted already? 

Mr. GUTIERREZ. Yes. 

Ms. WATERS. Did he need the permission—is he on bail? Is this 

witness out on bail? 

Chairman NEUGEBAUER. I think what we need to do is, the gentleman made a point of order. I ruled on the point of order. If you 

want to ask the gentleman—you are going to have an opportunity 

to ask the gentleman questions about where he is in his legal 

issues. But what we really need to do is—I have ruled on the point 

of order, so we really need to proceed with the hearing, and the 

gentlewoman will have an opportunity— 

Ms. WATERS. Will the gentleman yield? 

What is being requested is prior to the gentleman’s testimony 

that we find out— 

Chairman NEUGEBAUER. And the Chair has ruled on the issue. 

And so, we need to proceed with the hearing. 

Mr. Truax, you are recognized for 5 minutes. 

STATEMENT OF TIMOTHY TRUAX, CONVICTED OF DEFRAUDING ORGANIZATIONS THAT RECEIVED FUNDS FROM THE 

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT’S HOME INVESTMENT PARTNERSHIPS PROGRAM 

Mr. TRUAX. I first want to thank you for the opportunity to come 

before you today and assist in your awareness of the potential for 

fraud within the HUD program. Let me state at the outset that I 

know the program has its flaws. It can be defrauded, as I possess 

this knowledge because I sit before you as a man convicted in front 

of the Federal middle district court and who awaits his trial, but 

I also believe the program has its merits. 

It is not easy to admit that I have engaged in a criminal act and 

it is a fact of no particular pride in presenting to you today. And 

I can say with a certainty that is imputed to a person such as myself, who has defrauded the HOME Program, that I am willing to 

13 

bet that such fraud continues at the hands of others who hold the 

position I once held. 

In appearing before you today, I am a man who engaged in a 

criminal act, was caught, and awaits his payment to society. However, through my testimony before you, I would like to find a way 

to improve the system, to close the loopholes that I exploited, so 

that the program will be much better, much stronger and more effective in its achievements. 

My experience in the construction industry began in 1994 as a 

heavy-equipment operator; 10 years later, I became employed by 

Dolphin County in facility maintenance, where I engaged in all aspects of construction and remodeling. 

When the position of HOME rehabilitation opened, I applied for 

the position, and was employed until my resignation in 2010. My 

duties as a HOME rehab specialist included: soliciting applications 

from homeowners who qualified for government assistance in repairing their residences; soliciting the contractors for work to be 

completed; awarding the contracts; and verifying that the work had 

been completed before the contractor was paid. 

Essentially, I was the master of my own domain in that I rarely 

was supervised, and I was inspected by HUD only once every 3 

years. When HUD had determined it wanted to audit the HOME 

Program, a representative from the Philadelphia office would contact me to request that I select files and homes for inspection when 

the representative visited. 

Being the primary person in charge of the entire process, it was 

my sole decision what homes or related files would be selected. The 

examiner would review the files and only sometimes complete a 

home visit. 

Whenever an applicant submitted an application for HOME rehabilitation, I would review it. And as the process should work, the 

application would be publicized for bids and submitted by contractors interested in completing the work. In the early portion of my 

employment, that is how it was done. 

However, when I began abusing the system, I would forward the 

homeowner’s applications to certain selected contractors and keep 

them informed of the lowest bids I received at any one point, ultimately providing the chosen contractor with the lowest external bid 

information so that he could submit an even lower bid and thereby 

be awarded the work. 

Many times, because I had no oversight, I would simply provide 

the selected contractor with the application and take the bid he 

submitted as being the lowest, ultimately awarding the work to the 

contractor. Given that the Philadelphia examiner would only visit 

once every 3 years, and review only the files that I selected for the 

review, the process was virtually foolproof, or so I thought. 

As to how I selected contractors in my particular activity, I met 

one of the three individuals with whom I took the money in the 

course of my work. Because I have not received their permission 

to represent the contractors’ individual names, I will refer to them 

as contractors one, two, and three. 

Contractor one was referred to me by way of a third party as a 

contractor who might be interested in getting involved with the 

Program. I contacted him to come to the office, fill out an applicaVerDate Nov 24 2008 11:21 Jun 21, 2012 Jkt 072622 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\72622.TXT TERRIE
14 

tion for the Program, which he did and for which he was approved 

as a contractor. 

Contractor one completed roughly four to five jobs and appeared 

to do more than acceptable work. Throughout that time, and because of my ongoing contact, we developed a relationship. On one 

occasion, when contractor one and I were socializing after work, he 

turned the conversation to the state of his financial situation. 

I know I am running out of time. I am going to conclude here. 

Unfortunately, the process was entirely too simple to defraud 

merely by way of its own setup. With examination by the supervising Philadelphia HUD representative taking place only once 

every 3 years, and relying upon me to choose the files for review, 

I knew my wrongdoings might never be revealed. Obviously, I 

never considered getting caught, and I took advantage of the Program’s total lack of proper oversight. 

When the investigating officer came to me to ask questions about 

the situation, I realized at that point that I was caught, and I completely agreed with everything and completely cooperated. 

[The prepared statement of Mr. Truax can be found on page 92 

of the appendix.] 

Chairman NEUGEBAUER. I thank the gentleman for his testimony—and we will have an opportunity for some Q&A here in a 

minute. 

‘‘Ms. Smith’’, we are now going to go to you for questions. And 

I will be asking you the first question. 

We may not have the video, but ‘‘Ms. Smith’’, can you hear me? 

Ms. SMITH. Yes, sir, I can. 

Chairman NEUGEBAUER. Okay. ‘‘Ms. Smith’’, after reading your 

testimony, I was struck how quickly you went from a temporary receptionist in your organization to the executive director who managed affordable housing projects overseeing millions of dollars of 

Federal funds. 

I was further intrigued that you said you had no idea what it 

meant to operate a nonprofit and that your board of directors was, 

in many cases, just as clueless, that there was really nobody within 

the organization who understood how to develop affordable housing. 

You went on to say that even the contractors you worked with 

did not have the capacity to carry out the work. 

Did HUD ever raise any concerns about your organization and 

the fact that it had no experience in doing building and development prior to committing these millions of dollars to these projects? 

Ms. SMITH. One of the things that is very easy— 

Mr. GUTIERREZ. Mr. Chairman? Before the witness continues, I 

thought the agreement was that we were going to see her, that this 

was going to be a video conference. Is it only an audio conference? 

Chairman NEUGEBAUER. We are having video technical difficulties, and so we are only able to get audio at this time. 

Mr. GUTIERREZ. It is very difficult, and very unusual to have this 

kind of hearing. And it says the committee is, ‘‘To the maximum 

extent feasible, the committee shall make its publications available 

in electronic form’’—okay?—‘‘Audio and visual coverage of the committee hearing—to the maximum extent feasible, the committee 

shall provide audio and video coverage of each hearing or meeting 

15 

for the transaction of business in a manner that allows the public 

to easily listen and view the proceedings.’’ 

We can’t view these proceedings. It is impossible to view these 

proceedings. 

Chairman NEUGEBAUER. I appreciate the gentleman. Due to the 

fact that we are having technical difficulties, this is the maximum 

that we can provide. This hearing is being covered by audio and 

video. We are just unable to get the video— 

Ms. WATERS. Will the gentleman yield? 

Chairman NEUGEBAUER. Certainly. 

Ms. WATERS. How do we know who is talking? 

Chairman NEUGEBAUER. The gentlewoman did see ‘‘Ms. Smith’’ 

a while ago, and so— 

Ms. WATERS. I didn’t see her and she didn’t answer the questions 

that you asked. You asked her if she had been induced in some 

way— 

Chairman NEUGEBAUER. And the answer was no. 

Ms. WATERS. No, there was noise on the audio, and we did not 

hear her answer those questions, and we can’t see her now. What 

are we listening to? Who is this? 

Chairman NEUGEBAUER. I respect the gentlewoman, but we are 

going to proceed with the hearing with the technology that we have 

available. 

And so, ‘‘Ms. Smith’’, if you would go ahead and answer the question. Did you have any interface with HUD and did they ever question the ability of you or your board to be able to take on a fairly 

complex housing project? 

Ms. SMITH. As I was saying before, Mr. Chairman, when we 

started doing affordable housing, we were not asked by HUD about 

our capacity. 

One of the reasons we weren’t asked is because we hired the expertise, if you will. We brought in a consultant who could lend us 

the understanding that we needed. And we included that in all of 

our applications. But HUD never came and had a face-to-face interview with any of us to verify that what we put in that application 

was in fact accurate. 

If you read the application, we looked like we knew what we 

were doing, but in fact, again, nobody knew. We just hired a consultant who understood the process to actually do the application 

for us. 

Chairman NEUGEBAUER. And so in the 3-year history of that 

project, from when you started that project until you were caught 

in this situation, did HUD ever visit this site? 

Ms. SMITH. I was out there on the site quite often, and we never 

got any visitations from HUD. 

Quarterly, we were asked to do reports, and, again, we did not 

do the reports. We had the consultant come in and do the reports 

for us, and they were sent, and everything was fine as far as HUD 

was concerned. 

Chairman NEUGEBAUER. Mr. Truax, in the last HOME hearing 

we had, there was a number of projects that were identified, 

records that were opened and some of them were closed. Some of 

them were dropped from the books. That would indicate that some 

of those projects were closed out. 

16 

But when people made site inspections, they found vacant lots 

there. 

Can you explain how in the system, projects that hadn’t been 

completed, maybe haven’t even been started, were actually put on 

the books or then closed out? Did you have the ability to go to the 

Web site or to the database and mark projects closed-out? 

Mr. TRUAX. In the IDA system? 

Chairman NEUGEBAUER. Yes. 

Mr. TRUAX. Yes, I had the ability to do that. 

Chairman NEUGEBAUER. Could you hold the microphone just a 

little bit closer to you? 

Mr. TRUAX. Yes, I had the ability to do that. 

Chairman NEUGEBAUER. Can you just walk us through that process a little bit? 

Mr. TRUAX. I am not quite sure the question and the process of— 

Chairman NEUGEBAUER. If you were trying to hide that a project 

wasn’t completed, but the time was running out on when you 

should have finished that project, could you just go to the system 

and say that project is closed out? 

Mr. TRUAX. Yes. 

Chairman NEUGEBAUER. And did you do that? 

Mr. TRUAX. Yes, because I knew that it was usually a 3-year period before I would be audited. Like I said in my statement, they 

would ask me to select the files. 

Chairman NEUGEBAUER. So they would call up and say, ‘‘Hey, we 

are going to come out and look at some of your projects.’’ And, obviously, you didn’t pick the ones that you were shuffling around. 

Mr. TRUAX. Correct. 

Chairman NEUGEBAUER. And how long would that visit typically 

last? 

Mr. TRUAX. They were usually there for a week, because they 

would actually audit the CDBG program as well as the HOME Program and first-time homebuyers. 

Chairman NEUGEBAUER. How long would they spend with you 

particularly? 

Mr. TRUAX. It would be just a couple of days. 

Chairman NEUGEBAUER. How many visits while you were in that 

capacity did you actually have? 

Mr. TRUAX. We only had one visit from HUD while I was there. 

It was after the first year I was there. 

Chairman NEUGEBAUER. And what would be that time period 

that you only had one visit? 

Mr. TRUAX. It would have been in 2008. 

Chairman NEUGEBAUER. But when did you start— 

Mr. TRUAX. Oh, I am sorry. What was— 

Chairman NEUGEBAUER. Was that a 10-year period—you had one 

visit in 10 years, 5 years? 

Mr. TRUAX. My length of employment was only for 3 years. 

Chairman NEUGEBAUER. Okay. And so you had one visit in a 3- 

year period? 

Mr. TRUAX. Yes. 

Chairman NEUGEBAUER. All right. I am going to yield 5 minutes 

to Mr. Capuano. 

17 

We will say that you can continue to ask questions of ‘‘Ms. 

Smith.’’ We tried everything possible to get her video back up. Her 

audio is still working. So if you choose to direct questions to her, 

you may, but we still can’t get—now, we have the video up. 

I yield to the gentleman for 5 minutes. 

Mr. CAPUANO. Thank you, Mr. Chairman 

First of all, I would like to point out for the audience that ‘‘Ms. 

Smith’’—that is not her real name. We have agreed to withhold her 

name because the Bureau of Prisons has asked us to do so. That 

is why I agreed, and because the chairman asked, and I thought 

it was the respectful thing to do. 

But I want people to know that ‘‘Ms. Smith’’ is not her real 

name. ‘‘Ms. Smith’’, did you work for HUD? 

We lost the— 

Ms. SMITH. No, sir, I did not. 

Mr. CAPUANO. As I understand it, you worked for a nonprofit organization, is that correct? 

Ms. SMITH. Yes, sir, that is correct. 

Mr. CAPUANO. And did you have any other funds other than 

HOME funds that flowed through that organization? 

Ms. SMITH. Yes, sir, we did. 

Mr. CAPUANO. Did you steal those too? 

Ms. SMITH. I am sorry? 

Mr. CAPUANO. Did you steal that money too? 

Ms. SMITH. There were funds that were mismanaged, yes, sir. 

Mr. CAPUANO. So you stole that money too. So you stole anything 

you could get your hands on, I respect that. 

At one point in your testimony, you stated—I think it was testimony or maybe the news reports—that you were pressured by politicians. And I do not want you to name those here today, because 

that is not the purpose of this hearing. But I would like to know, 

did you pass those names along to the Justice Department? 

Ms. SMITH. Yes, sir. 

Mr. CAPUANO. And have there been any prosecutions as a result 

of that? 

Ms. SMITH. There were some. 

Mr. CAPUANO. And were they convicted? 

Ms. SMITH. There were a couple who were, sir. 

Mr. CAPUANO. That is good to hear. I am glad to hear that. 

As I understand it—again, I think this was news reports—your 

activity was basically from, give or take, the year 2000 and give or 

take the year 2005, is that correct? 

Ms. SMITH. No. It was prior to then, sir. 

Mr. CAPUANO. Say it again, I am sorry? 

Ms. SMITH. It was prior to 2005. 

Mr. CAPUANO. But between the years 2000 and 2005, is that 

right? 

Ms. SMITH. Yes, sir. 

Mr. CAPUANO. And do you know who the President of the United 

States was then? 

Ms. SMITH. It would have been George Bush. 

Mr. CAPUANO. That is what I thought. 

And do you know who the Secretary of HUD would have been at 

that time? 

18 

Ms. SMITH. No, sir, I don’t know— 

Mr. CAPUANO. It was Mr. Martinez and Mr. Jackson. 

Do you know who the Speaker of the House was at that time? 

Ms. SMITH. I don’t recall. 

Mr. CAPUANO. That would be Mr. Hastert. 

Mr. Truax, were you hired at any time by HUD? Were you paid 

or employed by HUD at any time? 

Mr. TRUAX. No. 

Mr. CAPUANO. You worked for another governmental entity, is 

that correct? 

Mr. TRUAX. Correct. 

Mr. CAPUANO. And did that governmental entity provide any 

oversight whatsoever to you? 

Mr. TRUAX. Just a supervisor. 

Mr. CAPUANO. Did that supervisor oversee you? 

Mr. TRUAX. Yes. 

Mr. CAPUANO. I guess, as I read your testimony, honestly, it 

sounds like old-fashioned bid-rigging and kick-back scheme, if you 

want the truth. 

Was there anything special about what you were doing other 

than the fact that you were stealing money? 

Mr. TRUAX. No. 

Mr. CAPUANO. And ‘‘Ms. Smith’’, it strikes me that what I saw 

of yours, it was just old-fashioned taking anything that was on the 

table. 

Is there any special, secret thing that you can enlighten us with 

as to what kind of crime that we could be able to stop in the future? 

Ms. SMITH. I am not sure that I understand your question. 

Mr. CAPUANO. Because when we went through the Wall Street 

thing, a lot of us—I don’t know about anybody else—but I learned 

a lot about some of the ways that Wall Street operated because we 

didn’t know it. But the truth is here in these testimonies—I am not 

suggesting it is good, but what I have read is just pretty much 

plain, old-fashioned, straight-up crime that could happen and does 

happen anywhere. 

Now, I am more than happy to find ways—and I actually appreciate that there is no way in the world that any auditor at any 

level should allow the person being audited to pick the projects 

that they get audited on. That is a very substantive commentary 

that should not happen, and I would hope that we would be able 

to address that issue. 

But, nonetheless, bid-rigging, kickbacks—I don’t know how we 

will ever stop those. It is not just the HOME Program. Every single 

program in the history of mankind has been subject to that type 

of fraud. 

And I am really interested in some insight as to what we can do. 

Do either of the witnesses suggest somehow that we should have 

a HUD auditor at all of the 15,000 people who utilize HOME Programs? Is that your suggestion, Mr. Truax? 

Mr. TRUAX. No. 

Mr. CAPUANO. ‘‘Ms. Smith’’, do you suggest that we have a HUD 

auditor sitting at the shoulder of each of the 15,000 people who receive HOME money? 

19 

Ms. SMITH. I am not suggesting that you have an auditor, but 

I am suggesting that there should be more hands-on interaction. 

As it stands today, HUD only requires applications. Anybody can 

put anything on paper and make it look good. 

Mr. CAPUANO. I am having a hard time hearing you. I did read 

at some point, ‘‘Ms. Smith’’, that you said that if you had more 

training, that would have been good. 

Is that something that you said at one point? 

Ms. SMITH. Sir, if HUD had provided more training to the organizations that it selects to fund—because every organization that 

comes to the table, they are not thinking, ‘‘Oh, let me just go to 

HUD and get a couple of dollars.’’ They start off with good intentions, but if the organization that is giving them the funds takes 

for granted that this organization knows what it is doing— 

Mr. CAPUANO. No, and I respect the fact that HUD should have 

more of a—I have no problem with that concept. I don’t think you 

will find anybody who disagrees with that. But at some point, I am 

just wondering if you had received more training, would that have 

stopped your criminal activity? Or would that just made you better 

at it? 

Ms. SMITH. I don’t know that I necessarily understand the way 

you are wording your question. If there was more training, maybe 

there would be better understanding of how things should have 

been done, especially for an organization that didn’t have any clue 

whatsoever. 

Mr. CAPUANO. My time has run out and I appreciate— 

Mr. GUTIERREZ. Point of parliamentary inquiry, Mr. Chairman? 

Chairman NEUGEBAUER. The gentleman will state his inquiry. 

Mr. GUTIERREZ. Thank you. 

Is it appropriate to ask the witness who the two elected officials 

who were indicted and convicted were? 

Chairman NEUGEBAUER. We don’t think that is— 

Mr. GUTIERREZ. No, I am just—I am just going to see what the 

chairman—are we keeping that a secret? 

Chairman NEUGEBAUER. Yes, I think— 

Mr. GUTIERREZ. It seems to me if we want to know, we should 

find out who they were and call them and they can tell us— 

Chairman NEUGEBAUER. The gentleman certainly is welcome to 

do that— 

Mr. GUTIERREZ. And is it appropriate to ask who the consultant 

was that ‘‘Ms. Smith’’ says was hired and was the primary reason, 

according to her testimony, in getting these HUD contractors? Is it 

appropriate to ask who that consultant was? 

Chairman NEUGEBAUER. I think what we have asked the witnesses to do is not to recount the acts themselves, but to focus on 

the purpose of this hearing, and that purpose is to identify that it 

is—it seems to be fairly easy to game the HOME Program. And 

that when there is a situation where the program is defrauded, 

there are two losers: the American taxpayers; and the intended 

beneficiaries. 

And as the gentleman outlined, in his district they have had a 

number of projects that were beneficial to his district. But when 

someone takes an opportunity to defraud the system, then the system suffers from that and the taxpayers. So what we are trying to 

20 

focus on, in order to get back to this hearing, is not to defend the 

HOME Program, not to tear down the HOME Program— 

Mr. GUTIERREZ. Mr. Chairman, if I might— 

Chairman NEUGEBAUER. But— 

Mr. GUTIERREZ. —just continue, it is just that I understand that 

to be the goal and it just seems to me since ‘‘Ms. Smith’’ stated that 

she—the organization would not—that they didn’t fill out anything; 

that the only reason they got the money—I am paraphrasing what 

she says—they got the money was because they hired the right— 

So it seems to me if you are going to find out, we should find 

out what consultants do so that we can intervene at that level. 

Chairman NEUGEBAUER. The gentleman made a point of order— 

was it appropriate? The Chair rules that it is not appropriate to 

ask for the specific names. 

I now recognize Mrs. Biggert for 5 minutes. 

Ms. WATERS. Will the chairman yield? 

Chairwoman BIGGERT. Thank you, Mr. Chairman. 

I would first ask ‘‘Ms. Smith’’—did HUD officials physically inspect the projects or conduct on-site visits? 

Ms. SMITH. No, ma’am, they did not. We provided reports and 

pictures to them. 

Chairwoman BIGGERT. Did they review the paperwork? 

Ms. SMITH. I was not present when they received the paperwork. 

I assume that they did. 

Chairwoman BIGGERT. Did they ever come back and say to you, 

‘‘This doesn’t seem to be complete. Do you have more information?’’ 

Ms. SMITH. Never. 

Chairwoman BIGGERT. Okay. You testified that there was a large 

HUD HOME project, Emerson, that had many cost overruns. 

Ms. SMITH. Yes, ma’am. 

Chairwoman BIGGERT. Do you recall that? 

Ms. SMITH. Yes. 

Chairwoman BIGGERT. How many of the units was the project 

supposed to deliver? 

Ms. SMITH. We delivered the final application, and what we—the 

first application had about nine more units, but because of the cost, 

we cut nine out and that was approved. But we delivered what we 

said we were going to deliver. 

Chairwoman BIGGERT. Okay. So there was no problem with that 

project? 

Ms. SMITH. There was no problem with the amount of units that 

we said that we would deliver. We did deliver those. But there was 

an enormous amount of cost overruns. We could not take it out of 

the actual project budget because that was pretty much set in 

stone. What we did was we had to take it from other funds from 

within the organization. 

Chairwoman BIGGERT. All right. Should that project have been 

stopped due to budget overruns? 

Ms. SMITH. Oh, absolutely, without question, it should have been 

stopped. 

Chairwoman BIGGERT. But you didn’t propose that. 

Ms. SMITH. Actually, politically, it was not suitable to propose 

doing that. 

21 

Chairwoman BIGGERT. Okay. Mr. Truax, did HUD ever physically inspect the projects or conduct on-site visits? 

Mr. TRUAX. Yes, but only at the direction of myself as far as the 

units—on what units to see. 

Chairwoman BIGGERT. Okay. And that was with the 3 years, did 

it— 

Mr. TRUAX. Yes. 

Chairwoman BIGGERT. Only once— 

Mr. TRUAX. Only one time. 

Chairwoman BIGGERT. —in 3 years. 

Did they review the paperwork? 

Mr. TRUAX. Yes. 

Chairwoman BIGGERT. And did they ever come back and say that 

it wasn’t complete enough? 

Mr. TRUAX. No. 

Chairwoman BIGGERT. All right. Did you have incomplete 

projects? 

Mr. TRUAX. When I left, yes. 

Chairwoman BIGGERT. Do you think that HUD would have 

flagged your incomplete projects if they had had more random and 

frequent inspections? 

Mr. TRUAX. Absolutely. 

Chairwoman BIGGERT. But you still would have just told them 

which ones to go to? 

Mr. TRUAX. Yes, if they gave me that opportunity. 

Chairwoman BIGGERT. And did they ever say, ‘‘I want to see 

something else?’’ 

Mr. TRUAX. No. 

Chairwoman BIGGERT. Okay. Did anyone from HUD ever question the information that you included in the HUD database about 

completed projects? 

Mr. TRUAX. No. 

Chairwoman BIGGERT. Did anyone ever question the accuracy of 

the information? 

Mr. TRUAX. No. 

Chairwoman BIGGERT. Okay. 

‘‘Ms. Smith’’, same question to you. Did anyone from HUD ever 

question the information that you included in the HUD database 

about completed projects? 

Ms. SMITH. No, never. 

Chairwoman BIGGERT. Did anyone question the accuracy of the 

information? 

Ms. SMITH. Absolutely not. 

Chairwoman BIGGERT. Mr. Truax, I think that law enforcement 

uncovered this scheme? 

Mr. TRUAX. Yes. 

Chairwoman BIGGERT. And was HUD involved in that, too? 

Mr. TRUAX. No. 

Chairwoman BIGGERT. So did HUD ever uncover your fraud? 

Mr. TRUAX. No. 

Chairwoman BIGGERT. But law enforcement did? 

Mr. TRUAX. Yes. 

Chairwoman BIGGERT. Could you tell us how? 

22 

Mr. TRUAX. Somebody in the county did ask the investigating officers of our Criminal Investigation Department to look into me receiving kickbacks. Upon that time, the U.S. investigating office 

came in. They went over a few files, and saw that I did do that. 

I admitted it openly, and I helped them throughout the entire investigation on everyone involved. 

Chairwoman BIGGERT. Okay. Thank you. 

‘‘Ms. Smith’’, what happened? Did HUD discover your fraud 

scheme? 

Ms. SMITH. No, ma’am. There was an investigation that took 

place with a couple of my board members, and it was sort of a 

snowball effect, but HUD was never involved in any of the investigations. 

Chairwoman BIGGERT. Thank you. My time is up. I yield back. 

Chairman NEUGEBAUER. I thank the gentlewoman. 

And now, Mr. Gutierrez is recognized for 5 minutes. 

Mr. GUTIERREZ. Thank you so much. 

Let me first of all, ‘‘Ms. Smith’’, so you defrauded the HOME Program and embezzled the HOME Program between 2000 and 2005. 

Is that correct? 

Ms. SMITH. We had HOME Program dollars, but— 

Mr. GUTIERREZ. When did you steal the money—in 2000 and 

2005? 

Ms. SMITH. Yes, but the actual— 

Mr. GUTIERREZ. Okay. 

Ms. SMITH. —had nothing to do with HUD funds. 

Mr. GUTIERREZ. It had nothing to do—no HOME funds? 

Ms. SMITH. No. 

Mr. GUTIERREZ. So, but this is a HOME fund hearing. You are 

here to tell us about the HOME fund, aren’t you? 

Ms. SMITH. Absolutely. 

Mr. GUTIERREZ. So you didn’t take steal any money from the 

HOME Program? 

Ms. SMITH. No. 

Mr. GUTIERREZ. Okay. What program did you steal the money 

and embezzle it from? 

Ms. SMITH. We mismanaged funds from the actual organization. 

Mr. GUTIERREZ. From the actual organization. Okay. 

So, let me ask you something. You worked at the Urban Enterprise Association as an executive? 

Ms. SMITH. Yes, sir, I did. 

Mr. GUTIERREZ. Okay. And that is in Gary, Indiana? 

Ms. SMITH. Yes, sir. 

Mr. GUTIERREZ. Okay. Are you the same person from the Gary 

Urban Enterprise Association who made a $300 contribution on 3/ 

10/2003 and a $5,000 contribution on 3/14/2003 to the National Republican Congressional Campaign Committee? 

Ms. SMITH. Yes, sir, I am. 

Mr. GUTIERREZ. And did those funds that you gave come from 

the money that you embezzled from the organization that you 

worked at? 

Ms. SMITH. It came from my salary, sir. 

Mr. GUTIERREZ. It came from your salary? 

Ms. SMITH. Yes. 

23 

Mr. GUTIERREZ. You kept two separate accounts—the money you 

stole and the money you earned? 

Ms. SMITH. It came from my personal account. 

Mr. GUTIERREZ. So while you were embezzling money, you were 

being charitable to the Congressional Republican Campaign Committee, you thought that would be your largess, to give them 

$5,000. So you are a thief on the one hand but you are very generous with the National Republican Congressional Campaign Committee. Is that what we are to believe? 

Ms. SMITH. If those are the words that you want to use, sir. 

Mr. GUTIERREZ. No. Okay. Who asked you and who invited you 

to contribute? Because this is pretty extraordinary, for somebody 

who is stealing money, $5,000 is a pretty extraordinary amount of 

money. Who asked you to contribute and invited you to contribute 

to the National Republican Congressional Campaign Committee? 

Ms. SMITH. I don’t actually recall how I— 

Mr. GUTIERREZ. You know you are under oath, right? 

Ms. SMITH. I do realize that I am under oath, sir. I remember 

everything— 

Mr. GUTIERREZ. And you don’t remember who asked you to give 

$5,000? 

Ms. SMITH. No, sir. It was maybe 10 years ago. So— 

Mr. GUTIERREZ. 10 years ago? I mean, 20 years ago, if somebody asked me if I could contribute $5,000 to something, I think I would 

remember, so let me ask you something. How much were you earning in salary in 2003? 

Ms. SMITH. In 2003? 

Mr. GUTIERREZ. And you are under oath. 

Ms. SMITH. I understand that, sir—probably $65,000. 

Mr. GUTIERREZ. Excuse me? 

Ms. SMITH. I am sorry? 

Mr. GUTIERREZ. How much was your salary? 

Ms. SMITH. I am sorry, I guess I got cut off, because I said $65,000. 

Mr. GUTIERREZ. So, $65,000. And as the Republicans keep telling 

us all the time, there is a lot of taxes on all that money, so you 

were probably getting about $45,000. So you just had an—at a $45,000 salary, and I am being a little generous, take-home pay, you just had an extra $5,000 lying 

around to give to the National Republican Congressional Campaign 

Committee, but you don’t remember who asked you for it. Is that 

right? 

Ms. SMITH. I don’t really remember who actually asked. 

Mr. GUTIERREZ. Let me ask you something. Since you used the 

money—and I know you are trying to—you are telling me that your 

salary had nothing to do with HUD or Federal Government programs; that your salary had nothing to do with governmental programs at this not-for-profit institution, and that your salary—not 

a penny of that salary, came from governmental funds. 

Ms. SMITH. No, sir, it did not. 

Mr. GUTIERREZ. It didn’t? All right, we will check into that real 

shortly. 

Let me ask you something: Have they sent you the money back 

now that they know you are a convicted felon and a fraud and you 

24 

were stealing money at the very same time from the Federal Government that you gave this money, did they give the money back 

to you, send you back a check? 

Ms. SMITH. No, sir, they didn’t. 

Mr. GUTIERREZ. Thank you. That is all the questions I have. 

Chairman NEUGEBAUER. I thank the gentleman. And now the 

gentleman, Mr. Fitzpatrick, is recognized for 5 minutes. 

Mr. FITZPATRICK. Thank you, Mr. Chairman. 

‘‘Ms. Smith’’, the purpose of this hearing is to do some oversight 

with HUD and specifically in the HOME Program, to make certain 

that every dollar that the taxpayers send to HUD, send to Washington, are dollars that are well spent and that the taxpayers get 

value for every dollar. 

At your organization, ‘‘Ms. Smith’’, were HOME Program funds 

through HUD sent to your nonprofit? 

Ms. SMITH. Actually, when we did the project, we set up an additional organization, because the HOME funds were not the only 

funds that made that project a reality. We also used the low-income housing tax credit funds as well. 

The HUD HOME funds were—was sort of like mezzanine financing. So there was a separate entity away from my organization that 

received those funds. 

Mr. FITZPATRICK. Did you oversee that separate organization? 

Ms. SMITH. Yes, sir, I did. 

Mr. FITZPATRICK. And so, between your nonprofit and the separate organization that you oversaw, there were HOME Program 

funds and other low-income housing tax credit funds, also Federal 

funds? 

Ms. SMITH. Yes, sir, there were. 

Mr. FITZPATRICK. And you oversaw the management of all those 

funds? 

Ms. SMITH. Yes, sir, I did. 

Mr. FITZPATRICK. And were the HOME funds, in your opinion, 

mismanaged or stolen from the program and away from the intended recipients, the beneficiaries? 

Ms. SMITH. Mismanaged, yes, in terms of the construction overruns, yes, it was completely mismanaged. 

Mr. FITZPATRICK. So were HUD HOME Program dollars lost? 

Ms. SMITH. Yes, sir. We probably could have built—if we didn’t 

run into the cost overruns that we experienced, we probably could 

have built more. We could have built more units. 

Mr. FITZPATRICK. ‘‘Ms. Smith’’, you indicated in your testimony 

that you started out with good intentions, but as a result of your 

lack of any experience and lack of any training, things went awry, 

correct? ‘‘Ms. Smith?’’ 

Ms. SMITH. Yes, sir. I am sorry. I don’t know if my microphone 

has given out or what, but yes, sir, I did— 

Mr. FITZPATRICK. ‘‘Ms. Smith’’, did you indicate that your board 

also lacked any direction or training or any real experience in the 

area of community and housing development? 

Ms. SMITH. I am sorry, did you hear me? I said, ‘‘yes, sir.’’ 

Mr. FITZPATRICK. Okay. So you indicated that you were able to 

hire consultants to provide the experience that both you and your 

board lacked. Is that correct? 

25 

Ms. SMITH. Yes, sir, that is correct. 

Mr. FITZPATRICK. Did the consultants deal directly with HUD or 

was that you, ma’am? 

Ms. SMITH. No one actually dealt directly with HUD. We went 

through the application process, and once the award came through, 

we didn’t have any contact with HUD at all. We just submitted the 

reports as we were asked to. 

Mr. FITZPATRICK. ‘‘Ms. Smith’’, do you believe as a result of your 

lack of experience and training and your board’s lack of experience 

and management training in community and housing development 

that HUD should have been more skeptical of you and your nonprofit? 

Ms. SMITH. From my personal experience, because I learned a lot 

during the process of getting that project done and afterwards, I 

think that HUD should have looked into the fact that we, at the 

time of the application, we could not speak of any historical work 

that we had done. 

Hindsight is 20/20—that should have raised a red flag for HUD 

to say, ‘‘Okay, what makes you think that—or what would lead us 

to believe that you have the capacity to do a project when you have 

no experience to speak of? And not only do you, yourself, as the executive director, not have experience, but there is absolutely no experience on your board either.’’ 

Because I do realize that sometimes nonprofits, the director may 

not have experience, but there could be members of the board who 

do actually have some experience to speak of. When they saw that 

there was nothing there, it should have raised a red flag to HUD 

to, not to discourage this organization from doing the work, but 

maybe we should be marrying this organization up with someone 

that we know has the track record to do the work that HUD loves 

to have done. 

Mr. FITZPATRICK. So, ‘‘Ms. Smith’’, you are saying that HUD 

never raised a red flag on your lack of experience? 

Ms. SMITH. No, sir. 

Mr. FITZPATRICK. Did HUD ever ask any tough questions? 

Ms. SMITH. There were no questions at all. Sometimes, these 

things are more politicized than we probably care to talk about. 

When you are in certain communities and you can put together a 

great application and you have some political support behind you, 

it doesn’t lead to any questioning at all. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman— 

Mr. GUTIERREZ. Mr. Chairman? 

Chairman NEUGEBAUER. Yes? 

Mr. GUTIERREZ. I have a question. It seems to me that we might 

want to go into executive session, because the witness just answered my question saying she got no money from HUD, she got 

no Federal money when I asked her directly that question. Now, 

she is testifying that she didn’t have any supervision from HUD, 

that they never asked her. Well, why would they? 

Chairman NEUGEBAUER. Does the— 

Mr. GUTIERREZ. Either she was or she wasn’t. Where is the truth 

here? 

26 

Chairman NEUGEBAUER. Does the gentleman have a point of 

order? 

Mr. GUTIERREZ. Yes, I would like to go into executive session, because I would like to ask this witness questions, and specific questions, about what she is telling the truth about and who was telling 

her about these truths. Because it is confounding to me. I have to 

be very honest. She lied. She has lied. She is a convicted felon, so 

she lied already. She has already agreed that she lied on forms. 

But— 

Chairman NEUGEBAUER. The gentleman has not made a point of 

order. 

The gentlewoman from California, Ms. Waters, is recognized for 

5 minutes. 

Ms. WATERS. Is there a motion before us for executive session? 

Mr. GUTIERREZ. Yes, I would like to go into executive session. I 

would like to ask her about the other elected officials. I would like 

to ask her who these consultants were. Questions that the chairman has already ruled she could not relate to us in direct evidence, 

but she can in executive session. 

Chairman NEUGEBAUER. We have a motion to go into executive 

session. Is there a second? 

VOICES. Second. 

Chairman NEUGEBAUER. All right. The Chair will pose the question. All in favor of going into executive session, say ‘‘aye.’’ 

[A chorus of ayes.] 

Chairman NEUGEBAUER. All opposed, say ‘‘nay.’’ 

[A chorus of noes.] 

Chairman NEUGEBAUER. The ‘‘nays’’ have it, and the motion is 

denied. 

Mr. GUTIERREZ. I ask for a recorded vote. 

Chairman NEUGEBAUER. Would the gentleman agree to a show 

of hands, since we don’t have the clerk here to read the roll? 

Mr. GUTIERREZ. No, I asked for a recorded vote to see if there 

is a quorum present. 

Chairman NEUGEBAUER. Stand by. We will get that done. We 

will make it happen. 

The clerk will call the roll. 

The CLERK. Mrs. Biggert? 

Chairwoman BIGGERT. No. 

The CLERK. Mrs. Biggert votes no. 

Mr. Fitzpatrick? 

Mr. FITZPATRICK. No. 

The CLERK. Mr. Fitzpatrick votes no. 

Mr. Hurt? 

[No response.] 

Mr. King? 

[No response.] 

Mr. Miller? 

[No response.] 

Mrs. Capito? 

[No response.] 

Mr. Garrett? 

[No response.] 

Mr. McHenry? 

27 

Mr. MCHENRY. No. 

The CLERK. Mr. McHenry votes no. 

Mrs. Bachmann? 

[No response.] 

Mr. Pierce? 

[No response.] 

Mr. Posey? 

[No response.] 

Mr. Westmoreland? 

[No response.] 

Mr. Duffy? 

[No response.] 

Ms. Hayworth? 

[No response.] 

Mr. Renacci? 

Mr. RENACCI. No. 

The CLERK. Mr. Renacci votes no. 

Mr. Dold? 

Mr. DOLD. No. 

The CLERK. Mr. Dold votes no. 

Mr. Canseco? 

[No response.] 

Mr. Stivers? 

[No response.] 

Mr. Fincher? 

[No response.] 

The CLERK. Mr. Capuano? 

Mr. CAPUANO. Aye. 

The CLERK. Mr. Capuano votes aye. 

Mr. Gutierrez? 

Mr. GUTIERREZ. Aye. 

The CLERK. Mr. Gutierrez votes aye. 

Ms. Waters? 

Ms. WATERS. Aye. 

The CLERK. Ms. Waters votes aye. 

Ms. Velazquez? 

[No response.] 

Mr. Watt? 

[No response.] 

Mr. Sherman? 

[No response.] 

Mr. Clay? 

[No response.] 

Mr. Baca? 

[No response.] 

Mr. Lynch? 

[No response.] 

Mr. Miller? 

[No response.] 

Mr. Cleaver? 

Mr. CLEAVER. Aye. 

The CLERK. Mr. Cleaver votes aye. 

Mr. Ellison? 

[No response.] 

28 

Mr. Himes? 

[No response.] 

Mr. Carney? 

[No response.] 

Mr. Chairman? 

Chairman NEUGEBAUER. No. 

The CLERK. Mr. Chairman votes no. 

Chairman NEUGEBAUER. The clerk will report. 

The CLERK. Mr. Chairman, the ayes are four and the noes are 

six. 

Chairman NEUGEBAUER. And the motion is not agreed to. 

The gentlewoman from California is recognized for 5 minutes. 

Ms. WATERS. Thank you very much. 

Mr. Truax, you have been convicted, but you have not been sentenced yet. So, are you out on bail? 

Mr. TRUAX. Yes. 

Ms. WATERS. And what State are you from? 

Mr. TRUAX. Pennsylvania. 

Ms. WATERS. And in order to come here, you had to have permission from someone? 

Mr. TRUAX. Yes. 

Ms. WATERS. Who gave you permission? 

Mr. TRUAX. The U.S. attorney who is prosecuting. 

Ms. WATERS. And did you have any conversations with the U.S. 

attorney, that perhaps your cooperation would be—you would get 

a lighter sentence, or the possibility of it? 

Mr. TRUAX. No. 

Ms. WATERS. Did you have that conversation with anybody? 

Mr. TRUAX. No. 

Ms. WATERS. Did you have that conversation with your lawyer 

that—was it suggested that you may get a lighter sentence if you 

come here? 

Mr. SHELDON. I am sorry, ma’am. I am going to have to object 

to that. That is attorney/client privilege, as to what my client and 

I discussed. That is an improper question. 

Ms. WATERS. I didn’t ask you what it was. 

Mr. SHELDON. You didn’t. You asked my client. 

Ms. WATERS. You can object if I was asking you. I didn’t ask you. 

Mr. SHELDON. You are asking my client for an answer— 

Ms. WATERS. I asked the witness who volunteered to come here 

today. 

Mr. SHELDON. He will not be— 

Ms. WATERS. On my time, you don’t get a chance to do that. I 

am asking the witness who appeared here today whether or not 

you had that conversation with your attorney where you discussed 

that your coming here may get you a lighter sentence? 

Mr. TRUAX. I am not going to answer that. It pertains to the attorney and— 

Ms. WATERS. You are under oath, and I am asking you whether 

or not you had that conversation with your attorney. 

Mr. TRUAX. With all due respect, I refuse to answer on the 

grounds that it is attorney-client privilege. 

Ms. WATERS. How long were you involved in the fraud and deception that you were convicted for? How many years? 

29 

Mr. TRUAX. I was employed there for 3 years. 

Ms. WATERS. Three years. About how many contractors competed 

for the contracts that you gave out that you steered to your three 

friends or people who were giving you kickbacks? 

Mr. TRUAX. There was an average of three contractors per project 

who were able to bid. 

Ms. WATERS. These were contractors who put in a bid, whose 

bids went in the trash can or did not get considered because you 

knew where you were going to direct the contracts. Is that right? 

Mr. TRUAX. Correct. 

Ms. WATERS. How many were those— 

Mr. TRUAX. Five. 

Ms. WATERS. Over a 3-year period of time? 

Mr. TRUAX. Five projects. 

Ms. WATERS. About five? Did any of these contractors sue you or 

the city or HUD or anybody— 

Mr. TRUAX. No. 

Ms. WATERS. —for the deception that you were involved in? 

Mr. TRUAX. No. 

Ms. WATERS. So would you think they have a cause of action? 

Mr. TRUAX. I am not a lawyer. I can’t answer that. 

Ms. WATERS. Do you have assets? Do you have a home? 

Mr. TRUAX. Yes. 

Ms. WATERS. Do you have a bank account? 

Mr. TRUAX. No. 

Ms. WATERS. Do you have any other assets? 

Mr. TRUAX. My home is in foreclosure. I have no bank account. 

I have no money. 

Ms. WATERS. Do you know you could be liable—in addition to the 

money that you stole, you could be liable for having defrauded 

those contractors who competed in an open process where you 

steered the contracts to other contractors? 

Mr. TRUAX. I am not a lawyer. I can’t answer that. 

Ms. WATERS. So for those contractors who bid for these contracts, 

and their contracts were not even considered because you steered 

them to your friends or others who were giving you kickbacks, they 

may have a cause of action where they could sue you; they could 

sue the city; or they could sue HUD because you denied them an 

honest opportunity to compete. And if you have assets, then those 

assets may be available to them. 

So, on the record, what you said here today is you have no assets. Is that what you are saying? 

Mr. TRUAX. Correct. 

Ms. WATERS. I didn’t hear you. 

Mr. TRUAX. Correct. 

Ms. WATERS. You have no assets? 

Mr. TRUAX. Correct. 

Ms. WATERS. Okay. And so for 3 years, you were involved in defrauding the HOME program and others. I don’t know how many 

others. Would you say that you were deceptive, at all? Would you 

say you lied? Would you say you cheated? 

Mr. TRUAX. Which one do you want me to answer? 

Ms. WATERS. The first one. Have you lied? In all of this, were you 

telling lots of lies to people? 

30 

Mr. TRUAX. No. 

Ms. WATERS. You didn’t lie to anyone? 

Mr. TRUAX. No. 

Ms. WATERS. You are under oath, sir. 

Mr. TRUAX. I understand that. 

Ms. WATERS. If you deceived them; if you took kickbacks; if you 

told the other contractors—unanimous consent for at least 30 seconds. This lawyer whispering in his ear is taking up all of my time. 

Chairman NEUGEBAUER. If the gentleman can answer that specific question, and then we will move on—the gentlewoman’s time 

will expire. 

Ms. WATERS. Did you lie when you deceived the contractors and/ 

or the government? Did you lie? 

Mr. TRUAX. Yes. 

Ms. WATERS. So you lied; you deceived— 

Chairman NEUGEBAUER. The gentlewoman’s time has expired. 

Ms. WATERS. And you are before us today. Why should we think 

you are telling us the truth if you are a liar? 

Chairman NEUGEBAUER. The gentlewoman’s time has expired. 

Mr. Renacci? 

Mr. TRUAX. To my knowledge, I have nothing to gain from this. 

I am going to jail. 

Ms. WATERS. Except what your lawyer directed you to do. 

Chairman NEUGEBAUER. The gentlewoman’s time has expired. 

Ms. WATERS. I yield back the balance of my time. 

Chairman NEUGEBAUER. Mr. Renacci is recognized for 5 minutes. 

Mr. RENACCI. Thank you, Mr. Chairman. 

I want to get to the point of HUD, more than the point of what 

you guys did. Because it appears you had some wrongdoings here. 

But first off, let us start with ‘‘Ms. Smith.’’ 

‘‘Ms. Smith,’’ did you work for an agency that did—I want to 

make sure—did you work for an agency that took monies under the 

HOME Program through HUD? 

‘‘Ms. Smith?’’ 

We must have lost her. 

Ms. SMITH. Can you hear me? 

Mr. RENACCI. ‘‘Ms. Smith?’’ Yes, did you work for an organization 

that actually received funds under the HUD HOME Program? 

Ms. SMITH. The organization that I worked for set up a sub-organization that received those funds, yes, sir. 

Mr. RENACCI. Okay. So you were involved in the HOME Program 

through your organization as an executive director? 

Ms. SMITH. Yes, sir. 

Mr. RENACCI. Thank you. 

Mr. Truax, did you work for an organization that received HUD 

dollars through the HOME Program? 

Mr. TRUAX. Yes. 

Mr. RENACCI. Okay. Mr. Truax, you said you had a number of 

projects. How many projects in total came through your organization? 

Mr. TRUAX. Throughout my tenure? 

Mr. RENACCI. Yes, just an estimate. 

Mr. TRUAX. Under 50 in a 3-year period. 

31 

Mr. RENACCI. Okay, under 50. Under those programs, you actually went out and took bids. If HUD would have asked you to submit three bids for each program, would that have caused you not 

to be able to do what you did? If they would have actually used an 

internal control that most other banks and businesses use, if they 

would have asked you for three bids, would you have been able to 

do what you did? 

Mr. TRUAX. No. 

Mr. RENACCI. Thank you. 

‘‘Ms. Smith’’, if HUD would have asked you for three bids on all 

the projects that you worked on, would you have been able to do 

some of the things you did? ‘‘Ms. Smith?’’ 

Ms. SMITH. Hello? Can you hear me? 

Mr. RENACCI. Yes. If HUD would have asked you for three bids 

for every project that you worked on, would you have been able to 

do some of the things you did as far as taking dollars? 

Ms. SMITH. I think so, because some of the bids—we did take 

bids, but, again, some of those bids were politically driven. 

Mr. RENACCI. But if they would have asked you to take three 

bids, and you were required to use the lowest bid, would you have 

been able to perform and take the dollars you did? 

Ms. SMITH. If HUD had received those bids, then no. 

Mr. RENACCI. Exactly. That is what normally happens in the 

banking world, in many cases. 

Now, I am going to move to another internal control. If HUD 

would have come into your organization, Mr. Truax, and done an 

unannounced, random selection, including site visits on even one or 

two of your projects, would you have been inclined to do what you 

did and take dollars? 

Mr. TRUAX. No. 

Mr. RENACCI. ‘‘Ms. Smith’’, if HUD would have done the exact 

same thing with your organization, if they would have come in, 

done unannounced, random selections to review the sites on the 

buildings you did, would you have been prone to take the money 

you did? 

Ms. SMITH. No. 

Mr. RENACCI. Thank you. 

Mr. Truax, one other thing—which is another internal control, a 

normal internal control—I am a CPA, I have seen internal controls 

like this—if there was an unannounced third party that was able 

to come in and randomly select, which happens in many cases, 

some of your projects, would you have been prone to take the dollars you did? 

Mr. TRUAX. No. 

Mr. RENACCI. Thank you. 

‘‘Ms. Smith’’, if there was an unannounced third party that was 

required to come in and on an unannounced basis take a look at 

your projects and determine percentage of completion and be able 

to determine how much of the project was completed, would you 

have been able to take the dollars you did through the HUD 

HOME Program indirectly? 

Ms. SMITH. No. 

Mr. RENACCI. Thank you. 

32 

So it does appear that if HUD’s internal controls were up to a 

higher standard, neither of you would have been able to do some 

of the things you did as far as taking the dollars you did? 

Mr. TRUAX. Correct. 

Mr. RENACCI. Thank you. I yield back my time. 

Chairman NEUGEBAUER. I thank the gentleman. 

The gentleman from Missouri, Mr. Cleaver, is recognized for 5 

minutes. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

Sir, I am curious about how your criminal enterprise was detected. 

Mr. TRUAX. I am sorry? 

Mr. CLEAVER. How were you found out? 

Mr. TRUAX. Somebody thought that I was possibly receiving kickbacks, and they contacted our criminal investigation department of 

Dauphin County, which in turn got ahold of the United States investigation department, and they came to me asking questions. I 

knew what I did was wrong, and then, that is how they found out. 

Mr. CLEAVER. Was HUD notified? 

Mr. TRUAX. After the investigations, yes; after the clarification of 

what was going on. 

Mr. CLEAVER. Did you have any contact with the I.G.? 

Mr. TRUAX. Just through the interviews. 

Mr. CLEAVER. The contact with the I.G., and when you were 

identified as allegedly having committed fraud, what was the time 

period between your contact with HUD, even through the I.G. or— 

Mr. TRUAX. I am not sure the exact time that they got ahold of 

HUD. When the I.G. came to me then, that is when it was all laid 

out on the table. It was instantly. 

Mr. CLEAVER. Yes, I guess where I am trying to go is, do you 

think you were given permission to do this? 

Mr. TRUAX. Was I given permission? 

Mr. CLEAVER. Yes. 

Mr. TRUAX. No. 

Mr. CLEAVER. So you don’t think HUD turned a blind eye that 

would allow criminal activity to take place? 

Mr. TRUAX. I don’t believe so. 

Mr. CLEAVER. And you have no reason to believe that, right? 

Mr. TRUAX. With the once-every-3-year inspection— 

Mr. CLEAVER. It opened the door. 

Mr. TRUAX. Yes. 

Mr. CLEAVER. So as best as you can recall, did you ever think, 

‘‘Well, we have every-3-year inspection, so this gives me a chance?’’ 

As best as you can recall, did you actually consciously wonder how 

much time you had before the next inspection to commit fraud? 

Mr. TRUAX. Yes. 

Mr. CLEAVER. And so you thought, ‘‘I can get away with it, because HUD has an every-3-year inspection?’’ 

Mr. TRUAX. Because of the oversight, correct. 

Mr. CLEAVER. How long have they had that procedure? 

Mr. TRUAX. I am not sure. I was only there for 3 years. 

Mr. CLEAVER. But it was there when you arrived, right? 

Mr. TRUAX. Yes. 

33 

Mr. CLEAVER. Okay. So we have to assume that it has been 

around a while. 

Mr. TRUAX. Yes. 

Mr. CLEAVER. It is possible that somebody else could have done 

something like this and gotten away with it 5 years ago, or 6 years 

ago. 

Mr. TRUAX. Sure. 

Mr. CLEAVER. And your recommendation to HUD would be? 

Mr. TRUAX. Just to have a little tighter oversight on monitoring 

the administrators of the program. 

Mr. CLEAVER. The problem, of course, is—you took a job that apparently had great temptation, right? 

Mr. TRUAX. Correct. 

Mr. CLEAVER. Did you know that when you took the job? 

Mr. TRUAX. Pardon me? 

Mr. CLEAVER. Did you realize, ‘‘I am taking a job, but, man, the 

temptation here is going to be—’’ 

Mr. TRUAX. No. I didn’t think about that— 

Mr. CLEAVER. Because you had no intention— 

Mr. TRUAX. I had no idea— 

Mr. CLEAVER. And so when HUD—when you were hired, nobody 

could have possibly assumed that you were going to commit fraud. 

Mr. TRUAX. Correct. 

Mr. CLEAVER. You didn’t think about fraud, the people who hired 

you didn’t think about fraud. If it has happened before, they probably didn’t think about it, the employer didn’t think about it, right? 

Mr. TRUAX. Right. 

Mr. CLEAVER. So what is the corrective step now? 

Mr. TRUAX. It is, like I said, a little tighter oversight. 

Mr. CLEAVER. I am sorry? 

Mr. TRUAX. Maybe not having one person in charge of the entire 

program. The more people that you have involved in the program, 

the more it will deter any kind of fraudulence. 

Mr. CLEAVER. Okay. So the whole issue of trust has to be discarded, right? In other words—Al Green, who is to my left—Congressman Green, I trust him, so I don’t need anybody to be an 

intermediary or check on him because I trust him. So I am wondering if you are saying that henceforth we should eliminate 

trust— 

Mr. TRUAX. No, but don’t put—the files, for example. Go in and 

randomly pick the files during an audit or inspection. 

Mr. CLEAVER. Yes. 

Chairman NEUGEBAUER. The gentleman’s time has expired. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. Does anybody on the— 

Ms. WATERS. Mr. Chairman, a point of order. Could you reiterate 

every now and then to the committee that there is a woman, faceless and nameless, who is also a witness who can be questioned? 

Because we don’t see her, and we don’t hear her, we kind of forget 

she is there. 

Chairman NEUGEBAUER. That is right; very good. And I thank 

the gentlewoman. 

‘‘Ms. Smith’’ is still with us. And we periodically get video and 

she is still available for questions. 

34 

Is there anybody else on the Minority who would like to question 

any of these witnesses? 

Mr. GREEN. May I have time, Mr. Chairman? 

Chairman NEUGEBAUER. Mr. Green, you are recognized for 5 

minutes. 

Mr. GREEN. Thank you. I would like to yield to Mr. Gutierrez. 

Mr. GUTIERREZ. Thank you very much, Mr. Green. 

So, ‘‘Ms. Smith’’, we have conflicting testimony here. You never 

worked for HUD, did you? 

Ms. SMITH. No, sir, I never worked for HUD. 

Mr. GUTIERREZ. Thank you. 

You worked for an organization that received HUD funds, did 

you not? 

Ms. SMITH. Yes, sir. 

Mr. GUTIERREZ. Thank you. And that is why you are here to tell 

us about how you stole those HUD funds, and how in the future 

we can stop HUD funds from being stolen. 

Yes? No? 

Ms. SMITH. Was that a question? 

Mr. GUTIERREZ. Yes, that is a question. Is that your purpose 

here, to tell us how you stole the HUD funds? 

Ms. SMITH. I am here to tell you how HUD’s funds were mismanaged and— 

Mr. GUTIERREZ. Were stolen and embezzled. Is that not correct? 

Ms. SMITH. Were mismanaged. Yes, sir. 

Mr. GUTIERREZ. But ‘‘mismanage’’—did you pay off your car debt? 

Did you pay off a car debt with those ‘‘mismanaged’’ funds? 

Ms. SMITH. No, sir, I did not. 

Mr. GUTIERREZ. Okay. Did you increase your salary with those 

mismanaged funds? 

Ms. SMITH. Did I do what? 

Mr. GUTIERREZ. Did you increase your salary with those mismanaged funds? 

Ms. SMITH. Yes, sir, I did. 

Mr. GUTIERREZ. Okay. So you increased your salary with those 

mismanaged funds, which we agree came from HUD. 

Ms. SMITH. No, sir; again, no, sir. Those funds did not come from 

HUD. That organization had its own revenue source. Those funds 

came from that revenue source. 

Mr. GUTIERREZ. Then what are you doing here? This is an investigation into the HOME Program conducted by HUD, which you 

have nothing to do with. You never received any money from that 

Program, according to you. 

Ms. SMITH. My organization, again, sir— 

Mr. GUTIERREZ. Your organization that you were the executive 

director of received money from HUD, did it not? 

Ms. SMITH. The organization that I was the executive director of 

set up a sub-organization that received money from HUD. 

Mr. GUTIERREZ. And you managed that sub-organization, did you 

not? 

Ms. SMITH. Yes, sir, I did. 

Mr. GUTIERREZ. There you go. So you were getting paid to manage that sub-organization which was receiving HUD funds. 

Ms. SMITH. Yes, sir, but— 

35 

Mr. GUTIERREZ. Okay. Good. We finally got to the HUD funds, 

and why you are here. 

Now, let me ask you just one more question—and I will give the 

time back to the gentleman from Texas—now that we have established that you were running an organization and supervising an 

organization and getting paid—right?—with HUD proceeds— 

right?—did any of those HUD proceeds go to make up the $5,000 

contribution that you made in 2003 to the National Republican 

Congressional Campaign Committee? 

Ms. SMITH. No, sir, it didn’t. 

Mr. GUTIERREZ. You segregated the money. 

Ms. SMITH. My salary did not come from those HUD— 

Mr. GUTIERREZ. Your salary did not, so you supervised an organization, but your salary didn’t come from it. I am sorry. It is like 

this doesn’t pass any remote test. The money came from there. You 

don’t want to admit it. The Majority won’t let us go into executive 

session so we can find out who the consultant was that designed 

this program. 

We can’t find out who the politicians were that consult this program. We want to find out how all these happened, but we are 

going to be limited to asking questions of two convicted felons, one 

of whom is saying she didn’t steal anything. She just like borrowed 

it and got caught before she paid it back. 

I return the time to my friend from Texas, Mr. Green. 

Mr. GREEN. Thank you. 

And I do want to ask just a limited number of questions. I will 

start with the lady since it is difficult to get her on and off. 

Ma’am, do you agree that you are a criminal? 

Ms. SMITH. I agree that I conducted some unfortunate— 

Mr. GREEN. I am sorry. I didn’t quite understand. Could you just 

answer yes or no, are you a criminal? 

Ms. SMITH. I participated in some criminal acts. Yes, sir. 

Mr. GREEN. And you were convicted? 

Ms. SMITH. Yes, sir. 

Mr. GREEN. Usually, when people are convicted of criminal acts, 

and they are felons, they are called ‘‘criminals.’’ You would not 

label yourself a criminal? 

Ms. SMITH. How you choose to label yourself is not something— 

society can’t label you. You can only label yourself. I choose not to 

label myself as that. 

Mr. GREEN. Let me just ask you about the definition of a person 

who has committed a crime. Let me just make this comment. You 

bring some concern to your credibility when you don’t own up to 

the fact that you have committed a crime and that you engaged in 

criminal conduct, and as a result you are a criminal. 

That causes some disbelief in some of what you say, and I am 

sorry I didn’t get to say more. 

But thank you, Mr. Chairman. 

Chairman NEUGEBAUER. The gentleman’s time has expired. 

The gentleman, Mr. Miller, is recognized for 5 minutes. 

Mr. MILLER OF NORTH CAROLINA. Thank you. I yield my time to 

Mr. Capuano. 

Mr. CAPUANO. Thank you, Mr. Miller. 

Thank you, Mr. Chairman. 

36 

Mr. Truax, first of all, I want to say, thank you. I know this is 

probably not easy for you, and I respect that. 

I also want to thank you because in this, I don’t know, we have 

been here about a couple of hours now, you provided the one point 

of light so far which, to me, was the only thing that I think I have 

heard that I could act on, which is to make sure that when HUD 

does inspect, that they don’t let you or people like you pick their 

own projects to be reviewed. That is a good point, and I think a 

point that we can follow up on, and I intend to do so. So thank you 

for providing that single point of light. 

But I do want to ask you, on the 50-odd projects that you had, 

in the final analysis, how much Federal HOME money did you 

steal? 

Mr. TRUAX. I didn’t steal any Federal HOME money. 

Mr. CAPUANO. You didn’t steal any Federal HOME money? 

Mr. TRUAX. Not personally. 

Mr. CAPUANO. ‘‘Ms. Smith’’, are you still there? ‘‘Ms. Smith?’’ In 

and out—on the presumption that she is not there, I thought I 

heard her say that she did not steal any HOME money. I am not 

sure of that. That is why I wanted to ask, but that is what I heard. 

‘‘Ms. Smith’’, if you come back, would you let us know because 

I don’t want to put words in your mouth. 

But if I have heard that correctly, we now have two people here 

testifying as some sort of experts on how to fix the HOME Program, which I want to hear, yet neither of them stole any HOME 

money. 

Mr. TRUAX. Sir, if I may add to that? 

Mr. CAPUANO. Go right ahead. 

Mr. TRUAX. I received the money that I admitted to through kickbacks. I defrauded the system. 

Mr. CAPUANO. I understand that. But you didn’t steal HOME 

money. I get that. 

And by the way, when one of my colleagues asked you if you had 

gotten three bids, would that have stopped you, in all the time that 

you did this, did you ever inform the contractors with whom you 

were working what the low bid was that they had to undercut? 

Mr. TRUAX. Yes. 

Mr. CAPUANO. So you told them, ‘‘If you bid $10,000, you will get 

the contract.’’ 

Mr. TRUAX. Yes. 

Mr. CAPUANO. So if you had to get three of those bids, would you 

somehow not have told them what the lowest of the third bid was? 

Mr. TRUAX. Correct. 

Mr. CAPUANO. You would not have told them? 

Mr. TRUAX. Right. 

Mr. CAPUANO. So by simply getting three—what if you had gotten two bids, would you have told them? 

Mr. TRUAX. No. 

Mr. CAPUANO. What were you comparing it to? Was there a sole 

bidder? 

Mr. TRUAX. Sometimes. 

Mr. CAPUANO. But when there was a sole bidder, why would you 

have to tell them the number to bid? 

Mr. TRUAX. I wouldn’t have to, at that point. 

37 

Mr. CAPUANO. So what you did when there were competitive bids 

is you would get on the phone or in person with your co-conspirator 

and say, ‘‘This contractor over here has already bid $10,000, so you 

have to bid $9,000.’’ 

Mr. TRUAX. Yes. 

Mr. CAPUANO. And somehow, miraculously, if you got three of 

those, you wouldn’t do that anymore? Is that what you are suggesting? 

Mr. TRUAX. No. I believe what he was asking is if we had to turn 

those bids into HUD themselves. 

Mr. CAPUANO. That is not the way I heard it. I heard if you had 

had to get three bids, would you do it. 

Mr. TRUAX. It states in here in my statement— 

Mr. RENACCI. Will the gentleman yield? 

Mr. CAPUANO. And would you have given those bids if they had— 

Mr. RENACCI. Would the gentleman yield? 

Mr. CAPUANO. Sure, I will. 

Mr. RENACCI. As a CPA and what I was talking about— 

Mr. CAPUANO. I am a tax accountant, so you are not the only person here who is a— 

Mr. RENACCI. Three— 

Mr. CAPUANO. And I am a former mayor just like you. 

Mr. RENACCI. Great. When three bids come in separate and individual and you turn them into HUD, you don’t have the opportunity to make— 

Mr. CAPUANO. Yes, that is true if you do it right, but it is not 

true if you are in conspiracy with a co-conspirator outside. You tell 

them what the other bids are. You open them up. And you re-seal 

them if you are a criminal. If you are not a criminal, you do it your 

way. If you are a criminal, you do it another way. 

All I am suggesting is if you are criminally oriented, which is 

fine, you are going to find a way. That is all I am suggesting. 

So we have two people here who haven’t stolen HUD funds, as 

far as they have said. And we have people here who claim to be 

experts on how to fix it, yet to my knowledge, I have only heard 

one suggestion that we can bring to HUD that we can act on, that 

is a good one, and I intend to follow up on. 

And I simply wanted to use my time to say thank you, and with 

that I appreciate the gentleman yielding, and I yield back the remainder of my time. 

Chairman NEUGEBAUER. The gentleman yields his time? 

Mr. MILLER OF NORTH CAROLINA. I yield back the balance of my 

time. 

Chairman NEUGEBAUER. I thank the gentleman. 

We are at this particular point in time—I want to thank these 

two witnesses. We appreciate you taking your time and your insight on this issue. 

And with that, this panel is excused, and we will now call up the 

second panel of witnesses. 

Chairwoman BIGGERT. [presiding]. I will now introduce the second panel of witnesses. 

We have Mr. John McCarty, acting Deputy Inspector General, 

Office of the Inspector General, U.S. Department of Housing and 

Urban Development; Mr. Kenneth Donohue, former Inspector GenVerDate Nov 24 2008 11:21 Jun 21, 2012 Jkt 072622 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 K:\DOCS\72622.TXT TERRIE
38 

eral, U.S. Department of Housing and Urban Development; Mr. 

James Beaudette, Deputy Director, Departmental Enforcement 

Center, U.S. Department of Housing and Urban Development; and 

Mr. Ethan Handelman, vice president for policy and advocacy, National Housing Conference. 

Thank you; and thank you for your patience—having had a vote 

and then quite a long questioning period for the first panel. Without objection, your written statements will be made a part of the 

record, and you will each be recognized for a 5-minute summary of 

your testimony. We will start with Mr. McCarty. 

You are recognized for 5 minutes. 

STATEMENT OF JOHN P. MCCARTY, ACTING DEPUTY INSPECTOR GENERAL, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

Mr. MCCARTY. Thank you. Good afternoon, Chairman Neugebauer, Chairwoman Biggert, Ranking Members Capuano and 

Gutierrez, and members of the subcommittees. I am John McCarty, 

Acting Deputy Inspector General for the Department of Housing 

and Urban Development, Office of Inspector General (OIG). I thank 

you for this opportunity to discuss our investigations of HUD’s 

HOME Program. 

My testimony on our investigative work builds upon prior OIG 

testimony in June of this year, which related to audit findings, internal controls, and administration of the HOME Program. 

Over the past 3 years, we have opened 51 investigations based 

on allegations of fraud in the HOME Program. Subjects of our investigations have included executive directors of community development departments and nonprofit entities, elected officials, construction companies, employees, contractors, developers, and investment companies. 

Typically, our HOME Program cases involve fraud schemes associated with embezzlement of funds, bribery, theft, false billing, and 

kickbacks. The Office of Investigations works closely with our many 

law enforcement partners in most of our cases, including investigations involving the HOME Program. Our relationships with State 

and local law enforcement entities, the FBI, the IRS, and other 

Federal agencies help to leverage our investigative resources. 

Many of our HOME cases are initiated based on information received from confidential informants. Often, these are contractors or 

developers who feel that they should have gotten contracts received 

by others or have come forward to reveal bid-rigging kickbacks. 

We also receive referrals from our Office of Audit and the Department itself. Typical charges in HOME cases involve conspiracy, 

bribery, tax violation, wire and mail fraud, embezzlement, money 

laundering, false statements, and theft of government funds. 

Since October of 2008, our criminal investigations have resulted 

in 21 convictions of individuals who used HOME funds for their 

own personal gain. It is clear that the penalties received by these 

wrongdoers represent the seriousness with which these cases are 

handled. 

Additionally, the impact on local jurisdictions which are victims 

of HOME fraud can be significant in terms of the loss of limited 

rehabilitation funds to a local community. 

39 

In addition to these convictions, we routinely refer individuals indicted or convicted of any HUD program fraud to the Departmental 

Enforcement Center for administrative actions. We maintain a 

well-established rapport with the Departmental Enforcement Center and work closely with them to facilitate timely and thorough referrals for administrative action to mitigate further wrongful use of 

program dollars. 

We feel that removing these bad actors from participating in the 

HOME and other government programs is imperative to protecting 

important taxpayer dollars. It also sends a strong message to the 

others in the industry that this type of fraudulent activity will not 

be tolerated. 

O.I. believes that HOME is an important program which provides affordable housing to low-income Americans. Given the current economic and housing crisis in our country, the need for affordable housing may never have been greater than in these tumultuous times. With this crisis comes fraudulent activity to compete 

against the good work of how HOME funds are to be used for their 

intended purposes. 

Since our investigative work focuses on areas of high risk and 

egregious actions in the program, our cases highlight areas where 

improvements need to be made, especially in the area of monitoring. 

O.I. believes that increased monitoring would have a deterrent 

effect on fraud in HUD’s HOME Program. We look forward to 

working with the Department and the Congress in addressing ways 

to improve the effectiveness of this vital program. 

I want to thank you for this opportunity to speak to you today 

about our investigations in the HOME Program. I am happy to answer any questions you may have. Thank you. 

[The prepared statement of Mr. McCarty can be found on page 

80 of the appendix.] 

Chairwoman BIGGERT. Thank you, Mr. McCarty. 

Mr. Donohue, you are recognized for 5 minutes. 

TESTIMONY OF KENNETH M. DONOHUE, FORMER INSPECTOR 

GENERAL, U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

Mr. DONOHUE. Thank you very much, Chairman Neugebauer, 

Chairwoman Biggert, Ranking Member Capuano, and Ranking 

Member Gutierrez. I am Kenneth M. Donohue, former Inspector 

General of HUD, and principal at the Resident Group firm. I am 

no stranger to this committee, and it is great to come back and get 

a chance to talk to you all with my 9 years of experience at the 

I.G.’s office. 

I am also delighted to have my colleague John McCarty join me. 

John was the Head of Investigations while I was the Inspector 

General and he holds a very important position at this time. 

It is rare that the Inspector General gets a chance to come back 

and speak on this type of activity, but I am delighted to do so. I 

would be remiss if I didn’t recognize the former colleagues that I 

served with for 9 years and the great job they did in many of these 

investigations. 

40 

My mission was independent, objective reporting to the Secretary 

and Congress for the purpose of supporting a positive change in integrity, efficiency, and effectiveness of HUD programs. That was 

my mandate and I took that very seriously. 

During my time, as John indicated, the number of investigations—we did 60 audits relating to the HOME Programs. By the 

way, when we were doing this, you might recall we had an enormous amount of mandated congressional oversight involving the redevelopment of Lower Manhattan after the 9/11 disaster. We had 

oversight of FHA and Ginnie Mae, the affected Gulf States via 

Hurricanes Wilma, Katrina, and Rita. And, quite frankly, you can 

imagine the amount of activity that was going on certainly with the 

mortgage-fraud activity. 

During my tenure, I was proactive. I had a proactive sense of urgency in everything I did. And my position was zero tolerance with 

those wrongdoers who might attempt to commit fraud and abuse 

their authority. I would often express my concerns to the Department. And the Department would receive that in a very formal sort 

of way. And the fact of the matter is, I expressed my concern about 

recapturing current and future funds due to compliance. 

I further expressed my concerns about compliance, controls, and 

information systems relating to the HOME Program. 

Of those 60 audits, on 12 separate cases, HUD came to us and 

asked me to address their concerns with regard to some of these 

programs. And in fact, I directed audits to be completed on those 

very 12 cases. 

The Secretary often expressed the importance of HOME Programs, based on his positive experience that he had involving his 

New York practice. 

The answer and sum up is the fact aggressive monitoring in my 

estimation has to occur with the sub-grantees on these programs. 

HUD had 42 local field offices with enormous undertaking to oversee these programs. Unfortunately, there were frequent incidences 

of noncompliance and, as John had recorded, criminal fraud, particularly in the sub-grantee level. 

The HUD information systems were self-reporting. And I was 

pleased to hear most recently the Assistant Secretary speaking in 

the June-July hearing where they said they are addressing such 

issues, as well. 

Yes, it is true that the Inspector General—there is never enough 

compliance and oversight to satisfy such programs that distribute 

precious tax dollars. I do, however, believe there is needed balance 

between program efficiency and oversight to be applied collectively 

between the programs and these oversight agencies. 

I believe, after 35 years in Federal law enforcement, that without 

an effective compliance and monitoring practice, we unfortunately 

encourage those wrongdoers, some we saw today, who would seize 

upon the system and use Federal funds for unintended purposes— 

their own self-gain, as stated in several examples in these hearings. 

Criminal cases like this could be considered anomalies, or are 

they a pattern of behavior? 

In my experience, I think when we don’t have effective monitoring, we in fact encourage those people who would take the big 

41 

step and get involved in criminal activity. And I think we owe it 

to ensure that we have aggressive compliance. 

I am pleased with the comments the Assistant Secretary made 

in June and the fact that I look forward to those aggressive actions 

that they are planning on following up and I think may very well 

might have occurred since that time. 

It is primarily to compliance responsibilities on local grant levels. 

HUD and Congress might consider reforming the legislation to expand the role and responsibilities of HUD to ensure a more active 

compliance program. 

I enjoyed a very positive relationship with the Department’s enforcement center and Jim Beaudette. Past Secretaries have often 

talked to me about the role and the placement of the enforcement 

center within HUD’s structure. 

In my opinion, over those 9 years, I felt they did not have adequate resources and the question of an independent role in addressing matters not only just for the grant activities but the subgrantees as well. 

As stated earlier, an effective Inspector General must be diligent, 

encouraging, and at times insisting on strong oversight and transparency within government programs. 

The practice of monitoring State and local government entities is 

paramount, as discussed today. And such programs do exist and 

are available. 

One such example is following the 9/11 disaster in New York, 

where the importance of New York City and New York State went 

back and hired monitors, recognized monitors to go back and look 

at real-time issues to see, in fact, whether grantees or the subgrantees were, in fact, doing things inappropriately. 

Chairwoman BIGGERT. If the gentleman could conclude? 

Mr. DONOHUE. Yes. 

Finally, I am at a disadvantage of knowing the constructive 

changes made by the HUD in the past year or so, but I do look forward to their continuation. Thank you. 

[The prepared statement of Mr. Donohue can be found on page 

72 of the appendix.] 

Chairwoman BIGGERT. Thank you. 

Mr. Beaudette, you are recognized for 5 minutes. 

STATEMENT OF JAMES M. BEAUDETTE, DEPUTY DIRECTOR, 

DEPARTMENTAL ENFORCEMENT CENTER, OFFICE OF GENERAL COUNSEL, U.S. DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

Mr. BEAUDETTE. Thank you. 

Chairmen Neugebauer and Biggert, Ranking Members Capuano 

and Gutierrez, and members of the subcommittees, thank you for 

inviting me to testify about efforts by HUD to prevent and combat 

fraud against government programs, including HOME. 

I am the Deputy Director of HUD’s Departmental Enforcement 

Center, or DEC, in HUD’s Office of General Counsel. The DEC is 

responsible for the Department’s suspension and debarment program and other civil enforcement actions against individuals who 

violate HUD rules and commit fraud. 

42 

My career has been devoted to law enforcement and related antifraud efforts. I served for 9 years in HUD’s Office of Inspector General, where my work involved virtually all HUD programs, including HOME. 

I also worked for 16 years for the U.S. Border Patrol in antifraud enforcement at the Department of the Interior. 

Throughout the course of my career, I am not aware of any fraud 

by any HUD or other Federal official in connection with the HOME 

Program. Overall, in my experience, there has been relatively little 

fraud by private individuals or more rarely by State or local officials with respect to HOME funds. 

I agree with Assistant Inspector General Jim Heist’s testimony 

that there is a very good relationship between the OIG and HOME, 

that the program’s Administration is probably better than most 

and that HUD has been very responsive in the last couple of years 

and agreed with OIG audits 95 percent of the time about HOME. 

The vast majority of people involved with HOME and other Federal programs and private institutions are honest and trustworthy. 

Unfortunately, dishonest and greedy people do exist. We strongly 

condemn fraudulent activity relating to HUD programs and place 

a high priority on preventing, uncovering, and punishing such activity. 

But attempted fraud relating to funds provided under HOME 

and other programs, just as in private institutions like banks, has 

sometimes occurred and will continue. This is just as true with respect to non-Block Grant as well as with Block Grant Programs. 

A key anti-fraud component is aggressive enforcement. That is a 

HUD focus. Secretary Donovan and others have made it clear that 

there is zero tolerance for fraud. 

Just last week, the DEC suspended a contractor who was recently indicted for fraudulently obtaining HOME funds from Lewiston, Maine, starting in 2005. 

The working relationship between OIG and HUD ensures that 

we can begin debarment or other actions against a violator as soon 

as possible. Another important approach is improved monitoring 

and oversight. A congressionally created Block Grant Program like 

HOME, by definition, involves local control and implementation. 

With some 30,000 HOME projects at any time, it would require 

significant additional funding to enable HUD to conduct day-to-day 

monitoring of each of these projects. 

But HUD recognizes its fiduciary responsibility as a steward of 

taxpayer funds. A critical part of that is monitoring State and local 

government grantees and referring suspected problems to the OIG 

for more investigation. 

In my experience, this is exactly the approach taken by HUD 

with respect to HOME. Within the last few years in particular, 

HUD has improved HOME monitoring and oversight such as 

through the additional reports that Assistant Secretary Marquez 

testified about in June. 

In addition, HUD has been working since 2009 on revisions to 

the HOME regulations that are designed in part to improve accountability and performance. 

Although the improvements are in the final stages of review by 

OMB, the Acting Inspector General concluded in a letter to SenVerDate Nov 24 2008 11:21 Jun 21, 2012 Jkt 072622 PO 00000 Frm 00048 Fmt 6633 Sfmt 6633 K:\DOCS\72622.TXT TERRIE
43 

ators Murray and Collins, after an OIG review of the proposed rule 

changes in August, that they should help ensure the timely completion of future program activities and strengthen HUD’s future enforcement authority. 

HUD is also making key enhancements to the IDIS system to ensure better project reporting, tracking, including more financial and 

project risk mitigation controls. 

In short, it is unfortunately likely that attempted fraud by private developers and others will continue with respect to HOME 

funds as with virtually any government program or private activity. 

In my opinion, based on a career in anti-fraud efforts, however, 

it is incorrect to single out HOME as being particularly susceptible 

to fraud. To the contrary, based on my experience at the DEC and 

OIG, HUD continues to take important steps to improve monitoring, oversight, and enforcement that can prevent and combat 

fraud with respect to HOME and other programs. 

Thank you again for the opportunity to testify. I would be 

pleased to answer any questions. 

[The prepared statement of Deputy Director Beaudette can be 

found on page 68 of the appendix.] 

Chairwoman BIGGERT. Thank you, Mr. Beaudette. Mr. 

Handelman, you are recognized for 5 minutes. 

TESTIMONY OF ETHAN HANDELMAN, VICE PRESIDENT FOR 

POLICY AND ADVOCACY, NATIONAL HOUSING CONFERENCE 

Mr. HANDELMAN. Thank you very much. My name is Ethan 

Handelman, and I am the vice president for policy and advocacy at 

the National Housing Conference. I am grateful to all the members 

of the committee for inviting me here to testify. I hope that, as part 

of the discussion of the need for strong regulatory and financial 

controls, we can remember the central work of the HOME Program 

in creating affordable housing. 

Since 1931, the National Housing Conference has been dedicated 

to ensuring safe, decent, and affordable housing for all in America. 

We are a nonpartisan, nonprofit group that brings together a diverse membership of housing stakeholders, including tenant advocates, mortgage bankers, nonprofit and for-profit homebuilders, 

property managers, policy practitioners, REALTORS®, equity investors and more; all of whom share a commitment to balanced 

housing policy. 

Some of our members administer HOME funds or work on 

projects that receive HOME funds, but most do not. We all, however, support the important work HOME does as part of our national commitment to safe, decent, and affordable housing for all in 

America. 

The first way HOME does that is simply by creating affordable 

housing. For 20 years, this Federal Block Grant Program has provided critical funding to State and local governments exclusively to 

provide affordable housing for low-income families. 

Over 1 million units have been produced, including those for new 

homebuyers, some for owner-occupied rehabilitations, and some for 

rental housing units. 

44 

Above and beyond those units created, over 240,000 tenants have 

received direct rental assistance to make private market apartments more affordable. 

Second, HOME leverages other resources. For every HOME dol- lar expended, $3.94 in other public and private investment has 

been leveraged, resulting in more than $80 billion in other funding 

for affordable housing since the program began. 

As just one example, the county of Orange in New York since 1992 has leveraged over $350 million in other funds using less 

than $16 million in HOME funds to construct and preserve affordable housing, often in properties with just a few apartments, sometimes in larger developments. 

In particular, HOME dollars are often the early money necessary 

to get projects off the ground, while private lenders, equity investors, low-income housing tax credit allocations and other resources 

come together. 

Third, HOME creates jobs. HOME funds frequently provide essential gap financing for low-income housing tax credit properties. 

Those developments create jobs. 

In the first year, construction of a typical 100-unit property results in 116 jobs, about half of which are in the construction sector. 

Other HOME Program activities, such as the development and renovation of owner-occupied homes also produce employment. Now 

more than ever, such jobs are essential. 

Fourth, HOME sustained projects during the downturn. The recession and financial crisis disrupted real estate development 

across the country. In a survey of homebuilders from the beginning 

of this year, 45 percent reported placing multifamily projects on 

hold, and 60 percent reported placing single family projects on hold 

until the financing climate gets better. 

Housing starts and completions have slowed dramatically as a 

result of the crisis by as much as 75 percent nationally from the 

height in 2005 to the bottom in 2010. HOME-funded projects, however, outperformed the broader real estate market. In June, HUD 

reported that only 2.5 percent of 28,000 active projects were delayed. So, against the backdrop of disrupted real estate markets, 

HOME projects stand out for completion. 

Fifth, HOME reaches many communities. The flexibility of the 

HOME Program provides urban, rural, and suburban communities 

across the country with the ability to both produce and rehabilitate 

single-family homes, many for new homeowners, while also providing and rehabilitating rental housing from low- to extremely 

low-income families. 

In addition, the HOME Program provides critical resources for 

housing persons with special needs including the homeless, disabled veterans, and persons with HIV/AIDS. I share as one example the Silver Star Apartments project in Battle Creek, Michigan, 

which used HOME funds as both first mortgage loan and gap financing to create 75 apartments on the campus of a VA hospital, 

allowing homeless veterans: one, to be housed; and two, to have access to the medical care they need. 

Lastly, HOME empowers State and local governments. Local 

communities can target the flexible HOME funds to the particular 

needs of their communities and housing market. HUD provides the 

45 

essential oversight function, making sure that communities follow 

program requirements, verifying project completion, and when necessary bringing enforcement action to recapture funds. 

HUD’s enforcement is strong, and must continue to ensure the 

continued success of HOME. The HOME Program is a proven solution that is part of our national commitment to creating housing 

opportunities for all Americans. 

Thank you again for the opportunity to be here, and I am glad 

to answer questions. 

[The prepared statement of Mr. Handelman can be found on page 

77 of the appendix.] 

Chairwoman BIGGERT. Thank you, Mr. Handelman. 

We will now recognize Members for 5 minutes each to ask questions. And we will begin with the gentleman from Illinois. 

Mr. Dold is recognized for 5 minutes. 

Mr. DOLD. Thank you, Madam Chairwoman. And I certainly appreciate the opportunity to ask some questions. 

And thank you all for being here. We had an interesting first 

panel. And I think really the goal of this hearing is to try and find 

out where we can make things better. 

Obviously, the intended result is to make sure that the HOME 

Program has the dollars that stretch further for the intended beneficiaries and for the American taxpayer. And unfortunately, we see 

dollars that are mismanaged, not just in the HOME Program, but 

across the sector and throughout the entire government. 

Our job in the oversight is to try to get that right, because if 

HUD doesn’t get it right, then beneficiaries suffer by not receiving 

the intended benefits and also making the American taxpayer more 

reluctant to fund additional programs, which we do believe are important. 

So, Mr. Beaudette, one thing that I just wanted to go at first is, 

we look at—according to the Washington Post, we had 700 projects 

in a sample of about 5,100 multifamily projects that were undeveloped, indefinitely delayed or abandoned. This represents about 14 

percent of the multifamily projects that were susceptible to waste, 

fraud, and abuse. Can you talk to me about this 14 percent, especially in light of what you had mentioned in your testimony about 

a zero tolerance policy for fraud? 

In fact, let me back up just 1 more second, because I do want 

to get a better understanding of how you are aware of the fraud 

in your role. 

Mr. BEAUDETTE. In my particular role it is after the fact. It is 

coming from the I.G.’s office to the DEC (Departmental Enforcement Center). 

Mr. DOLD. So, the I.G.’s office is giving you that information. I 

am just trying to—in layman’s terms, the Departmental Enforcement Center, you investigate whether a person who has already 

committed fraud or broken HUD rules should be barred from receiving HUD money? 

Mr. BEAUDETTE. That is incorrect. 

Mr. DOLD. Okay. Can you tell me about— 

Mr. BEAUDETTE. The Departmental Enforcement Center handles 

the suspension or debarment of individuals who do business with 

HUD. 

46 

Mr. DOLD. Okay. In the scope of the hearing that we are having 

here today—I am just trying to get a better handle. You are the 

best person in terms of HUD to be here to be answering the questions about fraud and abuse? 

Mr. BEAUDETTE. From HUD, I probably am, yes. 

Mr. DOLD. Okay. Can you go back then, and we talked about the 

700 cases, the 14 percent and the zero tolerance policy. Can you 

focus on that for us a little bit because we are interested in terms 

of how do we make it better—because 14 percent, to me, does that 

sound like a bigger number or a smaller number? 

Mr. BEAUDETTE. That sounds like a smaller number. 

Mr. DOLD. Fourteen percent of waste, fraud, and abuse is small. 

Okay? Please elaborate. 

Mr. BEAUDETTE. I don’t think it is a good number. I believe it 

is a smaller number. 

Mr. DOLD. Smaller than what? 

Mr. BEAUDETTE. Smaller than 15 percent. 

Mr. DOLD. Okay. Historically, it is smaller than 17 percent as 

well. It is certainly greater than 13 percent. I am glad we don’t 

have to go down this path. 

But what I am interested in is, it is certainly from my perspective as a taxpayer, as someone who is over here trying to do some 

oversight, 14 percent when you have—correct me if I am wrong— 

a zero tolerance policy, not a 14 percent tolerance policy. So, am 

I correct in thinking that it is the zero tolerance policy or 14 percent tolerance policy? 

Mr. BEAUDETTE. There is a zero percent tolerance policy. There 

is no evidence of fraud in this particular 14 percent we are talking 

about. 

Mr. DOLD. Okay. In the 14 percent that I am specifically referring to, we have monies that have gone out there in the programs 

that have not been spent. We have vacant lots. So, I guess I am 

having a difficult time saying there is not fraud involved with that. 

Mr. BEAUDETTE. I am not aware of it myself. 

Mr. DOLD. Okay. Is there anybody that we should be talking to 

at HUD who would be aware of those? 

Mr. BEAUDETTE. I am sorry? 

Mr. DOLD. Is there anybody at HUD who would be aware of 

those? 

Mr. BEAUDETTE. Actually, the Deputy Assistant Secretary is with 

me today, who could speak to the program aspect of it. 

Mr. DOLD. Madam Chairwoman? I don’t want to mess up your 

panel, but I would be happy to just try to find out if there is someone more appropriate to speak with. 

With just a short period of time, we will let you sit down, Mr. 

Beaudette. We will go to another thought. 

And Mr. Donohue, based on your years as Inspector General, can 

you please describe your greatest concern about oversight or lack 

thereof? Because I am sure I am confident that regardless of the 

Administration, we have had problems with regard to oversight. 

We want to make sure that it gets stronger and better for the 

future. Can you talk to me about what your greatest problem was 

in the past and what will fix it? 

47 

Mr. DONOHUE. Quite frankly, I transcend Administrations in my 

capacity as Inspector General. And I might say that the Secretaries, all of the Secretaries I served under were sensitive to the 

issue of oversight and monitoring all the programs. 

HUD by itself has systemic problems, I believe, in a lot of different programs as far as exposure to fraud. That is why my office 

is so engaged, as I indicated in my testimony. 

But to answer your questions specifically, I think the key here 

comes down to is that when these formula grants go back out, the 

issue, the key issue on most of these activities is at the sub-grantee 

level. And until you get to that sub-grantee level, you really don’t 

really know or find out necessarily as to what might be going on 

wrong. 

And we rely upon—as an Inspector General we rely upon, as Mr. 

McCarty indicated, the support of other Federal agencies, good 

stewards, colleagues within these housing programs and HUD programs to sort of give us the tips, let us know, hotlines or whatever 

else to come back. And we investigate those on a case-by-case basis, 

with the exception of my audits. 

I did 60 audits. That is a significant number. Audits are due in 

the HOME Program, and there is good reason to do so. 

Chairwoman BIGGERT. The gentleman’s time has expired. 

Mr. DOLD. Thank you. 

Chairwoman BIGGERT. Just as a reminder, we have an orderly 

process for witnesses. And so, we will continue. 

The gentleman from Massachusetts is recognized for 5 minutes. 

Mr. CAPUANO. Thank you, Madam Chairwoman. 

Thank you, gentlemen, for being here. Were you all here for the 

earlier panel to listen? Do you agree that it was probably a very 

good point that when someone is being audited, they should not be 

allowed to select the portion of their portfolio to get audited? Does 

anybody disagree with that statement? Did anybody here have anything else substantive that you learned that you didn’t know before 

you walked into the room, relative to the auditing HUD or anybody 

else does? The answer is no, right? It was a nice show, but you 

didn’t learn anything. 

Mr. DONOHUE. Sir, I think my standpoint is—being an I.G., I 

think it was very informative to hear. Anytime I hear criminal 

wrongdoers speak to that, the issues of how they do that and collect their fraud and do their fraud— 

Mr. CAPUANO. Did you hear anything today that was unique or 

something you hadn’t heard before? 

Mr. DONOHUE. You know, in 35 years, I have probably heard it 

all. 

Mr. CAPUANO. That is what I figured. I didn’t hear anything here 

that I haven’t heard before, and I haven’t been doing it that long. 

So, I mean, though it was fun, I don’t see why we—I would have 

rather gone right to this panel. I think you gentlemen have more 

to offer to the things we really want to do than we just did. 

And I would like to know specifically—not today, but I would ask 

each of you in writing, as soon as you can—I would like specific 

recommendations about what you think we should be doing to increase and enhance the oversight of the HOME Program. 

48 

There is nothing that I wouldn’t be open to. But, at the same 

time, though it is very interesting to hear we should have more, 

I need to hear specific proposals, as I am sure you all respect. 

So when you get a chance—this isn’t the time or place—I would 

appreciate more specificity as to either what we could have HUD 

do under current law or, if you think we should be changing the 

law to, say, something, suggest that as well because I would be 

more than happy to do that. 

I guess I would also like to ask—Mr. Beaudette, in his testimony, 

said there was, in his estimation, very little fraud in the HOME 

Program. 

Mr. McCarty, would you generally agree with that? 

And, again, that is not no fraud. Every program has something. 

Would you agree with the general statement? 

Mr. MCCARTY. Generally, like Mr. Donohue said, any fraud is too 

much fraud. 

Mr. CAPUANO. I agree with that. 

Mr. MCCARTY. So I think, from what we have seen over the last 

3 years, the numbers I gave you, that is what we have been provided to work with. 

Mr. CAPUANO. Fair enough. 

Mr. MCCARTY. Not knowing what is out there is what troubles 

us. 

Mr. CAPUANO. That is always the trouble. 

And I guess the other question that I really want to know is, 

during your term, Mr. McCarty—and I will ask you the same thing 

in a minute, Mr. Donohue and Mr. Beaudette—when you go to 

HUD with proposals, do they generally accept your proposals—not 

proposals but suggestions on how to improve something? 

Do they generally accept those suggestions and implement your 

suggestions? 

Mr. MCCARTY. I think my colleague, Jim Heist, testified in June 

that the Department’s HOME Program has been very receptive to 

our audits. 

Mr. CAPUANO. Yes, he did, but I want to know if you agree with 

him. 

Mr. MCCARTY. I think so. Yes, sir. 

Mr. CAPUANO. Mr. Donohue, would you agree with that, in your 

estimation, that HUD has been open to suggestions from the I.G. 

when you were there? 

Mr. DONOHUE. Not only do I believe all the Secretaries are quite 

sensitive to the issue of appropriate monitoring, making sure the 

monitoring goes— 

Mr. CAPUANO. So when you made a suggestion, they would try 

to implement it. Mr. Beaudette, have you found that to be true as 

well? 

Mr. BEAUDETTE. Absolutely. 

Mr. CAPUANO. So that, as people find new ways to do it and they 

go to suggest it, in general, the people at HUD, not just this Administration but past Administrations—they are good people trying 

to do the right thing. And if somebody comes up with a good idea, 

they do it. Is that a fair estimate of what you just said? 

I guess the other thing is, have there been any times when you 

have suggested, Mr. McCarty, that you really need to do this; it is 

49 

an important issue—not details, but an important issue; you really 

need to do this to enhance your oversight, that HUD has said no, 

we won’t do it; we refuse to do it? 

Mr. MCCARTY. We have been asking them for awhile to do more 

monitoring, to implement a real-time surprise monitoring system 

that was mentioned earlier here. And that started back when I was 

Assistant Inspector General for Investigations, for the most part 

right after 9/11, where it was successful, but we— 

Mr. CAPUANO. And they said, no, they won’t do it? 

Mr. MCCARTY. I think they tried to implement it in other ways. 

Mr. CAPUANO. But they haven’t said no? 

Mr. MCCARTY. No, sir. 

Mr. CAPUANO. Mr. Donohue, did you have the experience of them 

saying no to you? 

Mr. DONOHUE. I have presented in the past with regard to my 

past years as monitoring—that I put in my written testimony—to 

be applied in New York. It is a very effective program, but what 

it does is it gets down, a monitoring practice, to the sub-grantee 

level. And to me, that is the key to make this monitoring effective. 

Mr. CAPUANO. Have you suggested that to HUD, and they said 

no, when you were the I.G.? 

Mr. DONOHUE. I have made suggestions to HUD in past years, 

and they weren’t carried out. 

Mr. CAPUANO. Mr. Beaudette, have you had that experience, 

where you have made suggestions to HUD and they said no? 

Mr. BEAUDETTE. No, I have not. And I think, given the resources 

to do so, HUD would love to enhance their monitoring program. 

Mr. CAPUANO. Mr. Donohue, in your testimony, which I actually 

appreciated very much, I just want to read one sentence back to 

you: ‘‘As stated earlier, an effective Inspector General must be diligent and encouraging and at times insisting on strong oversight 

and transparency with any government.’’ 

I think that is a wonderful statement. Did you insist that your 

proposals be adopted? 

Mr. DONOHUE. Sir, if you knew me for 9 years, I insist quite a 

bit about the actions on these, my concerns. And I would make it 

very vocal, whether it is this matter or mortgage fraud or whatever 

else. Yes, I did. 

Mr. CAPUANO. I guess I don’t—what is the difference between 

suggesting and insisting? 

Mr. DONOHUE. I am sorry? 

Mr. CAPUANO. What is the difference, then, between suggesting 

and insisting? 

Mr. DONOHUE. It is probably synonymous, probably the same 

thing. 

Mr. CAPUANO. Fair enough. Thank you very much. 

And I look forward to your written comments on specificity because I would like to follow up on them. Thank you. 

Chairwoman BIGGERT. Thank you, Mr. Capuano. 

I think that we are here to really look at the future and how we 

can solve any of the problems both from the first panel and from 

the second panel. 

And with that, I would recognize the gentleman from Ohio, Mr. 

Stivers, for 5 minutes. 

50 

Mr. STIVERS. Thank you, Madam Chairwoman. I would like to 

thank the Chairs of the two subcommittees for calling this hearing. 

I would also like to thank these witnesses from panel two, as well 

as the witnesses from panel one, for your time, because we all want 

to make the Program much more accountable and root out waste, 

fraud, and abuse. 

My first question is for Mr. McCarty. Were you here for the first 

panel in which Mr. Renacci, the gentleman from Ohio, asked about 

internal controls, specifically random inspections, multiple bids, 

and taking the lowest bid? 

Mr. MCCARTY. Yes, sir, I was. 

Mr. STIVERS. Has your organization, as Inspector General, ever 

recommended these steps to HUD for the HOME Program? 

Mr. MCCARTY. I am certain we have through our audits, yes, sir. 

Mr. STIVERS. So to follow up on the gentleman’s question from 

Massachusetts, while you have recommended them, they have not 

been adopted. Is that correct? 

Mr. MCCARTY. I am not certain I could answer that right now, 

sir. 

Mr. STIVERS. It sure appears they have not been adopted, I guess 

we will— 

Mr. MCCARTY. At that sub-grantee level, probably not. 

Mr. STIVERS. At the sub-grantee level. 

Next, another question for Mr. McCarty about the information 

systems—because you brought up those in your testimony a bit. 

So the way the information system works today is grantees and 

sub-grantees can go in and change numbers at any point in the 

system. So it is really hard for the computer system to have a reconcilable audit trail that you can use in your investigations. Is that 

correct? 

Mr. MCCARTY. Yes, sir. That is what our audits have shown. And 

I think Mr. Truax testified to that also. 

Mr. STIVERS. He did. Has the Inspector General’s Department 

ever suggested that HUD fix that? 

Mr. MCCARTY. Yes, sir, we have. 

Mr. STIVERS. Okay. Again, and I know Mr. Capuano, the gentleman from Massachusetts, asked about specific actions. It sounds 

like we have four specific actions already. I appreciate you answering those questions. 

The next question is for Mr. Donohue. You suggested in your testimony some real-time monitoring fixes that HUD should adopt for 

the HOME Program. Can you quickly elaborate, knowing that we 

have 2 minutes and 50 seconds left, on specifically what those are? 

Mr. DONOHUE. Right. The one I saw most effective was implemented in New York and is currently in play with regard to redevelopment of Lower Manhattan. 

And what happens is, in effect, in concert with the grant recipient and the Inspector General, they hire a reputable monitor that 

goes back and, real-time, a la carte, real-time, goes back and looks 

at the disbursement of funds. It could be any matter that they ask 

upon. But the person goes on site at a sub-grantee level. Their reimbursement for those costs are provided for within the administrative cost of the grant. 

Mr. STIVERS. Great, thank you. 

51 

Mr. Beaudette, you talked about how you had never seen an 

issue when HUD didn’t adopt the recommendations from the Inspector General’s office. Have you heard about the four recommendations that I just talked about with Mr. McCarty? 

And I won’t get to the second one with Mr. Donohue yet. Is this 

the first time you have ever heard of those four recommendations? 

Mr. BEAUDETTE. In this kind of setting, yes, in that the— 

Mr. STIVERS. In any setting, really. I am just curious if you have 

read them in a report, if you have seen them as a requirement? 

This is the first time you have ever heard about these four ideas 

for fixing— 

Mr. BEAUDETTE. I believe these four ideas are in place. I don’t 

know if that was from the Inspector General’s office. But I believe 

the auditing standards are— 

Mr. STIVERS. So there are random inspections where the grantees and sub-grantees don’t pick the programs now? 

Mr. BEAUDETTE. I believe so. Don’t quote me on the random inspection. 

Mr. STIVERS. And the grantees and sub-grantees can no longer 

update the system on their own? 

Mr. BEAUDETTE. I don’t know that. 

Mr. STIVERS. Okay. 

Mr. BEAUDETTE. Actually, I thought you were referring to the internal controls and— 

Mr. STIVERS. The first three were the internal controls. The 

fourth is the systems issue. And so, you are saying all four of those 

issues are fixed. I will follow up with your office in writing on that. 

But I really appreciate—I would love to get a full report. That is 

what we are here for today. 

The last question is for Mr. Handelman. And I will just follow 

up on something that I think Mr. Dold asked. He talked about 14 

percent of fraud. And let us assume for a second—I don’t know if 

that is the right number. Let us assume there is 14 percent fraud, 

waste, and abuse. Because if you spend money on something, even 

if it is not fraud and they don’t build the stuff they are supposed 

to build, it might not be fraud but it is at least waste. 

If there is 14 percent fraud and waste in this program that you 

and I agree is an important program, what is the impact on this 

important program? 

Mr. HANDELMAN. You and I certainly agree that this is an important program. I understand that you have asked me to hypothetically assume the 14 percent number. I will say, for the benefit 

of the committee, we looked at the numbers produced by The 

Washington Post, were unable to replicate them, and The Post did 

not release its analysis. So I have no confidence in that number. 

Mr. STIVERS. If there is that kind of waste, is it bad for the program? 

Mr. HANDELMAN. Yes. 

Mr. STIVERS. Okay. That is really what I was looking for is, we 

all want to agree—when we agree there is a worthy program, we 

want the money in that program to be spent wisely and efficiently. 

I think my time has expired. Thank you— 

Chairwoman BIGGERT. The gentleman’s time has expired. 

52 

The gentleman from Missouri, Mr. Cleaver, is recognized for 5 

minutes. 

Mr. CLEAVER. Thank you, Madam Chairwoman. 

Mr. McCarty, we had the two individuals on earlier, and both of 

them appear to be headed toward serving time in prison for what 

they did. So that means the system worked. Does that mean the 

system worked? 

Mr. MCCARTY. It means the criminal justice system worked. 

Mr. CLEAVER. Yes. 

Mr. MCCARTY. Yes. 

Mr. CLEAVER. When people do that, what is supposed to happen? 

A combination of whistleblowers and good investigatory work done 

by the U.S. attorney, the I.G., all of that played into catching people who were committing fraud in the HOME Program. Is that correct? 

Mr. MCCARTY. Yes, sir. 

Mr. CLEAVER. Okay. So if the system is working, and people get 

into the system, like the gentleman who was here earlier, who said 

he didn’t go into the program to commit a crime, and the people 

who hired him didn’t see that. No human being can see into somebody else’s mind and soul. So they hired him. 

What else can we do? You try to hire the best people you can. 

And when people commit a crime, they get caught. What else do 

we do? 

Mr. MCCARTY. Speaking for law enforcement, we like to get the 

word out through fraud awareness briefings. We want to make sure 

that we have an ear to the ground for the people who are running 

the programs and possibly manipulating them. 

Those who are confronted with opportunities of fraud, it is done 

out of desperation, greed. And where we can reach those people before that happens, in prevention rather than in enforcement, we 

are all better off. 

Mr. CLEAVER. Yes. The human condition would be as such that 

we can’t stop people from doing wrong. Correct? 

Mr. MCCARTY. Correct. 

Mr. CLEAVER. And so all we can do is try to minimize it, and 

then punish people when they do so, so that others might be hesitant or reluctant to do the same. 

Mr. MCCARTY. Yes, sir. 

Mr. CLEAVER. Mr. Donohue? 

Mr. DONOHUE. Yes, sir. I want to go back to your reference of the 

two people. I think what I would—how I would phrase that is, in 

those two cases, the system worked perfectly. The system, the environment we deal is the ones we don’t know about or the ones we 

don’t—and I think as Mr. McCarty has specifically stated, that I 

think, in Federal law enforcement, a key issue is prevention. 

And I think how you prevent that—I have seen this in the mortgage fraud world—is that how you prevent that is having strong 

requirements, good oversight compliance and monitoring. So I 

think you can’t have one without the other to be effective. 

Mr. CLEAVER. So one of the most significant steps we can take 

now would be to cut funds from the HOME Program? 

Mr. DONOHUE. Are you asking me that? 

Mr. CLEAVER. Yes. 

53 

Mr. DONOHUE. I am not suggesting that at all. 

Mr. CLEAVER. No, I know you didn’t. 

Mr. DONOHUE. Oh. 

Mr. CLEAVER. I am asking, does it make sense now to—because 

we have a problem, let us cut the budget in the HOME Program, 

which probably would result in cutting people who would be in a 

position to do some of the monitoring. Do any of you disagree with 

what I just said? 

Did any of you understand what I just said? 

[laughter] 

Mr. BEAUDETTE. I don’t think the idea is to shut down HOME. 

I think the idea is to provide a deterrence to where an individual 

is relatively confident that if he defrauds the program, he is going 

to get caught. And not to mimic Mr. McCarty, but pursuing that 

sort of angle is going to be the best possible route to take. 

Mr. CLEAVER. Sir? 

Mr. HANDELMAN. I would further agree that shutting down 

HOME is not the answer to this problem. 

Mr. CLEAVER. Yes. I think anytime we start talking about a program like this—sometimes people think, okay, we had a problem 

there, so let us eliminate the program. I never will forget—we had 

a problem with somebody misusing their access to the Pages here 

in Congress a short time ago. And so there were people who said, 

‘‘Let us cut out the Page Program,’’ instead of saying, ‘‘Let us cut 

out Congress.’’ But the point that I think is important is that when 

there is a problem, we always decide, let us cut something, instead 

of trying to figure out ways to strengthen the system so that fraud 

becomes increasingly difficult to commit. 

Do all four of you agree with me? 

Does anybody disagree? 

Thank you, Madam Chairwoman. 

Chairwoman BIGGERT. The gentleman’s time has expired. 

The gentleman from Texas, Mr. Neugebauer? 

Chairman NEUGEBAUER. Yes, I thank the chairwoman. 

Mr. McCarty, does HUD track whether funds are used for the intended purposes—in other words, if I received a grant of HOME 

funds for 100 units, but only built 60, does HUD have a way of 

tracking whether I built 60 or 100 units? 

Mr. MCCARTY. I don’t think I would be able to answer that, sir. 

It would be a program question, how they run the program, how 

they track it. 

Chairman NEUGEBAUER. Let me ask you a question. I want to 

use an example up here. It is hard to see that, but that is a kind 

of a model that somebody did of a project that was going to be built 

here in the Washington, D.C., area. It was supposed to be 106 

units, which was in—$6.8 million was spent. 

The next slide is actually the property. And as you can see, some 

of the units were built in the back, but this property has been like 

this for 2 years. So do you think it would be appropriate for HUD 

to have some knowledge that, if they extended a grant for 106 

units, they got 106 units? 

Mr. MCCARTY. Yes, sir, I do. But I think, in your example, realtime surprise monitoring would pick something like that up immediately. 

54 

Chairman NEUGEBAUER. Yes. But today, does a system exist at 

HUD where they could pull up that project and determine whether 

that was 106 or 40 or 30 units built? 

Mr. MCCARTY. I am not certain about that, sir, how IDIS might 

draw that up. 

Chairman NEUGEBAUER. But you would agree they should have 

a system like that? 

Mr. MCCARTY. Yes, sir. 

Chairman NEUGEBAUER. Yes. And I want to go back to this computer system, where the recipients can manipulate that data. 

Would you agree that is not good internal control, that people who 

are receiving the money can go in and make entries into the 

records? 

Mr. MCCARTY. No, that should never happen. There has to be 

some control. 

Chairman NEUGEBAUER. Because I was thinking, if I was using 

this analogy, it would be like me being able to log in to my—I do 

online banking, because I don’t get the chance to go to the bank 

a lot; not that I have a lot in the bank to do anything with. 

But I was just thinking, if I could go into the bank, for example, 

and erase the checks and keep the deposits, it would be a good 

thing for me, wouldn’t it? 

Mr. MCCARTY. Certainly. 

Chairman NEUGEBAUER. Yes. And I kind of relate that to this 

system that is in place at HUD now, is that basically they can go 

in—and one of the examples that we have seen is, we saw examples where projects were closed when we brought those to HUD’s 

attention. Then, they were mysteriously reopened. 

Now, how would that happen? How would projects that were in 

the system that said they are closed, but all of a sudden we bring 

it to HUD’s attention, and all of a sudden they—when we go back 

and look in those records again, then they are open again. How 

does that happen? 

Mr. MCCARTY. —the data. 

Chairman NEUGEBAUER. And that is probably not good, is it? 

Mr. MCCARTY. No, that is not good. There needs to be transparency built into all the data. 

Chairman NEUGEBAUER. Because my credit card company, if I do 

a number of different transactions that are out of my usual pattern, they call me up. And sometimes, they cut my credit card off. 

They will say, we suspect something is going on. 

Should HUD have systems to be able to track—that we keep— 

that we are making disbursements for a project and it seems irregular? 

Mr. MCCARTY. I believe IDIS is supposed to do that in this particular program. 

Chairman NEUGEBAUER. But do you believe it is operating in an 

effective way? 

Mr. MCCARTY. No, sir, I do not. 

Chairman NEUGEBAUER. Yes. And so I think that the question 

here—we have been talking about suggestions. One of the things 

that—and I heard both of you say that, hey, when we say something to the Secretary or to the people in the organization, they are 

receptive to it. 

55 

But, there is—sometimes, my wife asks me to empty the trash. 

I am receptive to it, but I don’t always empty the trash. And there 

is a penalty for that, by the way, as well. 

I don’t think anybody is questioning whether these people are receptive. I think what we are talking about here, I think, is a very 

serious issue, is that being receptive and putting in place these internal controls to keep this from happening in the future are important. And this is just one example. We have other examples 

where when we pulled up the records, we went out and found vacant lots. 

Some people say, we may not have given you the right address. 

I think it would be appropriate for HUD to at least have the correct address for where they are spending millions of dollars. 

Wouldn’t you agree? 

Mr. MCCARTY. Yes, sir. 

Chairman NEUGEBAUER. Yes. I think some folks wanted to discredit some of the first panel witnesses. I think they painted a picture that is not a pretty picture. And that is a picture that inside 

the system today, the taxpayers’ money may not—we may not be 

the best stewards of it. 

It is my job; it is your job; it is HUD’s job to make sure that 

when we take money from taxpayers to use for other purposes, that 

we be good stewards of that. And I would hope the panel would 

agree with that. And so I think where we have it, we have some 

work to do. 

And I would hope that—from this hearing today, I would hope 

that the Secretary and others understand that we intend for this 

to stop. And we are trying to send a message here that we need 

to fix this. 

I thank the Chair. 

Chairwoman BIGGERT. The gentleman’s time has expired. 

The gentleman from Texas, Mr. Green, is recognized for 5 minutes. 

Mr. GREEN. Thank you very much, Madam Chairwoman. And I 

thank you for allowing me to be a part of the subcommittee. 

And I thank the witnesses for appearing. I just want to make a 

comment about the witnesses that testified previously. I think that 

persons who commit crimes should be caught. I think they should 

be appropriately prosecuted. And I think that they should be appropriately punished. 

So, I think that I speak for everybody on the committee when I 

say this. I rarely will take an opportunity to say I speak for everybody. But it is my belief that the committee would as a whole, with 

unanimous consent, agree that this is the case. 

My concerns with reference to them have little to do with their 

credibility as much as it has to do with the fact that they are criminals. I don’t participate in oversight hearings as much as I would 

like to because this is not my subcommittee. But as such, once we 

start setting this precedent of bringing the criminals in to act as 

experts. I guess at some point, Madoff will come in, and we will try 

to find out how we can better strengthen the SEC to make sure 

that we can prevent crimes from occurring. And if there is anybody 

who is an expert on how to defraud folks, probably Madoff may be 

one. I don’t know how he gets qualified. I am sure the process that 

56 

we use to qualify these folks would probably work with him as 

well. 

And I had a concern about just the specific thing that was being 

called to our attention about the three bids. It makes sense to get 

three. It makes sense that it might help. But it also makes sense 

to me that a determined criminal will find a way to manipulate the 

system. 

And these people, whether they admit it or not, are criminals. 

And whether they admit it or not, they may have found other ways 

to manipulate the system to their advantage. Criminals do this. 

That is why they are criminals, I guess, because they do these 

types of dastardly things. 

So, now to the gentlemen with HUD, I just want to make sure 

that you are on the record. And you may have said this. My assumption is that you want to catch all the criminals that you can 

if they are trying to defraud HUD in some way. Is this a fair statement? 

Mr. MCCARTY. Yes, sir. 

Mr. GREEN. Okay. And you are willing to change rules and make 

reasonable adjustments so that you will be in a position to prevent 

crimes from occurring. Is that a fair statement? 

Mr. MCCARTY. The rules need to prevent crimes from occurring. 

Mr. GREEN. Yes. So you are not—HUD is not trying to in some 

way declare that you have a perfect system that needs no adjustments, are you? 

Mr. MCCARTY. I can’t speak for HUD, but I know that they don’t 

have a perfect system— 

Mr. GREEN. Okay. Let me ask the HUD representative. 

Mr. MCCARTY. Could you repeat that, please? 

Mr. GREEN. You are not implying that HUD has a perfect system, and that you can’t make some adjustments, are you? 

Mr. MCCARTY. No. 

Mr. GREEN. And you want to see that criminals are caught, don’t 

you? 

Mr. MCCARTY. Yes, we do. 

Mr. GREEN. And it does not offend you to know that the system 

worked and criminals were caught this time. And you would like 

to make sure that it works every time. Is that a fair statement? 

Mr. MCCARTY. That is a fair statement. 

Mr. GREEN. Okay. I am saying this to you and to all who are 

within viewing and earshot of this because sometimes people do 

allow these things to metamorphose from an investigation into a 

desire to end the program. And I don’t—this is not something I am 

placing with any of my colleagues, but that can become the next 

hue and cry that the whole Program should be eliminated. 

Is there anyone who is of the opinion that this program should 

be eliminated because we caught two criminals who were trying to 

perform some sort of dastardly deed? Sir, do you—I see you moving 

forward. Is it Mr. Handelman? Are you of the opinion that the Program should be eliminated? 

Mr. HANDELMAN. The Program is one of the strongest housing 

programs we have. We should keep it. 

Mr. GREEN. Okay. Does anybody think it should be eliminated? 

Okay. 

57 

So, I want the record to reflect that all of the members of this 

panel are of the opinion that this Program should not be eliminated. 

And to be fair to you, you believe that if there are some places 

where we need to strengthen the regulations that we should do so 

to prevent criminals from preventing crimes. Would everybody 

agree with this? Okay. 

So, I think that the point I would like to make is I know how 

these programs benefit people. This is a good program. And I just 

don’t want this to metamorphose into a later time when you are 

not here that we need to eliminate it because there was fraud. 

I thank all of you for appearing. And I yield back. 

Chairwoman BIGGERT. Thank you. 

Mr. Canseco is recognized for 5 minutes. 

Mr. CANSECO. Thank you, Madam Chairwoman. 

Let me address this question to Mr. McCarty and Mr. Donohue, 

but one at a time. In your investigations into the HOME Program, 

did HUD personnel charged with oversight seem more concerned 

with achieving the mission of the HOME Program or ensuring that 

HOME Program funds were being spent correctly? 

Mr. MCCARTY. I believe that the HUD program people were concerned about both. That is their job. 

Mr. CANSECO. On making sure that the funds were being applied 

correctly and at the same time making sure that the mission of 

HOME was being taken care of? 

Mr. MCCARTY. Yes, sir. 

Mr. CANSECO. All right. 

Mr. Donohue? 

Mr. DONOHUE. In a manner of speaking, I agree with you. I think 

there are times as an I.G., when you are dealing with a Department for 9 years, that you have concerns. And you voice those concerns. 

But to fundamentally answer your question, I believe—listen, I 

believe these people come to work to do a good job, and I think they 

are trying to help people in need. And they are trying to do it the 

best way they can. But it all comes down to—I mentioned this balance between oversight, constructive oversight and the application 

of the programs themselves. Therein lies the challenges. 

Mr. CANSECO. Still to both of you, HUD relies on its participating 

jurisdictions for program management of the HOME Program. 

What policies or procedures does HUD have in place to verify that 

participants actually have adequate policies in place? 

Mr. MCCARTY. I would defer to the program on that. I don’t know 

the program that well at that level. 

Mr. CANSECO. Okay. 

Mr. Donohue, the same answer for you? 

Mr. DONOHUE. I believe the same answer would apply. You have 

to ask that question of the— 

Mr. CANSECO. Mr. Beaudette, do you have— 

Mr. BEAUDETTE. Same answer, I would have to defer to the program. We could get you that. 

Mr. CANSECO. All right. And you, sir? 

Mr. HANDELMAN. I am going to defer even further since I don’t 

work for HUD. 

58 

Mr. CANSECO. All right. I just thought you might have an opinion 

on that. 

Mr. HANDELMAN. Fair enough. 

Mr. CANSECO. So, we have learned that the HOME Program 

database is riddled with inaccuracies. Would you say that these inaccuracies stem from the database being difficult to enter information into? 

Mr. MCCARTY. I don’t believe so. No. 

Mr. CANSECO. Mr. Donohue? 

Mr. DONOHUE. I will say no. My answer is that the audits have 

indicated, as you suggest. I will state, however, that I believe in 

June, Assistant Secretary Marquez did speak to improvements 

with regard to that database program. I don’t know what the status of those are. 

Mr. CANSECO. Mr. Beaudette, can you weigh in on that? 

Mr. BEAUDETTE. I would hope it is easy to enter data into those. 

In this regard the grand tea, the State and local governments are 

the enterers of information into the Integrated Disbursement Information System (IDIS.) I suspect that HUD provides them with sufficient information to put the information in there. 

Mr. CANSECO. What policies does HUD have in place for auditing 

its database and flagging projects for review that obviously need 

more follow-up such as those with ‘‘address unknown?’’ 

Mr. Donohue, yes? 

Mr. DONOHUE. Oh, sure. And, again I am going to have to defer 

to—in that regard. If you get into these areas with me, I have lost 

any objectivity. I believe oversight is so paramount. My suggestion 

is, if it doesn’t exist, I would say it needs to exist. But I don’t know 

what the status of that is now. 

Mr. CANSECO. Mr. McCarty? 

Mr. MCCARTY. I don’t know what the status is. 

Mr. CANSECO. Mr. Beaudette? 

Mr. BEAUDETTE. Same. 

Mr. CANSECO. Okay. 

I yield back the balance of my time. 

Chairwoman BIGGERT. Thank you. 

The gentleman from North Carolina, Mr. McHenry, is recognized 

for 5 minutes. 

Mr. MCHENRY. I thank the Chair. 

Mr. McCarty, how does monitoring—or lack of monitoring—affect 

fraud in the HOME Program? For instance, additional site visits, 

and the fact that grantees—I guess the additional question is, the 

lack of monitoring, how does that effect fraud? 

And an additional question would be: Are grantees allowed to select which HOME projects they show and when the site visits 

occur? 

Mr. MCCARTY. The lack of monitoring provides an opportunity 

for fraud and criminal activity. As you heard Mr. Truax testify, he 

knew when the inspectors were coming, when the monitors would 

come. And he knew that, because of, probably, the lackadaisical implementation of the oversight guidelines that should have been applied, they allowed him to pick which projects would be inspected. 

Mr. MCHENRY. Is that commonplace? 

59 

Mr. MCCARTY. We have heard that throughout our investigations, yes, sir. 

Mr. MCHENRY. Okay—so not only the scheduling of it, but also 

which sites to show? 

Mr. MCCARTY. The grantees have been able to manipulate the 

monitoring system, the oversight system. 

Mr. MCHENRY. Okay. Are there apparent rules for how this is 

done, how the site visits are done or how the monitoring— 

Mr. MCCARTY. Yes, sir, I believe there is a checklist that the 

monitors go through. 

Mr. MCHENRY. Do you have issues with that checklist? Do you 

have— 

Mr. MCCARTY. Not if applied properly. 

Mr. MCHENRY. And it appears that it is not being followed properly. 

Mr. MCCARTY. Yes, sir. 

Mr. MCHENRY. Okay; all right. If we could put up on the screen, 

HOME. 

Mr. Beaudette, does HUD’s approach to oversight in the HOME 

Program leave the door open to fraud and abuse? 

Mr. BEAUDETTE. I believe anything pertaining to it would provide 

the opportunity. You enhance it, it decreases. You release it, the 

possibility of it goes up. 

Mr. MCHENRY. No, no. I am asking, does the current approach 

to oversight of the HOME Program leave the door open to fraud 

and abuse? 

Mr. BEAUDETTE. I don’t think so. 

Mr. MCHENRY. Okay. Then, let me show you an example. 

This is a duplex in the town I grew up in, not in my district, but 

I am in a divided county with a redistricting year, it will be in my 

new district, not in my current district. But, anyway, suffice it to 

say, I grew up, actually, just a couple of blocks from this house. 

You can see that it is not that old. 

That appears to be a duplex. Do you all agree? It looks like a duplex. If you disagree, just tell me. But, according to the grant information, this multi-family housing project was supposed to be six 

units. You can see it is clearly two units. First, I ask that your 

agency look into this, because this is a very serious discrepancy. 

And I would be happy to provide you with the exact address. But 

this is a big concern. 

I have a staffer who grew up in a hometown in a different State. 

She found the same thing. And this is not—we haven’t been working full-time on this. But the fact that we found this is a really a 

bad indication for the program. And, technically, I would like to 

know how this can happen. 

Mr. Beaudette? 

Mr. BEAUDETTE. I don’t know. 

Mr. MCHENRY. You don’t know how it could happen? 

Mr. BEAUDETTE. No, in this specific situation, I don’t know. I am 

sorry. 

Mr. MCHENRY. But generally, how does this happen? Because we 

have heard testimony from the first panel—there is a hue and cry 

on the other side of the aisle that we bring folks who are basically 

60 

fraudsters in to give examples. Then, we have another panel who 

says, ‘‘I don’t know how it happens.’’ You know? 

Mr. McCarty, do you, you know, is there— 

Mr. MCCARTY. It happens because there is no oversight. There 

is no one out on the street looking at it. Your staff went out and 

found this. If the Department were to go out there, the grantees 

go out there, the sub-grantees go out there, they will see this. 

Mr. MCHENRY. So is it a failure of policy or is it a failure of people to follow those policies? 

Mr. MCCARTY. I believe it is a failure of the people to get out 

there to do it. 

Mr. MCHENRY. Okay. 

Mr. MCCARTY. I think that when you have that many sub-grantees, and you have 42 offices of HUD that do this, and they probably 

all do it different ways, I think the numbers overwhelm them. 

Mr. MCHENRY. Okay. 

Mr. Beaudette? 

Mr. BEAUDETTE. Can we get back to you on this and give you 

specifics? 

Mr. MCHENRY. I would much appreciate it. And I think the taxpayers would appreciate it, too. I don’t think the person who did 

this would appreciate being found out, but we certainly appreciate 

you doing that. 

Mr. BEAUDETTE. Thank you very much. 

Chairwoman BIGGERT. The gentleman’s time has expired. 

The gentleman from Arizona, Mr. Huizenga—I mean, from 

Michigan. Sorry. 

Mr. HUIZENGA. Thank you, Madam Chairwoman. And I appreciate that. 

Mr. Beaudette, I am curious. How much waste, fraud, and abuse 

is present in the system? Because earlier, 14 percent was referenced, and staff, much like they are doing now, are shaking their 

heads and rolling their eyes and doing all those things and pulling 

faces. 

I am curious what number you are comfortable with citing? 

Mr. BEAUDETTE. I am comfortable with zero. And I don’t know— 

Mr. HUIZENGA. No, no. How much exists? Because I believe in 

the fallibility of mankind, so I know that there is some. But I am 

curious what number you would settle on, or your staff who are 

rolling their eyes behind you would settle on? 

Mr. BEAUDETTE. I don’t know how much fraud does exist. 

Mr. HUIZENGA. Okay. I would like to find out, then, from our Inspectors General what they think. But I would also like to know 

what internally you all believe is that number. So please feel free 

to get back to me on that. In fact, I insist that you get back to me 

on this. 

Do you commonly not know where and what projects you are 

funding, where they are? Is that common? 

Mr. BEAUDETTE. Is this for me? 

Mr. HUIZENGA. Yes. 

Mr. BEAUDETTE. Once again, that is a program question. And I 

can get that to you. 

Mr. HUIZENGA. Okay. I would like to put up an example of what 

is in my district. We just heard from my friend, Mr. McHenry. 

61 

This is the address that you all provided to me, to my office, to 

this committee. This is 400 136th Avenue in Grand Haven. My 

staff went out, and this is what is at the corner. 

When that was brought up, it was like, ‘‘Oh, no, no, no. Wait a 

minute. I guess it is the wrong city.’’ The city, granted, is in the 

same county, my home county, but about 20 to 25 miles south of 

there, in Holland. 

So that address I am very familiar with, because it is actually 

across the street from where my daughter takes her ballet lessons. 

That would be the headquarters of Heritage Home, Incorporated, 

the person who was doing the developing. 

Now, you all couldn’t tell me where their projects were, so I 

called them. We called them and talked to them. And they supplied 

us with the three different locations. I am just curious why we are 

in that spot. 

And I know that the ranking member has asked, ‘‘What are 

those specifics?’’ I think we have started to hear a few of those from 

Mr. McCarty. What are the specific action items that we can do, 

because I fully believe that you all in HUD, when you are told 

about fraud or you discover that fraud, you pursue that. I have no 

doubts about that. 

My problem is, I don’t believe there are systems in place to deter 

that fraud or that waste or that abuse of the system. 

Now, earlier, Mr. McCarty, you were talking about not knowing 

what is out there is what is troubling. That was your quote, and 

I think on page 4 of your testimony, you go into some of those problems. 

Mr. Beaudette, you said, after my friend, Mr. Stivers, had run 

through four different suggestions, you thought that those suggestions were in place. 

I don’t want to put words in anybody’s mouth, but Mr. McCarty, 

the look on your face at that point gave me an answer that contradicted that. I would like you to—if you want to take a moment and 

voice what you actually think of that. 

Mr. MCCARTY. Not to go into too great detail from my position, 

but Jim Heist, our Assistant Inspector General for audit, who testified in the June committee hearing, spoke very well to that, in our 

audit work, 60-plus audits that we have done, and the number of 

systemic problems within the controls, the monitoring, the oversight of the HOME Program. 

Mr. MCHENRY. Okay. HUD is not perfect. Our colleague from 

Texas has left. That would not be the case, I think, based on the 

context of what happened in that first panel, whether it was him 

or our friend from Illinois. They defended the internal systems of 

HUD. They defended the actions that have gone on. And that, to 

me is unconscionable, all right? 

We have an ability here to go in and change— 

Mr. CAPUANO. If the gentleman would yield, could he tell me 

about whom he is speaking? 

Mr. MCHENRY. That would be Congressman Gutierrez, who was 

talking about that, and Congressman Green. 

So it seems to me that we have some areas that we need to improve on. We have one side that is battling back on that. And we 

are trying to get in place here some of those control systems that 

62 

are the simple basic things that you would do when I am running 

my little gravel company back in Michigan or whether you are running a major corporation like Mr. Renacci has done or whether you 

are running GM. 

You must know what your assets are, where they are, and the 

status of them. Because I can tell you, when I was doing my developing as well, the bank had a trust with my family for about 50 

years of business. But guess what? They drove past every single 

one of my developments on a regular basis to make sure we were 

actually doing the work. That is ‘‘Trust, but verify.’’ And that is 

what we need. 

Thank you, Madam Chairwoman. 

Chairwoman BIGGERT. The gentleman’s time has expired. 

The gentleman from Ohio, Mr. Renacci, is recognized for 5 minutes. 

Mr. RENACCI. Thank you, Madam Chairwoman. 

I am not going to go through a lot of the internal controls that 

I already talked about. But I am a little shocked—and my colleague indicated that we only learned one thing. One thing about 

internal controls is one internal control does not fix things. It is 

usually when you have three or four that give you the opportunity 

to catch things. 

So even though there would be a potential of three bids, and 

maybe somebody could change or get the other person to change 

his bid, if you still do site visits, which every—I have done a lot 

of construction. Every bank I have ever worked with went out and 

did site visits. 

I have had third-party companies go out and do a reference, unannounced review of my projects. And I have had random visits. 

All of these things are part of internal controls. You can’t pick 

just one thing. So here is what I learned today. Here is what I 

learned today: We have some fraud. I don’t know what it is. And 

again, it sounds like none of you know what the number is. We 

talked about 14 percent. It could be 2 percent, or 5 percent. 

If it is $1 and we can stop it, it is a problem, because the taxpayers that I represent are not happy whether we waste $1 or $10, 

especially if we can catch it. 

Now, we know we are going to have issues with fraud. We know 

that. So the question is, what procedures can we put in place? 

I don’t know what the fraud is, but I know we have some of that. 

Mr. McCarty, you said you opened up 51 investigations. That is 

great. But you also said that those came from confidential informants. 

Mr. MCCARTY. Some did, sir. 

Mr. RENACCI. Yes, so informants are giving you the answer. But 

I think, if you had the internal controls in place, you wouldn’t have 

to worry about the informants. And if the informants give you the 

answers, then the internal controls will also help you. 

So if you are only catching 14 percent fraud, maybe there is 30 

percent fraud. But you have to have internal controls. 

What I have learned is I am not sure that any of you can tell 

me that we have at least four minimal internal controls in place. 

So I would like to get that answer. 

63 

And I am going to put a house up. This is in Ohio. This facility 

was funded $212,000, I guess, through 2008. I will bet you that, if 

somebody—of one of my four internal controls, if somebody would 

have done a random visit and went out there and looked at that, 

they would have had a hard time finding $212,000 in funding to 

that house. 

So the question is not whether the program is good. We can talk 

all day as to whether the program is good. The question is whether 

we can save some dollars that can be used in that program to better other recipients. 

So I would ask, somehow, some way because I am leaving here 

today with this question mark: Do we have internal controls? I 

would love to hear an answer. 

Do we have multiple internal controls, not just one? 

I did hear from the witnesses before; both of those witnesses 

said, whether they are criminals or not, if these four internal controls were in place, they would not have done what they did. 

So somehow, some way, I don’t want to leave this hearing and 

not get a follow up that tells me what the internal controls are, and 

how they are using them. 

Look, I understand it is a big Department, and I understand 

there are a lot of good programs going on. But the American people 

are counting on us and they are counting on you to implement 

these programs properly and to make sure the proper internal controls are in, not just one but all of them. Those are not expensive 

internal controls to require the recipient to pay for a third-party review, which could be done very simply. 

Hopefully, my colleague can say that there is another thing he 

learned. A third-party review, an inexpensive third party review, 

could stop some of this. 

So I appreciate your time, and I yield back. Thank you. 

Chairwoman BIGGERT. Thank you. And I recognize myself for 5 

minutes. 

Mr. Donohue, in your testimony, you said that there is a need 

in many of the HUD programs, including HOME for HUD, and the 

grantee recipients, to aggressively monitor the sub-grantees. 

What other programs would you recommend that this committee 

review? 

Mr. DONOHUE. You mean programs other than HUD itself, 

ma’am? 

Chairwoman BIGGERT. Yes. 

Mr. DONOHUE. I think any grant activity, be it HUD or, for that 

matter, any other government agency— 

Chairwoman BIGGERT. Or any other, if you really have— 

[laughter] 

Mr. DONOHUE. Yes, I think any activity where a grant application is involved, I think it has to warrant, in my estimation, a monitoring practice not just with the grantee but at the sub-grantee 

level. 

I think, without that, what in effect we are doing is we are telling, in a sense—by not doing it aggressively, we are telling the 

grantees, we are not going to look at you. Why would they spend 

the cost to go back and monitor the sub-grantees? 

64 

I think, in my estimation, we can encourage wrongdoing rather 

than discouraging it, at times. 

Chairwoman BIGGERT. Thank you. And we certainly don’t want 

to do that. 

And that leads me into—Mr. Beaudette, in your testimony, you 

state that with approximately 30,000 pending individual HOME 

projects at any time, it would require an additional appropriation 

of funds to reach the level of increased numbers of HUD staff to 

literally allow monitoring of day-to-day progress. 

Is there a way to—as Mr. Donohue said about—we really have 

to have the grantees and the sub-grantees—to have that monitored—but is there a way to have that go down so that it is not 

just HUD having to really monitor all of that? 

Mr. BEAUDETTE. I believe— 

Chairwoman BIGGERT. Or do we really need more money to be 

able to make sure that there isn’t fraud? 

Mr. BEAUDETTE. I think we would probably need more funding. 

Given State and local governments nowadays, I am not sure if they 

would be ready to jump on the bandwagon to enhance their monitoring. 

We could certainly do it, too. It would require additional funding. 

Chairwoman BIGGERT. And that would be nice, but obviously we 

can’t spend money that we don’t have right now. So we really have 

to find other ways to do that. 

Mr. Handelman, would you have any—I think we all recognize 

that this is just a huge project. But it is a very important project. 

And so we want to make it—if we can help to make it work—better. 

Mr. HANDELMAN. And I agree improving the effectiveness of the 

program is very important. What I would observe is that cost-effectiveness needs to be part of the calculation. It does not benefit us 

all collectively to spend $10 to save $1. 

So as we look at ways to improve internal controls and monitoring even at the sub-grantee level, which I think, potentially, is 

useful, I would hope that we do it in a cost-effective way to maximize how much of program funding goes to creating affordable 

housing rather than enforcement. 

As Mr. Donohue observed a few moments ago, you would build 

the cost of enforcement into the grant, which necessarily means it 

is taking away from funds that would go to create housing. 

Chairwoman BIGGERT. Okay. 

And then, Mr. McCarty, in your testimony it appears that there 

is about 20 percent of your audits were conducted due to recommendations from HUD. Would that be a way—why doesn’t HUD 

recommend more audits? And would that be necessary? 

Mr. MCCARTY. I think, since they are the ones working the programs and have firsthand knowledge of how they should be working if they are effective enough, we would encourage them to forward more to us that we could look at with our audit staff around 

the country. 

Chairwoman BIGGERT. And so that would be one way to try and 

alleviate the fraud? 

Mr. MCCARTY. Yes, ma’am. 

Chairwoman BIGGERT. Okay. 

65 

I think I have finished my questioning. And I want to thank all 

of the witnesses for your testimony. I think it has been very enlightening. Thank you all. 

Mr. CAPUANO. Madam Chairwoman? 

Chairwoman BIGGERT. Yes. 

Mr. CAPUANO. I don’t want to interrupt you. Are you finished? 

Madam Chairwoman, thank you. 

Madam Chairwoman, we have been here for about 3 hours now, 

and we have had four professional gentlemen who I think have 

some great and wonderful ideas and I am looking forward to getting on how to actually accomplish what we say we want to accomplish. 

But we also spent an hour-and-a-half on a dog-and-pony sideshow that in my opinion, wasted the time of Congress, wasted taxpayers’ money, and gave us no light into the issues. These gentlemen have given us some light and hopefully will give us more. 

We had, even in the hearings, we had questions asked of these 

people that they couldn’t possibly answer. How much fraud is in 

HUD? If they answered the question, the next question would have 

been and should be, well, if you know there is 10 percent, 5 percent, 14 percent, 100 percent fraud, why didn’t you stop it? It is 

because they don’t know how much because if they knew it, they 

would have stopped it. 

And we ask these kinds of questions even if that question is to 

the wrong people on this panel. The reason I just wanted to have 

a closing statement was simply because everybody here wants to 

minimize and eliminate as much fraud as possible. No one likes 

that. I actually would argue that those of us who actually like the 

HOME Program have the most to gain by limiting fraud the most. 

I want as much money put into these programs as possible. 

Yet, what do we get? Pictures of pretty homes put up on the 

screen that no one knows where they are, they weren’t asked these 

questions beforehand. You want to chase a particular issue of 

fraud, any Member here who has information of fraud should let 

these gentlemen know so they can do their job, chase them down, 

put more people in jail, not a problem. 

What I am simply asking is that if we really are serious about 

shutting down or limiting fraud, then we should act in a serious 

manner, talking to professionals, getting their ideas and implementing them to the best of our ability, and if they cost money, we 

have to have the discussion about, is it worth the money? Can we 

afford it? Where do we get it? 

Good points, good issues, but for me, I am hoping that the next 

time we do this, we do it in a more serious manner and leave the 

dog- and-pony show to some other committees. We haven’t done 

that here up until now, and I regret that we went through this. Not 

the second panel; the second panel was useful. The first panel was 

a dog-and-pony show that shed no light, and I am looking forward 

to receiving some thoughtful information from these gentlemen so 

that maybe we can implement some serious improvements to the 

HUD program. 

Thank you, Madam Chairwoman; and thank you for your indulgence. 

66 

Chairwoman BIGGERT. Thank you. Let me just say that I think 

that we want to ensure that we can help to move forward and not 

have the waste, fraud, and abuse that is there and to help HUD. 

I think that we should use any type of measure to get to the loopholes that we have here. And I think we are all very serious about 

this, and I think that it was a serious first panel to try and find 

out from people who have been involved in that. 

And so with that, I would disagree with you. But I think that 

this has been a good hearing, and I thank the witnesses. They are 

very professional, and I think that this has been a very professional hearing. 

The Chair notes that some Members may have additional questions for the panel which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 30 days 

for Members to submit written questions to these witnesses and to 

place their response in the record. 

With that, this hearing is adjourned. 

[Whereupon, at 5:42 p.m., the hearing was adjourned.] 

(67) 

A P P E N D I X 

November 2, 2011 

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