i

Semiannual Report to Congress

October 1, 2006, through March 31, 2007

U.S. Department of Housing and Urban Development

Office of Inspector General
Profile of Performance

Results

$2,516,206

$179,820

Hotline Profile of Performance

for the period, October 1, 2006, through March 31, 2007

Funds Put to Better Use

Recoveries/Receivables

Results

Investigation Profile of Performance

for the period, October 1, 2006, through March 31, 2007

$42,225,372

$190,176,284

694

562

31

1,050

24

1,777

30

7

433

Funds Put to Better Use

Recoveries/Receivables

Indictments/Informations

Convictions/Pleas/Pretrial Diversions

Civil Actions

Administrative Sanctions1

Personnel Actions

Arrests2

Search Warrants

Weapons Seized

Subpoenas Issued

Results

$755,037,441

$18,987,476

$14,535,322

6

Audit Profile of Performance

for the period, October 1, 2006, through March 31, 2007

Recommendations That Funds Be Put to Better Use

Recommended Questioned Costs

Collections from Audits

Administrative Sanctions

1

 Personnel actions include reprimands, suspensions, demotions, or terminations of the employees of Federal, state, or local governments, or of

Federal contractors and grantees, as the result of OIG activities. In addition, this reporting category includes actions by Federal agencies to

suspend, debar, or exclude parties from contracts, grants, loans, and other forms of financial or non-financial transactions with the government,

based on findings produced by the OIGs.

2

 Included in the arrests is our focus on the nationwide Fugitive Felon Initiative.
iii

Inspector General’s Message

Inspector General’s Message

It is with pride that I present the U.S. Department

of Housing and Urban Development (HUD), Office

of Inspector General (OIG), Semiannual Report that

outlines OIG's activities for the first half of fiscal year

2007.

HUD OIG provides constant oversight of the

administration of HUD programs through audits of

HUD's financial statements and internal control

reviews. In addition, OIG is a strong deterrent

through its criminal and administrative investigations

of white-collar crime and program abuse. OIG actively

pursues these efforts, finding partners in its drive to

uncover housing-related crimes in public housing and

HUD's economic development programs.

During the past 6 months, HUD OIG has partnered with the U.S. Department of

Justice (DOJ) on the National Procurement Fraud Task Force, the purpose of which is

to promote the early detection, prevention, and prosecution of procurement fraud

associated with government programs. In addition, OIG is participating in the DOJ

Public Housing Safety Initiative (PHSI), a crime prevention and community

development effort designed to assist in the investigation, prosecution, and prevention

of violent crimes and drug offenses in public housing. OIG is actively participating in

10 major PHSI sites across the country. A recent PHSI initiative in the Dallas/Ft. Worth

area netted 69 arrests, 36 administrative actions, and $592,992 in funds put to better

use.

HUD OIG continues to check the crime of Section 8 rental subsidy fraud. A recent

action in New York City, "Operation Heat 2," conducted by OIG in cooperation with

the New York City Housing Authority, led to the arrest of 30 individuals charged with

defrauding the Section 8 program of more than $1.2 million in housing subsidies.

HUD OIG has been a strong voice for strengthening the integration of the Federal

Housing Administration's financial management systems to the enhance lender

accountability and effectively deal with program abusers.

The destruction and aftermath of Hurricanes Katrina, Wilma, and Rita continue to

be a focus and challenge for HUD OIG. To deal with the enormous task of enforcement

and oversight, OIG has established a new, discrete regional office, headquartered in

New Orleans, LA. OIG audit, investigative, and inspections staff provide a continuing

and comprehensive review of the expenditure of funds and their administration. Weekly

Gulf Coast newspapers herald arrests and convictions of those who would seek to

defraud the government.
iv Inspector General’s Message

HUD OIG's major accomplishments for this period are highlighted in this report.

During the 6-month reporting period, audit reports related to the single-family housing,

public and indian housing, multifamily housing and community planning and

development program areas questioned more than $18.7 million in costs and made

$755 million in recommendations to the Department on how funds could be put to

better use. During this semiannual reporting period, OIG completed 60 audits.

HUD OIG's investigative workload continues at a steady pace. During this

timeframe, OIG opened 79 investigative cases and closed 111 cases in the single-family

program area, resulting in 142 indictments; 134 arrests; and 113 convictions, pleas, or

pretrial diversions.

In closing, I want to acknowledge the extraordinary efforts of the auditors,

investigators, inspectors, and support personnel who form the core of HUD OIG and

to thank them for their dedication and service to the American taxpayers and their

commitment to eliminating waste, fraud, and abuse.

Kenneth M. Donohue

Inspector General
Audit Charts v

Audit Reports Issued by Program

Monetary Benefits Identified in Millions of Dollars

Monetary Benefits Identified by Program

Other Programs

87%

Multifamily

Housing

5% Community

Planning &

Development

1%

Public & Indian

Housing

7%

Public and Indian

Housing

48%

Multifamily

Housing

10%

Single-Family

Housing

13%

Community

Planning &

Development

17%

Other

Programs

12%

700

600

500

400

300

200

100

0

$1.7 $37.4 $54.8

$9.0

Single

Family

Housing

Multifamily

Housing

Public &

Indian

Housing

Community

Planning &

Development

$671.1

Other

Programs
vi

Investigation Cases Opened by Program (Total: 635)

Investigation Recoveries by Program (Total: 190,176,284)

Investigation Charts

Single-Family

Housing

12% (79)

Public and Indian Housing

56% (358)

Other/GNMA

8% (48)

Community Planning

& Development

16% (101)

Multifamily

Housing

8% (49)

180,000,000

160,000,000

140,000,000

120,000,000

100,000,000

80,000,000

60,000,000

40,000,000

20,000,000

0

91%

($173,875,616)

Single

Family

Housing

Multifamily

Housing

Public &

Indian

Housing

Community

Planning &

Development

Other

Programs

1%

($1,457,213)

7%

($13,188,916) 1%

($1,649,655)

0%

($4,884)
Acronyms List vii

AIGA Assistant Inspector General for Audit

AIGI Assistant Inspector General for Investigations

ARIGA Assistant Regional Inspector General for Audit

ASAC Assistant Special Agent in Charge

ATFE Bureau of Alcohol, Tobacco, Firearms, and Explosives

CAS Computer Audit Specialist

CDBG Community Development Block Grants

CID Criminal Investigation Division

CPD Community Planning and Development

DAIGA Deputy Assistant Inspector General for Audit

DAIGI Deputy Assistant Inspector General for Investigation

DEA Drug Enforcement Administration

DHS Department of Homeland Security

DIG Deputy Inspector General

DoD Department of Defense

DOE Department of Education

DOJ U.S. Department of Justice

DROD Disaster Relief Oversight Division

DUI Driving Under the Influence

EIV Enterprise Income Verification

FBI Federal Bureau of Investigation

FDIC Federal Deposit Insurance Corporation

FEMA Federal Emergency Management Agency

FFMIA Financial Management Improvement Act of 1996

FHA Federal Housing Administration

FIRMS Facilities Integrated Resources Management System

FISMA Federal Information Security Management Act of 2002

FY Fiscal Year

GAO Government Accountability Office

HHS U.S. Department of Health and Human Services

HOME Home Ownership Made Easy

HOPWA Housing Opportunities for Persons with AIDS

Acronyms List
viii

HUD U.S. Department of Housing and Urban Development

ICE Immigration and Customs Enforcement

IG Inspector General

IRS Internal Revenue Service

KDHAP Katrina Disaster Housing Assistance Program

MTW Moving to Work

NAHRO National Association of Housing and Redevelopment Officials

OA Office of Audit

OI Office of Investigation

OIG Office of Inspector General

OMB Office of Management and Budget

OTND Officer/Teacher Next Door

PCIE/ECIE President’s Council on Integrity and Efficiency/Executive Council on

Integrity and Efficiency

PFCRA Program Fraud Civil Remedies Act

PHA Public Housing Authorities

PHSI Public Housing Safety Initiatives

PIH Office of Public and Indian Housing

REO Real Estate Owned

RHIIP Rental Housing Integrity Improvement Project

RIGA Regional Inspector General for Audit

SA Special Agent

SAC Special Agent in Charge

SBA Small Business Administration

SFA Supervisory Forensic Auditor

SSA Social Security Administration

SSN Social Security Number

TSA Transportation Security Administration

USAO U.S. Attorney’s Office

USDA U.S. Department of Agriculture

USMS U.S. Marshals Service

USPS U.S. Postal Service

USPIS U.S. Postal Inspection Service

VA U.S. Department of Veterans Affairs

Acronyms List
ix

Executive Highlights 1

Chapter 1 - HUD’s Single Family Housing Programs 7

Audits 8

Investigations 13

Chapter 2 - HUD’s Public and Indian Housing Programs 31

Audits 32

Investigations 45

Chapter 3 - HUD’s Multifamily Housing Programs 73

Audits 74

Investigations 78

Chapter 4 - HUD’s Community Planning and Development Programs 83

Audits 84

Investigations 89

Chapter 5 - Hurricane Relief Oversight 97

Introduction and Background 99

Audits 105

Investigations 107

Chapter 6 - Other Significant Audits and Investigations/OIG Hotline 115

Audits 116

Investigations 120

OIG Hotline 121

Chapter 7 - Outreach Efforts 123

Housing Outreach 124

Public Housing and Rental Assistance Programs 128

Community Planning and Development 134

Outreach to Law Enforcement Partners 139

Chapter 8 - Review of Policy Directives 143

Proposed Legislation 144

Proposed Rules 145

Proposed Notices 145

Chapter 9 - Audit Resolution 147

Significant Management Decision with Which OIG Disagrees 149

Federal Financial Management Improvement Act of 1996 150

Appendix 1 - Audit Reports Issued 151

Appendix 2 - Tables 157

Appendix 3 - Index 177

HUD OIG Operations Telephone Listing 181

Table of Contents

Table of Contents
x

The specific reporting requirements as prescribed by the Inspector General Act of

1978, as amended by the Inspector General Act of 1988, are listed below:

Source/Requirement Pages

Section 4(a)(2)-review of existing and proposed legislation and regulations. 143-146

Section 5(a)(1)-description of significant problems, abuses, and 1-123, 143-146

deficiencies relating to the administration of programs and operations

of the Department.

Section 5(a)(2)-description of recommendations for corrective action with 7-123

respect to significant problems, abuses, and deficiencies.

Section 5(a)(3)-identification of each significant recommendation Appendix 2, Table B

described in previous semiannual report on which corrective action has

not been completed.

Section 5(a)(4)-summary of matters referred to prosecutive authorities 7-123

and the prosecutions and convictions that have resulted.

Section 5(a)(5)-summary of reports made on instances where information No Instances

or assistance was unreasonably refused or not provided, as required by

Section 6(b)(2) of the Act.

Section 5(a)(6)-listing of each audit report completed during the Appendix 1

reporting period, and for each report, where applicable, the total dollar

value of questioned and unsupported costs and the dollar value of

recommendations that funds be put to better use.

Section 5(a)(7)-summary of each particularly significant report 7-123

and the total dollar value of questioned and unsupported costs.

Section 5(a)(8)-statistical tables showing the total number of Appendix 2, Table C

audit reports and the total dollar value of questioned and

unsupported costs.

Section 5(a)(9)-statistical tables showing the total number of audit Appendix 2, Table D

reports and the dollar value of recommendations that funds be put

to better use by management.

Section 5(a)(10)-summary of each audit report issued before the Appendix 2, Table A

commencement of the reporting period for which no management

decision had been made by the end of the period.

Section 5(a)(11)-a description and explanation of the reasons for No Instances

any significant revised management decisions made during the

reporting period.

Section 5(a)(12)-information concerning any significant management 149

decision with which the Inspector General is in disagreement.

Section 5(a)(13)-the information described under section 05(b) of the 150

Federal Financial Management Improvement Act of 1996.

Reporting Requirements

Reporting Requirements
Executive Highlights
2

Increasing

Homeownership Opportunities

Strategic Initiative 1

HUD Strategic Goal: Increase Homeownership Opportunities

OIG Strategy: Contribute to the Reduction of Fraud in Single-Family

Insurance Programs through

- Audits uncovering single-family and loan origination abuse

- Audits of the U.S. Department of Housing and Urban Development's (HUD) internal

 policies to determine whether controls are adequate

- Regional single-family mortgage fraud task forces

- Inspections and evaluations of program areas

- Outreach to industry and consumer groups and the Department

Highlights: Results or Impact of Significant OIG Work

- Recommended that mortgage companies hold HUD harmless for improperly page 9

 underwritten loans

- Recommended administrative action/civil monetary penalties against page 11

First Magnus for Federal Housing Administration (FHA) loans originated

 by its net branches that operated in violation of HUD requirements

- Reviewed HUD's oversight of 20-year loans and concurred with the change page 12

 for processing these loans, which resulted in decreased defaults

- $11.6 million forfeited and more than 5 years imprisonment imposed in page 14

 a loan origination scam

- More than $7.5 million in restitution awarded to HUD and victims of page 14

manufactured homes mortgage scam

- Foreclosure company owner sentenced to more than 37 months page 25

imprisonment as a result of a $2 million bankruptcy fraud scam

- Advocated changes to the seller-funded downpayment assistance programs page 145

Emerging Issues: Areas of OIG Interest

- FHA modernization program: risk and fraud potential

- Downpayment assistance: seller-funded downpayments

- Control of loan case binders: policy and procedure deficiency

- Risk involved in zero downpayment

HUD’s Management and Performance Challenges
3

Promote

Decent Affordable Housing

Strategic Initiative 2

HUD Strategic Goal: Promote Decent Affordable Housing

OIG Strategy: Contribute to the Reduction of Erroneous Payments in Rental

Assistance Programs through

- Audits of Section 8 Housing Choice Voucher program activities

- Investigative initiative against corruption in the management of troubled public

 housing authorities (PHA)

- Section 8 Fraud Initiatives in each Office of Inspector General (OIG) region

- Investigative Rental Assistance Overpayment Initiatives in each region

- Public Housing Fugitive Felon Initiative: locate and remove

- Sex Offender Initiative: locate and remove

- U.S. Department of Justice (DOJ) Public Housing Safety Initiative

- Inspections and evaluations of program areas

- Public and department-wide outreach initiatives

Highlights: Results or Impact of Significant OIG Work

- Housing choice voucher schemes result in indictments and prosecution page 31

- Identified excessive assistance payments due to payments for units not page 35

 meeting minimum housing quality standards (HQS), errors in tenant files,

 and lack of controls

- Expensive toys and $1.2 million home for sale as result of $3.5 million page 46

 embezzlement scam

- You can run but you cannot reside: HUD OIG works with U.S. Marshals page 69

 Task Force, arrests 545 fugitive felons; 291 in HUD-assisted housing, 50

 sex offenders

Emerging Issues: Areas of OIG Interest

- Nursing homes: equity skimming

- Adequacy of HQS inspections

- Public corruption and mismanagement

- Enterprise Income Verification System (EIV): long-term effectiveness

- HUD oversight of performance-based contract administrators

- Overpayments in Section 8 due to “Overhousing”: providing more bedrooms than

 needed

HUD’s Management and Performance Challenges
4

Strengthen

Communities

HUD Strategic Goal: Strengthen Communities

OIG Strategy:

- Promote Integrity, Efficiency, and Effectiveness of Programs

- Contribute to the Reduction of Fraud, Waste, and Abuse through

- Audits of the Community Development Block Grant (CDBG), Supportive Housing

 Program, and HOME program

- Investigative initiative against corruption in administration of State or local community

 planning and development programs in each OIG region

- Investigative initiative against corruption in FHA multifamily corruption

- Hurricane Relief Fraud program

- National plan to involve all regions in prevention of fraud in CDBG program funds in

 five Gulf Coast States

- Inspections and evaluations of program areas

- Public dissemination of HUD OIG activities and outreach activities with State and

 local government agencies

- Department liaison

Highlights: Results or Impact of Significant OIG Work

- Initiated total agent training program for community planning and page 75

 development and multifamily fraud and corruption investigations

- Health care official causes HUD loss of more than $4.4 million page 79

- City employees indicted for theft of government funds page 80

- Owner of three apartments pleads guilty to stealing more than $1.9 million page 82

 from HUD

- Advocated HUD controls over grantees to ensure that grant funds are used page 86

 in accordance with grant agreements

- Minister to face judgment day for theft of funds page 90

- Shelter directors using funds for vacations, vehicles, tuition, and Federal page 90

 income tax: arrested and charged

- Katrina scheme unravels page 109

Emerging Issues: Areas of OIG Interest

- Community planning and development performance monitoring

- Liens on real property purchases with Federal assistance

- Matching funds: grantee misuse of Federal funds

- Gulf Coast hurricane assistance fraud

HUD’s Management and Performance Challenges

Strategic Initiative 3
5

Embrace High Standards of Ethics,

Management, and Accountability

Strategic Initiative 4

HUD Strategic Goal: Embrace High Standards of Ethics,

Management, and Accountability

OIG Strategy:

- Be a Relevant and Problem-Solving Advisor to the Department

- Contribute to Improving HUD's Execution and Accountability of Fiscal

 Responsibilities through

- Audits of HUD's financial statements

- Audits of HUD's information systems and security management

- At the request of members of Congress, investigation of remarks attributed to the

 HUD Secretary, specifically, and possible political influence on the HUD contracting

- Implementation of DOJ Procurement Fraud Task Force at HUD

- FedRent data match operation: Identifying Federal employees improperly receiving

Highlights: Results or Impact of Significant OIG Work

- Encryption of OIG computers page 118

- Elimination of material weaknesses and HUD’s removal from General page 144

 Accountability Office (GAO) high-risk list

Emerging Issues: Areas of OIG Interest

- Ethics and accountability in contracting

- Security and data integrity

- Management of human capital

- Risks in information technology: vulnerabilities and security

HUD’s Management and Performance Challenges

Chapter 1

HUD’s Single-Family

Housing Programs
8

The Federal Housing Administration’s (FHA) single-family programs provide

mortgage insurance to mortgage lenders that, in turn, provide financing to enable

individuals and families to purchase, rehabilitate, and construct a home. In addition

to the audits and investigations described in this chapter, OIG has also conducted

numerous outreach efforts. (see chapter 8, page 124)

Audits

HUD’s Single-Family Housing Programs

Chart 2.1: Percentage of OIG Single-Family Housing Audit Reports

During this Reporting Period

Region 1

Boston 12%

Region 2

New York 0%

Region 3

Philadelphia 12%

Region 4

Atlanta 13%

Region 6

Fort Worth 0%

Region 9-10

Los Angeles 13%

Region 5

Chicago 13% Region 7-8

Kansas City 37%

Key Program Results

- Mortgagees, Loan Corresponents, and Direct

 Endoresement Lenders

- Single-Family Real Estate Owned Property Sales

- HUD’s Oversight of 20-Year Insured Loans

Strategic Initiative 1: Contribute to the Reduction of Fraud

in Single-Family Insurance Programs

Questioned Costs Funds Put to Better Use

Audit $524,000 $1.1 Million

page 9

page 11

page 12

Our

Focus

8 Audits
9

Mortgagees, Loan Correspondents, and Direct

Endorsement Lenders

Audits to uncover single-family lenders and loan origination abuses continued to

be a priority during this semiannual period. Lenders are targeted for audit through the

use of data mining techniques, along with prioritizing audit requests from outside

sources. During this period, the U.S. Department of Housing and Urban Development

(HUD) OIG reviewed four FHA single-family mortgage lenders. While OIG's

objectives varied by auditee, the majority of the reviews were to determine whether the

mortgage lender complied with HUD's regulations, procedures, and instructions for

the underwriting of FHA loans and to determine whether the mortgage lender's quality

assurance plan met HUD's requirements. The following section illustrates the audits

conducted in the single-family mortgage lender area.

HUD OIG audited loans that Pine State Mortgage Company, a nonsupervised

direct endorsement lender, underwrote at its Atlanta, GA, branch office. Pine State

improperly underwrote 21 of the 108 loans reviewed, thereby placing the FHA

insurance fund at risk for nearly $152,000 in questioned costs and more than $713,000

in funds to be put to better use. Pine State also did not maintain proper quality

controls over its underwriting process, placing HUD's insurance fund at risk for an

additional 15 loans. These loans involved material violations affecting the loans'

insurability that were not recognized by Pine State and reported to HUD, thereby

exposing HUD's insurance fund to unnecessary risk of default, claims, and foreclosure.

OIG recommended that HUD take appropriate administrative action against Pine

State. This action should, at a minimum, require Pine State to reimburse or hold HUD

harmless against any losses for the 21 improperly underwritten loans and any of the 15

loans that involved material violations. (Audit Report: 2007-AT-1002)

○○○○○○○○○○○○○○○○○

HUD OIG audited Colony Mortgage Corporation, Fairview Park, OH, a

supervised lender approved to originate, underwrite, and submit insurance

endorsement requests under HUD's single-family direct endorsement program.

Of 22 FHA loans reviewed, Colony approved nine that did not meet HUD's

requirements. Further, Colony incorrectly certified to the integrity of the data

supporting the underwriting deficiencies or to the due diligence used in underwriting

the loans. Colony's quality control plan did not fully comply with HUD's requirements,

and its quality control reviews were not adequately performed. For the loans in

question, the risk to the FHA fund was increased.

OIG recommended that HUD require Colony to reimburse HUD for any future net

loss once the associated properties are sold, reimburse HUD nearly $199,000 for the

loss incurred on four loans already sold and for one overinsured loan, improve its

existing procedures and controls to ensure that its underwriters follow HUD's

underwriting requirements, implement its revised quality control plan, and ensure that

quality control reviews are performed in accordance with its revised plan. OIG also

HUD’s Single-Family Housing Programs
10

recommended that HUD determine legal sufficiency and if legally sufficient, pursue

remedies under the Program Fraud Civil Remedies Act against Colony and/or its

principals for the nine incorrect certifications identified. (Audit Report: 2007-CH1006)

○○○○○○○○○○○○○○○○○

HUD OIG audited Plains Capital McAfee Mortgage, Lubbock, TX, because its

2-year default rate for loans with amortization dates between December 2003 and

November 2005 exceeded HUD's national average by 44 percent. In addition, the

percentage of current defaults and claims was 88 percent higher than HUD's national

average.

McAfee Mortgage did not follow HUD regulations when underwriting 11 of the 35

loans reviewed. As a result, HUD insured 11 loans with original mortgage amounts of

more than $1 million, placing the FHA insurance fund at unnecessary risk. McAfee

Mortgage submitted 821 loans from unregistered branch offices, circumventing HUD's

oversight controls and placing the FHA insurance fund at unnecessary risk for nearly

$75 million in loans.

OIG recommended that HUD require McAfee Mortgage to indemnify it for the 11

improperly underwritten loans and seek civil money penalties for all loans originated

from unregistered branches from December 1, 2004, to the present. (Audit Report:

2007-KC-1003)

○○○○○○○○○○○○○○○○○

HUD OIG audited Wells Fargo Home Mortgage, West Des Moines, IA, to

determine whether it originated, sponsored, or purchased Title II manufactured

housing loans in accordance with HUD requirements and whether the insured loans

met HUD permanent foundation requirements specific to Title II manufactured

housing loans.

Of 11 FHA-insured loans reviewed, one was not eligible for insurance because the

property's foundation did not meet HUD requirements, and Wells Fargo did not

provide HUD with all required certifications when submitting the loan for insurance.

As a result, HUD incurred a loss of almost $65,000. OIG recommended that HUD

require Wells Fargo to reimburse it for the loan. (Audit Report: 2007-KC-1002)

○○○○○○○○○○○○○○○○○

HUD OIG audited Mortgage Amenities Corporation, Lincoln, RI, a nonsupervised

mortgage company approved by HUD to originate, underwrite, and service FHA

single-family insured loans.

Mortgage Amenities approved one loan that was not eligible for FHA insurance

because of questionable citizenship and/or immigration status. It also charged

ineligible document preparation fees to borrowers and did not establish or operate its

branches in accordance with HUD requirements. In addition, a significant number of

mortgage records in HUD's Single-Family Insurance System were not accurate for loans

HUD’s Single-Family Housing Programs
11

originated or sponsored by Mortgage Amenities. Further, Mortgage Amenities did not

establish or implement a quality control plan that met all of HUD's requirements. This

noncompliance increased the risk to the FHA insurance fund and the public.

OIG recommended that HUD require Mortgage Amenities to (1) indemnify HUD

against future losses for the ineligible FHA-insured loan, (2) refund the ineligible

closing fees, (3) terminate its branches that do not comply with HUD requirements,

(4) review HUD's mortgage records and update them accordingly, and (5) update and

fully implement its quality control plan. OIG also recommended that HUD refer

Mortgage Amenities to the Mortgagee Review Board for consideration of

administrative sanctions and/or civil money penalties for the violations identified. (Audit

Report: 2007-BO-1002)

○○○○○○○○○○○○○○○○○

HUD OIG audited the branch office operations of First Magnus Financial

Corporation, Scottsdale, AZ, primarily the branch doing business as Great Southwest

Mortgage.

First Magnus violated HUD requirements by allowing officers to enact noncompete

clauses, requiring net branch managers to indemnify branch-related losses, allowing

nonexclusive employment, and failing to execute office leasing agreements and

equipment lease agreements in First Magnus' name. As a result of this noncompliance,

HUD's insurance funds and the public were exposed to an increased risk.

OIG recommended HUD impose civil money penalties against First Magnus for

FHA-insured loans originated by its net branches that were operated in violation of

HUD requirements and require First Magnus to either discontinue operations of all

net branches or bring them into compliance with HUD requirements. (Audit Report:

2007-LA-1002)

Single-Family Real Estate Owned Property Sales

HUD OIG audited HUD's single-family sales to owner-occupant purchasers under

the jurisdiction of its Philadelphia, PA, Homeownership Center to determine whether

HUD's policy for single-family home sales to owner-occupant purchasers was followed

and adequately monitored.

HUD's policy for single-family home sales to owner-occupant purchasers was

followed and adequately monitored to prevent multiple purchases by owner-occupant

purchasers within a 24-month period. However, for 15 of 51 owner-occupant purchases

audited, owner-occupant purchasers did not comply with the 12-month residency

requirement.

OIG recommended that HUD evaluate the 12-month residency requirement to

determine whether it is needed since enforcement of the requirement is not practical

and violations do not constitute a monetary loss to HUD. If HUD concludes that the

12-month residency requirement is essential, it should monitor compliance and enforce

the requirement. (Audit Report: 2007-PH-0001)

HUD’s Single-Family Housing Programs
12 HUD’s Single-Family Housing Programs

HUD's Oversight of 20-Year Insured Loans

HUD OIG reviewed HUD's oversight of 20-year insured loans to determine whether

HUD has adequately addressed the increased risk associated with 20-year loans

approved by an automated underwriting system.

HUD has adequately addressed the increased risk associated with these loans. In

December 2004, it changed the way it processes the loans. Since this change, the

default rate has decreased dramatically to less than 3 percent for loans closed in fiscal

year (FY) 2006.

OIG did not recommend corrective action. (Audit Report: 2007-KC-0001)

○○○○○○○○○○○○○○○○○
13

Investigations

Some of the investigations discussed in this report were conducted jointly with

Federal, State, and local law enforcement agencies. The results of OIG’s more

significant investigations are described below.

HUD’s Single-Family Housing Programs

Chart 2.2: Percentage of OIG Single-Family Housing Closed Investigation

Cases During this Reporting Period*

Region 1

Boston 3%

Region 2

New York 11%

Region 3

Philadelphia 15%

Region 4

Atlanta 9%

Region 6

Fort Worth 17%

Region 9-10

Los Angeles 11%

Region 5

Chicago 21% Region 7-8

Kansas City 14%

* This does not include cases where funds misused came from Congress for the hurricane relief.

(see chapter 6 for these cases)

- Loan Origination Fraud

- Identity Fraud

- False Social Security Number

- Bankruptcy Fraud

- Other Single-Family Fraud

Strategic Initiative 1: Contribute to the Reduction of Fraud

in Single-Family Insurance Programs

page 14

page 22

page 22

page 25

page 27

Our Focus

Key Program

Results

Investigations 111 $22 Million

Cases

Closed

$

Recovered

113

Convictions/Pleas/

Pretrials

114

Admin/Civil

Actions
14 HUD’s Single-Family Housing Programs

Loan Origination Fraud

Gary Konstantin, the former branch manager and loan officer at Brucha Mortgage

Bank, was sentenced in U.S. District Court, Brooklyn, NY, to 63 months incarceration

and 3 years probation, ordered to pay HUD $708,378 and Stewart Title $440,387 in

restitution and forfeit $11.6 million, and fined $6,100 for his earlier conviction of

conspiracy, money laundering, and wire and insurance fraud. Konstantin and others

conspired with nonprofit entities to secure FHA-insured mortgages by performing

minimal property renovations and submitting false loan documents and appraisals, then

flipped the properties and skimmed construction funds. HUD realized losses of $11.6

million after numerous mortgages defaulted.

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Donald W. Gupton, owner and president of Dynasty Homes of Henderson,

Superior Housing Center, Creative Real Estate, Manufacturing Housing Sales Center,

M&G Properties II, Inc., and CRE Properties, LLC, was sentenced in U.S. District Court,

Greenville, NC, for his earlier guilty plea to conspiracy to commit mail and wire fraud,

false statements, bank fraud, and money laundering. Gupton was sentenced to 75

months incarceration and 5 years supervised release and ordered to pay HUD more

than $7.5 million in restitution, including $160,000 to 20 victims. In addition, Gupton

agreed to forfeit $11 million in property, an aircraft, and additional assets belonging to

the businesses identified above. From 1999 to 2002, Gupton and other conspirators

bought and sold more than 150 manufactured mobile homes, some including land, and

assisted unqualified borrowers in obtaining $15 million in FHA-insured mortgages by

verifying fictitious trade-ins, providing cash or fabricated gift letters, or falsely

inflating values and certifying land ownership. HUD realized losses of $7.5 million after

numerous mortgages defaulted.

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Patrick Singletary, a former owner of Sunshine Mortgage and Universal Title; Peter

Russo, the current owner of Sunshine Mortgage; and Robert Singletary and Clifford

Shaw, former owners of Tropical Mortgage Company and Cal Investments, each pled

guilty in U.S. District Court, Atlanta, GA, to conspiracy, false statements to HUD, and

bank and wire fraud. The above defendants purchased then resold HUD Real Estate

Owned (REO) properties to unqualified borrowers obtaining FHA-insured and

conventional mortgages. HUD realized losses in excess of $7 million after

approximately 120 FHA-insured mortgages defaulted.

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Real estate investors Doug Hastings and Phil Miskimon, along with Jeffrey Meyer,

Shawn Fleming, Price Brooks, and Julie Smith, were sentenced in U.S. District Court,

Rockford, IL, for their earlier guilty pleas to conspiracy, false statements, and false

statements to HUD. Collectively, the above defendants were sentenced to more than

11 years incarceration and 15 years supervised release and ordered to pay HUD more

than $2 million and private lenders $228,259 in restitution. The defendants and others
15

acted as straw buyers or provided false credit letters, verifications of employment, or

gift letters to assist unqualified borrowers in obtaining more than 50 FHA-insured

mortgages. HUD realized losses in excess of $3.1 million after more than 40 mortgages

defaulted.

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In a civil judgment filed in U.S. District Court, Los Angeles, CA, real estate

investor Morteza Eghbal and his wife, Marilyn Trujillo, were ordered to pay HUD more

than $5.7 million and civil penalties and litigation costs of $148,500 for their earlier

convictions on false statements and conspiracy to defraud HUD. Eghbal and Trujillo

purchased then resold properties and provided downpayment funds for unqualified

borrowers obtaining FHA-insured mortgages. HUD realized losses of more than $2.4

million when 62 properties defaulted.

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Appraiser Kahala Hickoff was charged in an information filed in U.S. District Court,

Los Angeles, CA, with making a false statement. Hickoff allegedly completed and

submitted fraudulent FHA-insured property appraisals but signed the appraisals

using the names of others. HUD realized losses in excess of $2.7 million after 31

FHA-insured mortgages defaulted.

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Ricardo Medina, a former realtor with William E. Mendez Team, Inc., at Remax

100 in Lakewood, CO, was sentenced in U.S. District Court, Denver, CO, to 8 months

home detention and 60 months probation and ordered to pay HUD $126,420 in

restitution for his earlier guilty plea to wire fraud. Medina and others assisted

unqualified undocumented immigrants in obtaining more than 300 FHA-insured

mortgages. HUD realized losses of $2.4 million after 51 mortgages defaulted.

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HUD’s Single-Family Housing Programs

Copyright, 2006. The Rockford Register Star- Rockford, IL. Reprinted with permission.
16 HUD’s Single-Family Housing Programs

James L. Boyle, a former loan

officer at RBC and Irwin

Mortgage, was indicted in U.S.

District Court, Rockford, IL, for

mail fraud, false statements, and

false statements to HUD. In

addition, Frank J. Mazzarese, a

loan officer at RBC Mortgage;

Marie Caltagerone, owner of

Caltagerone Accounting; and

Israel Quintero and Raul

Raygoza, employees of Friends

Furniture, each pled guilty to

conspiracy. Boyle allegedly

and Mazzarese, Caltagerone,

Quintero, and Raygoza admittedly

provided fraudulent financial,

employment, and other documents

to assist unqualified borrowers in obtaining FHA-insured mortgages. HUD losses

exceeded $2 million after more than 40 mortgages defaulted.

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Greg Leigh Buzarde, a former HUD-approved appraiser, was indicted in U.S.

District Court, Los Angeles, CA, for conspiracy, false statements, and mail fraud.

Buzarde and others allegedly prepared and submitted HUD appraisal reports

certifying fewer than actual units in properties obtaining FHA-insured mortgages. HUD

losses are estimated at $1.9 million after 37 mortgages defaulted.

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Norvel Brown, owner of Mississippi Valley Title (MVT), pled guilty in U.S. District

Court, St. Louis, MO, to wire fraud and employee pension benefit plan theft. From

2000 to 2005, Brown and MVT, while under contract with HUD's Home Ownership

Center in Denver, CO, and performing as the closing agent for all HUD properties in

Missouri, failed to wire approximately $1.8 million in escrow funds to HUD and $990,000

to commercial lenders. Brown also embezzled employee pension account funds.

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World Wide Financial Services (WWFS), doing business as Loan Giant, and Jack

Wolfe, president of WWFS, were named in a $3.4 million civil complaint filed in U.S.

District Court, Detroit, MI. Wolfe and WWFS allegedly created and submitted false

documents to secure FHA insurance on 10 mortgage loans, causing HUD losses in

excess of $1.4 million.

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Copyright, 2007. The Rockford Register Star- Rockford, IL.

Reprinted with permission.
17

Trudy M. Peters, a former Ticor Title Agency escrow

officer; Larry M. Smith and John M. Soto, former service

representatives at Wells Fargo Home Mortgage; and Maria

A. Felix and Tony S. Vasquez, HUD-certified counselors, were

each indicted in U.S. District Court, Phoenix, AZ, on

numerous counts of conspiracy or mail and wire fraud.

Peters, Smith, Soto, Felix, Vasquez, and previously indicted

Edward Carrillo, owner of Sahara Investments in Scottsdale,

AZ, allegedly conspired to defraud HUD's "preforeclosure"

program by submitting fraudulent appraisals, falsifying

counseling certification forms, or concealing additional

mortgages encumbering properties. HUD losses are

estimated at more than $1.8 million.

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Emmitt Cotton Sr., a former loan officer at Mid-America

Mortgage, Fast Trac Mortgage, and Mortgage Executives;

Linda Edwards, a realtor at Affable Realty; and LaDonna

Mullins, a realtor at LaDonna's Realty and Management, were

each indicted in U.S. District Court, Denver, CO, for wire

fraud, false statements, false use of a Social Security number

(SSN), false statements to a financial institution, or money

laundering. In addition, Linda Carnagie, a former loan officer

at Highland Mortgage Financial Group; Stafford Hilaire, a loan

officer and president of Catalina Century Mortgage; and

Sandra Lindsey, an FHA-insured mortgagor, were each

convicted of wire fraud, false statements, or conspiracy. From

February 1999 to July 2004, Cotton, Edwards, and Mullins

were allegedly and Carnagie, Hilaire, and Lindsey were found

guilty of submitting or causing the submission of FHA loan

files containing fraudulent documentation and information

for more than 100 unqualified borrowers obtaining FHAinsured mortgages. HUD realized losses in excess of $1.2

million after 40 mortgages defaulted.

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Stacey Marrero, a former Neighborhood Mortgage Bankers underwriter previously

sentenced in U.S. District Court, Newark, NJ, for her earlier guilty plea to theft by

deception, was suspended from procurement and nonprocurement transactions as a

participant or principal with HUD and throughout the Executive Branch of the

Federal Government. Marrero and others assisted unqualified borrowers in obtaining

FHA-insured mortgages by submitting false loan documentation and appraisals. HUD

realized losses in excess of $1.2 million after 33 mortgages defaulted.

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HUD’s Single-Family Housing Programs

Copyright, 2007. The Arizona

Republic - Phoenix, AZ.

Reprinted with permission.
18 HUD’s Single-Family Housing Programs

Paul and William Peterson, owners of Peterson Land and Development, were each

sentenced in U.S. District Court, Los Angeles, CA, to 18 months incarceration and 3

years supervised probation and ordered to pay HUD more than $1.2 million in

restitution, jointly and severally, for their earlier convictions on false statements. Paul

and William Peterson submitted false gift letters and other documents to assist

unqualified borrowers in obtaining FHA-insured mortgages. HUD realized losses in

excess of $1.1 million after 43 morgtgages defaulted.

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Louay M. Kahale, owner of Marquee Mortgage and a former loan officer at Charter

West Mortgage, LLC, was charged in an information filed in U.S. District Court,

Denver, CO, with wire fraud. Kahale allegedly originated 37 FHA-insured loans at

Marquee Mortgage and 384 FHA-insured loans at Charter West Mortgage, LLC,

containing false income and employment documentation; the estimated value of the

FHA-insured loans containing false documents is approximately $66.8 million. HUD

losses have not yet been determined.

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Lawrence Lynch, James Smith, Pasquale Romeo, Mark McCarthy, Kathryn Zepka,

Michael Bergdoll, and Elliott Beals, mortgage or real estate brokers doing business as

Affordable Mortgage, Tiffy Corporation, Springfield Mortgage, Ivy Mortgage, Metro

Mortgage, Inc., or B&V Properties; Theodore Jarrett, the former branch manager of

Equicredit Corporation; Joseph Sullivan, an appraiser doing business as Sullivan

Appraisals; Anthony Matos, an investor doing business as New England Wholesalers,

First Empire Realty, and Elite Auto Center; and Wilfred Changasie were each sentenced

in U.S. District Court, Springfield, MA, for their earlier guilty pleas to wire fraud, money

laundering, false statements to Federal agents, or aiding and abetting. Collectively, the

above defendants were sentenced to more than 26 years incarceration, 37 years

probation, and 1,000 hours

community service; fined

$15,000; and ordered to

pay numerous financial

institutions more than $1.4

million and 16 victims

$68,858 in restitution.

Changasie was also ordered

deported to South America

after completion of his

prison term. The above

defendants and others

purchased and flipped

more than 70 HUD REO

properties and assisted

unqualified borrowers in

obtaining FHA-insured

mortgages valued in excess Copyright, 2006. The Republican - Springfield, MA.

 Reprinted wit permission.
19

of $5.9 million by processing fraudulent loans containing false information and

documentation. HUD realized losses of $834,795 after 31 mortgages defaulted.

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Naomi LaBrie, formerly doing business as Rehablers, Inc., was sentenced in U.S.

District Court, Kansas City, KS, to 4 months incarceration, 4 months home detention,

and 12 months supervised release and ordered to pay HUD $500,893 in restitution for

her earlier guilty plea to bank fraud. LaBrie purchased distressed properties,

fabricated property rehabilitation, and provided fraudulent documents to assist

unqualified borrowers in obtaining FHA-insured mortgages. HUD realized losses of

$688,770 after 20 mortgages defaulted.

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Sharon Blake, a former loan processor at Sunset Mortgage Company, and real

estate speculators Earl Ginter, Ronald Fruth, and David Walsh were sentenced in U.S.

District Court, Harrisburg, PA, for their earlier guilty pleas to false statements and

aiding and abetting. Blake was sentenced to 12 months confinement and Ginter, Fruth,

and Walsh were each sentenced to 24 months supervised probation and ordered to

pay HUD $511,253 in restitution, jointly and severally. In addition, Deborah Black, the

former branch manager and loan officer at Sunset Mortgage Company, was charged in

an information with false statements and aiding and abetting. Blake originated 40

fraudulent FHA-insured mortgages valued at $1.2 million, knowing that Ginter, Fruth,

and Walsh provided downpayment funds or paid delinquent debts for the

borrowers. Black allegedly conspired with the above defendants and provided

borrowers with fictitious gift letters used to obtain FHA-insured mortgages. HUD

realized losses of $511,253 after 10 mortgages defaulted.

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Jean Lindor, a former loan consultant and employee of American Redevelopment

Corp, was sentenced in U.S. District Court, Miami, FL, to 6 months home detention

and 3 years probation, fined $10,000, and ordered to pay HUD $180,929 in restitution

for his earlier conviction of conspiracy. From 1997 through 1999, Lindor conspired

with others to create fictitious documents and provide downpayment funds for

unqualified borrowers obtaining FHA-insured mortgages. HUD realized losses of about

$443,000 after 17 mortgages defaulted.

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Mario Izquiero, an assistant loan officer at First Capital Mortgage and Pacific

Network Funding, was sentenced in U.S. District Court, Los Angeles, CA, to 6 months

home detention and 3 years probation and ordered to pay HUD $313,340 in restitution

for his earlier conviction of false statements. Izquiero purchased false employment

documents from previously convicted Maggie Cuevas to assist unqualified borrowers

in obtaining FHA-insured mortgages. HUD realized losses of $441,556 after 14

mortgages defaulted.

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HUD’s Single-Family Housing Programs
20 HUD’s Single-Family Housing Programs

Straw buyers John and Caridad Prados were each indicted in U.S. District Court,

Newark, NJ, for conspiracy to defraud HUD for using a false SSN to secure an FHAinsured loan. In addition, former AMS Mortgage loan officer Kenneth DiPrenda and

former Weichart realtor Mario Mendoza, both previously sentenced for their earlier

guilty pleas to conspiracy to submit false statements to HUD, were each debarred from

procurement and nonprocurement transactions with HUD and throughout the

Executive Branch of the Federal Government for a period of 3 years. John and Caridad

Prados allegedly assisted DiPrenda, Mendoza, and others in recruiting and assisting

unqualified borrowers in obtaining FHA-insured mortgages by submitting fraudulent

employment, identity, and other loan documentation. HUD realized losses in excess of

$349,000 after 12 mortgages defaulted.

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George W. McRee, a mortgage broker at Mortgageworks, Inc.; Martin Rosenthal, a

recruiter for RETI Relocation Services; straw borrowers John O. Bello and Karen

Beckmann; and William Russell Chavis each pled guilty in U.S. District Court,

Atlanta, GA, to conspiracy, wire fraud, false statements to a lending institution, or bank

fraud. Straw borrower Reginald L. Kemp was sentenced to 57 months confinement and

ordered to pay Radian Group, Inc., and Amtrust Mortgage Corporation $475,361 in

restitution for his earlier guilty plea to conspiracy, bank fraud, and money laundering.

The above defendants and others created and submitted false documents to obtain 98

mortgage loans valued at more than $20 million. HUD realized losses of $300,000 after

two FHA-insured loans defaulted.

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Winston Shillingford, the former president of now-defunct First Funding

Mortgage Bankers, pled guilty to Federal income tax evasion in an information filed in

U.S. District Court, Brooklyn, NY. From 2000 through 2003, Shillingford obtained

more than $300,000 from sales proceeds on FHA-insured flipped properties originated

by First Funding Mortgage Bankers, then failed to report the $300,000 on his Federal

income tax returns.

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Barbara Stevenson, a former realtor with IE Investments, Inc., was sentenced in U.S.

District Court, Riverside, CA, to 6 months supervised probation and 1 month home

detention and ordered to pay HUD $33,317 in restitution for her previous guilty plea to

false statements to HUD. Stevenson assisted unqualified borrowers in obtaining

FHA-insured mortgages by providing false or forged loan applications, verifications of

employment, and other documents. HUD realized losses of $246,798 after nine

mortgages defaulted.

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Straw buyers Dennis LeBlanc, Dennis Addison, and Timothy Falls each pled guilty

to making false statements to HUD or aiding and abetting in informations filed in U.S.
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District Court, New Orleans, LA. LeBlanc,

Addison, and Falls provided false information

and inflated appraisals to obtain and later

default on FHA-insured mortgages. HUD

realized losses in excess of $159,800.

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Frank Pepe, a former AMS Mortgage loan

officer previously sentenced for his earlier

guilty plea in U.S. District Court, Trenton, NJ,

to conspiracy to commit false statements,

was debarred from procurement and

nonprocurement transactions with HUD and

throughout the Executive Branch of the

Federal Government for 19 months. Pepe

purchased, appraised, and flipped

approximately 31 properties and then

conspired with previously sentenced American

Home Loans branch manager/loan officer Kim

Sammartano to create and submit fraudulent

income, employment, and other documents for

unqualified borrowers obtaining FHA-insured

mortgages. HUD realized losses of $145,712

after 18 mortgages defaulted.

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James Galloway, a real estate broker at Colorado Classic Properties, was sentenced

in U.S. District Court, Denver, CO, to 12 months and 1 day imprisonment and 36 months

supervised release and ordered to pay HUD $29,359 in restitution for his earlier

conviction of conspiracy, wire fraud, false statements, and misuse of an SSN. Galloway

and others submitted or caused the submission of fraudulent FHA loan files, allowing

unqualified borrowers to obtain FHA-insured mortgages. HUD realized losses of

$94,048 after three mortgages defaulted.

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Katrina Arrington and John Kurzel, former loan processors at now-defunct N.J.

Affordable Homes (NJAH); Michael Meehan, a real estate appraiser retained by NJAH;

and Lucesita Santiago, a former investment account manager at NJAH and Woodbridge

Township Housing Authority (WTHA) public housing tenant, each pled guilty in U.S.

District Court, Newark, NJ, to conspiracy to commit wire fraud, conspiracy to create

and submit fraudulent loan documents, or submitting fraudulent claims for HUD rent

reduction subsidies. Arrington and Santiago created fictitious account statements for

use in qualifying borrowers obtaining FHA-insured or conventional mortgages; Kurzel

used the fraudulent investor account statements provided by Santiago to qualify

borrowers obtaining FHA-insured and conventional mortgage loans; Meehan appraised

nominee properties at inflated values, included substantial but fictitious improvements

HUD’s Single-Family Housing Programs

Copyright, 2006. The Times-Picayune - New

Orleans, LA. Reprinted with permission.
22

in the appraisal documents, then submitted the false appraisals, allowing borrowers to

secure FHA-insured or conventional mortgages; and Santiago failed to report the

income she received for creating fabricated account statements on annual WTHA

certifications and obtained $73,177 in WTHA housing assistance she was not entitled

to receive. HUD losses relating to defaulted FHA-insured mortgages have not yet been

determined.

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Shaian Birashk, owner of Global One Mortgage, Inc., was sentenced in U.S. District

Court, Denver, CO, to 36 months probation and ordered to refrain from employment

in the real estate or mortgage industry for his earlier guilty plea to wire fraud. Birashk

and previously indicted or sentenced Farid Bayot; Mehdi "Tim" Ghaemi, owner of Arborz

Real Estate Company; and Hamidullah Sarwary, a former Littleton Housing Authority

(LHA) Section 8 tenant, allegedly conspired to assist Sarwary in obtaining an FHAinsured mortgage and concealing his property ownership from LHA. HUD realized a

loss of $46,988 after Sarwary defaulted on his FHA-insured mortgage and $3,760 in

LHA housing assistance Sarwary obtained but was not entitled to receive.

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John Acevedo, a real estate agent at Exclusive Rights Realty, was sentenced in U.S.

District Court, Los Angeles, CA, to 4 months incarceration, 4 months home

detention, and 36 months probation and ordered to pay HUD $41,199 in restitution for

his earlier conviction of wire fraud, conspiracy to commit wire fraud, and aiding and

abetting. Acevedo and others recruited straw buyers, provided downpayment funds,

and obtained fraudulent documents to assist unqualified borrowers in obtaining

FHA-insured mortgages. HUD realized losses of $31,636 after 15 mortgages defaulted.

Identity Fraud and False Social Security Numbers

Real estate investor Rito Miguel Diaz, Jr., also known as Mike Diaz, and his parents,

Rosemary and Rito Miguel Diaz, Sr., licensed and unlicensed real estate agents at

Familia Realty, Realty World, or Network Realty, were each indicted in U.S.

District Court, Los Angeles, CA, for mail fraud and aiding and abetting. From

September 1998 to January 2002, Mike, Rosemary, and Rito Diaz, Sr., allegedly

provided or created false identification, employment, credit, and other information to

assist unqualified borrowers in obtaining FHA-insured loans. HUD realized losses

exceeding $900,000 after 18 mortgages defaulted.

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Twenty-two undocumented immigrants and former FHA-insured mortgagors were

indicted in Dallas County Judicial District Court, Dallas, TX, for securing execution of

a document by deception. The above defendants allegedly used false SSNs and other

documents to obtain and later default on FHA-insured mortgage loans. In addition,

Martin Cuenca, an undocumented immigrant, was sentenced in U.S. District Court to

36 months probation and ordered to pay HUD $13,151 in restitution for his earlier guilty

HUD’s Single-Family Housing Programs
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plea to misuse of an SSN. Cuenca used a false SSN and other fraudulent documents to

obtain and later default on an FHA-insured mortgage. Collectively, the above

defendants caused HUD losses in excess of $647,000 after 19 mortgages defaulted.

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Eight undocumented immigrants pled guilty in Johnson County Court, Johnson

County, KS, to making a false writing. The defendants were each sentenced to 5 months

incarceration and 18 months probation and ordered to refinance or eliminate their

FHA-insured mortgages to eradicate approximately $552,000 in FHA-insured

mortgages considered at risk. The above defendants fraudulently obtained

FHA-insured mortgages using false SSNs through an unidentified loan officer.

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Jose Antonio Caballero, owner of American International Finance and Mortgage

Services, Inc., pled guilty in U.S. District Court, Dallas, TX, to making a false statement

and agreed to pay HUD $119,520 in restitution prior to his sentencing. Caballero failed

to claim a prior felony conviction on his HUD FHA lender application and provided

undocumented immigrants with false SSNs or Internal Revenue Service employment

identifications, allowing the unqualified applicants to obtain FHA-insured mortgages.

HUD realized losses of approximately $400,000 after 11 mortgages defaulted.

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Lesly Bardales, a self-employed tax preparer, was sentenced in U.S. District Court,

Los Angeles, CA, to 6 months incarceration and 3 years supervised release and ordered

to pay HUD $265,809 in restitution for her previous guilty plea to mail fraud and

unlawful transfer of Social Security cards. Bardales and previously convicted

conspirators Catherine Diaz and Dalila Moreno created and submitted fraudulent loan

documents for unqualified borrowers, obtaining more than 100 FHA-insured

mortgages valued in excess of $1.3 million. HUD realized losses of $135,899 after eight

mortgages defaulted.

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Louis Ramon Luevano, also known as Ray Luevano, a real estate broker at Harvest

Realty in Denver, CO, and five FHA-insured mortgagors were arrested after criminal

complaints were filed in Colorado District Court, Brighton, CO, charging them with

theft, computer crimes, attempting to influence a public servant, forgery, criminal

impersonation, or offering a false instrument for recording. The above defendants

allegedly provided fraudulent SSNs to obtain and later default on FHA-insured

mortgages, causing HUD losses in excess of $120,000.

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Ignacio Juan Jasso, a real estate broker and former loan officer at JR Mortgage, was

indicted in U.S. District Court, Dallas, TX, for false Federal credit institution entries,

reports, and transactions. Jasso allegedly provided or used false SSNs or loan

HUD’s Single-Family Housing Programs
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documents to assist unqualified undocumented immigrants and others in obtaining

FHA-insured mortgages. HUD realized losses of $77,116 after four mortgages defaulted.

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Rudean Cooper pled guilty in Montgomery County Circuit Court, Rockville, MD,

to identity theft. Cooper used the SSN of another to obtain and later default on an

FHA-insured mortgage, causing a HUD loss of $58,742.

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Sergio Manuel Torres-Rodriguez was sentenced in U.S. District Court, Athens, GA,

to 12 months and 1 day incarceration for his earlier guilty plea to false statements. TorresRodriguez used the identity of another to obtain and later default on an FHA-insured

mortgage, causing a HUD loss of $40,376.

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Real estate speculator Willie Bynum was sentenced in U.S. District Court,

Norfolk, VA, to 4 years probation and 6 months home confinement and ordered to pay

HUD $11,413 in restitution for his earlier guilty plea to conspiracy to make false

statements to HUD. Bynum used a false SSN and employment, income, and credit

information to obtain FHA-insured mortgages on investment or owner-occupied

properties for himself and other unqualified borrowers. HUD realized a loss of $25,000.

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Fifteen FHA mortgagors were arrested after criminal complaints were filed in

Colorado State District Court, Golden, CO, charging them with forgery, criminal

impersonation, or offering a false instrument for recording; Maria De Los Angeles

Mendez was arrested in New Mexico after failing to appear. Five of the above

defendants pled guilty to forgery and were each sentenced to 3 years incarceration and

3 years probation. The above defendants allegedly provided fraudulent SSNs or other

forged documents to obtain and later default on FHA-insured mortgages. HUD losses

have not yet been determined.

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Francina Valadez, a former loan officer with Visalia Community Bank, and Mari

Oregon, a former realtor with 21 Arrow Realty, each pled "nolo contendere" in Tulare

County Superior Court, Visalia, CA, to false financial statements. Elizabeth del Valle,

Oregon's assistant, was sentenced to 30 days incarceration and 60 months probation

for her earlier conviction of grand theft. From December 2003 to April 2004, Valadez,

Oregon, and del Valle allegedly used fictitious names and SSNs to assist unqualified

borrowers in obtaining FHA-insured mortgages. HUD losses have not yet been

determined.

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HUD’s Single-Family Housing Programs
25

Alberto and Mabel Gutierrez were arrested after their indictments in U.S. District

Court, Harrison, VA, for making false statements to HUD, misuse of an SSN, and

identity theft. Alberto and Mabel Gutierrez, undocumented immigrants, allegedly used

false SSNs and Immigration and Naturalization resident alien cards to obtain and later

refinance an FHA-insured mortgage.

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Dolores Monger was charged in General District Court, Virginia Beach, VA, with

identity fraud and false statements to obtain property or credit. Monger allegedly

assumed the identity of her minor daughter and obtained and later defaulted on an

FHA-insured mortgage. HUD realized no loss when the property was resold.

Bankruptcy Fraud

Richard Leroy Davis, owner of Foreclosure and Tenant Company Association, was

sentenced in U.S. District Court, Detroit, MI, to 37 months incarceration and ordered

to pay various victims $34,000 for his earlier guilty plea to mail fraud. Davis and

previously convicted conspirators Chris Thomas and Milton Goddard acquired partial

ownership in 600 distressed properties including 120 properties with FHA-insured

mortgages, filed fraudulent bankruptcies to forestall foreclosure proceedings, then

skimmed property equity by diverting monthly payments. HUD realized losses

approximating $2 million after 100 mortgages defaulted.

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Mark Neusch and Michael Davis, former owners of M&M Properties; Greg Colledge,

former owner of G&KC Properties, LLC; and Donald Kingston, former owner of DBK

Properties, were each sentenced in U.S. District Court, Salt Lake City, UT, for their

earlier guilty pleas to false bankruptcy declarations, equity skimming, and bankruptcy

fraud. Collectively, the above defendants were sentenced to 33 months incarceration

and 72 months supervised release and ordered to pay HUD $241,789 in restitution.

Neusch, Davis, Colledge, and Kingston obtained quit claim deeds from distressed

homeowners, leased the properties but failed to pay the property mortgage loans, then

filed fraudulent bankruptcies to impede foreclosure proceedings. HUD realized losses

of $936,704 after eight mortgages defaulted.

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Donna Renae Woods Lawrence Willis, the former president of Assurety Mortgage

Group, Inc., was arrested after her indictment in U.S. District Court, Atlanta, GA, for

bank fraud, bankruptcy fraud, conspiracy, or witness tampering. Kerwanna Lashon

Bennet Woods, a former loan processor at Assurety Mortgage Group, Inc., and straw

buyer Gwendolyn Reshell Woods each pled guilty to conspiracy or false bankruptcy

declaration. Willis allegedly used a stolen SSN and obtained HUD approval to

originate FHA-insured loans through Assurety Mortgage Group, Inc., fraudulently

eliminated the security interest of prior lenders and received proceeds from multiple

loans on the same properties, then filed five fraudulent bankruptcy petitions to delay

HUD’s Single-Family Housing Programs
26

lender foreclosures. Kerwanna and Gwendolyn Woods assisted Willis in filing false

bankruptcies and creating false identities for FHA-insured mortgages. HUD realized

losses greater than $330,000 after five

mortgages defaulted.

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John Cash, also known as Dr. Typon Ra or Baba

Ankh, doing business as Lakeshore Group

Investments, Inc., pled guilty in U.S. District

Court, Chicago, IL, to bankruptcy and wire and

mail fraud. Cash provided false information to

30 FHA-insured, U.S. Department of Veterans

Affairs (VA)-guaranteed, or conventional

mortgagors facing foreclosure; collected $3,500

in upfront fees from each distressed

homeowner; withheld $190,000 in mortgage

loan payments from the bankruptcy court

trustee, lenders, or other creditors; triggered

five FHA-insured, one VA guaranteed, and 24

conventional mortgages to default; and caused

HUD losses of approximately $150,000.

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Ali Abdul Karim Farhat, Abdulamir Berro, Sami Ahmad Berro, Amira Farhat, Abdul

Karim Akram Berro, and Lina Reda, also known as Lina Berro, were each sentenced in

U.S. District Court, Detroit, MI, for their earlier guilty pleas to conspiracy to violate

the Racketeer Influenced and Corrupt Organization Act, bank fraud, false statements,

or mail fraud. Collectively, the above defendants were sentenced to 29 years

incarceration, 12 years supervised release, and 12 months probation; fined $4,000; and

ordered to perform 200 hours community service, forfeit a business and $72,621 in

cash, and pay Citibank and other credit card companies $823,654 in restitution. The

above defendants engaged in fraudulent credit card transactions, concealed assets in

bankruptcy filings, and obtained three FHA-insured mortgages totaling $368,000 by

submitting false documentation.

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Bankruptcy attorneys Edward Varga, Norton Helton, and Lorrie Westerfield and

Wall Street mortgage broker Charlotte Schuett were indicted in U.S. District Court,

Chicago, IL, on multiple counts of bankruptcy fraud, destruction, alteration or

falsification of records in bankruptcy, and mail fraud. Schuett allegedly paid straw

buyers $5,000 to purchased FHA-insured and other distressed properties through

identity-of-interest companies, while Varga, Helton, and Westerfield allegedly filed

Chapter 7 bankruptcy petitions in lieu of Chapter 13 petitions on behalf of the

debtors, withheld property sales information from the bankruptcy court, leased the

properties back to the debtors at inflated rents, and stripped the debtors of property

HUD’s Single-Family Housing Programs

Copyright, 2006. The Chicago Sun-Times -

Chicago, IL. Reprinted with permission.
27

ownership and equity. Approximately 10 FHA-insured properties defaulted, but HUD

realized no loss since the FHA loans were cleared after the properties were sold to straw

buyers.

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Mordecai Smith, the former chief financial officer of Virginia Beach Public Schools,

was sentenced in U.S. District Court, Norfolk, VA, to 64 months incarceration for his

earlier guilty plea to bankruptcy fraud, aggravated identity theft, and wire fraud. Smith

duped an individual into investing $27,000 for an appraisal and downpayment on a

multifamily Section 8 apartment complex, fraudulently used the SSN of another

person to obtain a conventional mortgage, and filed eight bankruptcies to forestall

foreclosure proceedings against his personal residence.

Other Single-Family Fraud

Dawn Raimo-Whitemiller, an insurance broker at Raimo Insurance, pled guilty in

U.S. District Court, Chicago, IL, to wire fraud. Steven Lucas, the former sales

coordinator for Dollars Express (DE), an FHA 203K general contractor, and DE office

manager Robert Bronke were each sentenced to 3 years probation and ordered to pay

First Tennessee Bank $349,000 in restitution for their earlier guilty pleas to wire fraud.

The above defendants and others defrauded HUD and First Tennessee Bank by

recruiting straw buyers and falsifying completed work orders to facilitate the release of

contracting escrow funds on more than 70 FHA-insured 203K mortgaged properties.

HUD realized losses in excess of $4.1 million.

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In Buffalo, NY, Washington Mutual Home Loans agreed to pay HUD $363,917 for

violating the terms of its 2001 civil settlement agreement. Washington Mutual Home

Loans submitted seven FHA-insured mortgage claims on loans previously indemnified

causing HUD losses of $264,917.

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HUD’s Single-Family Housing Programs

Copyright, 2006. The Chicago Tribune - Chicago, IL. Reprinted with permission.
28

Anthony James, a former loan officer at Park Place Mortgage and Top Elite

Financial, pled guilty in Wayne County Circuit Court, Detroit, MI, to false pretenses

greater than $20,000. James personally closed four FHA reverse equity loans of

elderly recipients and retained approximately $209,000 of the loan proceeds.

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Stephen White, a school teacher in Long Beach, CA, entered into a civil settlement

agreement with the United States Attorney's Office, Los Angeles, CA, and agreed to

repay HUD $60,000. White purchased a HUD-owned property through the Officer/

Teacher Next Door program (O/TND), falsely certified his residency at the property

and leased the property before reselling the property and realizing a substantial profit.

○○○○○○○○○○○○○○○○○

John Henry Davis, a licensed real estate agent and lieutenant at Ironwood State

Prison in Blythe, CA, was sentenced in U.S. District Court, Los Angeles, CA, to 5 years

probation and 6 months home confinement, fined $10,000, and ordered to pay trial

expenses for his earlier conviction for attempting to corruptly influence a witness. Davis

hid his nonresidency at the O/TND property and attempted to influence the testimony

of a witness/tenant.

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Lamont Harris, a former Norfolk public schools guidance counselor, pled guilty in

U.S. District Court, Norfolk, VA, to making false statements to HUD. Harris

purchased a HUD-owned property through the O/TND program, renovated and leased

the property to others, then falsely certified that the O/TND property was his sole and

principal residence.

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Francisco S. Renteria, a former U.S. Border Patrol agent and current Immigration

and Customs Enforcement (ICE) supervisory immigration officer, was indicted in U.S.

District Court, El Paso, TX, for false statements to HUD. Renteria allegedly falsified

his HUD Good Neighbor Next Door (GNND) program application and annual

certifications by failing to claim previously owned residential properties or actual

residency in the GNND property. HUD realized a loss of approximately $57,000.

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Real estate consultant Donovan Gilpin, doing business as Pre Amble Properties,

and realtor Rohan A. Johnson, also known as Ato Ra Ajah El, each pled guilty in U.S.

District Court, Central Islip, NY, to theft of government property or conspiracy to

commit mail fraud and convert and convey property owned by HUD without

authority. Gilpin and Johnson, members of an antigovernment Moorish rights group,

filed fraudulent real estate deeds transferring the ownership of three HUD-owned, one

VA-owned, and one bank-owned property to Pre Amble Properties; illegally resided in

two HUD properties; then sold the bank property to an unsuspecting buyer and

HUD’s Single-Family Housing Programs
29

  

attempted to sell a HUD- and VA-owned property to undercover operatives for

$550,000. The fraudulent deeds prevented HUD from selling its properties to

legitimate buyers and banks from deeding foreclosed properties to HUD.

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Nadine Sackor, also known as Nadine Taylor, a former loan officer at USA Home

Mortgage Corporation, was indicted in Cook County Circuit Court, Chicago, IL, for

theft and forgery. Sackor allegedly collected and retained $280,000 in loan origination

fees earmarked for her employer, then used more than $50,000 of the stolen funds to

purchase at least three HUD REO properties.

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Byron Fitchpatrick, owner of ABS Rentals, was sentenced in U.S. District Court,

Wichita, KS, to 60 months incarceration and 36 months supervised release, fined $1,000,

and issued a permanent government-wide debarment for his earlier guilty plea to

conspiracy to commit fraud against HUD. Fitchpatrick used proceeds from illicit drug

sales to purchase HUD-owned properties as an owner/occupant through previously

indicted conspirators Shatanya Fitchpatrick (also known as Shatanya Douglas), Manjur

Alam, Kathleen Fitchpatrick, Deverell Jones, or Demond Reed, then stored illegal drugs

at the homes prior to renting or reselling the properties.

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Kweku Fortune was sentenced in Kings County State Court, Brooklyn, NY, to 172

months incarceration, fined $45,000, and ordered to pay the State of New York $45,000

in restitution for his earlier conviction of grand larceny. Fortune, impersonating a HUDapproved real estate broker, attempted to sell HUD-owned and other properties, then

retained $55,000 of prospective buyers' downpayments.

○○○○○○○○○○○○○○○○○

Real estate investor Dariusz Przybylek and former HUD-approved appraiser Erwin

Espe each pled guilty in U.S. District Court, Chicago, IL, to wire fraud. Przybylek

attempted to use a straw buyer to purchase a HUD-owned property for 150 percent of

the HUD-appraised value by submitting an inflated appraisal, fraudulent contractor

affidavits, and false loan documents in an effort to facilitate his receipt of $113,000 for

property rehabilitation through a straw contractor; Espe provided the fraudulent

appraisal for Przybylek.

HUD’s Single-Family Housing Programs

Chapter 2

HUD’s Public and Indian

Housing Programs
32

The U.S. Department of Housing and Urban Development (HUD) provides grants

and subsidies to 2,637 public housing agencies (PHA) nationwide. Many PHAs

administer both public housing and Section 8 programs. HUD also provides assistance

directly to PHAs' resident organizations to encourage increased resident management

entities and resident skills programs. Programs administered by PHAs are designed to

enable low-income families, the elderly, and persons with disabilities to obtain and

reside in housing that is safe, decent, sanitary, and in good repair. (see chapter 8,

page 128)

Audits

HUD’s Public and Indian Housing Programs

Chart 3.1: Percentage of OIG Public and Indian Housing Audit Reports

During this Repoting Period

Region 1

Boston 3%

Region 2

New York 3%

Region 3

Philadelphia 14%

Region 4

Atlanta 10%

Region 6

Fort Worth 22%

Region 9-10

Los Angeles 17%

Region 5

Chicago 17% Region 7-8

Kansas City 14%

Key Program Results

- Low Income Housing Tax Credit

- Section 8 Housing Choice Voucher Program Activities at

 PHAs

- Public Housing Program Activities

Strategic Initiative 2: Contribute to the Reduction of Erroneous

Payments in Rental Assistance

Questioned Costs Funds Put to Better Use

Audit $12.8 Million $42 Million

page 33

page 33

page 37

Our

Focus

29 Audits
33

Low-Income Housing Tax Credit

HUD OIG audited HUD's Office of Public and Indian Housing, Washington, DC,

as a followup to previous OIG audit work at a public housing agency, which noted that

low-income housing tax credit projects charged higher rents to tenant-based housing

choice voucher households than to tenants without vouchers. The rents charged for

voucher households also exceeded the rent restrictions established by the Internal

Revenue Service (IRS) for these tax credit projects.

Consistent with program regulations, HUD allows tax credit project owners to

charge the Housing Choice Voucher program more than $13.5 million annually for rents

that exceed the IRS maximum rent when they lease rent-restricted units to households

with tenant-based housing choice vouchers. However, the same units would be

available to the same households at the lower, IRS-restricted rent if the households had

no vouchers.

OIG recommended that, for tenant-based vouchers used for units in tax credit

projects that have all of their units rent restricted, HUD change its regulations to cap

Section 8 gross rents to the IRS-restricted rent level that applies set-aside for

households qualifying in the 60 percent area median gross income level. OIG also

recommended that HUD track the overlap of these two affordable housing programs

by capturing the tax credit status of voucher units in its tenant record database.

(Audit Report: 2007-LA-0001)

Section 8 Housing Choice Voucher Program Activities at

PHAs

Audits of the Section 8 Housing Choice Voucher program were a priority during

this semiannual reporting period. In HUD's fiscal year (FY) 2006 appropriation, the

Congress directed OIG to increase its audit and investigative efforts related to public

housing agencies' administration of this program. Public housing agencies were

selected for audit based on risk analysis and/or hotline complaints. While OIG's

objectives varied by auditee, the majority of the reviews were to determine whether the

units met housing quality standards, whether the PHA managed the program

according to HUD requirements, and whether the eligibility of the tenants was

correctly determined. The following section illustrates the audits conducted in the

Section 8 Housing Choice Voucher program area.

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HUD OIG audited the Housing Authority of the Birmingham District's,

Birmingham, AL, Section 8 Housing Choice Voucher program. Of 66 units inspected,

58 did not meet HUD's housing quality standards, and 38 were in material

noncompliance. As a result, tenants lived in units that were not decent, safe, and

sanitary, and that the Authority made housing assistance payments for units that did

not meet standards. Over the next year, the Authority could make housing assistance

payments of more than $10.4 million for units in material noncompliance with housing

quality standards if it does not implement adequate controls.

HUD’s Public and Indian Housing Programs
34

OIG recommended that HUD require the Authority to inspect the 58 units that

did not meet housing quality standards to verify that the owners took appropriate

corrective action; if appropriate actions were not taken, the Authority should abate

the rents or terminate the housing assistance payments contracts. HUD should also

require the Authority to implement internal controls, policies, and procedures to

ensure that units meet housing quality standards and inspections meet HUD

requirements and to develop and implement quality control inspection procedures.

(Audit Report: 2007-AT-1001)

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HUD OIG audited the Puerto Rico Department of Housing's, San Juan, PR,

Section 8 Housing Choice Voucher program. Of 66 units inspected, 63 did not meet

minimum housing quality standards, and 23 were in material noncompliance. As a

result, Section 8 program funds were not used efficiently and effectively to provide

units that were decent, safe, and sanitary; and the authority made housing assistance

payments for units that did not meet standards. The authority also overhoused 29

tenants and miscalculated Section 8 assistance.

OIG recommended that HUD require the authority to inspect all of the units that

did not meet minimum housing quality standards to verify that the landlords took

appropriate corrective actions. If appropriate actions were not taken, the authority

should abate the rents or terminate the tenants' vouchers. In addition, HUD should

require the authority to establish and implement controls to ensure that it follows HUD

requirements so that assistance payments are correct and to prevent an estimated $2.6

million from being spent on units that are in material noncompliance with standards.

(Audit Report: 2007-AT-1005)

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HUD OIG audited the Columbus Metropolitan Housing Authority's, Columbus,

OH, Section 8 Housing Choice Voucher program. In administering its Section 8

Project-Based Voucher program, the Authority did not perform environmental reviews,

rent reasonableness determinations, and housing quality standards inspections before

executing housing assistance payments contracts. It paid housing assistance for units

not under housing assistance payments contracts, underpaid housing assistance for

program households, issued duplicate housing assistance payments for three units, and

did not use the proper HUD form to execute housing assistance payments contracts.

Regarding its Family Self-Sufficiency program, the Authority paid more than

$431,000 in escrow payments to households contrary to Federal requirements. It failed

to complete required forms, include individual training and service plans in the

contract of participation, ensure that participants sought and maintained suitable

employment, ensure that participants identified and met interim goals, ensure that

participants met interim goals before being issued early escrow payments, offer

supportive services, and require participants to meet regularly to ensure that they met

interim and final goals and properly changed goals.

HUD’s Public and Indian Housing Programs
35

The Authority failed to remove from its program households that did not receive

housing assistance payments for 180 days or more and made payments after

households should have been terminated. It did not follow its program administrative

plan regarding households with zero income, which required it to reverify zero-income

households every 180 days. It also did not follow HUD's requirements concerning

special admissions, waiting list reinstatements, third-party verifications, and other

excluded sources of annual income and stated that it would pay owners a household's

portion of unpaid rent.

OIG recommended that HUD require the Authority to reimburse its program from

nonfederal funds for the improper use of funds, reimburse its Family Self-Sufficiency

program from nonfederal funds for its improper use of contract and program funds,

provide support or reimburse its program from nonfederal funds for the unsupported

housing assistance payments, and implement adequate procedures and controls to

address the issues identified. (Audit Report: 2007-CH-1004)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Housing Authority of the City

of Evansville's, Evansville, IN, Section 8 Housing Choice

Voucher program.

Of 63 housing units inspected, 48 did not meet HUD's

housing quality standards, and 44 had 230 violations that

existed at the time of the Authority's previous inspections.

Of the 68 household files reviewed, 20 did not contain the

proper documentation to support the Authority's

payment of housing assistance and utility allowances. In

addition, the Authority did not abate 5 of the 25 program

units that failed an annual housing quality standards

inspection and reinspection(s) between January and June

2006 and did not ensure that 138 of the 320 unit

reinspections were performed in a timely manner. It also

allowed four household members to be claimed as

household dependents under both its Section 8 and

public housing programs.

OIG recommended that HUD require the Authority

to reimburse its program from nonfederal funds for the

improper use of program funds, provide support or

reimburse its program from nonfederal funds for the

unsupported housing assistance and utility allowance

payments and related administrative fees, and implement

adequate procedures and controls to address the issues

identified. These procedures and controls should help

ensure that more than $1.5 million in program funds

is spent on payments that meet HUD's requirements.

(Audit Report: 2007-CH-1003)

○○○○○○○○○○○○○○○○○

HUD’s Public and Indian Housing Programs

Copyright, 2007. Evansville

Courier & Press -

Evansville, IN.

Reprinted with permission.
36

HUD OIG reviewed the Housing Authority of the County of Santa Clara's, Santa

Clara, CA, Section 8 rent reasonableness determinations for its Section 8 Housing Choice

Voucher program. The Authority did not determine that rents charged to individuals

receiving Section 8 housing assistance were reasonable. Further, it did not administer

the rent reasonableness determinations in accordance with HUD rules and regulations

or its HUD-approved administrative plan.

OIG recommended that HUD require the Authority to establish adequate

controls and procedures to ensure that it makes Section 8 housing assistance payments

based on reasonable rent determinations, establish and implement policies and

procedures to ensure that Authority specialists have information needed to determine

reasonable rents, and support or reimburse HUD for more than $17,000 in questioned

housing assistance payments. In addition, OIG recommended that HUD recapture

$1.36 million of the administrative fees earned during the audit period for not

performing rent reasonableness in accordance with HUD rules and regulations. (Audit

Report: 2007-LA-1006)

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HUD OIG audited the Lubbock Housing Authority's, Lubbock, TX, Section 8

Housing Choice Voucher program. Of the 61 units inspected, 47 failed inspections,

and 30 were materially noncompliant with housing quality standards. As a result, the

Authority housed families in units that were not decent, safe, and sanitary. If the

Authority does not implement effective management and controls, it could spend more

than $1.2 million in the next 12 months on the estimated 266 units expected to be

materially noncompliant with HUD's housing quality standards.

OIG recommended that HUD require the Authority to ensure that all 47 units meet

housing quality standards and to implement procedures and controls over its Section 8

inspection process to ensure that all of its units meet housing quality standards.

(Audit Report: 2007-FW-1001)

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HUD OIG audited the Housing Authority of Bexar County's, Bexar County, TX,

Section 8 Housing Choice Voucher program. The Authority accurately calculated

assistance and correctly applied its subsidy standards in 151 of 224 vouchers reviewed.

However, it paid excessive assistance on 61 vouchers. For the remaining 12 vouchers,

the Authority incorrectly applied its subsidy standards but did not pay excessive

assistance because the contract rent was below the payment standard applied. In

addition, due to excessive assistance payments during 3 months in 2004 that were used

as the baseline for calculating the 2006 budget and maximum funding, HUD overfunded

the Authority's FY 2006 program budget.

OIG recommended that HUD require the Authority to (1) correct voucher sizes

and/or payment standards on the 61 vouchers with excessive assistance and repay HUD

for the excessive assistance of almost $108,000 paid through June 30, 2006, and (2)

implement procedures to ensure that it correctly assigns voucher sizes and calculates

assistance using the correct payment standards on future vouchers. OIG estimates

HUD’s Public and Indian Housing Programs
37

that the Authority could avoid additional overpayments of almost $133,000 during the

next 3.7 years by implementing such procedures. Finally, OIG recommended that HUD

reduce the Authority's 2006 budget by more than $34,000 due to the excessive

payments during 2004 used as the baseline in the formula for calculating its budget

and funding. (Audit Report: 2007-FW-1005)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Housing Authority of the County of Contra Costa's,

Martinez, CA, administration of rent reasonableness determinations for units leased

under its Section 8 Housing Choice Voucher program.

The Authority compared assisted units to units that were vastly dissimilar and,

therefore, provided no support for the contract rent. It did not consider important

factors that could affect the rental price, such as amenities, services provided, age of

units, and square footage. The forms used to document the rent reasonableness

determinations were often missing or incomplete and/or contained erroneous

information. The Authority also improperly used Federal funds to pay for housing

assistance overpayments caused by its delays in processing landlords' rent increase

requests and did not reimburse HUD for those improper payments.

OIG recommended that HUD require the Authority to (1) support or reimburse

HUD almost $83,000 in unsupported housing assistance payments; (2) follow

HUD-approved policies and procedures when performing rent reasonableness

determinations and ensure that adequate quality control procedures are in place; (3)

reimburse HUD nearly $78,000 in administrative fees; (4) repay HUD more than $5,000

for subsidy overpayments resulting from processing delays; (5) repay additional

subsidies disbursed due to late processing of rent increases from July 1, 2005, to the

present; and (6) develop procedures that ensure the timely processing of rent increase

requests, prevent the use of Federal funds to pay for the Authority's errors or

omissions, and address repayment of funds to HUD for overpayments resulting from

the use of Federal funds to pay for errors or omissions. (Audit Report: 2007-LA1004)

Public Housing Program Activities

HUD OIG audited the Utica Municipal Housing Authority, Utica, NY, to

determine whether the Authority (1) administered its HOPE VI grant program and

activities effectively, efficiently, and economically in accordance with grant agreements

and applicable rules and regulations, (2) complied with applicable procurement

requirements, (3) implemented sufficient disbursement controls over administrative

costs charged to the program, and (4) had a cost allocation plan to adequately account

for and distribute costs to the program.

The Authority's HOPE VI program is not achieving vital revitalization objectives in

a timely manner or in accordance with program goals and requirements as specified in

its application, revitalization plan, and grant agreement. The Authority did not always

comply with applicable procurement policies for three professional services contracts

when (1) excessive fees were paid for application service, (2) a consulting contract was

HUD’s Public and Indian Housing Programs
38

improperly modified, and (3) administrative costs were charged to the program. In

addition, the Authority periodically allocated certain costs such as wages and fringe

benefits but neglected to allocate other indirect costs, and its allocation plan for wages

and fringe benefits was not adequately supported or detailed.

OIG recommended that HUD instruct the Authority to implement procedures to

ensure that all collateral investments and in-kind services for the HOPE VI project are

documented and quantified, reevaluate the scope of its revitalization plan, and amend

the plan accordingly so that HUD can reassess whether the Authority is able to meet

its primary objective of revitalizing the project neighborhood known as Cornhill. Based

on this reassessment, HUD should determine whether the amended plan is effective

enough to ensure that the remaining $7.47 million in grant funds will be used efficiently.

If the Authority can only achieve certain objectives, HUD should consider reducing

the remaining amount of grant funds proportionately. HUD should also establish

controls to ensure compliance with all applicable Federal, State, and local

procurement policies and regulations; submit supporting documentation to justify all

unsupported costs, so that HUD can make an eligibility determination, and reimburse

the program from nonfederal funds all amounts determined to be ineligible; and

develop and implement a cost allocation plan or establish an indirect cost rate

proposal to ensure that all costs are properly allocated to the benefiting sources.

(Audit Report: 2007-NY-1001)

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HUD OIG audited the Montgomery County Housing Authority, Norristown, PA,

The audit objective was to evaluate whether the Authority properly used HUD funds

to purchase, renovate, and maintain its main administrative office. OIG also reviewed

the adequacy of the Authority's administration of its Section 8 Housing Choice Voucher

program.

The Authority improperly acquired a $1.2 million loan, using HUD assets as

collateral, and improperly used HUD funds to pay the interest and principal on the

loan, which it used to renovate its main office building. It improperly used Public

Housing Homeownership program proceeds and capital funds to purchase, renovate,

and maintain its main office building, much of which either was vacant or the Authority

had been attempting to lease commercially for several years or had leased to the

Redevelopment Authority of Montgomery County. The Authority improperly used

Homeownership program proceeds to pay the utilities of the Redevelopment

Authority, which is a tenant in its building. The Authority's improper use of HUD

funds contributed to a significant increase in its operating expenses and caused it to

delay and cancel needed repairs at public housing units in Montgomery County.

OIG recommended that HUD notify the Authority that it improperly encumbered

HUD assets and direct it to provide evidence that the financial instruments

encumbering the assets have been changed to exclude the assets and, thereby, put $1.1

million to better use. OIG further recommended that if the Authority does not

withdraw its encumbrances of HUD assets, it should be considered in substantial

default of its annual contributions contract. OIG also recommended that HUD

initiate appropriate sanctions against Authority officials responsible for encumbering

HUD’s Public and Indian Housing Programs
39

HUD assets to secure a loan and require the Authority to properly support its use of

almost $976,000 in Homeownership program proceeds or repay the program

unsupported amounts from nonfederal funds, repay to the United States Treasury from

nonfederal funds more than $609,000 in ineligible capital funds, reimburse the

Homeownership program more than $9,000 for improperly paying its tenants' utility

bills, begin paying future debt service on the $1.2 million loan from nonfederal funds,

and provide adequate support for more than $119,000 in interest payments it made on

the loan or repay HUD any unsupported amounts. (Audit Report: 2007-PH-1002)

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HUD OIG audited Oakland Housing Authority's, Oakland, CA, procurement and

contracting activities in response to a citizen's complaint. The objective was to

determine whether the Authority's procurement and contracting practices were in

compliance with Federal requirements.

The Authority did not follow HUD's procurement requirements and its own

procurement policy when it awarded, renewed, amended, and made payments on

several legal service contracts. As a result, it made unsupported and excessive

payments totaling more than $2.3 million for these services.

OIG recommended that HUD require the Authority to (1) provide support for

various expenditures charged for the program, (2) issue a new request for proposal for

eviction legal services to ensure that it obtains competitive prices for the service, (3)

revise its contract monitoring system to ensure that it only pays for goods and services

in accordance with contract terms and performs all future procurement actions in

accordance with applicable requirements, and (4) revise its Moving to Work

agreement so that it requires the Authority to obtain HUD's approval before

executing any professional service contracts and amendments totaling more than

$50,000 for a minimum of 1 year or until HUD is satisfied that the procurements and

contracts meet Federal requirements. (Audit Report: 2007-LA-1005)

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HUD OIG audited the Housing Authority of the City of Wilmington, Wilmington,

NC, to determine whether it inappropriately used Federal funds to support other

programs or entities in violation of requirements.

HUD’s Public and Indian Housing Programs

Copyright, 2006. The Philadelphia Inquirer - Philadelphia, PA. Reprinted with permission.
40

Authority management did not implement adequate internal controls to ensure

that program funds were used only for eligible program activities or that costs were

properly allocated and supported. Further, the Authority inappropriately used

operating subsidies to pay expenses of other Federal and nonfederal programs. In

addition, it could not support that it appropriately spent more than $800,000 in

accordance with requirements. Further, it did not follow IRS requirements to determine and report the value of fringe benefits received by employees from use of

employer-provided vehicles.

OIG recommended that HUD require the Authority to (1) repay ineligible costs of

almost $745,000; (2) provide support for more than $880,000 in costs; (3) develop

and implement procedures to ensure that program expenditures are eligible and

properly supported, thereby putting an estimated $564,000 to better use; and (4)

develop and implement policies and procedures governing employee use of

Authority-owned vehicles. (Audit Report: 2007-AT-1004)

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HUD OIG audited the Housing Authority of the City of Gary's, Gary, IN,

nonprofit development activities to determine whether the Authority effectively and

efficiently used resources subject to its annual contributions contract, other

agreements, or HUD regulations regarding its nonprofit development activities.

The Authority failed to properly administer refunding savings from the Fifth

Avenue Housing Development Corporation's June 1992 refunding of mortgage revenue

bonds, May 1993 redemption of mortgage revenue refunding bonds, and June 2001

refunding of mortgage revenue refunding bonds. It lacked adequate documentation to

support that it used more than $900,000 in refunding savings from the Corporation's

1992 refunding of mortgage revenue bonds and 1993 redemption of mortgage revenue

refunding bonds to provide affordable, decent, safe, and sanitary housing to very

low-income households. Further, the Authority and HUD were not aware of nearly

$800,000 and at least $260,000, respectively, in refunding savings funds available to

them until OIG brought it to their attention during the audit.

OIG recommended that HUD require the Authority to provide documentation or

reimburse its refunding savings from nonfederal funds for the unsupported payments;

submit a proposal for HUD's approval regarding the Authority's planned use of the

unused refunding savings for affordable, decent, safe, and sanitary housing for very

low-income households; and implement adequate procedures and controls to ensure

that it uses the refunding savings and submits required certifications and reports in

accordance with its financial adjustment factor refunding agreement with HUD. OIG

also recommended that HUD request The Bank of New York Trust Company, N.A., to

disburse to HUD the remaining refunding savings in the trust account from the

Corporation's refunding of the mortgage revenue refunding bonds in 2001. (Audit

Report: 2007-CH-1005)

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HUD’s Public and Indian Housing Programs
41

HUD OIG audited the Benton Harbor Housing Commission's, Benton Harbor, MI,

public housing program and its home ownership program, funded with Special

Purpose Grant funds from the City of Benton Harbor. The audit was conducted to

determine whether the Commission effectively maintained its program units in

accordance with applicable requirements and appropriately used its program

operating subsidies and the City's Grant funds.

The Commission did not maintain the program units selected for inspection in good

repair, order, and condition; nor did it always conduct its annual program unit

inspections within 1 year as required. It did not comply with HUD's requirements and

its policies in administering its program's admission and occupancy process and lacked

an effective maintenance process to ensure that program unit deficiencies were

identified and repaired in a timely manner. In addition, it inappropriately received

excess program operating subsidies for units that were vacant for more than 12 months.

It also failed to properly administer its home ownership program in accordance with

its master participation agreement with eight lending institutions and has not used

Grant funds it received from the City for the home ownership program more than nine

years ago or the interest earned on the Grant funds.

OIG recommended that HUD require the Commission to reimburse its program

from nonfederal funds for the improper use of funds, provide support or reimburse its

program from nonfederal funds for the unsupported payments, and implement adequate

procedures and controls to address the deficiencies identified. OIG also recommended

that HUD require the Commission to reimburse the City $240,000 from its home

ownership program's accounts so the City can use the Grant funds to support housing

rehabilitation, transfer to its general fund nearly $83,000 from its home ownership

program's accounts so it can use the funds to provide housing services in accordance

with the Michigan Complied Laws, and provide support or transfer more than $60,000

from its home ownership program's accounts so it can use the funds to provide housing

services in accordance with the Michigan Compiled Laws. (Audit Report: 2007-CH1002)

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HUD OIG audited the Newport News Redevelopment and Housing Authority,

Newport News, VA, to determine whether the Authority appropriately used low-rent

public housing funds to support its other programs and whether it purchased goods

and services in compliance with HUD and Federal regulations. OIG also evaluated the

Authority's compliance with HUD regulations for recertifying low-income housing

tenants and its support for drawdowns of HUD funds.

The Authority generally complied with HUD regulations for recertifying

low-income housing tenants and properly supported its drawdowns for HUD funds.

However, contrary to its consolidated annual contributions contract, the Authority

used low-rent public housing funds to pay expenses of its other HUD and non-HUD

programs and did not settle the balance due to the low-rent public housing fund in a

timely manner. Also, the Authority did not always record financial transactions on its

books in a timely manner. Additionally, contrary to Federal procurement regulations

HUD’s Public and Indian Housing Programs
42

and its own procurement policy, the Authority did not always adequately justify

awarding contracts.

OIG recommended that HUD direct the Authority to repay its low-rent public

housing fund more than $246,000 owed by its other HUD and non-HUD programs

and create and implement policies and procedures to ensure that all transactions are

recorded on the books in a timely manner and that the due-to/due-from account is

reconciled and settled monthly, thereby putting nearly $490,000 in public housing

funds to better use over a 1-year period. Further, OIG recommended that the

Authority develop and implement procedures to ensure that it properly awards

contracts according to established policies and procedures and emphasize to

responsible personnel the need to follow applicable policies and procedures and

provide them training regarding Federal procurement requirements. (Audit Report:

2007-PH-1005)

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HUD OIG audited the Lubbock Housing Authority's, Lubbock, TX, financial

relationship with its nonprofits to determine whether the Authority was operating its

nonprofits in accordance with HUD requirements and if not, to determine the extent,

cause, and impact of any violations.

The Authority made more than $672,000 in inappropriate advances from its lowrent fund to its two nonprofits. One nonprofit has no assets to repay the nearly $368,000

advanced to it. The second nonprofit still owes more than $304,000 to the Authority's

low-rent program fund and reportedly lacks the resources to repay it.

OIG recommended that HUD require the Authority to either repay the money

that it advanced to the first nonprofit or seek forgiveness for it and to repay its lowrent fund for the balance due from the second nonprofit. OIG also recommended that

HUD take applicable administrative actions against the appropriate parties. (Audit

Report: 2007-FW-1002)

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HUD OIG audited the Housing Authority of the County of Beaver's, Beaver, PA,

controls over HUD assets to determine whether the Authority properly used and

maintained control of HUD assets.

For the most part, the Authority used and maintained control of HUD assets

properly. However, it did not properly support allocations of salary and benefit costs

to its HUD-funded programs and did not properly monitor disbursements. As a

result, it made unsupported expenditures for salary and employee benefit costs of nearly

$293,000 and made ineligible disbursements totaling nearly $47,000.

OIG recommended that HUD direct the Authority to provide documentation to

support the questioned costs or reimburse that amount from nonfederal funds; repay

the ineligible costs; and develop and implement procedures to ensure that salary and

benefit allocations are properly supported, thereby putting more than $146,000 to

HUD’s Public and Indian Housing Programs
43

better use over a 1-year period, and disbursements of HUD funds are consistent with

the terms of its annual contributions contracts and other Federal regulations, thereby

putting almost $16,000 to better use over a 1-year period. (Audit Report: 2007-PH1001)

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HUD OIG audited procurements by the Jacksonville Housing Authority,

Jacksonville, AR. The audit addressed HUD allegations of mismanagement at the

Authority and was conducted to determine whether the Authority complied with its

procurement policy and satisfied HUD-mandated timeframes for the obligation of

program funding.

Due to its mismanagement of the program, the Authority overstated its

obligations to prevent HUD's recapture of almost $133,000 in funding. Therefore, it

did not satisfy HUD-mandated timeframes for the obligation of funding. In addition, it

did not comply with its procurement policy regarding soliciting bids, documenting

bids, and accepting the work, thereby misspending more than $164,000 of its funding.

OIG recommended that HUD assist the recently replaced board of commissioners

and the new executive director in establishing board oversight and controls to ensure

that the Authority implements sound funding plans, enters valid obligations in the Line

of Credit Control System, and complies with its procurement policy. This should

result in more than $281,000 being put to better use. HUD also should penalize the

Authority for slow obligation of funding and direct it to either support or repay HUD

for procurements not conducted in conformity with policy and/or supported for which

it spent more than $164,000 in program funding. (Audit Report: 2007-FW-1007)

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HUD OIG audited the East St. Louis Housing Authority, East St. Louis, IL, to

determine whether the Authority followed HUD's regulations and its own policies when

procuring goods and services, granting leave, and managing vehicle operations.

The Authority improperly procured goods and services, improperly granted leave

to employees at a cost of almost $148,000 in exchange for nonprofit contributions, and

poorly managed its general vehicle operations, incurring more than $29,000 in improper

vehicle allowances.

OIG recommended that HUD require the Authority to improve its procurement

controls by developing clearly written policies and procedures and repay from

nonfederal sources the funds improperly spent for employee leave. OIG also

recommended that HUD require the Authority to improve its controls over vehicle

operations, dispose of unnecessary vehicles, and repay from nonfederal sources the funds

improperly spent on vehicle allowances. (Audit Report: 2007-KC-1004)

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HUD’s Public and Indian Housing Programs
44

HUD OIG audited the Marion Housing Authority's, Marion, IN, nonprofit

development activities to determine whether the Authority diverted or pledged

resources subject to its annual contributions contract, other agreements, or regulation

for the benefit of non-HUD developments.

The Authority inappropriately used public housing operating funds to support the

activities of the Affordable Housing Corporation, a nonprofit organization created by

the Authority, without HUD approval. As of November 2006, the Authority owed its

public housing program more than $180,000. It inappropriately used nearly $19,000

in Housing Choice Voucher/Family Self-Sufficiently program coordinators funds from

January 2003 through June 2004 to pay its former family self-sufficiency/housing

counselor's salary and benefits while the former counselor worked on the Corporation's

activities. In addition, the Authority could not provide adequate documentation to

support that its use of more than $25,000 in coordinators funds to pay the former

counselor's salary and benefits during the same period was appropriate.

OIG recommended that HUD require the Authority to reimburse its public

housing operating and coordinators funds from nonfederal funds for the inappropriate

disbursements and implement adequate procedures and controls to ensure that it uses

public housing program and coordinators funds appropriately. OIG also recommended

that HUD take appropriate action against the Authority. (Audit Report: 2007-CH1001)

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HUD’s Public and Indian Housing Programs
HUD’s Public and Indian Housing Programs 45

Investigations

Some of the investigations discussed in this report were conducted jointly with

Federal, State, and local law enforcement agencies. The results of OIG’s more

significant investigations are described below.

Key Program

Results

- Public Housing Authority Theft/Embezzlement

- Rental Assistance Fraud

- Fugitive Felon Initiatives

- Other Fraud Crimes

Strategic Initiative 2: Contribute to the Reduction of Erroneous

Payments in Rental Assistance

438 $13 Million

page 46

page 51

page 69

page 71

Our Focus

Investigations

Cases

Closed

$

Recovered

370

Convictions/Pleas/

Pretrials

723

Admin/Civil

Actions

Chart 3.2: Percentage of OIG Public and Indian Housing Closed Investigation

Cases During this Reporting Period*

* This does not include cases where funds misused came from Congress for the hurricane relief.

(see chapter 6 for these cases)

Region 1

Boston 12%

Region 2

New York 6%

Region 3

Philadelphia 15%

Region 4

Atlanta 11%

Region 6

Fort Worth 13%

Region 9-10

Los Angeles 25%

Region 5

Chicago 11% Region 7-8

Kansas City 7%
46 HUD’s Public and Indian Housing Programs

Public Housing Authority Theft/Embezzlement

Raymond Asselin, Sr., the former Springfield Housing Authority (SHA) executive

director; his wife and sons, Janet, James, Christopher, Joseph, and Raymond Asselin, Jr.;

Arthur Sotirion, the former SHA deputy executive director; Francis X. Maroney, a former

SHA purchasing agent; and former SHA contractors Paul A. Bannick, doing business as

Paul A. Bannick Company; John Spano, doing business as Valley Floor Covering, Inc.;

John P. Corcoran, doing business as Corcoran Plumbing, Inc.; and Nicholas Katsounakis,

doing business as Manny's Plumbing, were each sentenced in U.S. District Court,

Springfield, MA, for their earlier guilty pleas to bribery, conspiracy to commit theft

against the government, racketeering, conspiracy to commit racketeering, theft,

obstruction of justice, filing false Federal income tax returns, and/or mail and wire fraud.

Raymond Asselin, Sr., was sentenced to 10 years incarceration and 2 years probation,

fined $75,300, and ordered to pay SHA $87,500 in restitution; collectively, the

remaining defendants were sentenced to 193 months incarceration, 30 months home

confinement, 6 years supervised release, 21 years probation, and 1,000 hours

community service; fined $483,900; and ordered to pay SHA more than $2.1 million in

restitution and forfeit six properties, including a $1.2 million house on Cape Cod,

time-share condo in Aruba, BMW automobile, 23-foot Chaparral boat, and $243,650 in

cash previously seized. The above defendants assisted Raymond Asselin, Sr,. in

embezzling more than $3.5 million from SHA for the personal benefit of Asselin, his

family members, and others.

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Dora Perez, the former San Benito Housing Authority (SBHA) low-rent manager,

pled guilty in U.S. District Court, Brownsville, TX, to embezzlement. From 1998 to

2006, Perez embezzled approximately $273,591 in tenant rents from Palmville I & II,

SBHA senior and disabled housing developments.

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Copyright, 2007. The Republican - Springfield, MA. Reprinted with permission.
HUD’s Public and Indian Housing Programs 47

Terry L. Taylor, a former City of Milwaukee Housing Authority (CMHA)

accountant, was sentenced in Wisconsin State Circuit Court, Milwaukee, WI, to 2

years confinement and 5 years probation and ordered to pay the City of Milwaukee

$262,271 in restitution for her earlier guilty plea to theft by fraud over $10,000. Taylor

embezzled CMHA funds by creating a fictitious business known as American League

Insurance (ALI), then submitted fabricated ALI invoices and obtained $262,271 in

CMHA payments.

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Marisol Cortez and Flora Cruz, Paterson Housing Authority (PHA) Section 8

caseworkers; Benny Ramos, City of Paterson (Paterson) Section 8 program deputy

director; Elisa Griffin and Marie Rosa, Paterson Section 8 caseworkers; Princess Reaves,

Paterson deputy court administrator; Lee Holland, Javier Nunez, Yolanda Lane, Victor

Ortiz, and Stanley Williams, Paterson employees; Mark Hooks, a City of Passaic

employee; and George Morgan and Robert Schweiderick, Passaic Valley Water

Commission employees, were each arrested and/or charged in U.S. District Court,

Newark, NJ, with soliciting and accepting bribes. The above defendants allegedly

solicited and accepted bribes from an unnamed conspirator in exchange for steering

Section 8 tenants to specific properties, expedited building inspections, or rejected

tenant complaints filed in municipal court. HUD losses have not yet been determined.

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Patricia Bobo, the former Gary Housing

Authority (GHA) finance director, was indicted in

U.S. District Court, Gary, IN, for embezzlement and

Federal income tax evasion. From August 2002

through September 2003, Bobo allegedly embezzled

about $120,000 from GHA by creating and cashing

duplicate salary checks for herself, removing the

fictitious earnings checks from GHA records,

prohibiting GHA employees from reconciling GHA

accounts, and then failing to claim the embezzled

funds on her Federal income tax forms.

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Teresa Thomas, a fictitious Greensboro Housing

Authority (GHA) Section 8 landlord, was sentenced

in U.S. District Court, Greensboro, NC, to 2 months

incarceration and 4 years probation and ordered to

pay GHA $54,000 in restitution for her earlier guilty

plea to mail fraud and aiding and abetting. Thomas

and previously indicted GHA intake specialist Serna

Parker and fictitious GHA landlord Vivian Bailey

conspired and caused the mailing of 48 fraudulent

GHA housing assistance payment checks totaling more than $70,000.

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Copyright, 2006. Metropolitan Digest -

Gary, IN. Reprinted with permission.
48 HUD’s Public and Indian Housing Programs

Larry Bell, the former executive director of Mound Bayou Housing Authority

(MBHA), was sentenced in U.S. District Court, Mound Bayou, MS, to 6 months home

confinement and 5 years probation and ordered to pay MBHA $1,000 and Gallagher

Basset Services $5,135 in restitution for his earlier guilty plea to embezzlement. Bell

stole approximately $64,000 in MBHA funds by manipulating MBHA bank records.

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Larry J. Caillier, the former Opelousas Police Department chief, was sentenced in

U.S. District Court, Lafayette, LA, to 10 months home confinement and 5 years

probation and ordered to pay HUD $26,300 in restitution for his earlier guilty plea to

filing a false claim. Caillier, under a bicycle patrol contract with Opelousas Housing

Authority (OHA), submitted false time and attendance reports to OHA and obtained

$63,255 in HUD funding he was not entitled to receive.

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Gregory Webb, a former manager at the Housing Authority for the City of New

Haven (HACNH), and Corey Newton, a former HACNH employee, were each sentenced

in U.S. District Court, Bridgeport, CT, for their earlier guilty pleas to conspiracy. Webb

was sentenced to 2 years probation, ordered to perform 200 hours of community

service and fined $1000; Newton was sentenced to 6 months incarceration and 2 years

supervised release. Webb and Newton created a fictitious company called Unlimited

Horizons (UH), awarded UH approximately $54,000 in HACNH maintenance and

rehabilitation contracts, then used HACNH employees to complete the contracted

work.

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Faye Nystrom, the former Benson County Housing Authority (BCHA) executive

director, pled guilty to an information filed in U.S. District Court, Fargo, ND, charging

her with embezzling $40,547 in HUD and $23,984 in U. S. Department of Agriculture

(USDA) Rural Development funds; Nystrom agreed to repay BCHA $82,558 in

restitution, including audit costs of $18,000. From 2002 to 2004, Nystrom embezzled

BCHA funds by paying herself excessive wages, issuing payments to relatives for

services not performed, and disbursing funds for fabricated travel expenses.

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Copyright, 2006. The New Haven Register - New Haven, CT. Reprinted with permission.
HUD’s Public and Indian Housing Programs 49

Betty Chandler Trent, Brooksville Housing Authority (BHA) executive director,

was indicted in U.S. District Court, Tampa, FL, for conspiracy, mail fraud, theft

concerning programs receiving Federal funds, false statements, false claims, and theft

of public money. Joe Ann Bennett, a former BHA project manager, pled guilty to

conspiracy to defraud and commit offenses against the United States. From December

2001 to September 2006, Bennett admittedly and Trent allegedly fabricated BHA

purchases and obtained more than $40,000 in BHA funds. HUD's Enforcement

Center suspended both Trent and Bennett from HUD program participation.

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James Lozano, a senior project

manager at Honore Construction, a

Housing Authority of New Orleans

(HANO) contractor, pled guilty to

an information filed in U.S. District

Court, New Orleans, LA, charging

him with theft or bribery

concerning programs receiving

Federal funds. Lozano solicited and

accepted more than $40,000 from

individuals seeking subcontracts

from Honore Construction after

Honore Construction received a $13

million HANO contract to build

senior citizen housing.

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George Flemming, a former

Virgin Island Housing Authority

(VIHA) contractor and owner of Mr.

G's Maintenance, was sentenced in

U.S. District Court, St. Croix, VI, to

Copyright, 2006. Hernando Times - Tampa, FL. Reprinted with permission.

Copyright, 2006. The Times-Picayune - New Orleans, LA.

Reprinted with permission.
50 HUD’s Public and Indian Housing Programs

24 months incarceration and 3 years probation and was ordered to pay a $15,000 fine

and $3,200 special assessment for his earlier conviction of conspiracy and Federal

program and wire fraud. From June 1998 to September 1999, Flemming paid more than

$30,000 to former VIHA procurement specialist and previously indicted conspirator

Walter John for John's assistance in securing a $1.5 million VIHA public housing

rehabilitation contract. John allegedly provided Flemming preferential treatment and

expedited payments by circumventing VIHA payment procedures. HUD's loss is

estimated at $30,000.

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Toni Hart, the former Lawrence County Housing Authority (LCHA) executive

director, pled guilty in U.S. District Court, Lawrenceville, IL, to embezzlement and

making false statements to a Federal agent. Hart used an LCHA credit card and

obtained cash withdrawals used to purchase clothing, jewelry, and personal vacations,

then provided false statements to Federal agents when questioned. HUD's loss is

estimated in excess of $24,000.

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John C. Wolfe, Sr., the former Marionville Housing Authority (MHA) executive

director, pled guilty in Missouri Judicial Circuit Court, Marionville, MO, to stealing

and was sentenced to 5 years supervised probation and ordered to pay MHA $23,117 in

restitution. From April 2003 to August 2004, Wolfe embezzled $23,267 from MHA by

obtaining salary checks not reported to or approved by the MHA board of directors.

○○○○○○○○○○○○○○○○○

Glaister Brooks, the former Fort Pierce Housing Authority (FPHA) executive

director, was sentenced in Nineteenth Judicial Circuit Court, Fort Pierce, FL, for his

earlier conviction of grand theft and official misconduct. Brooks was sentenced to 60

days incarceration, 6 months community control, 4 years probation, and 250 hours

community service and ordered to repay FPHA $13,288 for salary payments he received

during the investigation. Brooks used an FPHA purchase order to obtain tires for his

personal vehicle, but FPHA withheld payment and terminated Brooks after his

conviction

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Frederick Demps, the former Housing Authority of the City of Austin (HACA)

housing manager, was sentenced in U.S. District Court, Austin, TX, to 6 months house

arrest with electronic monitoring and 3 years probation and ordered to pay HUD $7,750

for his earlier conviction of theft from a federally funded program. Demps embezzled

tenant rents and altered HACA accounting documents to hide stolen HACA funds.

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Tara Louise Morrow, the former Wilburton Housing Authority (WHA) executive

director, was charged in an information filed in Latimer County District Court,
HUD’s Public and Indian Housing Programs 51

Wilburton, OK, with embezzlement. From August 2002 to February 2004, Morrow

allegedly charged personal items to WHA accounts. HUD's loss is estimated at $7,531.

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Kasandra Wakeman, a former Flandreau Santee Sioux Housing Authority (FSSHA)

employee, was sentenced in U.S. District Court, Sioux Falls, SD, to 3 months home

detention and 3 years supervised release for her earlier guilty plea to theft in excess of

$1,000 from an Indian tribal organization. Wakeman, while employed at FSSHA,

embezzled FSSHA cash rental payments received from FSSHA housing assistance

recipients; Wakeman repaid FSSHA $7,485 of the stolen funds.

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Stacey Yuma, a former Santa Fe Civic Housing Authority (SFCHA) Family

Self-Sufficiency Program (FSS) case manager, was indicted in First Judicial District State

Court, Santa Fe, NM, on numerous counts of fraud and conspiracy to commit fraud.

Sarah Yuma, the previously indicted SFCHA FSS coordinator, and Leonard Tapia, a

previously indicted SFCHA tenant and FSS recipient, each admitted wrongdoing, agreed

to a preprosecution diversion, and were sentenced to 24 months supervised probation;

Tapia was also ordered to pay SFCHA $1,800 in restitution. Sarah Yuma assisted her

sister, Stacey Yuma, who allegedly helped Tapia obtain $3,800 in SFCHA FSS funds he

was not entitled to receive.

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Benita James, a former Housing Authority of the City of New Haven (HACNH)

employee, pled guilty in Connecticut Superior Court, New Haven, CT, to trafficking

in personal identifying information; James was sentenced to 2 years each incarceration

(suspended), supervised release and probation. While employed at HACNH, James

accessed HACNH computer databases, obtained identifying information on another

HACNH employee/Section 8 landlord, and then sold the identification information to

previously indicted Sean Gray. Gray, using the stolen identification information he

purchased from James, allegedly opened residential and cellular telephone accounts in

the name of the victim.

Rental Assistance Fraud

Shirley Miles, Denise Bertrand, Linnette Stewart, Julia Jackson, Edna Johnson, Estella

Ligon, Ivette Longsworth, Danny Carter, and Darnisha Eason, Inglewood Housing

Authority (IHA) Section 8 recipients, were charged in Los Angeles County Superior

Court, Inglewood, CA, with filing a false/forged instrument, grand theft, and/or

perjury. The above defendants allegedly failed to report employment, income, or

assets on IHA certifications and obtained more than $231,000 in IHA housing

assistance they were not entitled to receive. IHA terminated Bertrand, Stewart, and

Eason from its rental assistance program.

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52 HUD’s Public and Indian Housing Programs

Sheree Dozier, Andrea Greene, Liliana Barranco, Rosa Colon, and Luis Zayas, former

Miami-Dade Housing Agency (MDHA) Section 8 tenants/landlord, were sentenced in

U.S. District Court, Miami, FL, for their earlier guilty pleas to theft of government

funds or conspiracy. Collectively, the defendants were sentenced to more than 12 years

supervised release and 17 months home confinement and ordered to pay HUD $122,199

in restitution. The above defendants failed to report Section 8 subsidies received from

other housing authorities, employment income, actual household composition, or

residency of a landlord on MDHA certifications and obtained $122,199 in MDHA

housing assistance they were not entitled to receive.

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Donna James, Sheila Wittenberg, Anthony Travis, and Christine Carpenter, former

Housing Authority of the County of San Mateo (HACSM) Section 8 recipients, were

sentenced in U.S. District Court, San Francisco and Sacramento, CA, for their earlier

guilty pleas to false statements to HUD. James was sentenced to 24 months probation

and ordered to pay HUD $29,916 in restitution; Wittenberg was sentenced to 24 months

probation and ordered to pay HUD $25,455 in restitution; Travis was sentenced to 12

months probation and ordered to pay HUD $19,085; Carpenter was sentenced to 6

months home confinement and 3 years probation and ordered to pay HUD $47,124 in

restitution. The above defendants failed to report their receipt of San Francisco

Housing Authority public housing assistance to HACSM and obtained $121,580 in

HACSM housing assistance they were not entitled to receive.

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Judy Delora Bell, La'Vina Reed, Blondine Wynn, and Johnnie Mae Brooks, former

Greensboro Housing Authority (GHA) Housing Choice Voucher program (HCVP)

participants, pled guilty or were sentenced in U.S. District Court, Greensboro, NC.

Bell pled guilty to false statements to HUD for failing to report her U.S. Postal Service

employment or income on GHA certifications; Reed and Wynn each pled guilty to

false statements to HUD and/or the U.S. Department of Health and Human Services

(HHS) for failing to report employment or income on GHA or Guilford County

Department of Social Services certifications; Brooks was sentenced to 5 years

probation and ordered to pay GHA $16,865 in restitution for her earlier guilty plea to

false statements to HUD. Brooks failed to report income from businesses she owned

on GHA certifications and obtained more than $48,000 in GHA housing assistance she

was not entitled to receive. In addition, Ebony Maness and Lidoris Ross, GHA public

housing or HCVP participants, pled guilty and were sentenced in Guilford County

District Court. Maness pled guilty to financial transaction card fraud, attempted

financial card theft, and larceny and was sentenced to 18 months supervised release;

Ross pled guilty to financial card fraud and was sentenced to 75 hours community

service; Maness and Ross were each ordered to pay the victim $135 in restitution. Maness

and Ross used a victim's debit card and purchased more than $800 worth of clothing,

jewelry, and cellular telephone services. Collectively, the above defendants caused HUD

losses of $116,569; GHA terminated Reid and Wynn from its rental assistance program.

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53

Josephine Ledbetter and her daughter Rebecca Heath, former City of Chandler

(COC) HCVP participant/landlord, were indicted in Maricopa County Superior Court,

Phoenix, AZ, for fraudulent schemes and forgery. Ledbetter allegedly concealed her

ownership of two properties and her relationship to Heath on COC certifications and

obtained $90,166 in COC housing assistance she was not entitled to receive. Heath

allegedly withheld her relationship with Ledbetter on COC certifications and obtained

$23,808 in COC rental contract payments she was not entitled to receive. HUD

realized losses of $113,974, and COC terminated both Ledbetter and Heath from its

rental assistance program.

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Rosaivette Baez-Colon, a former Everett Housing Authority employee and

Metropolitan Boston Housing Partnership (MBHP) Section 8 tenant, was arrested in

Plainville, MA, on outstanding warrants for identity and credit card fraud. Baez-Colon

allegedly used multiple identities and fictitious Social Security numbers (SSN) to

apply for and obtain about $40,000 in MBHP housing assistance she was not entitled

to receive. In addition, David Murray-McCarthy, also a former MBHP Section 8 tenant,

was sentenced in U.S. District Court, Boston, MA, to 18 months incarceration and 3

years supervised release and ordered to pay HUD and others $138,929 in restitution for

his earlier guilty plea to false statements to HUD, the Social Security Administration

(SSA), and the U.S. Department of Education (DOE). Murray-McCarthy assumed a

false identity to obtain an SSN, DOE student loans, and employment; used his true

identity to obtain MBHP housing assistance and SSA disability insurance benefits; failed

to report earned income to either MBHP or SSA; and defaulted on his DOE guaranteed

student loans. Collectively, the above defendants caused HUD losses of $112,609.

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Michael and Prudentia Taku, former City of Tucson (COT) HCVP participants,

were charged in U.S. District Court, Tucson, AZ, with fraud against HUD and

conspiracy to commit false statements. Estella, Vincent, Orlando, and Joseph Quihuis;

Daisy and Tasha Harvey; Nelcy Harold; Patricia Tellez; and Sandra Garcia, former COT

public housing or HCVP participants, each pled guilty to fraud against HUD and were

each sentenced to 60 months probation and ordered to collectively pay HUD $95,047

in restitution. From 1999 to 2005, Michael and Prudentia Taku allegedly and the

remaining defendants admittedly concealed income or familial relationships on COT

certifications and obtained $101,896 in housing assistance they were not entitled to

receive. COT terminated the above subjects from its rental assistance program.

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Eugene and Wilma Hardney, Cook County Housing Authority (CCHA) Section 8

landlords previously barred from conducting business with HUD after their earlier

convictions of false statements, were indicted in Cook County Circuit Court, Chicago,

IL, on numerous counts of theft, forgery, loan fraud, and deceptive practices. Eugene

and Wilma Hardney allegedly obtained two conventionally financed owner-occupied

properties by providing false information and/or documents, leased the properties to

CCHA, and then collected $4,000 in CCHA housing assistance contract payments

HUD’s Public and Indian Housing Programs
54

after one property went into foreclosure and became lender owned. In addition, Terry

Ann Littlepage, a CCHA landlord; Ruby Gethers, a CCHA Section 8 tenant; and

Gregory Pope, a fictitious CCHA landlord, each pled guilty or were sentenced in U.S.

District Court. Littlepage pled guilty to embezzlement of public funds for assisting

her mother, previously indicted CCHA Section 8 tenant Aserine Blevins, conceal

property ownership. Gethers and Pope were each sentenced to 6 months home

confinement and 36 months probation and ordered to pay HUD $69,950, jointly and

severally, for their earlier guilty pleas to theft of government funds. Gethers and Pope

concealed Gethers' ownership of her CCHA-subsidized housing unit. Collectively, the

above defendants caused HUD losses in excess of $101,800.

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Takara Madkins, a Cuyahoga County adult probation officer and Cuyahoga

Metropolitan Housing Authority (CMHA) Section 8 landlord, was charged in Cuyahoga

County Court of Common Pleas, Cleveland, OH, with numerous counts of theft,

tampering with records and securing writings by deception. Madkins allegedly

provided false employment and income documentation to purchase 11 properties, then

leased four properties to CMHA and obtained more than $100,000 in CMHA housing

assistance she was not entitled to receive.

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Tina Harring and Barbara Singleton-Pradia, Rochester Housing Authority (RHA)

Section 8 tenants, each pled guilty in U.S. District Court, Rochester, NY, to theft of

government funds. Harring failed to report income on RHA certifications and obtained

approximately $22,000 in RHA housing assistance she was not entitled to receive.

Singleton-Pradia and previously indicted Larry Pradia, an RHA landlord, failed to claim

their joint residency on RHA certifications and obtained $70,000 in RHA housing

assistance they were not entitled to receive. The above defendants caused HUD losses

of $92,000.

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Joan Glover, a Las Vegas Housing Authority (LVHA) Section 8 tenant, was charged

in Clark County Justice Court, Las Vegas, NV, with theft. Glover allegedly failed to

report income or actual household composition on LVHA certifications and obtained

$21,540 in LVHA housing assistance she was not entitled to receive. Deonna

Degraffenreid, a former LVHA Section 8 recipient, was sentenced to 12 months

incarceration (suspended), community service for an undetermined period of time, and

probation not to exceed 3 years and ordered to obtain and maintain full-time

employment and pay HUD $14,988 in restitution for her earlier guilty plea to conspiracy

to commit unlawful acts concerning food stamps. Degraffenreid failed to report

income or actual household composition on LVHA or Nevada Welfare certifications

and obtained $65,823 in LVHA housing assistance she was not entitled to receive. The

above defendants caused HUD losses of $87,363.

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HUD’s Public and Indian Housing Programs
55

Kim Carson, a former Santa Monica Housing Authority (SMHA) Shelter Plus Care

Program recipient and an auditor with the U.S. Department of Defense, Defense

Contract Audit Agency, was sentenced in U.S. District Court, Santa Monica, CA, to 60

months supervised release and 250 hours community service and ordered to pay HUD

$44,843 in restitution for her earlier guilty plea to theft of public money. From March

2002 to January 2005, Carson underreported her income by submitting altered

employer earning statements to SMHA and obtained $26,284 in SMHA housing

assistance and $14,100 in SMHA FSS program assistance she was not entitled to

receive. In addition, Blanca Gomez, a SMHA HCVP participant, was sentenced to 60

months probation and ordered to pay SMHA $44,503 in restitution for her earlier

conviction of grand theft in Los Angeles Superior Court. Gomez failed to report

employment or income on SMHA certifications and obtained $44,503 in SMHA

housing assistance she was not entitled to receive. The above defendants caused HUD

losses of $84,887.

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Jerome Massey, a convicted felon and Detroit Housing Commission (DHC)

Section 8 landlord, pled guilty in Wayne County Circuit Court, Highland Park, MI, to

larceny, false pretenses, and delivery/manufacture of marijuana. Massey used his son's

SSN to collect $80,000 as a DHC landlord while occupying a DHC-subsidized unit

with a DHC Section 8 tenant and produced and provided marijuana from the DHCsubsidized unit. Massey was sentenced to 3 years probation and 100 hours community

service and ordered to pay $1,100 in court costs and forfeit property seized as

restitution.

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Buck Thomas and his wife Gwenetta Atterberry, Maywood Housing Authority

(MHA) Section 8 landlord/tenant, each pled guilty in Cook County Circuit Court,

Chicago, IL, to theft by deception; Thomas and Atterberry were each sentenced to 30

months probation and ordered to pay HUD $36,000 in restitution. Thomas and

Atterberry failed to report their relationship, residency, employment income, and/or

property ownership on MHA certifications and obtained $72,000 in MHA housing

assistance they were not entitled to receive.

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Serena L. Priddy, a former Maricopa County Housing Authority (MCHA) Section

8 tenant, was indicted in Maricopa County Superior Court, Phoenix, AZ, for forgery

and fraudulent schemes and practices. In addition, Stephanie M. Williams, a former

MCHA HCVP participant, pled guilty to attempted fraudulent schemes and practices,

and Kathy D. Woods, a former MCHA Section 8 tenant, was sentenced to 12 months

imprisonment and 2 months probation and ordered to pay MCHA $27,638 in

restitution for her earlier guilty plea to attempted forgery. Priddy, allegedly and

Williams and Woods admittedly omitted income on MCHA certifications and obtained

$71,450 in MCHA housing assistance they were not entitled to receive.

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HUD’s Public and Indian Housing Programs
56

Tawanda Gulley, a former Pinellas County Housing Authority (PCHA) Section 8

tenant, was indicted in U.S. District Court, Tampa, FL, for false statements. From

2001 to 2006, Gulley allegedly failed to report ownership of real property on PCHA

certifications and obtained $20,225 in PCHA housing assistance she was not entitled

to receive. In addition, Lamesha Ware, a former PCHA Section 8 tenant, pled guilty to

false statements. Ware obtained two Florida drivers licenses showing different addresses

and then conspired with her mother, previously sentenced Saint Petersburg Housing

Authority (SPHA) Section 8 tenant Mary Martin, to obtain $16,900 in PCHA and

$36,997 in SPHA housing assistance they were not entitled to receive. The above

defendants caused HUD losses of $71,122.

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Felicia Tucker and Damaryes Villanueva, former Tampa Housing Authority (THA)

Section 8 or HCVP participants, were charged in Tenth and Thirteenth Judicial Circuit

Courts, Tampa, FL, with theft of government funds, false statements, or public

assistance fraud. Tucker and Villanueva allegedly failed to report income on THA

certifications and obtained $18,358 in THA housing assistance they were not entitled

to receive. La Gloria Timmons, a former THA Section 8 tenant, pled guilty in U.S.

District Court to false statements. Timmons failed to report income to THA and

obtained $19,855 in THA housing assistance she was not entitled to receive. In

addition, former THA Section 8 tenants Qwing Reed, Catrinia Parker, Gloria Dixon,

and Angel Smith were each sentenced for their earlier guilty pleas to public assistance

fraud. Reed was sentenced to 36 months probation, and, collectively, Reed, Parker,

Dixon, and Smith were ordered to pay THA $22,163 in restitution. The above

defendants caused HUD losses of $60,376.

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Lucinda Brown and Cheryl and Lasalle Waldrip, Riverside County Housing

Authority (RCHA) HCVP participants, were charged in Riverside County Superior

Court, Riverside, CA, with welfare fraud, perjury, grand theft, and/or possession of

marijuana. Brown allegedly failed to report the unauthorized residency of her adult

son, and Cheryl Waldrip allegedly failed to report her husband's residency or income

on RCHA certifications. In addition, Dionna Isreal, also an RCHA HCVP participant,

pled guilty to welfare fraud and was sentenced to 7 days incarceration and 36 months

probation. Isreal failed to report her previous arrests or the criminal history of an

unauthorized tenant on RCHA certifications. Collectively, the above defendants

obtained more than $59,740 in RCHA housing assistance they were not entitled to

receive.

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April Oliver, Lillie Jackson, Keyonus Whaley, and Lakita Jones, former Georgia

Department of Community Affairs (GDCA) Section 8 tenants, each pled guilty in U.S.

District Court, Macon, GA, to false statements. Oliver, Jackson, Whaley, and Jones

failed to report income on GDCA certifications and collectively obtained $58,191 in

HUD’s Public and Indian Housing Programs
57

GDCA housing assistance they were not entitled to receive. GDCA terminated Whaley

and Jones from its rental assistance program.

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Melinda and Carrie Bailey, former Isle of Wight Department of Social Services

(IOW) Section 8 tenants, were each sentenced in U.S. District Court or Isle of Wight

Circuit Court, Smithfield, VA, for their earlier guilty pleas to conspiracy, false

statements, and obtaining money by false pretenses from HUD, SSA, and the Virginia

Department of Social Services. Melinda Bailey was sentenced to 21 years imprisonment

(suspended), 10 years probation, and 200 hours community service and ordered to pay

SSA $134,315 in restitution; Carrie Bailey was sentenced to 22 years incarceration (20

years suspended) and indefinite probation, barred from receiving any public assistance,

and ordered to pay HUD $57,183 and various State and/or Federal agencies $187,875 in

restitution. Melinda and Carrie Bailey falsified household income and composition to

obtain IOW housing assistance, Social Security payments, food stamps, Medicaid, and

other social service benefits. Total loss to the government is estimated at $250,000,

including $57,183 in HUD-funded housing assistance payments.

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Sharmeitra Threatt, an Oklahoma Housing Finance Agency (OHFA) Section 8

tenant and U.S. Air Force employee, was charged in Oklahoma State District Court,

Oklahoma City, OK, with obtaining money by false pretenses. Threatt allegedly failed

to report income on OHFA certifications and obtained $22,901 in OHFA housing

assistance she was not entitled to receive. In addition, OHFA Section 8 tenant Kaudet

Reed was convicted of obtaining money by false pretenses; Reed was sentenced to 15

years imprisonment (suspended) and ordered to pay OHFA $31,753 in restitution. From

2001 to 2005, Reed failed to report income on OHFA certifications and obtained $31,433

in OHFA housing assistance she was not entitled to receive. Collectively, the above

defendants caused HUD losses of $54,334.

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Denise Darden, a Housing Authority of the County of Los Angeles (HACOLA)

HCVP participant, was charged in Los Angeles County Superior Court, Los Angeles,

CA, with grand theft, welfare fraud, and perjury. From 1998 to 2005, Darden allegedly

failed to report income from her business or ownership of her subsidized unit on

HACOLA certifications and obtained $46,544 in HACOLA housing assistance she was

not entitled to receive.

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Patricia Bryant, a former City of Pittsburg Housing Authority (CPHA) Section 8

tenant, pled no contest in Contra Costa County Superior Court, Martinez, CA, to grand

theft of personal property. Bryant was sentenced to 270 days imprisonment

(suspended) and 60 months probation, ordered to pay restitution not yet determined,

and fined $200. From October 1997 through November 2001, Bryant allegedly failed

HUD’s Public and Indian Housing Programs
58

to report an unauthorized tenant or income on CPHA certifications and obtained

$46,000 in CPHA housing assistance she was not entitled to receive.

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Charlene Philbrook, a former Malden Housing Authority (MHA) public housing

tenant previously indicted in Malden District Court, Malden, MA, for larceny over

$250, was fined $44,995 in a civil judgment. From September 2000 through

September 2005, Philbrook allegedly failed to report income on MHA certifications

and obtained $41,691 in MHA housing assistance she was not entitled to receive.

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Sharon Neely and her daughter, Chelsea Monks, Vancouver Housing Authority

(VHA) Section 8 landlord/tenant, were indicted in Clark County Superior Court,

Vancouver, WA, for theft. From December 2001 through February 2006, Neely

allegedly disguised her ownership of and residency in a VHA-subsidized unit leased to

her daughter; Monks allegedly failed to report her relationship to or Neely's residency

in her VHA housing unit, and together they obtained $40,000 in VHA housing

assistance they were not entitled to receive.

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Trang Pham, a Fairfax County Department of Housing and Community

Development (FCHCD) HCVP landlord, pled guilty in U.S. District Court,

Alexandria, VA, to false statements and was sentenced to 3 years supervised probation

and ordered to pay FCHCD $37,356 in restitution. Pham hid her ownership of

property leased to her mother, a FCHCD HCVP participant.

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Martha Garcia, a former Wichita Housing Authority (WHA) Section 8 tenant, was

sentenced in U.S. District Court, Wichita, KS, to 18 months incarceration and ordered

to pay HUD $35,615 in restitution for her earlier guilty plea to possession and use of

fraudulently obtained documents and theft of Federal funds; Garcia was also ordered

deported to Mexico upon completion of her incarceration. From September 1999 to

June 2006, Garcia used three SSNs to conceal her undocumented immigrant status

and obtained $35,615 in WHA housing assistance she was not entitled to receive.

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Alexandra Triviz and Billy Reed, San Bernardino County Housing Authority

(SBCHA) Section 8 tenants, were both convicted in San Bernardino County Superior

Court, San Bernardino, CA, of fraud to obtain aid; Triviz was sentenced to 36 months

probation and Reed was sentenced to 60 days incarceration and 24 months probation.

Triviz and Reed failed to report unauthorized tenants residing in their SBCHA housing

units and/or lifetime sex offender registrant status and obtained $35,316 in SBCHA

housing assistance they were not entitled to receive.

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HUD’s Public and Indian Housing Programs
59

Terri Crawford, a Lee's Summit Housing Authority (LSHA) Section 8 recipient,

pled guilty in Jackson County Court, Kansas City, MO, to theft of government funds;

Crawford was sentenced to 60 months probation and ordered to pay LSHA $6,000 in

restitution. Crawford failed to report income on LSHA certifications and obtained

$33,853 in LSHA housing assistance she was not entitled to receive.

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Latrice Carter, a former Clark County Housing Authority (CCHA) Section 8

tenant, pled guilty in U.S. District Court, Las Vegas, NV, to fraud involving HUD

transactions. From 2001 through October 2005, Carter failed to report income or

actual household composition on CCHA certifications and obtained $33,091 in CCHA

housing assistance she was not entitled to receive. Carter repaid the government $33,091

after entering into a civil settlement agreement with the U.S. Attorney's Office.

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Emad Duar, a San Francisco Housing Authority (SFHA) Section 8 tenant, was

charged in U.S. District Court, San Francisco, CA, with false statements to HUD. From

October 2001 through November 2003, Duar allegedly failed to report his receipt of

U.S. Department of Veterans Affairs (VA) benefits on SFHA certifications and obtained

approximately $33,000 in SFHA housing assistance he was not entitled to receive.

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Denise Peters, a former Mississippi Regional Housing Authority VII (MRHA)

Section 8 tenant, was indicted in U.S. District Court, Jackson, MS, for false statements,

theft of government funds, and aiding and abetting. Peters allegedly provided false

employment or income information on MRHA certifications and obtained $23,104 in

MRHA housing assistance she was not entitled to receive. In addition, K'Hari Gowdy,

a former MRHA Section 8 tenant, pled guilty in U.S. District Court, Gulfport, MS, to

false statements, aiding and abetting, and theft of government funds. Gowdy reported

false income information on MRHA certifications and obtained $9,069 in housing

assistance she was not entitled to receive. Collectively, the above defendants caused

HUD losses of $32,173.

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Wilhermina Rodriguez, also known as Wilhermina Muriel, a former Portland

Housing Authority (PHA) Section 8 tenant, was indicted in Cumberland County Court,

Portland, ME, for theft by deception and unsworn falsifications. From March 2001

through September 2005, Rodriguez allegedly failed to report income to PHA or the

Maine Department of Health and Human Services (DHHS) and obtained approximately

$31,000 in PHA housing assistance and $42,000 in DHHS benefits she was not entitled

to receive.

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HUD’s Public and Indian Housing Programs
60

Kristal Allen, a Worcester Housing Authority (WHA) public housing tenant, was

charged in Worcester District Court, Worcester, MA, with larceny over $250 by false

pretense and presentation of false claims. Allen allegedly failed to report income on

WHA certifications and obtained $30,313 in WHA housing assistance she was not

entitled to receive.

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Dorothy Hansen, a former Vermont State Housing Authority (VSHA) Section 8

tenant, was sentenced in U.S. District Court, Burlington, VT, to one year probation

and ordered to pay VSHA $24,552 in restitution for her previous guilty plea to false

statements and theft of government funds. Hansen failed to report income on VSHA

certifications and obtained $24,552 in VSHA housing assistance she was not entitled to

receive.

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Elaine Bradfordt, also known as Robeana Ware, a Cuyahoga Metropolitan Housing

Authority (CMHA) Section 8 landlord, and her son, Samuel Dickerson, the former

managing agent of HCVP Properties, were each sentenced in U.S. District Court,

Cleveland, OH, for their earlier convictions on theft of government funds and false

statements to HUD and SSA. Bradfordt was sentenced to 41 months incarceration and

5 years probation and ordered to pay HUD $20,000 and SSA $100,000 in restitution;

Dickerson was sentenced to 5 years probation and ordered to pay the above restitution

jointly and severally with Bradfordt. Bradfordt and Dickerson used a fictitious name

and SSN to obtain CMHA housing assistance contract payments and SSA benefits they

were not entitled to receive. In addition, former CMHA Section 8 landlord Tonja

Williams, also known as Latonya McKinley, was sentenced to 36 months incarceration

and 5 years supervised release and ordered to pay HUD $3,678, the Federal Emergency

Management Agency (FEMA) $2,823, and Ohio Savings Bank $2,336 in restitution for

her earlier guilty plea to misuse of an SSN, false statements to HUD, and mail and bank

fraud. Williams used aliases and a false SSN to acquire credit cards, bank accounts, and

a Federal Housing Administration (FHA)-insured mortgage on property she leased to

CMHA but used as her personal residence and to file a fictitious nonhurricane storm

damage claim with FEMA. The above defendants caused HUD losses of $23,678.

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Raquel Bonifacio, a former Broward County Housing Authority (BCHA) Section 8

tenant and support services technician with the Federal Bureau of Investigations (FBI),

was sentenced in U.S. District Court, Miami, FL, to 6 months incarceration and 36

months supervised release and ordered to pay HUD $23,647 in restitution for her

earlier conviction of theft of government funds and false statements. From January

2003 through December 2005, Bonifacio failed to report her FBI employment or

income on BCHA certifications and obtained $23,647 in BCHA housing assistance she

was not entitled to receive.

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Juanzie Edwards, a Dallas Housing Authority (DHA) Section 8 tenant, admitted to

theft of public money/property in a pretrial diversion agreement with the U. S.

Attorney's Office, Dallas, TX, and agreed to pay HUD $22,842 and DOE $4,800.

Edwards failed to report income on DHA certifications or DOE applications and

obtained $22,842 in DHA housing assistance and $4,800 in DOE educational assistance

she was not entitled to receive.

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Kynia Morris, a former North Las Vegas Housing Authority (NLVHA) Section 8

tenant, pled guilty in Clark County Justice Court, Las Vegas, NV, to attempted theft.

From January 2003 through October 2006, Morris allegedly failed to report correct

income or actual household composition on NLVHA and Nevada Welfare

certifications and obtained $22,762 in NLVHA housing assistance she was not entitled

to receive.

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Adam Doyle, an Omaha Housing Authority (OHA) Section 8 landlord, pled guilty

in Douglas County District Court, Omaha, NE, to theft of government funds; Doyle

was sentenced to 60 months probation and ordered to pay OHA $22,620 in

restitution. Doyle resided with an OHA Section 8 tenant at his OHA Section 8 leased

property and obtained $22,620 in OHA rental contract payments he was not entitled

to receive.

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Awilda Negron, a Hampton Redevelopment and Housing Authority (HRHA)

Section 8 tenant, pled guilty in U.S. District Court, Newport News, VA, to false

statements to HUD; Negron was sentenced to 60 months probation and ordered to

pay HUD $22,340 and the Hampton Department of Social Services (HDSS) $4,427 in

restitution. From April 2002 to May 2006, Negron failed to report income on either

HRHA or HDSS certifications and obtained $22,340 in HRHA housing assistance and

$4,427 in HDSS utility and food stamp assistance she was not entitled to receive.

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Charles Woods, a fictitious Chicago Housing Authority (CHA) landlord, was

indicted in Cook County Circuit Court, Chicago, IL, for theft by deception and

forgery. Woods allegedly certified ownership of six properties, supplied fraudulent

ownership certificates and other documents to CHA Section 8 contractor CHAC, Inc.,

then obtained $22,000 in CHA housing assistance contract payments he was not

entitled to receive.

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Crystal Humphries and Dawn Maynor, Delaware County Housing Authority

(DCHA) HCVP participants and employees of the VA or IRS, were indicted in

Commonwealth of Pennsylvania District Court, Delaware County, PA, for theft by

deception and theft of services. Humphries and Maynor allegedly failed to report

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income on DCHA certifications and obtained approximately $20,750 in DCHA

housing assistance they were not entitled to receive.

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Krista Kay James and Mckenzie Rachel Davis, former Davis County Housing

Authority (DCHA) HCVP participants, were arrested after indictments were filed in

Utah State Court, Farmington, UT, charging them with fraudulently obtaining

housing benefits. James and Davis allegedly failed to report unauthorized tenants,

including a registered sex offender, residing in their subsidized units and together

obtained $20,635 in DCHA housing assistance they were not entitled to receive.

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James Bell, a former St. Louis Missouri Housing Authority (SLMHA) Section 8

tenant and owner of The Thomas Clinic, was sentenced in U.S. District Court, St. Louis,

MO, to 1 year in prison and ordered to pay HUD and others $753,810 in restitution for

his previous guilty plea to false statements. From 1999 to 2004, Bell failed to disclose

his business ownership or income to numerous agencies, including SLMHA and SSA,

and obtained $753,810 in SLMHA housing assistance, SSA disability, Medicaid, and food

stamps he was not entitled to receive. HUD realized a loss of $20,590.

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Darrin Carmouche, a Long Beach Housing Authority (LBHA) Section 8 tenant, was

charged in Los Angeles County Superior Court, Long Beach, CA, with fraud, grand

theft, and perjury. From 2002 to 2004, Carmouche allegedly failed to report income, a

residence in Perris, CA, or the subleasing of his LBHA-subsidized unit on LBHA

certifications and obtained $19,863 in LBHA housing assistance he was not entitled to

receive.

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Ramona Lee Emmett, a former Billings Housing Authority (BHA) Section 8 tenant,

was sentenced in U.S. District Court, Billings, MT, to 12 months incarceration and 3

years probation and ordered to pay BHA $19,382 in restitution, jointly and severally

with previously convicted BHA landlord Kenneth Christenot. Emmett, previously

convicted of false statements and theft of Federal funds, claimed absent children and

failed to declare property ownership or the residency of Christenot on BHA

certifications and obtained $19,382 in BHA housing assistance she was not entitled to

receive.

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Lakisha Day, a former Phenix City Housing Authority (PCHA) HCVP participant,

was indicted in U.S. District Court, Phenix City, AL, for false statements to HUD. Day

allegedly failed to report income on PCHA certifications and obtained $19,168 in PCHA

housing assistance she was not entitled to receive.

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Susie Williams, a former Springfield Housing Authority (SHA) Section 8 tenant,

was indicted in U.S. District Court, Springfield, FL, for theft of government funds.

Williams allegedly failed to report income on SHA certifications and obtained $8,316 in

SHA housing assistance she was not entitled to receive. Lashawn Renee Williams, also

a former SHA Section 8 tenant, pled guilty to theft of government funds. Lashawn

Williams failed to report employment or income on SHA certifications and obtained

$10,252 in SHA housing assistance she was not entitled to receive. Together, the above

defendants caused HUD losses of $18,568.

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Loise Hall, a New Castle County Housing Authority (NCCHA) Section 8

Homeownership Program participant, and her husband Ayatta Hall, both employees

of Wilmington Housing Authority (WHA), were indicted in Superior Court,

Wilmington, DE, for theft, conspiracy, and filing a false instrument. Loise Hall

allegedly failed to disclose her husband's residency or income on NCCHA

certifications and obtained $18,000 in NCCHA housing assistance she was not entitled

to receive.

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Caroline Gray, a former Housing Authority of Winston-Salem (HAWS) HCVP

participant, pled guilty in U.S. District Court, Greensboro, NC, to false statements to

HUD. From 2002 to 2005, Gray allegedly failed to report income on HAWS

certifications and obtained approximately $18,000 in HAWS housing assistance she

was not entitled to receive. HAWS terminated Gray from its rental assistance

program.

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Wilhemenia Jefferson, a former Bucks County Housing Authority (BCHA) HCVP

participant, was charged in Bucks County Court of Common Pleas, Doylestown, PA,

with theft by deception, receiving stolen property, and tampering with public records.

Jefferson allegedly submitted forged employment documents and fraudulent income

amounts to BCHA and obtained $17,406 in BCHA housing assistance she was not

entitled to receive.

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Cheryl Davis, a former St. Louis County Housing Authority (SLCHA) Section 8

tenant, was indicted in U.S. District Court, St. Louis, MO, for causing materially false,

fictitious, and fraudulent statements and representations. Davis and others allegedly

conspired to conceal property ownership from SLCHA, and Davis obtained an

undetermined amount of SLCHA housing assistance she was not entitled to receive. In

addition, Janet Buckner, a USDA employee and former SLCHA Section 8 tenant, was

sentenced to 5 months probation and ordered to pay SLCHA and others $33,775 in

restitution for her earlier guilty plea to false statements to HUD, SSA and USDA.

Buckner failed to report income on SLCHA certifications and obtained $16,534 in

HUD’s Public and Indian Housing Programs
64

SLCHA housing assistance and more than $109,000 in USDA and SSA benefits she was

not entitled to receive.

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Nancy Savitch, a former Fall River Housing Authority (FRHA) Section 8 tenant,

pled guilty in U.S. District Court, Boston, MA, to theft of government funds and SSA

fraud. From May 2000 to March 2004, Savitch failed to report income to FRHA or

SSA and obtained $16,411 in FRHA housing assistance and $39,956 in SSA benefits she

was not entitled to receive.

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Cheryl Vaughan, a District of Columbia Housing Authority (DCHA) public

housing tenant, pled guilty in Superior Court, Washington, DC, to fraud and was

sentenced to 180 days confinement and 5 years supervised probation and ordered to

pay DCHA $12,000 in restitution. From 2000 through 2005, Vaughan falsified her

income on DCHA certifications and obtained $16,322 in DCHA housing assistance she

was not entitled to receive.

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Connie Wooten, a former Housing Authority of Kansas City, MO (HAKC), Section

8 tenant and U.S. Postal Service employee, pled guilty in Jackson County Circuit Court,

Kansas City, MO, to stealing by deceit and was sentenced to 40 hours community

service and ordered to pay HAKC $5,000 in restitution. Wooten failed to report

income on HAKC certifications and obtained $16,294 in HAKC housing assistance she

was not entitled to receive.

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Lisa Phillip and Carl Johnson, Housing Authority of the City of Pottsville (HACP)

HCVP participants, were each indicted in U.S. District Court, Scranton, PA, for

conspiracy. Phillip and Johnson allegedly failed to report employment income or

property ownership and rental income on HACP certifications and obtained $15,473 in

HACP housing assistance they were not entitled to receive.

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Bobbie Smith, a former Fairfield Housing Authority (FHA) HCVP participant, pled

no contest in Solano County Superior Court, Fairfield, CA, to false statements. Smith

allegedly leased a dwelling in Suisun City, CA, failed to report her leased residence or

live in her FHA subsidized unit as her sole residence, and obtained $14,606 of FHA

housing assistance she was not entitled to receive.

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Philomina Shalo, an Olathe Housing Authority (OHA) Section 8 tenant, was charged

in Johnson County Court, Olathe, KS, with stealing. From 2002 to 2006, Shalo

HUD’s Public and Indian Housing Programs
65

allegedly failed to report income on OHA certifications and obtained $13,783 in OHA

housing assistance she was not entitled to receive.

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Linda L. Romero, a former Jefferson County Housing Authority (JCHA) Section 8

recipient, was sentenced in U.S. District Court, Denver, CO, to 5 years probation and

ordered to pay HUD $20,338 in restitution for her earlier guilty plea to false

statements. From July 2003 to October 2004, Romero earned income using an alias

and false SSN, failed to report the income to JCHA or SSA, and obtained $13,745 in

JCHA housing assistance and $10,968 in SSA disability insurance payments she was not

entitled to receive.

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Tien Doan, a Santa Ana Housing Authority (SAHA) Section 8 recipient, was charged

in Orange County Superior Court, Santa Ana, CA, with filing a false/forged

instrument, perjury and grand theft. Doan allegedly failed to disclose his lifetime sex

offender registrant status on SAHA certifications and obtained more than $12,000 in

SAHA housing assistance he was not entitled to receive.

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Tamra Butler and Ray Eugene Jones, former Tooele County Housing Authority

(TCHA) Section 8 tenants, pled guilty in Tooele County District Court, Tooele, UT, to

public assistance fraud. Butler and Jones were each sentenced to 36 months probation

and ordered to pay TCHA $12,000 in restitution, jointly and severally. From 2004 to

2006, Butler failed to report that Jones resided in her TCHA housing unit and obtained

$12,000 in TCHA housing assistance she was not entitled to receive.

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Jill Sulser, a Torrance City Housing Authority (TCHA) HCVP participant, was

charged in Los Angeles County Superior Court, Torrance, CA, with welfare fraud and

theft. From 2004 to 2005, Sulser allegedly failed to report self-employment income on

TCHA certifications and obtained more than $11,445 in TCHA housing assistance she

was not entitled to receive.

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Gail Bush, a former Area Housing Authority of the County of Ventura (AHACV)

HCVP participant, pled guilty in Ventura County Superior Court, Thousand Oaks,

CA, to grand theft and perjury. From June 2002 to February 2003, Bush failed to

report income on AHACV certifications and obtained $10,587 in AHACV housing

assistance she was not entitled to receive. AHACV terminated Bush from its rental

assistance program.

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HUD’s Public and Indian Housing Programs
66

Iris Riley, a former Lakeland Housing Authority (LHA) Section 8 tenant, pled guilty

in Polk County Tenth Judicial Circuit Court, Bartow, FL, to public assistance fraud

and was sentenced to 5 years probation and ordered to pay LHA $6,500 in restitution.

From January 2003 to December 2005, Riley failed to report income on LHA

certifications and obtained about $9,975 in LHA housing assistance she was not

entitled to receive.

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Alisia Etheridge, a former Norfolk Redevelopment and Housing Authority (NRHA)

Section 8 tenant, pled guilty in U.S. District Court, Norfolk, VA, to making false

statements to HUD and was sentenced to 60 months probation and ordered to pay

HUD $9,744 in restitution. Etheridge failed to report income from her U.S. Postal

Service employment on NRHA certifications and obtained $9,744 in NRHA housing

assistance she was not entitled to receive. NRHA terminated Etheridge from its rental

assistance program.

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Tamiko Lockett, a Section 8 tenant through Rental Assistance Corporation (RAC),

a HUD-funded nonprofit, was sentenced in U.S. District Court, Buffalo, NY, to 60

months probation and ordered to pay HUD $9,549 in restitution for her earlier guilty

plea to false statements to HUD. From September 2003 to November 2005, Lockett

failed to report income on RAC certifications and obtained $9,549 in RAC housing

assistance she was not entitled to receive.

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Kathy Frazier, a former Richmond Redevelopment Housing Authority (RRHA)

public housing tenant, was indicted in Richmond Circuit Court, Richmond, VA, for

obtaining money by false pretenses. Frazier allegedly failed to report income on RRHA

certifications and obtained more than $9,300 in RRHA housing assistance she was not

entitled to receive.

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Sherry White, a former Fairfield Housing Authority (FHA) Section 8 tenant, was

sentenced in U.S. District Court, Fairfield, AL, to 5 years probation and ordered to pay

FHA $9,115 in restitution for her earlier guilty plea to theft of government funds. From

2003 to 2004, White hid her familial relationship to her FHA landlord and obtained

$9,115 in FHA housing assistance she was not entitled to receive.

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Teresa Reid, a former Franklin Redevelopment Housing Authority (FRHA)

employee and Section 8 recipient, was indicted in Southampton County Court, Franklin,

VA, for forgery. Reid allegedly underreported her FRHA income, forged the signature

of another FRHA employee on employment verification forms, recertified herself on

HUD’s Public and Indian Housing Programs
67

FRHA housing assistance certifications and obtained $7,400 in FRHA housing

assistance she was not entitled to receive.

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William M. Foster, a Kentucky Housing Corporation (KHC) Section 8 tenant, was

arrested after his indictment in U.S. District Court, Bullitt County, KY, for wire fraud

and false statements. Foster allegedly claimed a deceased household member on KHC

certifications and obtained $7,196 in KHC housing assistance he was not entitled to

receive.

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Marietta Sims, a former City of Houston Housing Authority (CHHA) Section 8

recipient and U.S. Postal Service employee, was arrested after her indictment in Harris

County District Court, Houston, TX, for theft. From August 2004 to December 2005,

Sims allegedly failed to report income on CHHA certifications and obtained more than

$5,000 in CHHA housing assistance and $1,400 in food stamp benefits she was not

entitled to receive.

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Jacqueline Davis, a Pasadena Housing Authority (PHA) Section 8 tenant, was charged

in Los Angeles County Superior Court, Pasadena, CA, with perjury, grand theft and

obtaining money under false pretenses. Davis allegedly failed to report the

unauthorized residency of her brother, a convicted felon and lifetime sex offender

registrant, on PHA certifications and obtained more than $4,700 in PHA housing

assistance she was not entitled to receive.

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Catherine M. Schlepp, a Mobridge Housing and Redevelopment Commission

(MHRC) Section 8 tenant, was indicted in U.S. District Court, Sioux Falls, SD, for

false statements. In 2005, Schlepp allegedly failed to report income on MHRC

certifications and obtained $4,622 in MHRC housing assistance she was not entitled to

receive.

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Gloria Dutton, a former Augusta Housing Authority (AHA) Section 8 tenant, was

indicted in Kennebec County Superior Court, Augusta, ME, for aggravated forgery

and theft by deception. Dutton allegedly failed to report her ownership interest in her

AHA subsidized housing unit and obtained $3,028 in AHA housing assistance she was

not entitled to receive.

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Tariq Ayyad, a former Housing Authority of the City of Napa (HACN) Section 8

landlord, was charged in Napa County Superior Court, Napa, CA, with grand theft.

HUD’s Public and Indian Housing Programs
68

From December 2003 through April 2004, Ayyad allegedly failed to report the transfer

of his ownership interest in HACN-subsidized property and obtained $2,780 in HACN

housing assistance he was not entitled to receive.

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Donald Leaper, a North Little Rock Housing Authority (NLRHA) Section 8 tenant

and VA employee, was charged in Pulaski County District Court, Little Rock, AR, with

theft of public benefits. Leaper allegedly failed to report income on NLRHA

certifications and obtained $2,296 in NLRHA housing assistance he was not entitled to

receive.

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Marwan Othman El-Hindi, a public housing tenant at Lucas Metropolitan Housing

Authority (LMHA) previously indicted for theft of public funds, false statements, wire

fraud, and conspiracy, was charged with others in a superseding indictment filed in

U.S. District Court, Cleveland, OH, with conspiring to provide material support to

terrorists, distributing information regarding the manufacture and use of explosives,

and making and using false documents. El-Hindi and others, operating a nonprofit

organization known as Educational Social Foundation Services, Inc. (ESFS), allegedly

applied for and obtained a $40,000 Low Income Taxpayer Clinic Program grant from

the IRS to operate tax clinics and provide Federal income tax services but failed to

operate any clinics and diverted and personally used the grant funds. In addition,

El-Hindi allegedly provided false documents to LMHA and obtained $2,270 in LMHA

housing assistance he was not entitled to receive.

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Joseph Barbieri, a former Waterbury Housing Authority (WHA) Section 8

landlord, was indicted in Connecticut Superior Court, Waterbury, CT, for larceny and

forgery. Barbieri allegedly obtained about $1,152 in WHA housing assistance contract

payments on property he did not own.

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Jeffrey St. Martin, Ayanna Israel, Renita Burke, Shirley Rogers, Carla Phillips,

William C. Daniel, Blue and Son Contracting Co., Nehkayvah Enterprises, Inc., Regency

Title Co., LTD., Dana Capital Group, and Artis D. White, doing business as Avinic

Financial Group and Avinic Investment Group, LLC, were each indicted in Cuyahoga

County Common Pleas Court, Cleveland, OH, for theft by deception, securing

writings by deception, forgery, telecommunication fraud, tampering with records,

receiving stolen property, acting as a mortgage broker or real estate agent without a

license, and/or falsification. The above defendants allegedly provided false information

and forged documents to obtain mortgage loans on overvalued properties, then leased

the properties to Cuyahoga Metropolitan Housing Authority Section 8 or HCVP

participants.

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HUD’s Public and Indian Housing Programs
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Five New York City Housing Authority (NYCHA) public housing tenants were

arrested on outstanding State warrants charging them with theft and/or grand larceny

at Marcy Green Homes in Brooklyn, NY. The above defendants, allegedly running an

identity theft operation, obtained victims' SSNs, birthdates, and employment

information; activated credit accounts in the victims' names; then used the fraudulent

credit cards for purchases.

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An individual identified as "John Doe" was arrested after his indictment in U.S.

District Court, Worcester, MA, for making a false statement in the application for a

passport and misuse of an SSN. Doe, whose real identity is unknown, allegedly used the

identity of another to obtain a U.S. passport and DOE guaranteed loan while

illegally residing in a Massachusetts Department of Housing and Community

Development-subsidized unit.

Fugitive Felon Initiatives

Section 903 of Public Law 104-193 is titled "Elimination of Housing Assistance with

Respect to Fugitive Felons and Probation and Parole Violators." Signed into law in

1996, it allows for tenancy termination of public housing recipients who flee to avoid

prosecution or confinement after conviction of a felony or when felons violate parole or

probation conditions imposed under Federal or State laws. This law also authorizes law

enforcement agencies to exchange information and perform data matches.

HUD assists approximately 4.8 million households through public housing and

rental assistance including Section 8 and Housing Choice Voucher programs.

Reducing overpaid rent subsidies is a HUD management improvement goal as stated in

the President's Management Agenda and an OIG goal as stated in our strategic plan.

The identification and termination of fugitive felons fleeing felony prosecution or

probation and parole violators may impact HUD's housing assistance subsidies.

OIG continues to support Fugitive Felon Initiatives (FFI) by matching HUD

housing assistance information with crime data from the National Crime Information

Center, U.S. Marshals Service (USMS), and/or participating States. Since the

inception of OIG's FFI, hundreds of cases have been opened and closed, resulting in

more than 988 arrests. In addition, OIG provides tenant records matching USMS wanted

persons lists and participates in "Operation FALCON," a USMS operation designed to

apprehend fugitive felons living in public and assisted housing.

Operation FALCON (Federal and Local Cops Organized Nationally), a nationwide

fugitive felon apprehension operation coordinated by the USMS, combines Federal,

State, city, and county law enforcement resources in a joint effort to locate and

apprehend criminals wanted for violent crimes. Conducted in most major cities

throughout the United States and its territories, Operation FALCON places a strong

emphasis on violent crimes involving gangs, weapons, homicides, and sexual assaults,

along with crimes against children and the elderly. In addtion to other locales,

Operation FALCON targets wanted felons in public housing. OIG strongly supports

HUD’s Public and Indian Housing Programs
70

Operation FALCON in an effort to make HUD-assisted housing a safe place for families

to live.

OIG participated in "Operation FALCON III," a USMS action initiated to identify,

locate, and apprehend violent fugitives, particularly those charged with sex crimes. As

a result, 2,185 individuals were arrested on outstanding felony warrants in Hartford,

New Haven, Waterbury, and Bridgeport, CT; Tampa, FL; Atlanta and Macon, GA;

Boston, Worcester, Springfield, West Springfield, Holyoke, and Chicopee, MA;

Greensboro, NC; throughout NJ; Lafayette, LA; Gulfport, MS; and the Vermont

counties of Franklin and Chittenden. HUD OIG arrested 240 individuals; 116 of

those arrested resided in HUD-assisted housing.

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HUD’s Public and Indian Housing Programs

Copyright, 2006. The Boston Globe - Boston, MA. Reprinted with permission.
71

In conjunction with a Department of Justice Public Housing Safety Initiative, HUD

OIG participated in an "Operation FALCON" in Baltimore, MD. As a result, 196

individuals were arrested on outstanding felony warrants. HUD OIG arrested 75

individuals; 25 of those arrested resided in HUD-assisted housing.

○○○○○○○○○○○○○○○○○

Chuck Rosenberg, U.S. Attorney for the Eastern District of Virginia; Bob McDonnell,

Attorney General of the Commonwealth of Virginia; and members of the MetroRichmond Identity Theft Task Force announced the indictments of 51 individuals on

Federal charges of identity theft and other offenses in a press conference held in

Richmond, VA. During the operation, dubbed "Operation Reconcile," HUD OIG

participated in the arrest of 24 individuals indicted; seven of those arrested resided in

HUD-assisted housing.

○○○○○○○○○○○○○○○○○

Seventeen Aurora Housing Authority (AHA) Section 8 tenants were arrested in

Aurora, CO, on outstanding warrants for failure to appear and/or contempt of court;

five of the above defendants were also issued citations for possession of drugs and/or

drug paraphernalia. Belinda Foreman and Andrea Coleman, AHA Section 8 tenants,

each pled guilty in Aurora Municipal Court to possession of drug paraphernalia and/or

possession of cannabis.

○○○○○○○○○○○○○○○○○

Kaylene Elder, Charlotte Martinex, Michael Omal, Patricia Thompson, Ashlei

Christopher, and Kimberly Shuffet, Salt Lake City Housing Authority public housing

or HCVP participants, were arrested in Salt Lake City, UT, on outstanding warrants

for possession of marijuana, carrying a concealed weapon, failure to appear, or traffic

violations.

○○○○○○○○○○○○○○○○○

Howard Harrell, an unauthorized tenant in a Yonkers Municipal Housing

Authority-subsidized unit and lifetime sex offender, was arrested on an outstanding

State felony warrant in Yonkers, NY, for failing to register.

○○○○○○○○○○○○○○○○○

As part of a national Fugitive Felon Initiative involving law enforcement personnel

from HUD OIG and the Salt Lake County Sheriffs Office, Loren Johnson, a Salt Lake

City Housing Authority applicant, was arrested in Salt Lake City, UT, on an

outstanding felony warrant issued by the State of Oregon.

Other Fraud/Crimes

Mary K. Pedlow, also known as Mary Casey Ackerman, an employee of Ackerman

Mechanical Services, Inc., a Buffalo Municipal Housing Authority (BMHA) contractor,

was sentenced in U.S. District Court, Buffalo, NY, to 1 year probation for her earlier

HUD’s Public and Indian Housing Programs
72

guilty plea to submitting false documents to HUD. Pedlow and previously sentenced

Eric Ackerman, president of Ackerman Mechanical Services, Inc., falsely certified their

qualification as a Minority Business Enterprise (MBE) and their use and distribution of

contract work to an actual MBE company on BMHA projects, then obtained

approximately $1.75 million in BMHA contracts they were not entitled to receive.

○○○○○○○○○○○○○○○○○

Kevin Timochenko, a Reading City Housing Authority (RCHA) landlord and owner

of Metropolitan Management Corporation, was sentenced in U.S. District Court,

Reading, PA, to 15 months incarceration and 36 months supervised release and fined

$75,000 for his earlier guilty plea to theft of utilities from an interstate pipeline.

Timochenko, representing that he paid tenant utilities in his RCHA housing assistance

contract, installed bypass devices on utility meters and pilfered natural gas valued at

approximately $800,000 from UGI Utilities, Inc. HUD debarred Timochenko from

the HCVP.

○○○○○○○○○○○○○○○○○

Forty-seven residential and commercial properties owned by Ida Carson, doing

business as Carson Investments, Puritan Development, Inc., and Wyoming-Fenkell

Investment Corporation, were named in a Federal civil forfeiture action filed in U.S.

District Court, Detroit, MI. Ida Carson and her deceased husband, previously indicted

Clarence Carson, allegedly obtained the above properties with proceeds derived from

illegal narcotic transactions, then leased approximately 28 residential properties to

Section 8 or HCVP participants through the Michigan Housing Development

Authority, Detroit Housing Commission, or other HUD-funded organizations.

○○○○○○○○○○○○○○○○○

Hiram Lewis, owner of section8programs.com, was sentenced in U.S. District Court,

St. Louis, MO, to 18 months supervision and ordered to allow unlimited oversight and

review of his Internet Web site for his previous guilty plea to wire fraud. Lewis

published false and misleading information on his Web site in an effort to solicit and

obtain Internet subscriptions and application fees from HUD clientele and low-income

families attempting to obtain fictional low-income grants.

HUD’s Public and Indian Housing Programs

  
Chapter 3

HUD’s Multifamily

Housing Programs
74

In addition to multifamily housing developments with U.S. Department of Housing

and Urban Development (HUD)-held or HUD-insured mortgages, the Department

owns multifamily projects acquired through defaulted mortgages, subsidizes rents for

low-income households, finances the construction or rehabilitation of rental housing,

and provides support services for the elderly and handicapped. In addition to the

audits and investigations described in this chapter, OIG has also conducted numerous

outreach efforts. (see chapter 8, page 124)

Audits

HUD’s Multifamily Housing Programs

Key Program Results

- HUD’s Use of Multifamily Residual Receipts

- Owner and Management Agent Operations

Strategic Initiative 2: Contribute to the Reduction of Erroneous

Payments in Rental Assistance

Questioned Costs Funds Put to Better Use

Audit $395,000 $37 Million

page 75

page 75

Our

Focus

6 Audits

Chart 4.1: Percentage of OIG Public and Indian Housing Audit Reports

During this Repoting Period

Region 1

Boston 17%

Region 2

New York 32%

Region 3

Philadelphia 0%

Region 4

Atlanta 0%

Region 6

Fort Worth 17%

Region 9-10

Los Angeles 17%

Region 5

Chicago 0% Region 7-8

Kansas City 17%
75

HUD’s Use of Multifamily Residual Receipts

HUD OIG reviewed HUD's use of multifamily projects' receipts to determine

whether HUD used multifamily projects' residual receipts to reduce housing assistance

payments.

HUD did not provide detailed guidance to ensure that project managers and

contract administrators understood that they could use residual receipts in lieu of

subsidy payments. As a result, HUD did not use more than $36 million in available

residual receipts to reduce housing assistance payments for the 10 projects reviewed.

OIG recommended that HUD provide detailed guidance to its field offices and

contract administrators that will identify when projects have sufficient residual receipts

to fund housing assistance payments and provide and annually update a list of projects

to the field offices and contract administrators that indicates when projects have

sufficient residual receipts to fund subsidy payments. (Audit Report: 2007-KC-0002)

Owner and Management Agent Operations

Over the past 6 months, OIG has audited owner and management agent operations

with an emphasis on combating equity skimming. While OIG's objectives varied by

auditee, the majority of the reviews were to determine whether the owner and/or

management agent used the project funds in compliance with the regulatory

agreement and HUD requirements. The results of OIG's more significant audits are

described below.

HUD OIG audited The Associates Group Pioneer Pines Park, located in

Bakersfield, CA, in response to a request from the HUD Departmental Enforcement

Center.

Pioneer Pines failed to collect more than $195,000 in rental payments from its mobile

home dealers, paid more than $133,000 in unsupported wages, made payments of more

than $373,000 for ineligible expenses, commingled funds and repaid advances while in

a non-surplus-cash position, failed to maintain its vacant spaces in good repair and

condition, and failed to make required mortgage payments.

OIG recommended that HUD require the owner to repay the uncollected rent and

other ineligible and unsupported expenses. OIG also recommended that HUD pursue

double damages remedies against the owner for the inappropriate disbursements that

were used in violation of the regulatory agreement, pursue action under the Program

Fraud Civil Remedies Act against the owner's president, and impose other civil money

penalties and administrative sanctions against the president and owner. (Audit

Report: 2007-LA-1001)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Peregrine Health Management Company's, Syracuse, NY,

management of the financial operations of Peregrine's Landing Senior Community in

response to a complaint.

HUD’s Multifamily Housing Programs
76

The agent used almost $117,000 in project funds for items that were ineligible,

unsupported, and/or not necessary or reasonable for project operations. Further,

$50,000 in project funds and more than $35,000 in a bond and associated interest were

held, in addition to a more than $5,000 account payable, to cover non-project-related

legal fees. In addition, the agent collected almost $73,000 in excessive management

fees that could have been avoided and used project funds to pay the salary and benefits

of one of its employees, resulting in ineligible costs of almost $40,000.

OIG recommended that HUD instruct the owner and agent to develop procedures

to ensure compliance with its regulatory agreement and HUD rules and regulations

and require the owner and agent to (1) reimburse the project for the ineligible and/or

unnecessary costs, (2) submit supporting documentation to justify all unsupported

costs and reimburse the project from nonproject funds all amounts determined to be

ineligible, (3) unencumber the project by removing more than $5,000 in accounts

payable from the project's books and records and take appropriate action to prevent

future payments of non-project-related legal expenses, (4) negotiate a management

fee that is reasonable and commensurate with the services provided, and (5) reimburse

the project from nonproject funds for the excessive supervisory salary paid. (Audit

Report: 2007-NY-1003)

○○○○○○○○○○○○○○○○○

HUD OIG reviewed operations at Harris Health Center, 016-43106, a 34-bed

nursing home located in East Providence, RI, because the mortgage was delinquent

and final endorsement of a HUD-insured loan was delayed.

The Center did not ensure that renovations were completed properly. It also paid

unnecessary interest and non-project-related costs and did not properly calculate and

pay fees to its related management agent. As a result, the Center did not receive the full

benefits of its renovations and spent money on unnecessary expenses, all of which

contributed to operating losses and cash flow shortfalls.

OIG recommended that HUD require the Center's owner to correct the

renovation deficiencies, develop a repayment plan to reimburse the project nearly

$22,000 for unnecessary and non-project-related costs, and establish a consistent

management agent structure and method for computing and paying management agent

fees. (Audit Report: 2007-BO-1004)

○○○○○○○○○○○○○○○○○

HUD OIG audited Asbury Square Apartments located in Tulsa, OK, in response to

a request from HUD.

Sheltering Palms - Tulsa I, LLC, the owner and borrower, and Paramount Property

Group, LLC, the management agent, spent almost $35,000 on ineligible and

unsupported costs.

OIG recommended that HUD require Sheltering Palms to support or reimburse

HUD's Federal Housing Administration (FHA) insurance fund almost $35,000 and take

HUD’s Multifamily Housing Programs
77

appropriate administrative sanctions against Sheltering Palms and its principals/

officers and Paramount and its owners. (Audit Report: 2007-FW-1006)

○○○○○○○○○○○○○○○○○

HUD OIG reviewed the management fees claimed by the management agent P.J.

Alizio Realty, Inc., pertaining to six multifamily properties in Mineola, NY. For the

fees tested, the agent generally calculated the management fees in compliance with

applicable HUD requirements and did not claim payments in excess of those specified

in the certifications. However, certifications for two projects were not submitted to

HUD as required.

OIG recommended that HUD request that the management agent submit the

certifications for the two projects to HUD and implement procedures to ensure that

whenever management fees are revised, a new certification is submitted to HUD.

(Audit Report: 2007-NY-1801)

○○○○○○○○○○○○○○○○○

HUD’s Multifamily Housing Programs
78

Investigations

Some of the investigations discussed in this report were conducted jointly with

Federal, State, and local law enforcement agencies. The results of OIG’s more

significant investigations are described below.

HUD’s Multifamily Housing Programs

Key Program

Results

- Theft/Embezzlement

- Rental Assistance Fraud

- Other Fraud Crimes

Strategic Initiative 2: Contribute to the Reduction of Erroneous

Payments in Rental Assistance

49 $1.45 Million

page 79

page 81

page 82

Our Focus

Investigations

Cases

Closed

$

Recovered

46

Convictions/Pleas/

Pretrials

57

Admin/Civil

Actions

Region 1

Boston 6%

Region 2

New York 4%

Region 3

Philadelphia 26%

Region 4

Atlanta 2%

Region 6

Fort Worth 13%

Region 9-10

Los Angeles 21%

Region 5

Chicago 13% Region 7-8

Kansas City 15%

Chart 4.2: Percentage of OIG Multifamily Housing Closed Investigation Cases

During this Reporting Period*

* This does not include cases where funds misused came from Congress for the hurricane relief.

(see chapter 6 for these cases)
79

Theft/Embezzlement

David E. Forgy, chief executive officer of RM&G, doing business as Heartland Health

Care Group of Oklahoma, was indicted in U.S. District Court, Oklahoma City, OK, for

equity skimming, false statements, misapplication of health care benefit program funds,

and aiding and abetting. From March 2001 through December 2002, Forgy allegedly

disbursed funds from Heartland Health Care Center (HHCC) project accounts for his

personal benefit while HHCC was in a non-surplus-cash position, then defaulted on

HHCC's HUD-insured mortgage loan and caused HUD losses in excess of $4.4 million.

○○○○○○○○○○○○○○○○○

Larry Lippman, a former managing agent for Republic Management at Eastwood

Terrace Apartments (ETA), a HUD-subsidized multifamily housing complex, pled guilty

in U.S. District Court, Beaumont, TX, to embezzlement. From August 2000 to June

2003, Lippman embezzled ETA funds by manipulating ETA accounts under his

control. HUD realized losses of $347,693.

○○○○○○○○○○○○○○○○○

Herbert Wright, Community Resource Management, Inc., and Ennis Francis Houses

Associates were named in a $3 million civil complaint filed in U.S. District Court, New

York City, NY. The complaint seeks to recover funds and civil damages resulting from

the unauthorized use and misuse of assets and income from a HUD-funded multifamily

property known as Ennis Francis Houses (EFH) located in Harlem, NY. The

defendants allegedly depleted $150,000 in EFH funds for their personal use or political

contributions and certified nonexistent tenants, causing approximately $160,000 in

rent subsidy overpayments. HUD loss is estimated at approximately $310,000.

○○○○○○○○○○○○○○○○○

Wanda Mercado, a former Peabody Properties manager at Schoolhouse 77, a HUDsubsidized multifamily complex, was sentenced in U.S. District Court, Boston, MA, to

2 years incarceration and 3 years supervised release and ordered to pay Peabody

Properties $82,571 for her earlier guilty plea to bribery. Mercado solicited and received

HUD’s Multifamily Housing Programs

Copyright, 2007. The Brockton Enterprise - Boston, MA. Reprinted with permission.
80

more than $34,000 from unqualified Section 8 applicants seeking Schoolhouse 77

subsidized units. HUD realized losses in excess of $151,478 when 10 unqualified

applicants obtained subsidized housing units they were not entitled to receive.

○○○○○○○○○○○○○○○○○

Patricia Yats, the former site manager at Grange Acres Senior Citizen (GASC)

complex, a HUD-subsidized multifamily housing development, was sentenced in U.S.

District Court, Grand Rapids, MI, to 6 months incarceration and 2 years probation

and ordered to pay HUD $119,233 in restitution for her earlier guilty plea to

embezzlement. Yats embezzled $119,000 from GASC by writing, endorsing and

cashing GASC checks, then used the GASC funds for gambling.

○○○○○○○○○○○○○○○○○

Joel Hernandez, a former contractor for United Housing Management (UHM), a

HUD multifamily Section 8 contractor, pled guilty in U.S. District Court, Boston, MA,

to conspiracy to defraud an agency of the United States. Hernandez solicited and

received $35,700 in bribes from five Section 8 applicants seeking HUD-subsidized

housing units managed by UHM. HUD realized losses of approximately $150,000 when

three unqualified Section 8 applicants obtained subsidized housing units they were not

entitled to receive.

○○○○○○○○○○○○○○○○○

Mary Spruell, the former treasurer of D. Edward Wells Federal Credit Union

(DEWFCU) and owner/manager of Walnut Street Apartments, an FHA-insured

multifamily project, was sentenced in U.S. District Court, Springfield, MA, to 12 months

home confinement with electronic monitoring, 3 years supervised release, and 200 hours

community service and ordered to pay National Credit Union Administration $114,000

in restitution and file an amended Federal income tax return for her earlier guilty plea

to embezzlement, filing a false Federal income tax return, and aiding and abetting.

Spruell embezzled more than $114,000 from DEWFCU, including more than $65,000

from Walnut Street Apartments. Terms of her previous plea agreement include the

forced sale of Walnut Street Apartments to repay HUD for unauthorized distributions,

excessive management fees, and court ordered restitution.

HUD’s Multifamily Housing Programs

Copyright, 2006. The Republican - Springfield, MA. Reprinted with permission.
81

Rental Assistance Fraud

Arinola Ajidele-Parlor, a former Section 8 tenant at Sheridan Gunnerson Apartments,

a HUD-subsidized multifamily housing complex, was sentenced in U.S. District Court,

Chicago, IL, to 6 months home confinement and 3 years probation and ordered to

pay HUD $47,348 in restitution for her previous guilty plea to false statements.

Ajidele-Parlor failed to report income, her purchase of an FHA-insured home and two

FHA-insured refinances, or her nonresidency and business use of the HUD-subsidized

housing unit on annual certifications and obtained $47,348 in housing assistance she

was not entitled to receive.

○○○○○○○○○○○○○○○○○

Darlean Marcucilli, also known as Darlean Hall, a New York State Division of

Housing and Community Renewal (HCR) Section 8 recipient and New York Police

Department administrative aide, and her husband John Marcucilli, an HCR senior

housing management representative, were each indicted in U.S. District Court, New

York City, NY, on conspiracy and theft of government funds. Darlean Marcucilli

allegedly failed to report her husband's income or residency on HCR certifications and

obtained approximately $37,464 in HCR housing assistance she was not entitled to

receive.

○○○○○○○○○○○○○○○○○

Eight Section 8 tenants at Park 7 Apartments, a HUD-subsidized multifamily

complex, were arrested on outstanding warrants issued by Johnson County District

Court, Olathe, KS, for false statements. The above defendants allegedly failed to report

income on housing certifications and obtained approximately $32,000 in housing

assistance they were not entitled to receive.

○○○○○○○○○○○○○○○○○

Elsa Ondina Herrera-Martinez, a former Section 8 tenant at High Point Village, a

HUD-subsidized multifamily housing complex, was convicted in U.S. District Court,

Boston, MA, of theft of government funds, aggravated identity theft, and illegally

obtaining a Social Security number. Herrera-Martinez and previously charged Rafael

Rosario illegally acquired and used the identity of another to obtain more than $15,000

in housing assistance they were not entitled to receive.

○○○○○○○○○○○○○○○○○

Donald Pierce, a former Section 8 tenant at William Woods Apartments, a HUDsubsidized multifamily housing complex, was sentenced in U.S. District Court,

Portland, ME, to 13 months incarceration and 3 years probation and ordered to pay

HUD $15,000 in restitution for his earlier guilty plea to false statements to HUD. Pierce

falsified assets and income on annual certifications and obtained $15,000 in housing

assistance he was not entitled to receive.

○○○○○○○○○○○○○○○○○

HUD’s Multifamily Housing Programs
82

Lashanda McLaughlin, Dollie Jamison, and Delores James, former HUD multifamily

Section 8 tenants at Walnut Grove Apartments, each pled guilty in Clay County Court,

Liberty, MO, to stealing. McLaughlin was sentenced to 5 years probation and ordered to

pay HUD $3,006 in restitution, Jamison was sentenced to 24 months probation and

ordered to pay HUD $1,153 in restitution, and James was sentenced to 24 months

probation and ordered to pay HUD $1,560 in restitution. The above defendants failed to

report income on annual certifications and obtained $5,719 in HUD housing assistance they

were not entitled to receive.

○○○○○○○○○○○○○○○○○

Dris Mitchell, a Section 8 tenant at Crestview Apartments, a HUD-subsidized

multifamily housing complex, was indicted in U.S. District Court, Jackson, MS, for false

statements and claims. Mitchell allegedly provided false income information on annual

certifications and obtained $3,759 in housing assistance she was not entitled to receive.

Other Fraud/Crimes

Aaron Dare, a former owner of three FHA-insured multifamily properties, pled guilty in

U.S. District Court, Albany, NY, to wire fraud, false statements to HUD, and conspiracy.

Berne Watkins, the previous owner of the three FHA-insured multifamily properties sold

to Dare, was indicted on conspiracy, wire fraud, false statements to HUD, and aiding and

abetting. In 2000 and 2001, Dare and Watkins allegedly executed two promissory notes,

creating the appearance that Dare held equity worth $2.5 million and, thereby, enabling

him to purchase the above properties from Watkins. Dare used the fraudulent promissory

notes to obtain FHA-insured mortgages on the three properties, then failed to make

mortgage payments as promised. HUD realized losses of $1.9 million after the mortgages

defaulted.

○○○○○○○○○○○○○○○○○

Edward Boppert, a former Section 8 tenant at Stony Crest Towers, a HUDsubsidized multifamily housing complex, was indicted in Middlesex Superior Court,

Middleton, CT, on possession of child pornography. Boppert allegedly possessed 322

images of child pornography in his HUD-subsidized unit.

○○○○○○○○○○○○○○○○○

As a result of "Operation Justice," law enforcement personnel from the U.S.

Marshals Service, Fort Worth Police Department, Fort Worth City Marshals, Tarrant

County Sheriff's Office, and HUD OIG arrested 25 individuals on outstanding felony

warrants in Fort Worth, TX; 16 of the individuals arrested resided in HUD-subsidized

multifamily housing units.

○○○○○○○○○○○○○○○○○

Shirzad “Rocky” Mehrrafiee was arrested on outstanding felony warrants charging him

with bank and wire fraud at his grandmother's Section 8 unit in Ashbrooke Apartments, a

HUD-funded multifamily complex located in Kansas City, MO.

  

HUD’s Multifamily Housing Programs
Chapter 4

HUD’s Community Planning

and Development Programs
84

The Office of Community Planning and Development (CPD) seeks to develop

viable communities by promoting integrated approaches that provide decent housing,

suitable living environments, and expanded economic opportunities for low- and

moderate-income persons. The primary means toward this end is the development of

partnerships among all levels of government and the private sector. In addition to the

audits and investigations described in this chapter, The Office of Inspector General

(OIG) has also conducted numerous outreach efforts. (see chapter 8, page 134)

Audits

HUD’s Community Planning and Development Programs

Key Program Results

- Community Development Block Grant Programs

- Supportive Housing Program Grant

- HOME Investment Partnerships Program

Strategic Initiative 3: Contribute to the Strengthening of Communities

Questioned Costs Funds Put to Better Use

Audit $5 Million $4 Million

page 85

page 87

page 88

Our

Focus

10 Audits

Region 1

Boston 20%

Region 2

New York 10%

Region 3

Philadelphia 10%

Region 4

Atlanta 10%

Region 6

Fort Worth 0%

Region 9-10

Los Angeles 20%

Region 5

Chicago 0% Region 7-8

Kansas City 30%

Chart 5.1: Percentage of OIG Community Planning and Development

Audit Reports During this Repoting Period
85

OIG audits the Community Development Block Grant (CDBG) program,

Supportive Housing Program Grant, and HOME Investment Partnerships Program

(HOME) program. While OIG's objectives varied by auditee, the majority of the

reviews were to determine whether the grant funds were administered for eligible

activities and that they met program objectives. The following section illustrates the

audits conducted in the CPD area.

Community Development Block Grant Programs

The U.S. Department of Housing and Urban Development (HUD) OIG audited the

City of St. Louis, MO's use of its CDBG funds. OIG did not find any material

deficiencies in the City's allocation of administrative costs to the CDBG program.

However, the City provided loans totaling nearly $4.5 million to 52 of 66 economic

development projects that could not demonstrate that they met HUD's requirements

for creating and retaining jobs. The City also did not require the St. Louis Development

Corporation to properly report the number of jobs it created with the HUD funds it

loaned to projects.

OIG recommended that HUD require the City to (1) provide sufficient

documentation to show that the 52 projects created or retained at least the minimum

number of jobs or repay $1.7 million in forgivable loans provided to projects and create

additional jobs to offset the $2.8 million in repayable loans that did not properly create

or retain jobs and (2) improve its control structure to ensure that the nearly $1.7

million in underway projects creates the appropriate number of jobs and impose

sanctions against its development corporation if poor performance continues.

○○○○○○○○○○○○○○○○○

HUD OIG audited the Office of Community Development, City of Chicopee, MA's

administration of its CDBG and HOME programs. The City did not adequately

administer more than $2.2 million in housing rehabilitation contracts funded through

its CDBG and HOME programs. It did not perform the required independent analysis

of cost estimates submitted by developers before awarding rehabilitation contracts,

did not always enforce procurement and financial management contract provisions

included in written agreements with developers, did not adequately address

performance problems on the part of developers identified during reviews performed

by it, and approved final payments for unfinished projects. In addition, it approved

more than $1.2 million in unreasonable and unsupported rehabilitation contract costs.

The $1.2 million is part of the overall $2.2 million, and the City's use of a $700,000

community housing development organization set-aside from the HOME program was

an ineligible use of these funds.

OIG recommended that HUD require the City to establish written policies and

procedures for both the HOME and CDBG programs that meet HUD requirements for

awarding, administering, and monitoring program funds. OIG also recommended that

the City provide supporting documentation for the $1.2 million in unsupported costs,

including establishing the reasonableness of the costs, or repay the funds and be

HUD’s Community Planning and Development Programs
86

directed not to use set-asides on the ineligible project, which will allow $700,000 to be

put to better use for other eligible projects. (Audit Report: 2007-BO-1003)

○○○○○○○○○○○○○○○○○

HUD OIG audited the operations of the City of Amsterdam, NY, regarding its

administration of a Section 108 loan obtained in May 2002 under HUD's Canal

Corridor Initiative. The grantee did not disburse Section 108 loan proceeds in

accordance with CDBG and Section 108 loan rules and regulations. Specifically, some

loan proceeds were not disbursed in accordance with the loan application, while other

funds were disbursed without adequate support, and there is no evidence of

compliance with labor standards. As a result, the grantee could not demonstrate that

loan proceeds totaling $535,000 were used for proper, reasonable, and eligible costs.

OIG recommended that HUD instruct the grantee to submit supporting

documentation to justify all unsupported costs, so that HUD can make an eligibility

determination, and reimburse the program from nonfederal funds for all amounts

determined to be ineligible. OIG also recommended that the grantee develop

administrative controls that will ensure compliance with all Section 108 loan guarantee

regulations and requirements for all future CDBG-related funding. (Audit Report:

2007-NY-1002)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Gwinnett County, Lawrenceville, GA, CDBG and HOME

programs. The Block Grant and HOME projects reviewed were eligible and met HUD's

national objectives, and the subrecipients operated the projects in accordance with

their contract with the grantee. However, the grantee's subrecipients did not provide

their share of the project funding as required by their contracts. As of October 31,

2006, the subrecipients had not provided more than $278,000 toward the projects.

 OIG recommended that HUD require the grantee to either collect the funds due

from the subrecipients according to the contracts or amend the contracts

appropriately. In the future, if the grantee does not require the subrecipients to

provide funding to the projects, the contracts should not contain this requirement.

Also, the grantee should establish controls to ensure that all contract requirements are

enforced. (Audit Report: 2007-AT-1003)

○○○○○○○○○○○○○○○○○

HUD OIG audited HUD's Hartford, CT, Office of Community Planning and

Development (CPD) due to indications of inadequate monitoring identified during a

previous OIG external audit. The Hartford CPD office appeared to ensure that CDBG

funds were used for activities that met one of the three primary national objectives and

were eligible and properly classified. However, it did not always adequately monitor

CDBG program participants or follow HUD requirements. It did not always issue

required monitoring letters in a timely manner, maintain or complete required

documentation, and perform adequate followup. Inadequate monitoring allows

findings and concerns to go uncorrected, placing CDBG funds at unnecessary risk.

HUD’s Community Planning and Development Programs
87

Further, the lack of an administrative record and required documentation negatively

impacts HUD and makes enforcing sanctions more difficult.

OIG recommended that HUD implement additional oversight and a plan to ensure

that (1) the CPD staff are familiar with and understand HUD monitoring requirements;

(2) monitoring letters are prepared and provided to the program participants within

45 days; (3) correct handbook exhibits are used, completed, and prepared

electronically before issuance of the monitoring letter; (4) all correspondence,

documentation, and working papers relating to the monitoring and conclusions are

maintained in the official field office files; (5) adequate followup is performed and

documented; and (6) the director of the Hartford CPD office is complying with the

procedures and policies described in these recommendations. (Audit Report: 2007-

BO-0001)

Supportive Housing Program Grant

HUD OIG audited the City of Long Beach, CA's Continuum of Care Supportive

Housing Program to determine whether the City (1) monitored its project sponsors

adequately to ensure compliance with HUD regulations, (2) closed out expired grants

in compliance with HUD regulations, (3) provided the proper amount of

administrative fees to its project sponsors, and (4) made timely reimbursements to its

project sponsors.

The City failed to (1) monitor its project sponsors, which resulted in project

sponsors being unable to support required cash match; (2) close out expired grants in

accordance with HUD requirements; (3) provide at least 50 percent of the

administrative fees to the project sponsors as Congress intended; and (4) make timely

reimbursement payments to its project sponsors. As a result, the City failed to ensure

that HUD funds were spent in the most effective and efficient manner, unnecessarily

overburdened project sponsors, and put HUD funds at risk. Additionally, the City

unnecessarily delayed nearly $2 million in expired grant funds from being deobligated.

OIG recommended that HUD require the City to comply with HUD's and its own

policies and procedures regarding on-site monitoring of its project sponsors, provide

support for more than $315,000 in cash match or repay HUD for more than $1.1 million

in expended grant funds, immediately close out nearly $637,000 in expired grants so

these funds can be put to better use, and reevaluate its payment process and establish

and implement procedures to reduce the time it takes to reimburse its project

sponsors. (Audit Report: 2007-LA-1003)

○○○○○○○○○○○○○○○○○

HUD OIG audited the YWCA of Seattle, WA, King and Snohomish Counties, to

determine whether it administered its Supportive Housing Program grants in

accordance with HUD requirements, Office of Management and Budget requirements,

and the grant agreements.

The YWCA generally administered its Supportive Housing Program grants in

accordance with HUD requirements. However, it received excess funds because it did

HUD’s Community Planning and Development Programs
88

not provide a sufficient cash match for one of its grants. It was also unable to support

labor costs charged to its grants.

OIG recommended that HUD require the YWCA to (1) repay more than $118,000

in grant funds expended without the required cash match, (2) reimburse the grant

and/or repay HUD from nonfederal funds for the nearly $69,000 in unsupported labor

costs unless it can provide adequate supporting documentation, and (3) implement

policies and procedures so that its grants are carried out in accordance with applicable

laws and regulations. (Audit Report: 2007-SE-1001)

HOME Investment Partnerships Program

HUD OIG reviewed the City and County of Denver, CO's HOME program to

determine whether the City properly established, administered, and accounted for

eligible HOME projects.

The City did not properly enter its data into the Integrated Disbursements and

Information System, which resulted in its incorrectly reserving $722,000 in HOME

funds. In addition, the City did not have adequate controls over the administration of

its HOME activities and funds. Therefore, HUD lacked assurance that management

properly accounted for or realized maximum benefit from the HOME funds.

OIG recommended that HUD require the City to implement policies and

procedures to ensure that it accurately and completely enters and maintains all required

information in the HUD system and to ensure effective administration of the HOME

program. (Audit Report: 2007-DE-1001)

○○○○○○○○○○○○○○○○○

HUD OIG reviewed the HOME program administered by the State of Nebraska's

Department of Economic Development in Lincoln, NE. The audit objective was to

determine whether the State closed HOME-funded projects in accordance with HUD

requirements.

The State did not close HOME projects in HUD's computer systems in a timely

manner. It has made progress in properly closing several hundred past-due projects,

but many projects remain unresolved.

OIG recommended that HUD verify that the State has implemented appropriate

controls to ensure that it closes HOME projects in HUD's data systems within the

required timeframes, monitor the State's progress in closing projects currently

exceeding HUD's required timeframes, and ensure that the projects are closed

properly and expeditiously. (Audit Report: 2007-KC-1005)

○○○○○○○○○○○○○○○○○

HUD’s Community Planning and Development Programs
HUD’s Community Planning and Development Programs 89

Investigations

Some of the investigations discussed in this report were conducted jointly with

Federal, State, and local law enforcement agencies. The results of OIG’s more

significant investigations are described below.

Key Program

Results

- Theft/Embezzlement

- Other Fraud Crimes

Strategic Initiative 3: Contribute to the Strengthening of Communities

34 $1.6 Million

page 90

page 95

Our Focus

Investigations

Cases

Closed

$

Recovered

32

Convictions/Pleas/

Pretrials

22

Admin/Civil

Actions

Region 1

Boston 26%

Region 2

New York 22%

Region 3

Philadelphia 9%

Region 4

Atlanta 4%

Region 6

Fort Worth 9%

Region 9-10

Los Angeles 9%

Region 5

Chicago 9% Region 7-8

Kansas City 13%

Chart 5.2: Percentage of OIG Community Planning and Development Closed

Investigation Cases During this Reporting Period*

* This does not include cases where funds misused came from Congress for the hurricane relief.

(see chapter 6 for these cases)
90

Theft/Embezzlement

Derrick Earls and Johnnie Wright, board members of HUD-funded Gary Urban

Enterprise Association (GUEA), each pled guilty in U.S. District Court, Hammond,

IN, to conspiracy to commit mail fraud and theft concerning programs receiving

Federal funds. Earls, Wright, and others diverted and personally used more than

$750,000 in GUEA funds.

○○○○○○○○○○○○○○○○○

Patti Buffington, the former

executive director of Genesis

House (GH), a HUD-funded

emergency shelter providing

housing, rehabilitation, and other

services for prostitutes, and

Valerie Lewis, the former GH

chief financial officer, were

arrested and charged in criminal

complaints filed in Cook County

Circuit Court, Chicago, IL.

Buffington was charged with

organizing a continuing financial

crimes enterprise, and Lewis was

charged with theft; together they

were charged with embezzling

HUD CPD and U.S Department

of Health and Human Services

funds. Buffington and Lewis

allegedly embezzled more than

$526,000 in GH funds and then

used the money for vacations and

vehicles and to pay private school

tuition and previously assessed

Federal income tax.

○○○○○○○○○○○○○○○○○

Murilda "Chris" Hayes, executive director of Love Social Services Center (LSSC), a

HUD- and U.S. Department of Justice (DOJ)-funded nonprofit, and her husband James

C. Hayes, the former LSSC treasurer, mayor of Fairbanks, AK, and current pastor of

Lily of the Valley Church of God in Christ, were charged in a superseding indictment

filed in U.S. District Court, Fairbanks, AK, with criminal forfeiture of funds up to

$825,000. Murilda and James Hayes were previously indicted for conspiracy, theft,

fraud, misapplication from an organization receiving Federal funds, money laundering,

and engaging in monetary transactions involving criminally derived property. From

2000 to 2005, Murilda Hayes allegedly wrote and negotiated LSSC checks payable to

cash; obtained money orders or cashier checks with the LSSC funds; and in concert

HUD’s Community Planning and Development Programs

Copyright, 2006. Chicago Sun Times - Chicago, IL.

Reprinted with permission.
HUD’s Community Planning and Development Programs 91

with James Hayes, used LSSC

funds to purchase personal items,

pay for personal expenses, or

provide furnishings and pay for

Lily of the Valley Church of God

in Christ construction and

operating expenses. HUD and

DOJ grant funds embezzled are

estimated to exceed $450,000.

○○○○○○○○○○○○○○○○○

Leroy Brown, a former

financial manager for the Salvation

Army, was sentenced in U.S.

District Court, Newark, NJ, to 37

months incarceration and 3 years

probation and ordered to pay the

Salvation Army $385,760 for his

previous guilty plea to conspiracy

to steal from an organization

receiving Federal funds and

Federal income tax evasion.

Brown embezzled $385,760 from

a Salvation Army bank account,

funded in part with HUD Housing Opportunities for Persons with AIDS (HOPWA)

program funds, by creating fraudulent client files, check request forms, and court

documents to support the issuance of bogus landlord payments to previously indicted

and sentenced Susan Bigelow.

○○○○○○○○○○○○○○○○○

Francis Keough III, the former executive director of Friends of the Homeless (FOH),

a HUD-funded nonprofit, was sentenced in U.S. District Court, Springfield, MA, to 3

years incarceration and 2 years probation, fined $50,000, and ordered to pay FOH and

others $145,000 in restitution and forfeit $145,000 in cash for his previous guilty plea

to extortion, obstruction of justice, false statements, witness tampering, perjury, and

filing a false Federal income tax return. In addition, Angel T. Guzman, the former FOH

operations manager; Michael P. Hallahan, a former FOH intake supervisor; and Daniel J.

McNamee, a former Springfield Housing Authority (SHA) maintenance supervisor, each

pled guilty to mail fraud, conspiracy to commit mail fraud, obstruction of due

administration of justice, and/or filing false Federal income tax returns. Keough lied to

Federal agents while under oath, attempted to persuade witnesses, provided fabricated

jobs or offered no-bid FOH contracts to family members, and diverted and used FOH

inventory while building a personal residence in Rhode Island; Guzman assisted Keough

in falsely certifying FOH unit occupancy information and obtaining approximately

$38,000 in FOH housing assistance for unqualified tenants; Hallahan, while employed

at and during FOH working hours, assisted Keough with the construction of his

Copyright, 2007. Daily News-Miner - Fairbanks, AK. Reprinted

with permission.
92

personal residence; and McNamee caused SHA to purchase heating components later

installed in Keough's personal residence. HUD losses are estimated at $145,000.

○○○○○○○○○○○○○○○○○

Theodore LeBlanc, the former Norristown Borough mayor; and Herbert Bagley, a

former insurance broker and contractor for Norristown Borough, were each sentenced

in U.S. District Court, Norristown, PA, for their earlier guilty pleas to mail fraud,

bribery, conspiracy, bank fraud, filing a false Federal income tax return, and/or honest

service mail fraud. LeBlanc was sentenced to 51 months incarceration and 36 months

supervised release, fined $2,000, and ordered to pay HUD $83,000 in restitution; and

Bagley was sentenced to 30 months incarceration and 24 months supervised release,

fined $1,200, and ordered to pay HUD $43,845 in restitution. From 2002 through 2005,

LeBlanc illegally awarded contracts to Bagley and others, allowed Bagley to submit false

invoices for services not performed, ordered Norristown Borough finance department

officials to pay the fraudulent invoices using HUD CDBG funds, and received

approximately $50,000 in bribery payments from Bagley. HUD realized losses of

$126,845.

○○○○○○○○○○○○○○○○○

Chang Sheng Yu, a Chinese national and president of American McKinley Venture

Management, Inc., was sentenced in U.S. District Court, New York City, NY, to 15

months incarceration and 36 months supervised release and ordered to pay Empire

State Development Corporation (ESDC) $118,876 in restitution for his previous guilty

plea to theft of government funds, mail fraud, and submission of false Social Security

numbers. Yu, an undocumented immigrant, was also ordered deported when released

from prison. Yu falsely obtained a Business Recovery Grant and attempted to obtain a

Small Firm Attraction and Retention Grant through ESDC, a HUD-funded nonprofit

established to provide assistance to businesses in lower Manhattan after the

September 11, 2001, terrorist attacks.

○○○○○○○○○○○○○○○○○

HUD’s Community Planning and Development Programs

Copyright, 2007. The Republican - Springfield, MA. Reprinted with permission.
HUD’s Community Planning and Development Programs 93

Elischa Campbell, the former director of Just-a-Sister-Away House of Texas, Inc.

(JASA), a HUD-funded supportive housing nonprofit, was indicted in State District

Court, Houston, TX, for misappropriation of fiduciary property or property of a

financial institution. Campbell allegedly submitted false documents to support the

use of $47,500 in JASA funding to purchase property, but no property was acquired.

○○○○○○○○○○○○○○○○○

Sharon L. Johnson, a former case manager at United Services Community Action

Agency (USCAA), a HUD-funded organization, was sentenced in U.S. District Court,

Kansas City, MO, to 3 months each incarceration and community confinement and 3

years supervised probation and ordered to pay HUD $24,250 in restitution for her

earlier guilty plea to theft of government funds. Johnson and others obtained $24,250

in USCAA funds by issuing USCAA housing payments to fictitious landlords.

○○○○○○○○○○○○○○○○○

Kemeaka Martin-Thorton, a former program assistant at Athens-Clarke Human

Economic Development (ACHED), a HUD-funded organization, pled guilty in U.S.

District Court, Athens, GA, to theft by deception and was sentenced to 26 consecutive

weekend incarcerations and 15 years probation and ordered to pay Clarke County $16,331

in restitution. Martin-Thorton obtained and personally expended $16,331 in ACHED

funds.

○○○○○○○○○○○○○○○○○

Whitfield Jenkins, president of the Ocala Leased Housing Corporation (OLHC)

board and the unofficial executive director of OLHC, a HUD-funded organization, was

arrested after grand theft charges were filed in Fifth Judicial Circuit Court, Ocala, FL.

Jenkins allegedly obtained and personally used $10,043 in OLHC funds.

○○○○○○○○○○○○○○○○○

Mark Marcucilli, the former assistant director of housing management for New York

State Division of Housing and Community Renewal (HCR); his father Fred Marcucilli;

and Carmine Carpinone were each sentenced in U.S. District Court, New York City,

Copyright, 2007. Star-Banner - Ocala, FL. Reprinted with permission.
94

NY, for their earlier guilty pleas to conspiracy, conspiracy to commit mail fraud, mail

fraud, and/or theft of government funds. Mark Marcucilli was sentenced to 1 year and 1

day incarceration and 2 years supervised release and ordered to pay Lower Manhattan

Development Corporation (LMDC) $10,863 in restitution; Fred Marcucilli was

sentenced to 1 year probation; and Carpinone was sentenced to 24 months probation

and ordered to pay South Bridge Towers $15,870 in restitution. Mark and Fred Marcucilli

and Carpinone conspired to obtain LMDC funds by falsely claiming a residence in the

lower Manhattan World Trade Center area. LMDC is a HUD-funded organization

created to coordinate the rebuilding and revitalization of lower Manhattan after the

September 11, 2001, terrorist attacks.

○○○○○○○○○○○○○○○○○

Marilee Jackson, the former community development director of the City of

Paterson, a HUD-funded local government organization, pled guilty in Passaic

County Court, Newark, NJ, to official misconduct, theft by deception, and

misapplication of property. Jackson, in a pretrial

intervention agreement, agreed to pay the City of

Paterson $2,475 and a vendor $350 for misusing

HUD funds and purchasing unapproved merchandise.

○○○○○○○○○○○○○○○○○

Anthony Ardolino, the former chief of staff for the

mayor of Springfield, MA, and his brother Chester

Ardolino, a former Springfield police officer, each pled

guilty in U.S. District Court, Springfield, MA, to

conspiracy and filing false Federal income tax returns.

Anthony Ardolino influenced the awarding of HUD

CDBG funds earmarked for the City of Springfield's

Façade program to various businesses, including

businesses owned by Chester Ardolino and other family

members.

○○○○○○○○○○○○○○○○○

John Cushmeer and Larry Radcliff, regional

coordinators for Cleveland Housing Network (CHN), a

HUD-funded organization, and Shiryl Chambers, a

maintenance manager for CHN, were each indicted in

U.S. District Court, Cleveland, OH, for conspiracy and

theft or bribery concerning programs receiving Federal

funds. Cushmeer, Radcliff, and Chambers allegedly

obtained kickbacks from contractors securing CHN

low-income rehabilitation contracts, created fabricated

work orders for contracts never completed, and used

CHN contractors to perform work at their personal

residences. HUD losses have not yet been determined.

○○○○○○○○○○○○○○○○○

HUD’s Community Planning and Development Programs

Copyright, 2007. The Republican -

Springfield, MA. Reprinted

with permission.
HUD’s Community Planning and Development Programs 95

Joseph McNulty, Sam K. John, and George Thomas each pled guilty in U.S. District

Court, Newark, NJ, to bribery concerning programs receiving Federal funds and

aiding and abetting. From January 2004 to September 2006, McNulty, John, and

Thomas, under rehabilitation contracts with New Brunswick Department of

Community Planning and Economic Development (DCPED), a HUD-funded

organization, paid multiple DCPED employees in exchange for monthly rehabilitation

contracts, expedited and lenient inspections, and accelerated contract payments. HUD

losses have not yet been determined.

○○○○○○○○○○○○○○○○○

Other Fraud/Crimes

The Eleventh Circuit U.S. Court of Appeals

(appellate court) affirmed the convictions and

sentencing of Steve Allen LaBrake, Paulette Lynne

LaBrake, and Chester Maurice Luney in Atlanta,

GA. Steve LaBrake, the former City of Tampa

Community Redevelopment Agency (TCRA)

director, his wife Paulette LaBrake, a former TCRA

senior redevelopment counselor, and Luney, the

former chief executive officer of Tampa

Hillsborough Action Plan, a City of Tampa lowincome housing contractor, were previously

convicted of bribery, wire fraud, conspiracy, and

other charges. The appellate court agreed that the

trial evidence was sufficient to prove beyond a

reasonable doubt that the above defendants were

guilty of the above charges and further rejected

the defendants' arguments challenging their

indictment, the district court's conduct at trial,

and Steve LaBrake's sentencing. Steve and Paulette

LaBrake are currently serving 60 and 41 months

imprisonment, respectively, and Luney is serving

33 months incarceration.

○○○○○○○○○○○○○○○○○

Douglas Hersom was indicted in U.S. District Court, Portland, ME, for maliciously

damaging or destroying a building by means of fire. Hersom and others allegedly set a

fire and destroyed a building under renovation and owned by Greeley Capital, LLC, the

recipient of a $50,000 HUD CDBG loan through the City of Lewiston Economic and

Community Development Office.

○○○○○○○○○○○○○○○○○

Copyright, 2007. St. Petersburg Times - St.

Petersburg, FL. Reprinted with permission.
96

  

HUD’s Community Planning and Development Programs

James Joyce, a former HUD CPD employee in Manchester, NH, was sentenced in

U.S. District Court, Concord, NH, to pay a $1,000 fine for his earlier guilty plea to

carrying a weapon into Federal space. In August 2004, Joyce transported and

possessed a knife in the Manchester Federal Building. Joyce retired from HUD in

January 2006.
Chapter 5

Hurricane Relief

Oversight
98

Cases Closed by Program Area During this Reporting Period*

* Total number of hurricane-related cases, some of which may have been worked in different States due to relocation

of evacuees.

12

10

8

6

4

2

0 SF PIH MF CPD Other

2

8

2

11

1

Hurricane Relief Oversight
99

Introduction and Background

Since Hurricanes

Katrina, Rita, and Wilma

struck the Gulf Coast, the

U.S. Department of

Housing and Urban

Development (HUD),

Office of Inspector

General (OIG), has

established an audit and

investigative presence in

the disaster area to

combat fraud, waste,

and abuse. HUD has

received supplemental

appropriations of

approximately $17 billion

that have begun to flow to the States in the form of HUD Community

Development Block Grants (CDBG) for housing and other needs. In addition, $390

million was provided for emergency housing vouchers for households within the

declared disaster area.

The HUD OIG Office of Audit (OA) responded quickly to establish Hurricane

Katrina oversight to prepare for the long recovery process. The newly created regional

office, Gulf Coast Region, is staffed by seven permanent employees and one additional

auditor detailed from another HUD OIG regional office. As of March 31, 2007, OA has

completed four audits of HUD's emergency disaster funding (two internal and two

external) with a total contract value of $22.8 million. Of this amount, auditors reported

questioned costs of $96 thousand. Currently, auditors are evaluating the control

processes for the two largest contractors of the homeowner grant programs for the

States of Louisiana and Mississippi, respectively.

The Office of Investigations (OI) created the HUD Headquarters Disaster Relief

Oversight Division (DROD) to perform oversight responsibilities in the detection and

prevention of waste, fraud, and abuse of all HUD funds in the five affected Gulf Coast

States. DROD plays a significant role in monitoring and tracking the HUD disaster

funds from HUD Headquarters program areas to the Gulf States, identifying fraud

weaknesses and potential criminal and civil cases. OI has also established a new Gulf

Region with offices in New Orleans, LA; Baton Rouge, LA; Houston, TX; Arlington, TX;

Jackson, MS; and Hattiesburg, MS. The Gulf Region coordinates investigations with

the U.S. Department of Justice (DOJ) Hurricane Katrina Fraud Task Force (HKFTF).

OI is an active member of HKFTF in Baton Rouge, LA. DROD coordinates public

corruption and contract fraud matters with DOJ. OI continues to provide training,

presentations, and outreach on HUD disaster recovery funding matters to

prosecutors, law enforcement, and State agencies.

Hurricane Relief Oversight
100

Hurricane Financial Profiles of HUD Community

Development Block Grant Funds

The following provides

a snapshot of the HUD

CDBG disaster funds

appropriated to the five

Gulf States and a summary

of the programs for two

of the five Gulf States,

Mississippi and Louisiana.

These funds are

aggressively being tracked

and monitored for waste,

fraud, and abuse, from

HUD to the State Agencies

and to the contractors,

consultants, homeowners, and evacuees by HUD OIG Office of Audit and Office of

Investigations.

Disaster Community Development Block Grant

- $16.6 billion authorized to five Gulf Coast States (disbursed $1.828 billion)

- Alabama $ 95,613,574 (disbursed $1.2 million)

- Florida $ 182,970,518 (disbursed $33,000)

- Louisiana $ 10,410,000,000 (disbursed $525.4 million)

- Mississippi $ 5,481,221,059 (disbursed $1.3 billion)

- Texas $ 503,194,849 (disbursed $1.3 million)

State of Louisiana

The Road Home Program

 (authorized $3.5 billion; disbursed $503.6 million)

The purpose of The Road Home program is to rebuild Louisiana's impacted

communities. Devastated communities will be subjected to abandoned homes, clouded

land titles, and disinvestments if a large portion of the financial assistance is not

provided to homeowners. Also note that some owner-occupants may choose none of

the basic options to repair, rebuild, or relocate in Louisiana. In these instances, the

State will compensate the homeowner for 60 percent of the home's prestorm value, less

insurance and Federal Emergency Management Agency (FEMA) repair funds. The State

received 119,297 homeowner applications and held 4,373 closings that averaged an award

of $76,900 per homeowner.

Hurricane Relief Oversight
Hurricane Relief Oversight 101

Housing for Renters

 (authorized $845.9 million; disbursed $3.8 million)

The Louisiana Recovery Authority (LRA) will allocate funds for the Workforce and

Affordable Rental Programs (by formula) to ensure that those parishes with the most

damaged or destroyed rental housing have adequate resources to replace significant

numbers of affordable rental units.

Restoration Homeless Support

 (authorized $25.9 million; disbursed $55,200)

The proposed $25.9 million will support the State's goal to immediately restore

and expand capacity in hurricane-impacted areas and provide permanent supportive

housing and assistance for persons and families who are homeless and persons at risk of

becoming homeless.

Other Housing Activities

 (authorized $32.1 million; disbursed $0)

This program is to provide special incentives to attract new mixed-income housing

development to restore both the rental and owner-occupied housing stocks. The plan

proposes several developer incentives, with a special focus on the New Orleans

metropolitan area and other communities with major losses to their housing stock.

Infrastructure

The storms severely affected the infrastructure of many of our communities, some

of which continue to suffer from the lack of electricity, telephone, and gas service. The

total impact on roads, bridges, and utilities, including debris removal, is estimated at

$15 to $18 billion.

- Local Government Emergency Infrastructure

 (authorized $595 million; disbursed $0)

This program will provide local governments with the required FEMA match for

emergency infrastructure projects. The method of distribution will be on a first come,

first served basis, as public assistance projects are approved by FEMA.

- State Infrastructure

 (authorized $142.5 million; disbursed $9.3 million)

Louisiana has developed a process to determine the priorities and timing in

restoring State buildings because it is impossible to repair all 1,528 damaged facilities

at the same time.

Economic Development

 (authorized $332.5 million; disbursed $3.1 million)

The economic development programs ($332.5 million) are designed to provide

capital, provide technical assistance, rebuild the customer base and provide trained
102 Hurricane Relief Oversight

employees for existing businesses, and rebuild the base for developing new, higher wage

jobs for both the short-term and long-term economic recovery of Louisiana.

Public Services

 (authorized $46.7 million; disbursed $0)

The fully funded program will support an estimated 3,000 units with supportive

housing services. Other HUD programs, such as the McKinney Vento Act,

project-based Section 8 vouchers, and Sections 811 and 202 program funds, may

supplement supportive efforts.

Supportive services will be provided in 30 percent of the 6,000 to 9,000 rental

units targeted to households with incomes at or below 40 percent of area median

income. To provide that level of services, the State proposes to allocate $46.7 million of

the currently available CDBG funds to help pay for the services. This program

component and use of CDBG funds for supportive services is proposed with the

recognition that the number of supportive housing units that can be developed in

Louisiana over the next few years will be severely limited by the scarcity of public and

private funding for the necessary resident services.

Planning

 (authorized $9.5 million; disbursed $1.85 million)

LRA will develop priorities for the use of CDBG Disaster Recovery Assistance funds.

LRA is organized into task forces in the areas of economic development, workforce

development, health, human services, infrastructure, environmental, housing, and

education. The roles of these groups include the development of best practices based

on strategic plans to guide the recovery and rebuilding process and the efficient use of

funds as well as to make recommendations to the LRA board on programs funded

through the CDBG program ($9.5 million).

Technical Assistance

 (authorized $12.42 million; disbursed $20,900)

LRA will provide assistance to units of local governments to help plan and

implement long-term recovery strategies. Louisiana's Office of Community

Development will provide preapplication workshops for local governments as well as

implementation workshops. Technical assistance programs will be developed to assist

in areas where it has been determined that a need exists. Training and materials on

various topics will be provided to assist homeowners, inspectors, contractors, etc.

One-on-one technical assistance will be provided to those units of local governments

experiencing performance problems. Currently, $12.4 million is being set aside for

technical assistance activities.

Administrative Costs

 (authorized $148.6 million; disbursed $3.5 million)

These funds will be used to pay reasonable administration costs related to

the planning of disaster recovery community development activities. Program
103

administration costs will include staff and related costs required for overall program

management, coordination, monitoring, reporting, and evaluation. This category

includes both the State's cost of administering the program and units of general local

governments' costs of administering grants awarded by the State. For administration,

$148.6 million is being set aside.

Restricted Balance

 (authorized $450 million; disbursed $0)

Funds held in reserve.

2nd Supplemental Funds

 (authorized $4.2 billion; disbursed $0)

Plans not yet approved.

State of Mississippi

Homeowner Grant Assistance Program

 (authorized $3.25 billion; disbursed $878.4 million)

The purpose of

the Homeowner Grant

Assistance program is

to provide a one-time

grant payment (maximum

$150,000) to eligible

homeowners who had

suffered flood damage to

their primary residence as

of August 29, 2005, from

Hurricane Katrina. The

Homeowner Assistance

program is designed to

provide compensation to

those impacted by the hurricane. The State received 18,465 homeowner applications,

and paid 11,894 grants that averaged an award of $70 thousand per homeowner.

Also noted - There is no requirement that the homeowner occupy the property

after replacement/rehabilitation work is completed. After certain deductions, the

homeowner has complete discretion of the use of grant funds, as allowable by State and

Federal law, as they work through their personal disaster recovery situation.

Public Housing

 (authorized $100 million; disbursed $482,600)

The purpose of this public housing program is to provide funding, in an amount up

to $100 million, to the five housing authorities that suffered damages to their facilities

on August 29, 2005, from Hurricane Katrina.

Hurricane Relief Oversight
104

Building Permit-Inspections

 (authorized $5 million; disbursed $205,500)

The Mississippi Development Authority will establish a $5 million grant pool (for

local governments in Hancock, Harrison, Pearl River, and Jackson Counties) for costs

of additional permitting and building inspector officials for 1 year due to the

significant amount of construction taking place on the Mississippi Gulf Coast.

Gulf Coast Regional Infrastructure Program

 (authorized $31.5 million; disbursed $3.4 million)

The purpose of the plan is to provide infrastructure (water, sewer, and storm water

utility service) for long-term growth and recovery in Hancock, Harrison, George,

Jackson, Pearl River, and Stone Counties.

Privately Owned Utilities

 (authorized $440 million; disbursed $420 million)

The Ratepayer and Wind Pool Mitigation Plan will help utility and gas companies

defray excessive costs associated with damaged infrastructure, provide emergency

response services, and help the Mississippi Windstorm Underwriting Association

offset insurance premium increases.

Economic Development

 (authorized $500 million; disbursed $0)

The Economic Development Program is designed to assist local governments

affected by Hurricane Katrina (Pearl River, Stone, George, Hancock, Harrison, and

Jackson Counties) in providing infrastructure to support economic development

(grants or loans to assist companies in creating or retaining jobs - $340 million, a

community revitalization program to rebuild the downtown areas - $150 million, and

$10 million for planning).

Administrative Costs

 (authorized $169.2 million; disbursed $2.1 million)

Up to 5 percent (or $169.2 million) of a State's allocation is authorized for planning

and administrative activities.

Restricted Balance

 (authorized $562.4 million; disbursed $0)

Funds held in reserve.

2nd Supplemental Funds

 (authorized $423 million; disbursed $0)

Plans not yet approved.

Hurricane Relief Oversight
105

Audit

During this period, OIG issued an audit memorandum, dated December 8, 2006,

regarding HUD's procedures and controls over the Katrina Disaster Housing Assistance

Program (KDHAP) and Disaster Voucher Program (DVP).

Emerging Oversight Trends

OA is in the process of starting other reviews of the States' (specifically Louisiana,

Mississippi, and Alabama) system of controls over the issuance of the $16.7 billion in

CDBG funding. The following is a list of planned audits:

- Homeowner Grant Assistance Program (MS)

- Elevation Grants Program (MS)

- Local Assistance Grants Program (MS)

- Fraud Prevention and Investigation Program (MS)

- Housing Programs - The Road Home, Small Rental Program, Tax Credit

- Supportive Housing and Predevelopment Loan Program (LA)

- Infrastructure Programs (LA)

- Economic Development - Bridge Loan Program (LA)

- Disaster Relief Program (AL)

- Restoration of Infrastructure Program (AL)

- Long-Term Recovery Program (AL)

Also, on January 30, 2007, the HUD Secretary stated that the Department would

provide $27.3 million in funding to help five Mississippi housing authorities continue

repairing thousands of public housing units damaged by Hurricane Katrina. Last year,

HUD issued additional guidance that allowed eligible public housing authorities (PHA)

to convert regular Housing Choice Voucher (Section 8) program funds to the DVP,

which made voucher program funding available. PHAs were then permitted to use

these funds to repair public housing units. OIG is monitoring the progress of this

rebuilding effort and will schedule a review at the appropriate time.

Final Audit Products

Evaluation of HUD's Procedures and Controls for the Katrina Disaster Housing

Assistance Program and Disaster Voucher Program:

HUD OIG audited the KDHAP and DVP programs. HUD and FEMA developed

KDHAP in response to Hurricane Katrina. HUD replaced KDHAP with DVP on

January 31, 2006, and included HUD participants affected by both Hurricanes Katrina

and Rita. KDHAP and DVP provided rent to participants up to the fair market rent

and housing authority payment standard, respectively. The objective was to evaluate

the adequacy of the two programs' operational procedures and controls. HUD OIG

only noticed minor mistakes in the operational procedures and controls review and did

Hurricane Relief Oversight
106 Hurricane Relief Oversight

not disclose any major findings. However, the second phase of the review, which

involves recipient eligibility, has initial indications of possible problems. (Audit

Report: 2007-AO-0001-CM)

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Hurricane Relief Oversight 107

Investigations

HUD OIG DROD supports the Gulf Region and conducts a variety of

important activities on HUD OIG OI directives and initiatives associated with disaster

assistance and recovery. DROD implemented fraud prevention programs in the

affected States of the Gulf Coast Region. OIG officials have coordinated with State

agencies and their contractors, HUD program officials, and industry groups. HUD OIG

also hosted and participated in law enforcement meetings and conferences held

throughout the Gulf Coast region. HUD OIG continues to be an active member of the

DOJ HKFTF Command Center in Baton Rouge, LA. The Gulf Region consists of 10

special agents (including a Special Agent in Charge), six forensic auditors (including

a Supervisory Forensic Auditor), and one administrative officer. One of the forensic

auditors is assigned full time to the Command Center in Baton Rouge, coordinating

requests for information between HUD OIG and outside agencies.

During this reporting period, OIG opened 90 and closed 24 investigations in the

Gulf Region Disaster Relief program areas. Judicial action taken on these cases include

41 arrests, 21 indictments/information, 11 convictions/pleas/pretrial diversions, $4,829

in investigative recoveries, and 14 administrative actions.

Some of the investigations discussed in this report were conducted jointly with

Federal, State, and local law enforcement agencies, including the DOJ HKFTF.

Following the Attorney General's policy of "zero tolerance" for Hurricane Katrinarelated fraud, OIG pursues each allegation of waste, fraud, and abuse in HUD's

Hurricane Katrina, Rita, and Wilma-related benefit programs. The results of various

significant investigations are described below.

Hurricane-Related Benefit Fraud

Trudy Davis, Naisha Davis, Lawrence Williams, Jerry Davis, Gilbert Gasice, and Larry

McDaniel, Sacramento Housing and Redevelopment Agency (SHRA) public housing,

Housing Choice Voucher program (HCVP), or unauthorized tenants of SHRA housing

assistance recipients, were indicted, arrested, pled guilty, or were sentenced in U.S.

District Court, Sacramento, CA, on various charges including aggravated identity theft,

false claims, false representation of a Social Security number (SSN), theft of

government property, false statements, or mail and wire fraud. Trudy Davis, Naisha

Davis, and Lawrence Williams allegedly applied for FEMA disaster assistance, claiming

they resided in a Louisiana declared disaster area, but actually resided in California during

the storm; Naisha Davis also allegedly used the name and SSN of another when she filed

her FEMA claim. Jerry Davis allegedly applied for and received $4,787 in SHRA public

housing and FEMA disaster assistance, claiming he resided in Monroe, LA, and was

displaced by Hurricane Katrina, but Monroe, LA, was not declared a disaster area.

Gasice, who pled guilty to false statements and wire fraud, claimed he was a Hurricane

Katrina victim, secured lodging and monetary aid from the Red Cross and other

charitable organizations, failed to report that he vacated his SHRA subsidized

residence, and obtained $1,140 in SHRA housing assistance he was not entitled to

receive. McDaniel was sentenced to 36 months probation and 300 hours community

service and ordered to pay FEMA $12,251 in restitution for his earlier guilty plea to
108

false claims. McDaniel claimed he resided in a Louisiana declared disaster area and

applied for FEMA disaster assistance but actually resided in an SHRA subsidized

housing unit. Collectively, the above defendants caused HUD losses of $5,927.

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Phillip A. Winchester and Dominic T. Leperi, Jr., were each indicted in U.S. District

Court, Jackson, MS, for filing fraudulent applications and claims. Winchester and Leperi

allegedly filed fraudulent applications with FEMA, the Small Business Administration

(SBA), and the HUD-funded Mississippi Development Authority (MDA), claiming their

primary residences suffered hurricane damage, and obtained more than $29,992 in

FEMA assistance and SBA disaster loan funding, but neither properties damaged by

Hurricane Katrina were Winchester's or Leperi's primary residences.

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Ernestine Lewis, a Mississippi Regional Housing Authority VII (MRHA) Section 8

tenant at Canal Street Apartments (CSA), and Willie Lewis, Willie Blackmon, Jr., Stacey

Lewis, Lisa Lewis, and Claudette Luckett, unauthorized tenants at CSA, were each

indicted in U.S. District Court, Jackson, MS, on false statements, aiding and abetting,

theft of government funds, and mail fraud. The above defendants allegedly filed for

FEMA assistance and claimed residency in separate Biloxi Housing Authority (BHA)

subsidized units during Hurricane Katrina and collectively obtained $25,485 in FEMA

assistance, but none of the defendants were BHA tenants during the storm. In

addition, Ernestine Lewis allegedly falsified household composition and obtained $1,023

in MRHA housing assistance she was not entitled to receive.

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Tina Marie Winston was sentenced in U.S. District Court, Belleville, IL, to 48 months

incarceration and ordered to pay FEMA and others $23,982 in restitution for her

earlier guilty plea to mail fraud, misuse of an SSN, aggravated identity theft, false

statements, and concealment of information from the Social Security Administration

(SSA). Winston submitted fraudulent applications to HUD and FEMA, claiming she

lost her New Orleans home, possessions, and two children during Hurricane Katrina,

but Winston resided in Belleville, IL, during the storm and did not have any children.

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Antoinette Perea, a San Francisco Housing Authority (SFHA) Section 8 tenant;

Kaneshaeia Boyd and Lawana Wyatt, SFHA public housing recipients; Tania Hill, a

former unauthorized Housing Authority of the County of Santa Clara (HACSC)

Hurricane Relief Oversight

Copyright, 2007. News-Democrat- Belleville, IL. Reprinted with permission.
Hurricane Relief Oversight 109

Section 8 tenant; and Merolyn Wilson, a Section 8 tenant at All Hallows Garden

Apartments, a HUD-subsidized multifamily housing complex, were each charged in

U.S. District Court, San Francisco, CA, with theft of government funds. The above

defendants allegedly applied for and received FEMA funds after claiming to be

displaced victims of Hurricane Katrina but actually lived in the San Francisco area and

received HUD housing assistance during the storm.

○○○○○○○○○○○○○○○○○

Jay Landers was indicted in U.S. District Court, New Orleans, LA, on theft of

government funds. Landers, while incarcerated during Hurricane Katrina, allegedly

filed for and obtained $14,750 in FEMA assistance by claiming residency at his mother's

Housing Authority of New Orleans subsidized unit, thus preventing his mother from

obtaining legitimate FEMA evacuee and property damage assistance.

○○○○○○○○○○○○○○○○○

Ashley Clark and Shannon Sylvester, Morgan City Housing Authority (MCHA)

Section 8 tenants, each pled guilty in U.S. District Court, Lafayette, LA, to theft of

public monies. Clark and Sylvester applied for and received $6,665 in FEMA disaster

assistance, but MCHA sustained no damage, nor were MCHA residents evacuated

during any hurricane.

○○○○○○○○○○○○○○○○○

Morris Singleton and Jermaine White were each sentenced in U.S. District Court,

New Orleans, LA, for their earlier guilty pleas to false statements. Singleton was

sentenced to 10 months confinement and 3 years supervised release and ordered to pay

FEMA $2,000 in restitution, and White was sentenced to 6 months incarceration and

2 years supervised release and ordered to pay FEMA $2,000. Singleton and White

applied for and received $2,000 in FEMA assistance by claiming residency in Terrebonne

Parish Housing Authority (TPHA) housing units and Hurricane Katrina evacuee

status, but neither Singleton nor White resided in TPHA housing units, nor did TPHA

suffer any hurricane damage.

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Shantelle Griffin, a Section 8 tenant at Himbola Manor Apartments, a HUDsubsidized multifamily housing complex, was indicted in U.S. District Court, Lafayette,

LA, for wire fraud and false claims. Griffin allegedly filed for and received $2,000 in

FEMA disaster assistance, claiming she sustained personal property damage and

evacuated as a result of Hurricane Katrina, but Himbola Manor Apartments sustained

no hurricane damage, nor were residents forced to evacuate during the storm.

○○○○○○○○○○○○○○○○○

Sheila Davis was sentenced in U.S. District Court, Harrisburg, PA, to 4 months

home detention and fined $350 for her earlier guilty plea to making false statements to

HUD. Davis filed a false application for emergency housing with the Housing

Authority of the County of Dauphin, claiming she was a Hurricane Katrina evacuee
110 Hurricane Relief Oversight

forced to relocate from New Orleans, LA, to Harrisburg, PA, but Davis actually resided

in Harrisburg, PA, and was facing eviction from her apartment during the storm.

○○○○○○○○○○○○○○○○○

Latoya Dunn, a Section 8 tenant at Scotland Square Apartments, a HUD-subsidized

multifamily housing complex, was indicted in U.S. District Court, Baton Rouge, LA,

for making a false statement and submitting a false claim. Dunn allegedly filed a claim

with FEMA requesting $2,000 in FEMA funds as a result of Hurricane Katrina damages

to her personal property, but Scotland Square Apartments suffered no structural

damage, and residents were not forced to evacuate during either Hurricane Katrina or

Rita.

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Joy Promise, a Housing Authority of Snohomish County (HASC) Section 8 tenant,

was indicted in U.S. District Court, Seattle, WA, for false statements. Promise

allegedly applied for FEMA assistance, claiming to be a displaced victim of Hurricane

Katrina, but actually lived in HASC subsidized housing during the storm.

Hurricane-Related Outreach

Louisiana Outreach:

Deputy Assistant Inspector General for Investigations (DAIGI) Ruth Ritzema and

Special Agent in Charge (SAC) Thomas Luke provided the current status on Louisiana

Road Home Program, multifamily, and Louisiana tax credit efforts and Federal

Housing Administration (FHA) single-family issues facing southeastern Louisiana

during briefings held in New Orleans and Baton Rouge, LA. HUD Departmental

Enforcement Center (DEC) Director and Senior Advisor to the Secretary Stephen B.

Hollingshead, DEC Deputy Director Henry Czauski, Associate Regional Counsel for

DEC Enforcement Programs Sakeena Adams, and DEC Operation Oversight Analyst

Tommy Visage attended.

○○○○○○○○○○○○○○○○○

SAC Thomas Luke introduced DEC Director and Senior Advisor to the Secretary

Stephen B. Hollingshead, DEC Deputy Director Henry Czauski, DEC Associate

Regional Counsel for Enforcement Programs Sakeena Adams, and DEC Operation

Oversight Analyst Tommy Visage to Eastern District of the Louisiana U.S. Attorney's

Office (USAO) staff in New Orleans, LA. A round table discussion involving issues

related to civil and criminal prosecutions of HUD violations followed.

○○○○○○○○○○○○○○○○○

Supervisory Forensic Auditor (SFA) Windell Durant and Hotline Director Robert

Ashworth met with Kathleen Wylie, Director of Law Enforcement Online (LEO) and

HKFTF Hotline personnel at the HKFTF Command Center on the Louisiana State

University campus in Baton Rouge, LA. Hotline Director Ashworth and SFA Durant
Hurricane Relief Oversight 111

reviewed the HKFTF Hotline system, provided recommendations to capture additional

data in hotline complaint forms, and emphasized the need for accurate and timely

referrals to OIG and other Federal law enforcement agencies.

○○○○○○○○○○○○○○○○○

SFA Windell Durant and Special Agent (SA) Aimee Peralta met with Mary Langston,

U.S. Bankruptcy Court Assistant United States Trustee, in New Orleans, LA. SFA

Durant and SA Peralta discussed developing a working relationship with both

Louisiana and Mississippi United States Trustee Offices to identify potential bankruptcy

fraud investigations involving HUD programs.

Mississippi Outreach:

SAC Thomas Luke introduced DEC Director and Senior Advisor to the Secretary

Stephen B. Hollingshead, DEC Deputy Director Henry Czauski, DEC Associate

Regional Counsel for Enforcement Programs Sakeena Adams, and DEC Operation

Oversight Analyst Tommy Visage to Southern District of the Mississippi USAO staff in

Gulfport, MS. A round table discussion involving issues related to civil and criminal

prosecutions of HUD violations followed.

Texas Outreach:

DROD SAC Larry Amaker and HUD OIG Region VI SAC Daniel Salas provided a

fraud awareness briefing to the Houston HUD Manager and Office of Community

Planning and Development (CPD) staff in Houston, TX. The briefing addressed fraud

concerns relating to $74.5 million in CDBG Disaster Recovery Program and $428.6

million in Hurricane Rita Disaster Recovery funds managed by the State of Texas. SAC

Salas introduced HUD OIG Region VI Assistant Special Agent in Charge (ASAC) Juan

Juarez and indicated that ASAC Juarez was available to work with Houston HUD

personnel in preventing, identifying, and prosecuting fraud related to HUD disaster

funding. DROD Senior Special Agent (SSA) Kevin Whalen assisted with the briefing.

○○○○○○○○○○○○○○○○○

SACs Larry Amaker and Daniel Salas provided a fraud awareness briefing to

officials of the Texas Department of Housing and Community Affairs (TDHCA) and

Houston/Galveston Area Councils of Government (H/GACOG) in Houston, TX. The

briefing addressed fraud concerns relating to $74.5 million in CDBG Disaster Recovery

Program and $428.6 million in Hurricane Rita Disaster Recovery funds earmarked for

H/GACOG and managed by TDHCA. OIG will work with TDHCA and H/GACOG in

preventing, identifying, and prosecuting fraud related to HUD disaster funding. SSA

Kevin Whalen and ASAC Juan Juarez assisted with the briefing.

○○○○○○○○○○○○○○○○○

SACs Larry Amaker and Daniel Salas provided a fraud awareness briefing to

Southern District of Texas USAO staff and other Federal law enforcement agencies in

Houston, TX. The briefing addressed fraud concerns relating to $74.5 million in CDBG
112

Disaster Recovery Program and $428.6 million in Hurricane Rita Disaster Recovery

funds earmarked for H/GACOG and managed by TDHCA. OIG will work with TDHCA,

H/GACOG, and the USAO in preventing, identifying, and prosecuting fraud related to

HUD disaster funding. SSA Kevin Whalen and ASAC Juan Juarez assisted with the

briefing.

○○○○○○○○○○○○○○○○○

SACs Larry Amaker and Daniel Salas provided a fraud awareness briefing to

Eastern District of Texas U.S. Attorney Matthew D. Orwig and his staff in Plano, TX.

The briefing addressed fraud concerns relating to $74.5 million in CDBG Disaster

Recovery Program and $428.6 million in Hurricane Rita Disaster Recovery funds

earmarked for H/GACOG and managed by TDHCA. OIG will work with TDHCA, H/

GACOG, and the USAO in preventing, identifying, and prosecuting fraud related to

HUD disaster funding. SSA Kevin Whalen and ASACs Mike Wilson and Juan Juarez

assisted with the briefing.

○○○○○○○○○○○○○○○○○

SACs Larry Amaker and Daniel Salas provided a fraud awareness briefing to HUD

program personnel in Fort Worth, TX. The briefing addressed fraud concerns relating

to $74.5 million in CDBG Disaster Recovery Program and $428.6 million in Hurricane

Rita Disaster Recovery funds earmarked for H/GACOG and managed by TDHCA. OIG

will work with HUD, TDHCA, H/GACOG, and the USAO in preventing, identifying,

and prosecuting fraud related to HUD disaster funding. SSA Kevin Whalen and ASACs

Mike Wilson and Juan Juarez assisted with the briefing.

○○○○○○○○○○○○○○○○○

SAC Daniel Salas and ASAC Juan Juarez met with Assistant U.S. Attorney Greg

Costa, Hurricane Fraud Coordinator, and supervisory representatives of the U.S. Postal

Inspection Service and Department of Homeland Security at the USAO in Houston,

TX. SAC Salas and ASAC Juarez described HUD OIG's objectives for hurricane relief

investigations in the Southern District of Texas.

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SAC Daniel Salas and ASACs Juan Juarez and Mike Wilson met with Acting CDBG

Disaster Recovery Program Director Jennifer Molinari and Bill Dally, TDHCA Deputy

Director, in Austin, TX. SAC Salas discussed the coordination of hurricane funding

information, the monitoring of hurricane relief contracts, and outreach and training

efforts to prevent fraud, waste, and abuse.

Washington, DC, Outreach:

SAC Larry Amaker and ASAC Kevin Whalen met with HUD Office of Single Family

Asset Management Deputy Director Laurie Maggianno at HUD Headquarters in

Washington, DC. SAC Amaker and ASAC Whalen obtained HUD real estate owned

Hurricane Relief Oversight
113

  

Hurricane Relief Oversight

(REO) portfolio information to proactively identify possible fraud related to HUD REO

properties housing disaster victims in the Gulf Coast area.

○○○○○○○○○○○○○○○○○

SAC Larry Amaker and ASAC Kevin Whalen met with HUD Deputy Assistant

Secretary (DAS) for Public Housing and Voucher Programs Milan Ozdinec, and Office

of Public and Indian Housing, Housing Voucher Program (HVP), Director David Vargas

at HUD Headquarters in Washington, DC. DAS Ozdinec and HVP Director Vargas

provided a briefing on the current status of public housing in New Orleans, LA, and

other information to proactively identify potential fraud as a result of the Gulf Coast

disasters.

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ASAC Kevin Whalen met with HUD Compliance Division Director Arthur Orton

and DEC Liaison Officer Douglas Fischer at HUD Headquarters in Washington, DC.

ASAC Whalen provided an overview of OIG Gulf Coast operations and described the

type of investigations for potential referral to HUD DEC. Director Orton and Liaison

Officer Fischer provided a briefing on DEC operations and systems and described DEC

assistance available to HUD OIG when conducting disaster-related investigations.

○○○○○○○○○○○○○○○○○

ASAC Kevin Whalen and Disaster Oversight Liaison Director Patrick Bannon met

with Associate Deputy Assistant Secretary (ADAS) Sherone Ivey, Office of Policy

Development and Research (PD&R), Office of University Partnerships, at HUD

Headquarters in Washington, DC. ADAS Ivey provided ASAC Whalen and Director

Bannon an overview of PD&R disaster relief funding before ASAC Whalen and

Director Bannon described OIG Gulf Coast operations and offered OIG assistance in

preventing PD&R disaster funding fraud.

○○○○○○○○○○○○○○○○○

SAC Larry Amaker and ASAC Kevin Whalen established a Hurricane Fraud

Working Group (HFWG) in Washington, DC. HFWG monthly meetings are held at

the Federal Bureau of Investigation (FBI) headquarters to facilitate the dissemination

of Gulf Coast recovery activities and intelligence information to member agencies. Those

participating in the HFWG include Federal law enforcement managers from DOJ;

the OIGs of the U.S. Department of Labor, Transportation, Homeland Security,

Agriculture; and the Small Business Administration OIG.

Hurricane-Related OIG Hotline

During this reporting period, the Hotline received and processed 179 complaints

related to Hurricanes Katrina, Rita, and Wilma.

Chapter 6

Other Significant HUD

Audits and Investigations/

OIG Hotline
116 Other Sugnificant HUD Audits and Investigations/OIG Hotline

In addition to the audits and investigations described in this chapter, OIG has also

conducted numerous outreach efforts. (see chapter 8, pages 136 and 139)

Audit

Audit of HUD's Financial Statements

HUD OIG provided additional details to supplement the Report on HUD's Fiscal

Years (FY) 2006 and 2005 Financial Statements, which is included in HUD's FY 2006

Performance and Accountability Report.

The financial statements presented fairly, in all material respects, the financial

position of HUD, Washington, DC, as of September 30, 2006 and 2005, and its net

costs, changes in net position, budgetary resources, and reconciliation of net costs to

budgetary obligations for the fiscal years then ended in conformity with accounting

principles generally accepted in the United States of America.

OIG identified six reportable conditions regarding internal controls relating to the

need to

- Comply with Federal financial management system requirements;

- Continue improvements made in the oversight and monitoring of subsidy

calculations and intermediaries’ program performance;

Key Program Results

- Audit of HUD’s Financial Statements

- FHA Financial Statements

- Audit of the Government National Mortgage Association's

 (Ginnie Mae) Financial Statements

- Review of HUD Firewall Implementation

- Review of HUD's Information Technology Services (HITS)

 Contracts

- Review of HUD's Procurement Systems

- Fiscal Year 2006 Review of Information Systems Controls

 in Support of the Financial Statements Audit

Strategic Initiative 4: Contribute to Improving HUD’s Execution and

Accountability of Fiscal Responsibilities as a Relevant and Problem

Solving Advisor to the Department

Questioned Costs Funds Put to Better Use

Audit -- $671 Million

page 116

page 117

 page 118

page 118

 page 118

 page 118

page 119

Our

Focus

7 Audits
Other Sugnificant HUD Audits and Investigations/OIG Hotline 117

- Further strengthen controls over HUD's computing environment, including the

enhancement of controls at the Federal Housing Administration (FHA) around

the user access request (UAR) process and managing the FHA Subsidiary

Ledger (FHASL) as a mission-critical system;

- Improve personnel security practices for access to the Department's critical

financial systems;

- Improve processes for reviewing obligation balances; and

- Improve FHA's funds controls processes.

OIG’s findings also included two instances of noncompliance with applicable laws

and regulations and provisions of contracts and grant agreements:

- HUD did not substantially comply with Federal Financial Management

Improvement Act system requirements and applicable accounting standards,

and

- FHA and certain of its allotment holders did not have an approved funds

control plan.

OIG’s report discussed each of these conditions in detail, provided an assessment

of actions taken by HUD to mitigate them, and recommended corrective actions.

Several matters that were not material to the financial statements were separately

communicated to HUD management. (Audit Report: 2007-FO-0003)

FHA Financial Statements

Urbach, Kahn, and Werlin, LLP, audited the FHA, Washington, DC, financial

statements for the years ended September 30, 2006 and 2005.

The financial statements presented fairly, in all material respects, FHA's financial

position as of September 30, 2006 and 2005, and its net costs, changes in net position,

budgetary resources, and reconciliation of budgetary obligations to net cost for the

fiscal years then ended in conformity with accounting principles generally accepted in

the United States of America. However, Urbach, Kahn, and Werlin identified three

reportable conditions regarding internal controls:

- FHA should improve its funds control processes,

- FHA must enhance the controls around the UAR process, and

- FHASL needs to be managed as a mission-critical system at HUD’s information

technology services (HITS) data center.

and one instance of noncompliance with laws and regulations:

- FHA and certain of its allotment holders did not have an approved funds

control plan as required by HUD policy.

OIG’s report discussed each of these conditions in detail, provided an assessment

of actions taken by FHA to mitigate them, and recommended corrective actions. Other
118 Other Sugnificant HUD Audits and Investigations/OIG Hotline

matters that were not material to the financial statements were separately

communicated to FHA management. (Audit Report: 2007-FO-0002)

Audit of the Government National Mortgage Association's

(Ginnie Mae) Financial Statements

Carmichael, Brasher, Tuvell, and Company audited the Government National

Mortgage Association's (Ginnie Mae), Washington, DC, financial statements for the

years ended September 30, 2006 and 2005.

The financial statements presented fairly, in all material respects, the financial

position of Ginnie Mae as of September 30, 2006, and September 30, 2005, and the

results of its operations and its cash flows for the fiscal years then ended in conformity

with accounting principles generally accepted in the United States of America. There

were no material weaknesses or reportable conditions in Ginnie Mae's internal controls

and no reportable instances of noncompliance with laws, regulations, and provisions of

contracts. Other matters that were not material to the financial statements were

reported separately to Ginnie Mae's management. (Audit Report: 2007-FO-0001)

Review of HUD Firewall Implementation

HUD OIG audited the HUD, Washington, DC, deployment and configuration of

firewalls within its network to evaluate the configurations and effectiveness of the

controls surrounding the firewalls. The audit was conducted in conjunction with the

annual audit of HUD's consolidated financial statements and the annual evaluation of

HUD's information system security program and practices required by the Federal

Information Security Management Act of 2002. OIG has determined that the contents

of this report are not appropriate for public disclosure and has, therefore, limited its

distribution to selected officials. (Audit Report: 2007-DP-0001)

Review of HUD's Information Technology Services (HITS)

Contracts

HUD OIG audited the management and modifications of HUD's information

technology services contracts. OIG examined contract compliance, service-level

agreements, contract modifications, and implementation of information security

controls. OIG has determined that its findings are not appropriate for public

disclosure and has, therefore, limited their distribution to selected officials. (Audit

Report: 2007-DP-0002)

Review of HUD's Procurement Systems

HUD OIG audited the HUD Procurement System and Small Purchase System to

assess their compliance with Federal financial management and Federal Information

Security Management Act of 2002 requirements. OIG evaluated the systems and

reviewed certain input and processing controls to determine (1) whether the HUD

procurement systems comply with the requirements of the Joint Federal Management
Other Sugnificant HUD Audits and Investigations/OIG Hotline 119

Improvement Program publication, JFMIP SR-02-02, "Acquisition/Financial Systems

Interface Requirements," and (2) the adequacy of the implementation of information

security responsibilities and information security categorization.

The HUD Procurement System and Small Purchase System do not adequately

support HUD's efforts to manage and monitor procurement transactions. They do not

(1) adequately monitor the procurement process, (2) have adequate separation of

duties controls, or (3) contain sufficient financial data to effectively manage and

monitor procurement transactions. In addition, HUD did not design or implement

information security controls or ensure that its information security responsibilities

were fulfilled.

OIG recommended that HUD perform a cost benefit analysis to determine whether

it is more advantageous to modify or replace the HUD Procurement System and Small

Purchase System to comply with Federal requirements. OIG also recommended that

HUD complete, design, and implement the required information security controls.

(Audit Report: 2007-DP-0003)

Fiscal Year 2006 Review of Information Systems Controls

in Support of the Financial Statements Audit

HUD OIG reviewed general and application controls for selected information

systems as part of the HUD OIG audit of HUD's financial statements for FY 2006. The

review was based on the Government Accountability Office (GAO) "Federal

Information Systems Controls Audit Manual" and information technology guidelines

established by the Office of Management and Budget (OMB) and the National

Institute of Standards and Technology (NIST).

There were weaknesses and deficiencies in controls that stem from HUD's

noncompliance with (1) requirements for internal controls established by OMB, (2)

guidance for securing information systems issued by NIST, and (3) HUD's own policies

and procedures.

OIG recommended that HUD take steps to ensure compliance with OMB

requirements, NIST guidelines, and HUD's own internal policies and procedures.

(Audit Report: 2007-DP-0004)

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120 Other Sugnificant HUD Audits and Investigations/OIG Hotline

Investigations

Some investigations were conducted jointly with Federal, State and local law

enforcement agencies. The results of a significant investigation is described below.

Timothy Eugene Benjamin, a defense witness who testified in the U.S. v. Isaac Woods

trial, pled guilty in U.S. District Court, New Bern, NC, to attempted witness

tampering, conspiracy, and aiding and abetting. Isaac Lee and Regina Bailey Woods,

owners and officers of Woodbai, Inc., a mortgage lender doing business as Unlimited

Financial Resources (UFR), were previously convicted of conspiracy, wire fraud, false

statements, and money laundering for creating phony mortgages, electronically

submitting the bogus mortgages to the secondary mortgage market, and causing the

Government National Mortgage Association to guarantee $1.4 million in counterfeit

investments. Benjamin, prior to the appearance and testimony of a government

witness, telephoned the witness and made false, misleading, and/or threatening

statements in an attempt to influence or prevent the witness from testifying, then

communicated his efforts to Woods. In addition, while testifying on the Woods'

behalf, Benjamin uttered materially false declarations.

○○○○○○○○○○○○○○○○○

Key Program

Results

Strategic Initiative 4: Contribute to Improving HUD’s Execution and

Accountability of Fiscal Responsibilities as a Relevant and Problem

Solving Advisor to the Department

Investigations 33 $4,884

Cases

Closed

$

Recovered

1

Convictions/Pleas/

Pretrials

165

Admin/Civil

Actions
Other Sugnificant HUD Audits and Investigations/OIG Hotline 121

OIG Hotline

The HUD OIG Hotline is operational 5 days a week, Monday through Friday, from

10:00 a.m. to 4:30 p.m. The Hotline is staffed by nine full-time OIG employees, who

take allegations of waste, fraud, abuse, or serious mismanagement in HUD or

HUD-funded programs from HUD employees, contractors, and the public and

coordinate reviews with internal audit and investigative units or with HUD program

offices.

During this reporting period, the Hotline received and processed 10,519

complaints--76 percent received by telephone, 17 percent by mail, and 7 percent by

e-mail. Every allegation received by the Hotline is logged into a database and tracked.

Of the complaints received, 1,118 were related to the mission of OIG and were

addressed as Hotline cases. Hotline cases are referred to OIG's Offices of Audit and

Investigation or to HUD program offices for action and response. The following

illustration shows the distribution of Hotline case referrals by percentage.

Chart 7.1: Hotline Cases Opened by Program Area

OIG Audit

and Investigation Other HUD 16%

Offices

5%

Public and

Indian

Housing

58%

Single-Family

Housing

6%

Multifamily

Housing

15%

The Hotline closed 869 cases this reporting period. The closed Hotline cases

included 134 substantiated allegations. The substantiated allegations resulted in three

administrative sanctions against investors for improprieties involved in the purchase of

a home. The Department also took 131 corrective actions that resulted in $179,820 in

recoveries of losses and more than $2.5 million in HUD funding that could be put to

better use. The recoveries included repayments of overpaid rental subsidies. Some of

the funds that could be put to better use were the result of cases in which tenants were

terminated from public housing or multifamily housing programs for improperly

reporting their incomes or family composition to qualify for rental assistance.
122 Other Significant Audits and Investigations/OIG Hotline

Chart 7.2: Hotline Dollar Impact from Program Offices

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

Single-Family

Housing

Multifamily

Housing

Public and Indian

Housing

$0 $0 $6,997

$249.138 $172,823

$2,267,068

Recoveries Funds Put to Better Use

Chart 7.3: Substantiated Cases by Type of Complaint Received by Hotline

Rental Fraud and

Improprieties

85%

Other

2%

Owner/Occupant

Violations

2% Mismanagement

6%

  
Chapter 7

Outreach
124 Outreach

To foster a cooperative, informative, and mutually beneficial relationship with

agencies and organizations assisting the U.S. Department of Housing and Urban

Development (HUD) in accomplishing its mission, the Office of Inspector General (OIG)

participated in numerous special outreach efforts. The outreach efforts described

below complement routine coordination with Federal, State, and local law enforcement

agencies; various congressional committees and subcommittees; and other OIGs.

Housing Outreach

Special Agent in Charge (SAC) Barry McLaughlin hosted an Illinois Mortgage Fraud

Working Group Task Force quarterly meeting in Chicago, IL. A representative of

Freddie Mac provided an overview of its roles in mortgage fraud prevention, detection,

and investigation to more than 30 mortgage regulatory and Federal, State, and local law

enforcement personnel in attendance.

○○○○○○○○○○○○○○○○○

SAC Barry McLaughlin hosted a quarterly meeting of the Illinois Mortgage Fraud

Working Group in Chicago, IL. A guest speaker from Neighborhood Housing Services

provided information on the agency and its role in combating mortgage fraud. More

than 30 individuals from the Illinois Department of Professional Regulation, Illinois

Attorney General's office, U.S. Postal Inspection Service (USPIS), and Federal Bureau

of Investigation (FBI) attended.

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SAC Peter Emerzian, Assistant Special Agent in Charge (ASAC) Diane DeChellis,

and Special Agent (SA) John Keaney described HUD OIG's mission, priorities, and

several HUD single-family investigations at the Connecticut Mortgage Bankers

Association's annual conference in Cromwell, CT. More than 300 loan originators,

underwriters, brokers, appraisers, and closing attorneys attended.

○○○○○○○○○○○○○○○○○

Acting SAC Brad Geary described rescue and foreclosure frauds and their affect on

the mortgage industry, the Federal Housing Administration (FHA) insurance fund, and

bankruptcy courts at a meeting held at the Northern District of Florida U. S. Attorney's

Office (USAO) in Tallahassee, FL. Approximately 20 individuals representing the FBI,

Internal Revenue Service (IRS), USPIS, and U.S. Secret Service attended.

○○○○○○○○○○○○○○○○○

ASAC Brad Geary provided a presentation on mortgage industry fraud to the

Illinois Association of Mortgage Brokers in St. Charles, IL. ASAC Geary described

rescue fraud, property flipping, and how straw buyers fuel fraudulent schemes. More

than 50 people attended the seminar.

○○○○○○○○○○○○○○○○○
Outreach 125

ASAC Rene Febles and SA Frank Aeillo presented HUD OIG's investigative

process to officials and employees attending an Interstate Management Corporation

(IMC) annual conference in Chester City, PA. SA Aeillo also provided an overview of

recent HUD OIG investigations and prosecutions and hosted a question and answer

forum for IMC officials. IMC, a private real estate management company, oversees HUD

multifamily housing units in Pennsylvania, New Jersey, and Delaware.

○○○○○○○○○○○○○○○○○

ASAC Michael Powell and SA Kris Kanakares provided a real estate and mortgage

loan training session at a regional meeting of Kansas City bankruptcy trustees in

Kansas City, MO. ASAC Powell and SA Kanakares described single-family mortgage

loan documentation and provided an overview of the real estate acquisition process to

assist bankruptcy trustees in identifying possible mortgage fraud in bankruptcy

petitions.

○○○○○○○○○○○○○○○○○

ASAC Ruth Valdes provided

information on FHA program fraud

at the State of Florida's Office of

Financial Regulation annual training

conference held in Fort Lauderdale,

FL. ASAC Valdes discussed

common FHA fraud schemes,

including property flipping and

equity skimming, and provided

data on Government National

Mortgage Association (GNMA)

mortgage-backed securities fraud.

More than 100 USAO, USPIS, and

State of Florida Office of Financial

Regulation investigators and/or

analysts attended.

○○○○○○○○○○○○○○○○○

ASAC Brad Geary and a Northern District of Illinois Assistant United States

Attorney (AUSA) provided a fraud presentation at a meeting of the Neighborhood

Housing Services (NHS), a nonprofit organization designed to provide affordable

housing for low- or moderate-income families, in Chicago, IL. ASAC Geary discussed

bankruptcy and rescue fraud schemes, and the AUSA described methods used for fraud

prosecutions. Approximately 50 loan officers, loan processors, and housing counselors

attended.

○○○○○○○○○○○○○○○○○

ASAC Ruth Valdes speaking at the Office of Financial

Regulation annual training conference.
126

ASAC George Dobrovic and SAs Patrick Jefferson and George Adams provided

mortgage fraud prevention techniques and discussed current mortgage fraud schemes

and investigations at a Mortgage Society of Ohio meeting held in Independence, OH.

Approximately 25 mortgage loan professionals attended.

○○○○○○○○○○○○○○○○○

ASAC Brad Geary provided a mortgage fraud presentation at a "Bank Safety and

Security Seminar" hosted by the Chicago Police Department in Chicago, IL. ASAC

Geary discussed property flipping, equity theft, and rescue fraud schemes affecting the

banking and mortgage industry. More than 150 detectives and financial institution loss

prevention personnel attended.

○○○○○○○○○○○○○○○○○

ASACs Ray Espinosa and Brad Geary participated in an Illinois Mortgage Bankers

Association mortgage fraud conference entitled "Solutions, Tools, and Strategies for

the Mortgage Industry," in Naperville, IL. ASACs Espinosa and Geary provided

information on rescue and foreclosure fraud and the role of gangs in mortgage fraud

and identity theft, then participated in a panel discussion entitled "Mortgage Fraud

Issues." More than 50 individuals attended the conference.

○○○○○○○○○○○○○○○○○

ASAC George Dobrovic and SA George Adams provided loan document due

diligence training at Huntington National Bank in Cleveland, OH. Approximately 20

Huntington National Bank security employees attended.

○○○○○○○○○○○○○○○○○

ASAC Brad Geary provided a presentation on rescue and foreclosure fraud to U.S.

Trustees attending a U.S. Department of Justice (DOJ) National Advocacy Center

training seminar in Columbia, SC. ASAC Geary described the effects of current rescue

and foreclosure frauds on the FHA insurance fund, bankruptcy court, and mortgage

industry. More than 50 trial attorneys and assistant U. S. trustees attended.

○○○○○○○○○○○○○○○○○

Senior Forensic Auditor (SFA) Tony Putzulu and Forensic Auditor (FA) Jim

Hoogoian spoke at the Western Intergovernmental Audit Forum's (WIAF) Winter

2007 Conference held in Los Angeles, CA. SFA Putzulu and FA Hoogoian provided an

update on HUD OIG forensic auditing and discussed several housing and mortgage

fraud investigations. The WIAF includes audit and accountability organizations at the

Federal, State, and local levels in addition to nonprofit and private sector organizations

in Arizona, California, Hawaii, Nevada, Guam, Samoa, and the Pacific Basin.

Approximately 75 professionals attended the conference.

○○○○○○○○○○○○○○○○○

Outreach
127

SA Heather Yannello, Auditor Patrick Anthony, and AUSA Robert Trusiak hosted

a presentation entitled "Flipping and Fraudulent Flipping of Real Estate" at the Buffalo

Mayor's Anti-Flipping Task Force seminar held at SUNY Erie Community College's

North Campus in Buffalo, NY. The Mayor's Anti-Flipping Task Force was developed

to curb real estate flipping and fraudulent activity in Buffalo, NY. More than 100

participants from the Western New York Bar Association, Buffalo Niagara Board of

Realtors, and Appraisal Institute attended.

○○○○○○○○○○○○○○○○○

SAs Stan Mercer and Chumnan Jim Sangsvang Jr. attended a meeting of North Texas

Housing Association members in Denton, TX. SAs Mercer and Sangsvang provided an

overview of HUD OIG's mission and role and described housing fraud prosecutions to

15 North Texas housing authority representatives.

○○○○○○○○○○○○○○○○○

SA Frank Grillo participated in a panel discussion entitled "Working with Law

Enforcement to Fight Mortgage Fraud" at a SourceMedia Mortgage Fraud conference

held in Las Vegas, NV. SA Grillo discussed current mortgage fraud trends including

identity theft, property flipping, equity skimming, and fraudulent appraisals. Individuals

from across the country associated with the mortgage industry attended.

○○○○○○○○○○○○○○○○○

SA Brandon Gardner met with representatives from the USAO and various Federal

law enforcement agencies in Plano, TX, to discuss mortgage fraud in Collin County,

TX. As a result, a mortgage fraud task force, comprised of investigators from HUD

OIG, the FBI, the U. S. Secret Service, the Federal Deposit Insurance Corporation (FDIC)

OIG, the U.S. Department of Veteran Affairs (VA) OIG, the U.S Postal Service (USPS)

OIG, and USPIS, was formed.

○○○○○○○○○○○○○○○○○

SAs Robert Jones, Brandon Gardner, and Stan Mercer provided identity theft and

false Social Security number (SSN) mortgage fraud information and described current

FHA-insured mortgage fraud schemes involving undocumented immigrants at an

Eastern District of Texas Mortgage Fraud Task Force meeting in Plano, TX.

The Eastern District of Texas Mortgage Fraud Task Force members include

representatives from the Eastern District of Texas USAO, IRS, Social Security

Administration (SSA) OIG, Immigration and Customs Enforcement (ICE), U.S. Secret

Service, and HUD OIG.

○○○○○○○○○○○○○○○○○

SA Malinda Antonik provided a presentation entitled "Single Family Fraud

Awareness" at a West Coast Florida Chapter of the Appraisal Institute (WCFCAI)

training seminar held in Tampa, FL. SA Antonik supplied information on single-family

fraud, the impact and consequences of loan origination and appraisal fraud, and recent

Outreach
128

FHA reforms and mortgagee letters. Approximately 70 real estate appraisers from

WCFCAI attended the seminar.

○○○○○○○○○○○○○○○○○

SA Carissa Barnes and Utah State Department of Insurance Fraud Division

Investigators Doug LeDoux and Ken Benson presented FHA and conventional

mortgage fraud information at a meeting of Utah Mortgage Lender's Association

members in Ogden, UT. SA Barnes and Investigators LeDoux and Benson identified

and explained the differences between FHA and conventional mortgage fraud

investigations, provided information on recent investigations and prosecutions, and

offered proactive prevention ideas and fraud reporting information for realtors and loan

officers to implement in their day-to-day operations. Numerous loan officers,

mortgage brokers, and real estate agents attended the presentation.

○○○○○○○○○○○○○○○○○

SA Scott Savedow provided FHA program fraud training at a South Florida

Mortgage Fraud Task Force meeting in Miami, FL. SA Savedow discussed common

FHA fraud schemes, to include property flipping and equity skimming, to law

enforcement personnel representing the State of Florida Prosecutor Offices; the FBI;

and other Federal, State, and local agencies in attendance.

○○○○○○○○○○○○○○○○○

SA Carissa Barnes and Utah State Department of Insurance Investigator Doug

LeDoux presented FHA-insured and conventional mortgage fraud information at a

Re/Max real estate sales meeting in Salt Lake City, UT. SA Barnes and Investigator

LeDoux discussed recent fraud investigations, provided proactive prevention ideas, and

described the process for reporting suspected fraud to real estate agents and loan

officers attending.

○○○○○○○○○○○○○○○○○

SA Kimberly Studerus attended a mortgage fraud task force working group

meeting comprised of representatives from the FBI, the Washington State Department

of Financial Institutions and Department of Licensing, the Seattle Police Department,

U.S. Attorneys, and King County prosecutors held at the King County Prosecutor's

Office in Seattle, WA. During a round table discussion of mortgage fraud in western

Washington, SA Studerus provided an overview of a current HUD OIG and FBI

mortgage fraud investigations.

Public Housing and Rental Assistance Programs

Bryan Saddler, Counsel to the Inspector General, and Regional Inspector General

for Audit (RIGA) Heath Wolfe gave presentations at the Michigan Housing Directors

Association's Winter Conference in Houghton Lake, MI. RIGA Wolfe presented

information on OIG's common audit findings in Section 8 and public housing

authority (PHA) nonprofit development audits. Counsel Saddler's presentation

Outreach
129

covered ethics for PHA officials. There were approximately 70 PHA officials in

attendance.

○○○○○○○○○○○○○○○○○

Deputy Assistant Inspector General for Audit (DAIGA) Robert Gwin, and Fred

Smith, Assistant Regional Inspector General for Audit (ARIGA), presented a plaque

signed by Inspector General Donohue to the Denver, CO, Housing Authority. The

plaque was a special recognition award for "Superior service to the Denver community

in providing low-rent affordable housing and administering the Section 8 subsidy

program for low- and moderate-income people in the Denver area." Mr. Gwin presented

the plaque to the Authority's board chairman. Also in attendance were the Authority's

executive director and his staff.

○○○○○○○○○○○○○○○○○

SAC Joseph Clarke, ASAC Rene Febles, and Senior Special Agent (SSA) Daniel Ellis

presented successful HUD OIG initiatives addressing violent crimes and fraud in

central Pennsylvania public and assisted housing to the director of the Pennsylvania

Commission on Crime and Juvenile Delinquency and Commission members in

Harrisburg, PA. In addition, SSA Ellis discussed subsidized housing programs, public

housing agencies, multifamily property owners, housing program participants'

responsibilities, and recent investigations relating to HUD OIG's Fugitive Felon

Initiative (FFI) and Rental Housing Income Integrity Program (RHIIP) initiative. The

FFI and RHIIP initiatives in Pennsylvania are executed in conjunction with the USAO;

Dauphin County District Attorney's Office; FBI; Drug Enforcement Agency (DEA); U.S.

Department of Alcohol, Tobacco, Firearms, and Explosives (ATFE); Pennsylvania State

Police; Harrisburg Police Department; and Dauphin County Sheriff's Criminal

Investigation Division. Representatives from the Pennsylvania Attorney General's

Office and State, county, and municipal law enforcement personnel attended.

○○○○○○○○○○○○○○○○○

SAC James Todak, ASAC Herschell Harvell, and SA John Rodriguez met with

representatives from the San Diego Housing Authority, San Diego County Housing

Authority, Southern District of California USAO, and San Diego District Attorney's

Office and FBI personnel in San Diego, CA. SAC Todak presented HUD OIG's mission,

goals, organizational structure, and investigative focus.

○○○○○○○○○○○○○○○○○

The HUD OIG Los Angeles field office conducted a PHA Section 8 investigative

training seminar at a Southern California Housing Managers Association meeting hosted

by the City of Long Beach Housing Authority in Long Beach, CA. The training was

designed to give public housing caseworkers, inspectors, investigators, and other

employees an overview of HUD OIG requirements for investigations and prosecutions.

The training also focused on techniques for housing authority staff to use in identifying

fraud during the initial phase of the Section 8 application process. SAC James Todak

provided opening remarks, and RIGA Joan Hobbs discussed HUD OIG's organizational

structure and mission. Additional guest speakers included HUD Los Angeles Acting

Outreach
130

Field Office Director Beverly Kendrick, Public Housing Director Anthony Sprowl, City

of Long Beach Housing Authority Housing Bureau Manager Darnisa Tyler, and San

Bernardino Housing Authority Executive Director Dan Nackerman. Training modules

conducted during the seminar were developed and presented by Los Angeles HUD OIG

ASAC Herschell Harvell and SAs Herminia Neblina, David Carter, John Rodriguez, Mary

Jo Stauner, Matthew Gideon, Ira Long, and Vicky Lawson. Department of Homeland

Security, ICE SA Bruce Kamei provided fraudulent document training. A question and

answer forum concluded the seminar attended by approximately 103 Southern

California housing authority executive directors, attorneys, caseworkers, inspectors,

housing specialists, and investigators.

○○○○○○○○○○○○○○○○○

RIGA Joan Hobbs participated in the Fall Regional National Association of

Housing and Redevelopment Officials (NAHRO) conference held in Tucson, AZ. RIGA

Hobbs spoke on a panel with Stephen Schneller, Director of Public Housing, Region

IX. The topic of the session was "Fraud Detection: Saving Public Dollars and Preserving

Our Assets," and it was attended by housing authority boards of commissioners. One

area of discussion involved ways in which the board can detect fraud without being

involved in the day-to-day activities of the housing authority.

○○○○○○○○○○○○○○○○○

ASAC Tony Meeks and SAs Neil McMullen and Rene Bardales conducted a fraud

awareness and investigation training session for approximately 20 Inglewood Housing

Authority staff members in Inglewood, CA. ASAC Meeks described HUD OIG's

mission, role, and function; and SA McMullen provided information on all facets of rental

assistance violations and explained methods used to detect and prevent housing

assistance fraud.

○○○○○○○○○○○○○○○○○

ASAC Herschell Harvell speaking at the

Southern California Housing Managers

Association meeting.

Group photo from the Public Housing Authority Section 8

Investigative Training Seminar.

Outreach
131

ASAC Herschell Harvell and SA Herminia Neblina met with Bakersfield/Kern County

Housing Authority (B/KCHA) management staff and representatives from the Kern

County District Attorney's office in Bakersfield, CA. ASAC Harvell discussed HUD

OIG's mission, goals, and resources available to confront housing assistance fraud. The

B/KCHA executive director and chief investigator expressed their commitment to

working with HUD OIG in resolving housing assistance and other fraud issues affecting

their organization. ASAC Harvell and SA Neblina toured all B/KCHA public housing

developments and Sections 8 complexes.

○○○○○○○○○○○○○○○○○

ASAC Lori Chan and ARIGA Helen Sparks presented an overview of HUD OIG at a

Northern California/Nevada Executive Directors Association (NCNEDA) quarterly

meeting held in San Francisco, CA. In addition, ASAC Chan provided information on

current housing authority fraud and other investigations and initiatives, and ARIGA

Sparks described auditors' roles and audit procedures during housing authority audits.

ASAC Chan and ARIGA Sparks held a brief question and answer forum following their

presentations for approximately 25 individuals representing various housing

authorities.

○○○○○○○○○○○○○○○○○

ASACs Ray Espinosa and Brad Geary provided fraud in assisted housing training

sessions for both Chicago Housing Authority (CHA) and Cook County Housing

Authority (CCHA) personnel in Chicago, IL. Topics included current fraud schemes,

"red flag" indicators, investigations, recommendations, and the roles of both OIG and

housing providers. More than 100 CHA and CCHA supervisors, inspectors, and

caseworkers attended.

○○○○○○○○○○○○○○○○○

ASAC Kathleen Hatcher and SAs Charles Cherry, Linda Cisco, and Daniel Harding

attended the Maryland NAHRO fall conference in Hagerstown, MD. SAs Cherry, Cisco,

and Harding explained HUD OIG's authority, mission, and role; provided information

on detecting, preventing, and reporting public housing fraud; described specific

public housing investigations; and hosted a question and answer forum. More than 70

Maryland public housing authority representatives attended.

○○○○○○○○○○○○○○○○○

ASAC Herschell Harvell and SA Vicky Lawson discussed HUD OIG's mission and

organizational structure, the investigative process and fraud complaint procedures, and

housing assistance applications and "red flag" indicators and identified the benefits of

developing a partnership at a Culver City Housing Authority staff meeting in Culver

City, CA. ASAC Harvell and SA Lawson also hosted a question and answer forum for

approximately 12 housing inspectors, caseworkers, and supervisors in attendance.

○○○○○○○○○○○○○○○○○

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132

ARIGA Narcell Stamps participated with Region IV's Deputy Regional Director

and Regional Counsel in presenting a training session to about 90 attendees at the

national NAHRO conference held in Atlanta, GA. The presentation covered ethical

issues in public housing with focus on nonprofit housing development corporations.

○○○○○○○○○○○○○○○○○

SA Louis J. Mancini, Jr., provided an overview of HUD's public housing programs

and HUD OIG's role in public housing fraud at a Monroe County investigators meeting

held in Tannersville, PA. In addition, SA Mancini described subsidized housing

tenant/landlord schemes, provided examples of recent prosecutions, and hosted a

question and answer forum. Investigators in attendance included members of the

Pennsylvania State Police, Stroud Regional Police Department, Pocono Township

Police Department, and the Monroe County District Attorney's office.

○○○○○○○○○○○○○○○○○

SAs James Waldron, Michael Catinella, and Matt Nutt presented fraud in

HUD-assisted housing training at a Michigan State Housing Development Authority

meeting in Detroit, MI. Approximately 45 managers, investigators, and other staff

attended.

○○○○○○○○○○○○○○○○○

SA Daniel Harding attended a Madison Park and Reservoir Hill Community

meeting in Baltimore, MD, to discuss illegal drug activities and the increase of violence

in the area. Baltimore City Police Department Sergeant Edward Martini provided crime

statistics deriving from Madison Park Apartments, a HUD-subsidized multifamily

complex, and SA Harding joined Sergeant Martini in discussing current efforts to

identify violent criminal offenders and those responsible for housing assistance fraud.

Baltimore City Police Department personnel and members of local churches and

neighborhood associations attended.

○○○○○○○○○○○○○○○○○

SA Anthony Troeger provided information on HUD OIG and housing assistance

investigations conducted jointly with varied social service departments at a North

Carolina Program Integrity Investigators meeting held in Greensboro, NC. In

addition, SA Troeger discussed housing assistance, child care, and food stamp fraud

issues appearing in current investigations; provided certification and advisement samples

used to deter housing and welfare fraud; and supplied HUD OIG SA and Hotline

personnel contact information. More than 30 social service and State program fraud

investigators attended.

○○○○○○○○○○○○○○○○○

SA Neil McMullen conducted fraud awareness and investigation training for

approximately 15 Pasadena Housing Authority staff members in Pasadena, CA. SA

McMullen provided information on all facets of rental assistance violations and described

steps to detect and prevent housing assistance fraud. At the conclusion of training, and

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133

in an effort to limit criminal activity and assist HUD OIG in prosecuting violations, the

Pasadena Housing Authority agreed to revamp and expand its housing assistance

certification forms.

○○○○○○○○○○○○○○○○○

SA Cortez Richardson met with Tulsa Housing Authority employees in Tulsa, OK.

SA Richardson explained the function of HUD OIG as it relates to housing authorities

and encouraged a working relationship with the HUD OIG Oklahoma field office to

address suspected housing authority fraud.

○○○○○○○○○○○○○○○○○

SA Anthony Troeger described recent housing assistance, child care, and food stamp

fraud investigations conducted jointly with various social service departments at a North

Carolina Program Integrity Investigators Region III network meeting in Durham, NC.

In addition, SA Troeger offered suggestions to improve applicant certifications and

advisements and provided contact information for HUD OIG's fraud Hotline and North

Carolina SAs. More than 20 program integrity investigators from numerous North

Carolina counties attended.

○○○○○○○○○○○○○○○○○

SA Alexander Rosania provided an overview of HUD OIG's mission/priorities and

described successful public and Indian housing fraud investigations at a monthly

meeting of the Section 8 Managers Association held at the Johnston, Rhode Island,

Housing Authority in Johnston, RI. Approximately 26 individuals representing all

Rhode Island public housing authorities attended.

○○○○○○○○○○○○○○○○○

SA Anthony Troeger provided information on HUD OIG, housing assistance fraud,

and housing authority corruption at a North Carolina Housing Authority Director's

Association conference in Greensboro, NC. SA Troeger also described tenant fraud

investigations and housing authority employee conduct leading to public corruption

investigations, provided contact information for HUD OIG's SAs and Hotline

personnel, and hosted a question and answer forum for more than 100 North Carolina

PHA executive directors and managers in attendance.

○○○○○○○○○○○○○○○○○

SA Jorge Reyes, Jr., presented a general overview of HUD OIG's mission and role in

detecting, investigating, and preventing fraud, waste, and abuse to employees of the

Beaumont Housing Authority (BHA) in Beaumont, TX. SA Reyes described how to

identify, investigate, and prosecute fraud cases and provided proactive prevention ideas

for BHA personnel to implement in their day-to-day operations and contacts with

program participants.

○○○○○○○○○○○○○○○○○

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134

SA Brian Rymill provided information on HUD OIG, housing assistance fraud, and

housing authority corruption at a meeting of PHA and Department of Social Services

(DSS) investigators and management personnel in Charlotte, NC. SA Rymill described

successful tenant fraud investigations in North Carolina and the importance of PHA

tenant file documents, explained the potential success from a partnership between PHA/

DSS investigators and HUD OIG, and provided contact information for HUD OIG SA

and Hotline personnel. More than 45 PHA/DSS fraud investigators and DSS

management personnel from the western counties of North Carolina attended.

○○○○○○○○○○○○○○○○○

SA Nicholas Fasciglione met with Randy Thomason, the executive director of

Shawnee Housing Authority (SHA), and Melissa Terrell, the director of SHA housing

operations in Shawnee, OK. SA Fasciglione provided an overview of HUD OIG,

housing assistance fraud, and the avenues available when reporting alleged violations.

 ○○○○○○○○○○○○○○○○○

SA Edward Redmond provided information on HUD rental assistance fraud

investigations to approximately 20 New Hampshire housing authority managers

attending a meeting at the University of New Hampshire, in Durham, NH.

○○○○○○○○○○○○○○○○○

SA Charles Grace conducted a fraud awareness briefing and training session for

Portland Housing Authority (PHA) Section 8 staff members in Portland, OR. SA Grace

explained rental assistance violations and described steps in detecting and preventing

housing assistance fraud, while a PHA fraud investigator and Multnomah County deputy

prosecuting attorney conveyed requirements necessary for successful investigations and

prosecutions.

Community Planning and Development

SAC James Todak,

RIGA Joan Hobbs, and

ASAC Herschell Harvell

met with Los Angeles HUD

Office of Community

Planning and Development

(CPD) Director William

Vasquez and his staff

to explore strategies for

building a collaborative

relationship and identifying

CPD cases involving fraud

in Los Angeles, CA.

Director Vasquez discussed SAC James Todak and RIGA Joan Hobbs exploring strategies for building a

collaborative relationship and identifying CPD cases involving fraud

in Los Angeles, CA

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135

the CPD process as well as staff responsibilities and interaction with grantees. SAC

Todak and RIGA Hobbs presented HUD OIG's role and mission, and SAC Todak

emphasized HUD OIG's willingness to work with CPD staff in identifying those who

defraud HUD. In addition, CPD staff and HUD OIG discussed solutions to various

issues and building a cohesive relationship to further the mission of both entities and

committed to providing assistance in identifying potential CPD fraudulent activities.

Approximately 20 CPD staff members attended the meeting.

○○○○○○○○○○○○○○○○○

RIGA Heath Wolfe and SAC Barry McLaughlin made a presentation to 170

members of the Michigan Community Development Association at its annual

conference held in Lansing, MI. Discussed at the conference was the OIG mission, role,

and priorities; the Office of Audit and common audit findings; and the Office of

Investigation and "red-flags" of fraud.

○○○○○○○○○○○○○○○○○

ASACs Brad Geary and Ray Espinosa provided a fraud presentation to HUD's CPD

staff in Chicago, IL. ASACs Geary and Espinosa discussed common OIG

misconceptions, "red flag" fraud indicators, and the process for fraud referrals before

describing the investigative process and providing an illustration of a CPD

investigative prosecution. Approximately 20 HUD employees attended the

presentation.

○○○○○○○○○○○○○○○○○

ASAC Lori Chan presented an overview of HUD OIG and provided information on

detecting and reporting fraud at a HUD CPD training session entitled "Homelessness

101 Training" in San Francisco, CA. Approximately 85 individuals representing

nonprofit organizations and county governments attended the HUD-sponsored

training.

○○○○○○○○○○○○○○○○○

SA Michele Simpson and Auditor Jacob Williams provided an overview of HUD

OIG's mission and role in detecting, investigating, and preventing waste, fraud, and abuse

in HUD's Community Development Block Grant (CDBG) programs at a CPD roundtable

discussion held at the HUD office in Houston, TX. The CPD roundtable discussion

provided HUD entitlement grantees and nonprofit subgrantees an overview of HUD

programs and CPD services. Approximately 80 people attended the event.

○○○○○○○○○○○○○○○○○

SA Malinda Antonik was a guest speaker at the 2007 CDBG Disaster

Implementation Workshop presented by the Florida Department of Community

Affairs, CDBG Disaster Recovery Unit, in Miami, FL. The workshop provided detailed

information on CDBG grants provided to the State of Florida to assist distressed areas

recovering from Hurricanes Katrina and Wilma. SA Antonik provided general

Outreach
136

information on HUD programs and HUD OIG oversight, along with specific

information on criminal violations, investigations, partnerships with other law

enforcement agencies, and avenues for reporting suspected fraud. Approximately 90

Florida State, county, and local government grantees attended.

Outreach to Law Enforcement Partners

SAC Peter Emerzian; ASAC Diane DeChellis; and SAs John Keaney, Samuel

Ortiz-Diaz, and Bozena Schrank provided information on HUD programs vulnerable to

fraud and corruption at a Housing Corruption Task Force (HCTF) meeting hosted by

Connecticut U.S. Attorney Kevin O'Connor in New Haven, CT. The HCTF was

initiated in response to a series of high-profile public corruption investigations

involving HUD-funded entities in Connecticut and targets public corruption involving

State and local agencies funded by HUD. Connecticut U.S. Attorney O'Connor; several

AUSAs; and Federal, State, and local law enforcement officials attended.

○○○○○○○○○○○○○○○○○

SAC Daniel Salas presented HUD OIG's investigative priorities, described

successful fraud investigations and prosecutions, and expressed his gratitude for law

enforcement supportive efforts at a meeting held in Irving, TX. Approximately 30

Federal law enforcement SACs and prosecutors from the Northern and Eastern

Districts of Texas attended.

○○○○○○○○○○○○○○○○○

SAC James Todak met with San Luis Obispo Sheriff Patrick Hedges, San Luis Obispo

Police Department Chief Deborah Linden, District Attorney Gerald Shea, and

approximately 20 local law enforcement supervisors and officials from San Luis Obispo

universities and State correctional facilities in San Luis Obispo, CA. SAC Todak

discussed jurisdictional authority and HUD OIG investigative trends and priorities for

fiscal year (FY) 2007.

○○○○○○○○○○○○○○○○○

SAC Phyllis Grissom-Robinson and SA Melissa McFadden hosted a Western

District of Missouri and District of Kansas Suspicious Activity Report (SAR) Review

Team monthly meeting in Kansas City, KS. The review team evaluates SARs filed by

financial institutions and coordinates joint investigations resulting from significant

information. Those in attendance included AUSAs from both the Western District of

Missouri and the District of Kansas.

○○○○○○○○○○○○○○○○○

SAC James Todak met with McGregor W. Scott, U.S. Attorney for the Eastern

District of California, and approximately 20 OIG agency supervisors in Sacramento,

CA. SAC Todak discussed current HUD OIG regional investigative trends in addition

to FY 2007 investigative priorities. SAC Todak expressed his gratitude to U.S.

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137

Attorney Scott for providing prosecutive support on recent hurricane Relief-related

fraud investigations.

○○○○○○○○○○○○○○○○○

SAC Barry McLaughlin, Chairman of the Midwest Regional Inspector General

Council (MRIGC), hosted a semiannual MRIGC meeting in Chicago, IL. During the

meeting, MRIGC SACs discussed criminal justice issues within their jurisdictional

areas, and a Northern District of Illinois AUSA provided current DOJ goals and

initiatives.

○○○○○○○○○○○○○○○○○

RIGA John Buck and SAC Joseph Clarke participated in a meeting of the

Philadelphia, PA, Regional Task Force on Procurement/Grant Fraud. The Task Force

is part of a National Procurement Fraud Task Force established by DOJ to attack fraud

in government procurements and grant programs. As Philadelphia is home to many

government agencies and their regional offices, DOJ formed the Task Force to advance

its national effort. Numerous other investigative agencies, regional inspectors general,

and AUSAs were also in attendance to exchange ideas and best practices. The goals of

the Task Force include strategizing about areas of potential fraud, identifying viable

matters for investigation and prosecution, cooperating and deploying resources as

intelligently as possible, developing strategies to streamline investigations and reach

just results, and enhancing these efforts with needed training.

○○○○○○○○○○○○○○○○○

ASAC Nadine Gurley and Acting SAC Brad Geary attended a Procurement Fraud

Working Group meeting sponsored by the Northern District of Georgia USAO in

Atlanta, GA. ASAC Gurley and Acting SAC Geary provided brief presentations on the

role of HUD OIG and how HUD funds are misused in procurement fraud schemes. ASAC

Gurley agreed to serve on a "How to Detect Fraud" subcommittee with Department of

Defense (DoD) OIG and FBI personnel. Representatives from more than 17 Federal law

enforcement and prosecutor offices attended.

○○○○○○○○○○○○○○○○○

ASACs Brad Geary and Ray Espinosa provided a fraud presentation for

approximately 20 financial analysts and FBI special agents in Chicago, IL. ASACs Geary

and Espinosa described single-family fraud "red flag" indicators, subsidized housing

landlord/tenant schemes, and recent prosecutions.

○○○○○○○○○○○○○○○○○

SA Nancy Valencic provided an overview of HUD OIG's mission and explained the

FFI at a Regional Organized Crimes Enforcement Center training conference held in

Houston, TX. More than 400 representatives of various State, local, and Federal law

enforcement agencies attended.

○○○○○○○○○○○○○○○○○

Outreach
138

SAs Cortez Richardson and Nicholas Fasciglione and Senior Auditor Tamara

Wallinger met with AUSA Phil Pinnell, Affirmative Civil Enforcement Coordinator for

the Northern District of Oklahoma, in Tulsa, OK. SAs Richardson and Fasciglione

discussed various types of criminal cases, and Senior Auditor Wallinger provided

information relating to possible civil actions. AUSA Pinnell expressed an interest in

civil prosecution of HUD OIG cases.

○○○○○○○○○○○○○○○○○

SA Chumnan Sangsvang, Jr., provided HUD OIG's mission and role at a meeting

with representatives from the Texas Department of Health and Human Services (HHS)

Office of Inspector General in Fort Worth, TX. In addition, SA Sangsvang explained

HUD OIG's role in public and assisted housing and agreed to corroborate investigative

efforts.

○○○○○○○○○○○○○○○○○

SA Kimberly Studerus participated in a fraud investigators working group meeting

held at the Federal Way Police Department in Federal Way, WA. SA Studerus

discussed fraud trends and possible HUD OIG partnerships with Federal Way Police

Department, Pierce County Sheriff's Office, DEA, Washington State HHS, Seattle

Housing Authority, King County Housing Authority, and Snohomish County Housing

Authority investigators and other law enforcement personnel in attendance.

○○○○○○○○○○○○○○○○○

SAs Charles Grace and Kimberly Studerus presented HUD OIG's mission and

function to members of the Lakewood Police Department in Lakewood, WA. In

addition, SAs Grace and Studerus provided information on HUD rental assistance fraud

and a listing of public housing developments within the Lakewood jurisdiction and

described avenues available for help in maintaining the integrity of HUD rental

assistance programs.

○○○○○○○○○○○○○○○○○

SA Jorge Reyes, Jr., provided an overview of HUD OIG's mission, structure, and role

in safeguarding HUD's rental assistance program to members of Richmond Police

Department and Fort Bend County Sheriff's Office in Richmond, TX. SA Reyes also

discussed HUD OIG's investigative process and Section 8 tenant fraud before

proposing a joint Section 8 fraud initiative. Approximately 10 individuals attended the

meeting.

○○○○○○○○○○○○○○○○○

Cliff Cole, Computer Audit Specialist (CAS) for the Information Systems Audits

Division, wrote an excellent article on OIG's data mining initiatives entitled "Digging

for the Gold" that was published in the Fall/Winter 2006-2007 issue of The Journal of

Public Inquiry. The article discussed the evolution of data mining activities within HUD

OIG and joint efforts with the Office of Investigation and other government

organizations. The results of these efforts led to the location and arrest of about 5,600

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139

fugitives and the identification of approximately 3,500 Federal and USPS employees

who may have falsely reported their incomes in order to receive HUD-funded housing

assistance. Also in FY 2006, OIG reported monetary benefits of $432.6 million from

audits in which data mining techniques were used. The article can be found at

http://www.ignet.gov/randp/fw06jpi.pdf.

Outreach to HUD Staff and Others

During the week February 26 through March 2, Inspector General Kenneth

Donohue, SAC James Todak, and RIGA Joan Hobbs visited the Honolulu, HI, field

office and briefed HUD staff (approximately 25 people) on the mission and

organization of OIG. Meetings were also held with the FBI, USAO, Hawaiian Home

Lands Staff, City Auditor, State Welfare Investigators, State Procurement Officer, and

HHS OIG. In addition, RIGA Hobbs briefed about 15 CPD grantees on the OIG

mission and organization and discussed the areas in which the Office of Audit has found

problems in CPD grant activity in recent audits.

○○○○○○○○○○○○○○○○○

SAC Rene Febles and SA Joseph Bredehoft were invited guests at an "Ethics in

Government" symposium held at Monmouth University in West Long Branch, NJ. This

symposium addressed methods and strategies used to prevent, detect, and punish

official misconduct and public corruption while maintaining an honest and

accountable government at municipal, county, and State levels. SAC Febles and SA

Bredehoft discussed HUD OIG's role, and Inspector General Donohue's commitment

to investigating public corruption at the municipal, county, State, and Federal levels.

State Attorney General Stuart Rabner was keynote speaker, and other attendees

included State legislators, senators, freeholders, mayors, and council members and

Monmouth County Federal, State, and local law enforcement personnel.

○○○○○○○○○○○○○○○○○

RIGA Ron Hosking, ARIGAs Carrie Gray and Kim Randall, and CAS Glenn Brock

met with Susan Montee, State Auditor of the State of Missouri, and her Director of

Audit in Jefferson City, MO. The purpose of the meeting was to explain the role of

OIG, develop lines of communication, and discuss joint audits each agency has

conducted in the past and how the two agencies might work together in the future.

The RIGA and ARIGAs talked about mission and staffing; audit planning, selection,

and reporting; and the success of prior joint efforts with the City Auditor of Kansas

City, MO. CAS Brock briefly talked about the Information Systems Audit Division and

described the CAS role, history, and some details of the data retrieval and analysis work

conducted. He also talked about OIG's successes in working with the State of

Missouri, which include data matching that the Division of Employment Security

performed for the income analysis of subsidized housing tenants and data supplied by

the Missouri Housing Development Commission for audit work on multifamily projects.

The door was opened for possible joint efforts in the future regarding CDBG and HOME

Investment Partnerships Program funds and cooperation between the offices in

referring audit leads to each other.

○○○○○○○○○○○○○○○○○

Outreach
140

RIGA John Dvorak, ARIGA Kevin Smullen, and ASAC Diane DeChellis met with

the State Auditors from Maine on October 25 in Bangor, ME. The objectives of this

meeting were to explain the role of HUD OIG, develop lines of communication, and

provide information on the organizational structure and functions of the Offices of Audit

and Investigation. The top management challenges were also discussed, and recent

relevant HUD OIG audit and investigation results were shared. Additionally, the State

Auditor was provided the OIG's Web site address for OIG external audit reports and

other information. The State Auditors shared information regarding responsibilities of

their offices and the types of audits conducted by their offices. In addition, they

expressed interest in several OIG audits that involved overlapping HUD- and

State-funded programs. This outreach effort provided the opportunity to explore the

possibility of leveraging resources and sharing information between organizations.

○○○○○○○○○○○○○○○○○

RIGA Joan Hobbs, Regions IX and X, spoke before a group of Region X supervisors

in the Seattle, WA, Regional Office on the topic "Supervising and Managing Staff in

Remote Locations." There were 14 supervisors in attendance.

○○○○○○○○○○○○○○○○○

ASAC Timothy Mowery and SA Brian Rymill attended an annual law enforcement

breakfast meeting sponsored by the Middle District of North Carolina USAO in High

Point, NC. ASAC Mowery described HUD OIG's mission, xpressed HUD OIG's

appreciation to the USAO staff for their continued support, and provided contact

information for the Greensboro HUD OIG office. More than 50 individuals

representing 17 Federal law enforcement and prosecutorial offices throughout North

Carolina attended.

○○○○○○○○○○○○○○○○○

ARIGA Charles Johnson presented the Phoenix, AZ, HUD program office staff

with an overview of HUD OIG audit operations. This included information relating to

the Office of Audit's authority and organizational structure, its relationship with the

OIG Office of Investigation, the audit process, the audit reporting process, and the

audit resolution process. Information relating to one ongoing audit was also provided,

including why the auditee was selected for review, the audit objective, a brief overview

of the work conducted as part of the audit, and a summary of the audit results. About

50 HUD program staff members attended the presentation.

○○○○○○○○○○○○○○○○○

ARIGA Michael Motulski and Senior Auditor Lloyd Currie spoke at the

Association of Certified Fraud Examiners - Rhode Island Chapter 33 in Warwick, RI,

on the topic "Procurement Fraud." The issues discussed included pricing proposal

audits, incurred cost audits, and schemes by contractors on cost-type contracts to

fraudulently inflate the cost of labor or materials. Also discussed was defective pricing

(postcontract award reviews), which occurs when a contractor does not submit or

disclose cost or pricing data to the government that is current, accurate, and complete

Outreach
141

ARIGA Michael Motulski and Senior Auditor Lloyd Currie

at the Association of Certified Fraud Examiners.

Outreach

  

before reaching an agreement on

the price on the negotiated sole

source procurements. The final topic

was the False Claims Act and

remedies available for recovery. The

conference was attended by just

under 70 professionals comprised of

certified fraud examiners, other

antifraud specialists, internal and

independent auditors, forensic

accountants, lawyers and law

enforcement personnel, detectives

and private investigators, educators,

and other professionals seeking

knowledge of fraud in the

procurement process.

Chapter 8

Review of Policy Directives
144

Reviewing and making recommendations on legislation, regulations, and policy

issues is a critical part of the Office of Inspector General's (OIG) responsibilities under

the Inspector General Act. During this 6-month reporting period, OIG reviewed 99

issuances and testified on a Federal Housing Administration (FHA) legislative proposal.

This chapter highlights some of OIG's prior comments on notices, comments for this

reporting period, and other policy directives.

Proposed Legislation

FHA Modernization

The U.S. Department of Housing and Urban Development (HUD) has proposed

legislation that would allow increased flexibility in setting insurance premiums based

on risk and reduce downpayment requirements. As noted in the President's FY 2008

budget, through the Expanding Homeownership Act of 2006, HUD has sought to

provide workable solutions for homebuyers who do not qualify for prime financing,

giving them more affordable and safer ways to achieve the "American dream." The key

components of the legislative proposal are to

- Eliminate the current statutory 3 percent minimum downpayment.

- Create a new, risk-based insurance premium structure for FHA that would

match the premium amount with the credit profile of the borrower.

- Increase and simplify FHA's loan limits.

On March 15, 2007, the Inspector General testified on the modernization proposal

before the United States Senate, Committee on Appropriations, Subcommittee on

Transportation, Housing and Urban Development, and Related Agencies. OIG remains

concerned about the future solvency of the FHA fund in view of the proposed FHA

modernization. The legislative reform package-which includes risk-based premiums,

zero-downpayment loans, and higher mortgage limits-could bring higher default and

foreclosure risks, as FHA attempts to recover its historic share of first-time homebuyer

and minority markets.

- Risk-Based Premiums: Moving to a mixed price premium structure could by

its very complexity require increased budget authority to make FHA system

modifications and impose new administrative/cost burdens on originating and

servicing lenders. FHA reform will also require higher risk borrowers to pay

higher premiums. Risk-based pricing, therefore, may increase the mortgage

carrying costs of FHA borrowers who are the least able to afford them.

- Zero Downpayment: FHA has experienced higher default and claim rates on

seller-funded nonprofit downpayment assisted loans. These loans are

effectively zero downpayment loans (100 percent loan -to value), and as reported

by the General Accountability Office (GAO), the probability of such loans

resulting in an insurance claim was 76 percent higher than comparable loans

without such assistance. It is reasonable to conclude that zero downpayment

loans would represent a comparable insurance risk.

Review of Policy Directives
145

- Higher Mortgage Limits: FHA should determine mortgage loan limits

consistent with its mission to serve underserved borrowers and communities,

particularly first-time homebuyers and minorities. Raising the loan limits to

conforming maximums may serve to attract borrowers who have access to

conventional financing and do not need a government program to acquire

homeownership.

- Silence on Controls: The proposed reform is silent on strengthening controls

and enforcement actions and preventing future fraud. Conventional lending in

the private sector is beginning to use predictive models that screen

loan applications for fraud at prefunding. FHA needs to move beyond

postendorsement monitoring and embrace this new technology through policy

and programmatic changes as part of FHA reform.

Proposed Rules

Seller-Funded Downpayment Assistance

OIG continues to express concerns that seller-funded nonprofit downpayment

assistance providers inflate real estate prices and increase the risk of default. OIG's

concerns with downpayment assistance from seller-funded nonprofits have been

long-standing and are consistent with concerns raised by others, including GAO. FHA

was not responsive to GAO's and OIG's concerns even after the Internal Revenue

Service (IRS) issued a revenue ruling making it clear that seller-funded downpayment

assistance providers are not charities as they do not meet the requirements of 26 U.S.C.

§501(c)(3). As a result, OIG pressed the Department to issue a proposed rule to

establish specific criteria regarding a borrower's investment in the mortgaged

property when a gift is provided by a nonprofit or other organization. OIG concurs

with the proposed rule which was published in the Federal Register on May 11, 2007.

Condominiums

OIG objected to a proposed rule related to condominiums in Puerto Rico. OIG

was concerned that the rule would preclude HUD from foreclosing on the properties.

OIG lifted its nonoccurrence after HUD provided evidence that the proposed rule would

not prevent HUD from foreclosing on the properties.

Proposed Notices

Relocation Assistance

HUD's Office of Community Planning and Development (CPD) proposed a

notice pertaining to relocation assistance under section 104(d) of the Housing and

Community Development Act of 1974. OIG objected to the proposed notice and

continues to await HUD's revised proposal.

Review of Policy Directives
146

  

Waivers

Notices Waivers for the State of Louisiana Community Development Block Grant

(CDBG) Disaster Recovery Grant. OIG objected to HUD's proposed notice because

the notice failed to include a provision in the public law. OIG continues to await HUD's

revised proposal.

Review of Policy Directives
Chapter 9

Audit Resolution
148

In the audit resolution process, Office of Inspector General (OIG) and U.S.

Department of Housing and Urban Development (HUD) management agree upon the

needed actions and timeframes for resolving audit recommendations. Through this

process, OIG hopes to achieve measurable improvements in HUD programs and

operations. The overall responsibility for assuring that the agreed-upon changes are

implemented rests with HUD managers. This chapter describes significant

management decisions with which OIG disagrees. It also contains a status report on

HUD's implementation of the Federal Financial Management Improvement Act of 1996

(FFMIA). In addition to this chapter on audit resolution, see appendix 2, table B,

"Significant Audit Reports Described in Previous Semiannual Reports in Which Final

Action Had Not Been Completed as of March 31, 2007."

Audit Reports Issued before Start of Period with No

Management Decision as of March 31, 2007

Office of Housing, Washington, DC

Issued July 11, 2006. The Inspector General referred this issue to the Deputy

Secretary on December 4, 2006, because agreement could not be reached with the

Office of Housing. The three recommendations relate to the Office of Housing's not

independently determining that mortgage loans insured under the Mutual Mortgage

Insurance Fund met program requirements after paying billions in single-family

insurance claims. During the period October 1, 2003, through June 3, 2005, HUD

received and paid claims on loans for which the lender did not show that the borrower

(1) was able to make the required monthly payments, (2) made the minimum

investment in the property, and (3) was creditworthy. HUD paid the claims and did

not subsequently review the loan files for compliance with the program requirements,

fraud, and/or misrepresentations. HUD relied upon lender certifications that loans

were eligible and contained all required supporting documents, a preendorsement

review of the insurance applications for key documents, and risk-based compliance

testing of recently insured loans. We estimate that final HUD costs for claims that

HUD's files did not support as meeting program requirements during the period

reviewed totaled $356 million on those claims for which all revenues and expenses were

finalized.

In his February 23, 2007, response, the Deputy Secretary stated support of OIG's

objective and agreed with the overall conclusions reached. The Deputy Secretary

directed the Office of Housing to immediately begin implementing procedures in

conjunction with and acceptable to OIG to effect the recommendations. However, the

Office of Housing did not submit its plan to implement the Deputy Secretary's

directive until March 30, 2007. OIG determined the proposed plan did not meet the

Deputy Secretary's instructions. The Office of Housing's proposal does not provide for

the development of procedures to take appropriate actions for all claims with

inadequate documentation and essentially renders the recommendations ineffective.

The recommendations remain open until the Office of Housing submits a corrective

action plan that accurately reflects the Deputy Secretary's instructions and

demonstrates a good faith effort to implement OIG's recommendations. (Report No.

2006-SE-0001).

Audit Resolution
149

Significant Management Decision with

Which OIG Disagrees

Office of Housing, Washington D.C.

Issued June 14, 2006. While HUD's system controls were effective in preventing

most lenders from originating Federal Housing Administration (FHA) mortgage loans

in areas where their approval had been Credit Watch-terminated, some lenders were

still able to originate loans while they were terminated. As a result, in a 3-year period,

HUD inappropriately insured 58 loans totaling $6.2 million.

These loans were approved and endorsed for FHA insurance because the Office of

Housing modified the programming of its automated systems to accommodate two

changes to its loan approval policies. It changed its system business rules to allow a

lender to originate streamline refinanced loans in any jurisdiction rather than limiting

the lender to the specific HUD-approved area. A similar change was made for loans

originated through a principal agent. These changes eliminated the system controls

that prevented a Credit Watch-terminated lender from originating loans in the

jurisdiction barred by the Office of Housing. The Office of Housing said that it would

be cost prohibitive to modify the system so that the Credit Watch termination

controls worked 100 percent of the time.

OIG recommended that HUD take appropriate administrative action against the

lenders for the loans they were not authorized to originate. This action included

requiring the lenders to indemnify HUD against future losses on 47 active loans with

original mortgage amounts totaling about $4.7 million, obtaining reimbursement from

lenders for claims paid and losses incurred on four loans anticipated to be about

$164,000, and/or referring the lenders to the Mortgagee Review Board. No action was

recommended for seven loans that were subsequently paid off.

The Office of Housing disagreed with the recommendation. It determined that

the loans were originated under business rules established by the Department, paid in

full, or originated during the update of its data system. It maintained that it could not

take administrative action against the lenders because the issue raised in the report is

not fully addressed in any of FHA's regulations, policies, handbooks, or mortgagee

letters. However, it did agree to add language to its termination letter to address the

issues raised in the audit.

OIG forwarded the disagreed-upon matters to the Deputy Secretary of Housing

for resolution. The Deputy Secretary agreed with the Office of Housing's position. OIG

disagrees with this determination and stands by the conclusion that HUD should hold

the lenders accountable for the ineligible FHA loan originations. (Report No. 2006-

KC-0002).

Audit Resolution
150

Federal Financial Management

Improvement Act of 1996

FFMIA requires that HUD implement a remediation plan that will bring financial

systems into compliance with Federal financial management system requirements within

3 years or obtain Office of Management and Budget (OMB) concurrence if more time is

needed.

FFMIA requires OIG to report in its Semiannual Reports to the Congress instances

and reasons when an agency has not met the intermediate target dates established in its

mediation plan required by FFMIA. In April 1998, HUD determined that 38 of its

systems were not in substantial compliance with FFMIA. At the end of 2006, the

Department reported that 2 of its 41 financial management systems were not in

substantial compliance with FFMIA. These two systems are the HUD Procurement

System (HPS) and Small Purchase System (SPS).

  

Audit Resolution
Appendix 1

Audit Reports Issued
152

Internal Reports

12 Audit Reports

Chief Financial Officer (1 Report)

2007-FO-0003 Additional Details to Supplement Our Report on HUD's FY 2006 and

2005 Financial Statements, 11/14/2006. Better Use: $558,300,000.

Chief Information Officer (3 Reports)

2007-DP-0001 Review of HUD Firewall Implementation, 10/11/2006.

2007-DP-0002 Review of HUD's Information Technology Services Contracts,

 01/18/2007. Better Use: $5,582,000.

2007-DP-0004 FY 2006 Review of Information Systems Controls in Support of the

Financial Statements Audit, 02/22/2007.

Chief Procurement Officer (1 Report)

2007-DP-0003 Review of HUD's Procurement Systems, 01/25/2007.

Community Planning and Development (1 Report)

2007-BO-0001 The Hartford CPD Did Not Always Adequately Monitor CDBG

Program Participants or Follow HUD Requirements, 02/12/2007.

Government National Mortgage Association (1 Report)

2007-FO-0001 Audit of the GNMA's (Ginnie Mae) Financial Statements for FY

2006 and 2005, 11/07/2006.

Housing (4 Reports)

2007-FO-0002 Audit of the FHA's Financial Statements for FY 2006 and 2005,

11/08/2006. Better Use: $107,176,596.

2007-KC-0001 HUD Adequately Addressed the Increased Risk Associated with

20-year Loans Approved by Automated Underwriting Systems,

01/26/2007.

2007-KC-0002 HUD Can Improve Its Use of Residual Receipts to Reduce Housing

Assistance Payments, 01/29/2007. Better Use: $36,692,718.

2007-PH-0001 HUD Controls Prevented Multiple Sales to Owner-Occupant

Purchasers but Did Not Ensure That Owners Occupied Residences

as Required, 01/12/2007.

Public and Indian Housing (1 Report)

2007-LA-0001 Tax Credit Project Owners Are Allowed to Charge Higher Rents for

Tenant-Based Section 8 Voucher Households than Non-Voucher

Households, 11/08/2006. Better Use: $13,500,000.

Audit-Related Memoranda1

Public and Indian Housing (1 Report)

2007-LA-0801 Corrective Action Verification of Seattle Housing Authority's MTW

Program Audit Report 2004-SE-1004, Seattle, WA, 11/16/2006.

1

 The memorandum format is used to communicate the results of reviews not performed in accordance with generally

accepted government audit standards, to close out assignments with no findings and recommendations, to respond to

requests for information, to report on the results of a survey, to report results, or to report the results of civil actions or

settlements.

Audit Reports Issued
153

External Reports

46 Audit Reports

Community Planning and Development (9 Reports)

2007-AT-1003 Gwinnett County Subrecipients Did Not Provide Funds Required by

Their Contracts, Lawrenceville, GA, 01/31/2007. Better Use: $278,418.

2007-BO-1003 The Office of Community Development, City of Chicopee, Did Not

Properly Award and Administer CDBG and HOME Funds Used for its

Housing Activities, Chicopee, MA, 03/21/2007. Questioned: $1,388,600;

Unsupported: $1,105,960; Better Use: $534,066.

2007-DE-1001 The City and County of Denver, CO, Did Not Comply with HOME

Investment Partnerships Program Requirements, Denver, CO,

10/18/2006. Better Use: $722,000.

2007-KC-1001 The City of St. Louis Did Not Meet HUD's Requirements for Creating

and Retaining Jobs, St. Louis, MO, 10/11/2006. Questioned: $1,716,840;

Unsupported: $1,716,840; Better Use: $1,662,210.

2007-KC-1005 The State of Nebraska Did Not Close HOME Projects in a Timely

Manner, Lincoln, NE, 03/13/2007.

2007-LA-1003 The City of Long Beach Did Not Administer Its Continuum of Care

Supportive Housing Program in Compliance with HUD Requirements,

Long Beach, CA, 12/12/2006. Questioned: $1,185,740; Unsupported:

$1,185,740; Better Use: $636,916.

2007-NY-1002 The City of Amsterdam Needs to Make Improvements in Administering

Its Section 108 Loan Guarantee Program, Amsterdam, NY, 12/20/2006.

Questioned: $535,000; Unsupported: $535,000.

2007-PH-1004 The City of Baltimore Generally Administered Uses of Block Grant

Funds Reviewed in Accordance with Applicable Requirements,

Baltimore, MD, 12/20/2006.

2007-SE-1001 The YWCA of Seattle, King and Snohomish Counties, Did Not Properly

Administer Its Supportive Housing Program Grants, Seattle, WA,

01/12/2007. Questioned: $186,990; Unsupported: $68,783.

Housing (10 Reports)

2007-AT-1002 Pine State Mortgage Company Did Not Always Comply with FHA

Underwriting and Quality Control Requirements, Atlanta, GA,

11/03/2006. Questioned: $151,687; Unsupported: $85,262; Better Use:

$713,495.

2007-BO-1002 Mortgage Amenities Corporation Did Not Comply with Certain HUD

Requirements in Administering Its FHA Insured Loan Programs,

Lincoln, RI, 12/01/2006. Questioned: $5,850; Better Use: $49,416.

2007-BO-1004 Harris Health Center Did Not Ensure That Renovations Were

Properly Completed, Paid $21,729 for Unnecessary and Nonproject

Costs, and Did Not Calculate Management Fees Properly, East

Providence, RI, 03/22/2007. Questioned: $37,634.

2007-CH-1006 Colony Mortgage Corporation, Supervised Lender, Did Not Always

Comply with HUD's Requirements Regarding Underwriting of Loans

and Quality Control Reviews, Fairview Park, OH, 03/26/2007.

Questioned: $219,229; Unsupported: $20,457; Better Use: $141,774.

Audit Reports Issued
154

2007-FW-1006 Aberdeen Villa Apartments, Formerly Asbury Square Apartments,

FHA #118-35200, Spent Almost $35,000 in Project Funds on Ineligible

and Unsupported Costs, Tulsa, OK, 03/07/2007. Questioned: $34,649;

Unsupported: $26,568.

2007-KC-1002 Manufactured Home Lending by Wells Fargo Home Mortgage, West

Des Moines, IA, 10/25/2006. Questioned: $64,612.

2007-KC-1003 PlainsCapital McAfee Mortgage Did Not Follow HUD Underwriting

Requirements and Originated Loans from Unregistered Branch

Offices, Lubbock, TX, 11/06/2006. Questioned: $82,604; Better Use:

$215,954.

2007-LA-1001 The Associates Group Pioneer Pines Park Did Not Follow the

Provisions of the Regulatory Agreement, Bakersfield, CA, 10/20/2006.

Questioned: $160,564; Unsupported: $133,049; Better Use: $195,202.

2007-LA-1002 First Magnus Financial Corporation Did Not Comply with HUD

Guidelines When Operating and Managing Net Branches, Scottsdale,

AZ, 12/12/2006.

2007-NY-1003 Peregrine Health Management Company Used Project Funds for

Ineligible, Unsupported, and/or Unnecessary Costs, Syracuse, NY,

03/12/2007. Questioned: $161,984; Unsupported: $2,109; Better Use:

$126,922.

Public and Indian Housing (27 Reports)

2007-AT-1001 The Housing Authority of the Birmingham, AL District Did Not

Ensure That Section 8 Units Were Decent, Safe, and Sanitary,

Birmingham, AL, 10/25/2006. Better Use: $10,428,048.

2007-AT-1004 The Wilmington Housing Authority Needs to Improve Internal

Controls Over Its Program, Wilmington, NC, 03/09/2007.

Questioned: $1,632,505; Unsupported: $887,589; Better Use: $563,908.

2007-AT-1005 The Puerto Rico Department of Housing Did Not Effectively

Administer Its Section 8 Housing Program, San Juan, PR, 03/29/2007.

Questioned: $5,451; Better Use: $2,616,124.

2007-BO-1001 Lynn Housing Authority & Neighborhood Development Generally

Administered its Section 8 Voucher Program in Accordance with HUD

Requirements, Lynn, MA, 11/03/2006.

2007-CH-1001 The Marion Housing Authority Improperly Used HUD Funds for

Nonprofit Development Activities, Marion, IN, 12/13/2006.

Questioned: $225,303; Unsupported: $25,033.

2007-CH-1002 Benton Harbor Housing Commission Did Not Effectively Manage Its

Public Housing Program and Has Not Used Special Purpose Grant

Funds It Received More Than Nine Years Ago, Benton Harbor, MI,

01/25/2007. Questioned: $278,669; Unsupported: $234,716; Better Use:

$527,731.

2007-CH-1003 The Housing Authority of the City of Evansville Needs to Improve Its

Section 8 Housing Choice Voucher Program Administration,

Evansville, IN, 02/13/2007. Questioned: $76,550; Unsupported:

$20,716; Better Use: $1,576,512.

2007-CH-1004 The Columbus Metropolitan Housing Authority Failed to Adequately

Operate Its Section 8 Housing Choice Voucher Program, Columbus,

OH, 03/15/2007. Questioned: $1,971,984; Unsupported: $886,763;

Better Use: $196,611.

Audit Reports Issued
155

2007-CH-1005 The Housing Authority of the City of Gary Lacked Adequate Controls

over Refunding Savings, Gary, IN, 03/23/2007. Questioned: $913,365;

Unsupported: $913,365; Better Use: $1,054,990.

2007-DE-1002 The Lusk Housing Authority Improperly Awarded Its Administration

and Management Contract, Lusk, WY, 02/27/2007.

2007-DE-1003 The Buffalo Housing Authority Improperly Awarded Its

Administration and Management Contract, Buffalo, WY, 02/27/2007.

2007-DE-1004 The Cheyenne Housing Authority Improperly Awarded Its

Administration and Management Contract, Cheyenne, WY,

03/05/2007.

2007-FW-1001 Lubbock Housing Authority's Lack of Management Controls

Resulted in Section 8 Units Not Meeting Housing Quality Standards,

Lubbock, TX, 10/16/2006. Better Use: $1,205,989.

2007-FW-1002 The Lubbock Housing Authority Inappropriately Advanced Federal

Funds to Support Its Nonprofit Entities, Lubbock, TX, 11/28/2006.

Questioned: $672,395.

2007-FW-1003 The Lubbock Housing Authority's Lack of Management Controls

Resulted in Overhoused Tenants and Miscalculated Assistance

Payments, Lubbock, TX, 11/28/2006. Questioned: $15,096; Better Use:

$2,479.

2007-FW-1004 Oklahoma City Housing Authority Generally Complied with HUD's

Standards, Oklahoma City, OK, 12/08/2006.

2007-FW-1005 The Housing Authority of Bexar County Overhoused Tenants and

Paid Excessive Housing Assistance Payments in the Section 8 Housing

Choice Voucher Program, San Antonio, TX, 02/22/2007. Questioned:

$107,658; Better Use: $166,828.

2007-FW-1007 The Jacksonville Housing Authority Mismanaged Public Housing

Capital Fund Program Funding, Jacksonville, AR, 03/30/2007.

Questioned: $164,203; Unsupported: $164,203; Better Use: $281,462.

2007-KC-1004 The Housing Authority of East St. Louis Improperly Used Public

Housing Funds, East St. Louis, IL, 01/12/2007. Questioned: $177,029;

Better Use: $58,285.

2007-LA-1004 The Housing Authority of the County of Contra Costa Did Not

Adequately Determine and Support Section 8 Rents, Martinez, CA,

12/15/2006. Questioned: $165,892; Unsupported: $82,659.

2007-LA-1005 Oakland Housing Authority Did Not Comply with Procurement and

Contracting Requirements, Oakland, CA, 02/14/2007. Questioned:

$2,370,531; Unsupported: $2,370,531.

2007-LA-1006 The Housing Authority of the County of Santa Clara Did Not

Adequately Determine and Support Section 8 Rents, San Jose, CA,

03/16/2007. Questioned: $1,379,992; Unsupported: $4,827.

2007-NY-1001 Utica Municipal Housing Authority Needs to Make Improvements in

Administering Its Hope VI Revitalization Program, Utica, NY,

11/02/2006. Questioned: $318,533; Unsupported: $316,598; Better Use:

$7,540,777.

2007-PH-1001 The Housing Authority of the County of Beaver Needed to Improve

Controls over HUD Assets, Beaver, PA, 10/31/2006. Questioned:

$339,493; Unsupported: $292,576; Better Use: $161,927.

Audit Reports Issued
156

2007-PH-1002 The Montgomery County Housing Authority Improperly Used HUD

Funds to Purchase, Renovate, and Maintain Its Main Office,

Norristown, PA, 12/13/2006. Questioned: $1,713,659; Unsupported:

$1,095,039; Better Use: $1,615,730.

2007-PH-1003 The Housing Authority of the City of Weirton Needed to Improve Its

Administration of Its HUD-Funded Programs, Weirton, WV,

12/18/2006.

2007-PH-1005 The Newport News Redevelopment and Housing Authority Did Not

Always Follow HUD Requirements, Newport News, VA, 02/20/2007.

Questioned: $246,254; Better Use: $489,522.

Audit-Related Memoranda2

Housing (1 Report)

2007-NY-1801 Management Agent Fees Claimed by P.J. Alizio Realty, Inc., Mineola,

NY, 01/29/2007.

2

 The memorandum format is used to communicate the results of reviews not performed in accordance with generally

accepted government audit standards, to close out assignments with no findings and recommendations, to respond to

requests for information, to report on the results of a survey, to report results, or to report the results of civil actions or

settlements.

  

Audit Reports Issued
Appendix 2

Tables
158

Table A

Audit Reports Issued Prior to Start of Period with No Management

Decision at March 31, 2007

* Significant Audit Reports Described in Previous Semiannual Reports

Report Number Reason for Lack of Issue Date/Target

& Title Management Decision for Management

 Decision

See Chapter 9, page 147

Tables
159

Table B

Significant Audit Reports Described in Previous Semiannual

Reports Where Final Action Had Not Been Completed

as of 03/31/2007

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

1997-CH-1010

2000-KC-0002

2001-CH-1007

2001-FW-1005

2002-BO-1003

2002-KC-0002

2002-FW-1003

2002-PH-1005

2003-SE-1002

2003-AT-1001

2003-FW-1001

Major Mortgage Corporation,

Section 203(K) Rehabilitation

Home Mortgage Insurance

Program, Livonia, MI

Housing Subsidy Payments

Detroit Housing Commission,

Hope VI Program, Detroit, MI

Supportive Housing Program,

Harmony House, Inc.,

Harrison, AR

Newport Resident Council,

Inc., Newport, RI

Nationwide Survey of HUD’s

Office of Housing Section 232

Nursing Home Program

New Mexico Public Interest

Education Fund, Outreach

and Training Assistance

Grant and Public Entity

Grant, Albuquerque, NM

Philadelphia Regional Alliance

of HUD Tenants, Outreach

and Training Assistance

Grant and Intermediary

Technical Assistance Grant,

Philadelphia, PA

Tenants Union, Outreach and

Training Assistance Grant

and Intermediary Training

Assistance Grant, Seattle, WA

Northwestern Regional

Housing Authority, Public

Housing Programs, Boone, NC

Low Rent Program, Housing

Authority of the City of

Morgan City, LA

09/17/1997

09/29/2000

05/16/2001

08/27/2001

04/30/2002

07/31/2002

09/30/2002

09/30/2002

12/02/2002

01/09/2003

02/21/2003

01/06/1998

02/21/2001

09/13/2001

12/21/2001

09/16/2002

11/22/2002

03/31/2003

03/31/2003

03/31/2003

06/02/2003

06/20/2003

Note 2

Note 2

06/30/2011

08/03/2007

01/15/2008

03/31/2008

Note 1

04/01/2008

Note 2

08/15/2007

12/31/2011

Tables
160

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2003-DE-0001

2003-NY-1005

2004-KC-1001

2004-BO-1004

2004-FO-0003

2004-AT-0001

2004-AO-0001

2004-DP-0002

2004-PH-1008

2004-AT-1012

2004-CH-1803

2004-CH-1008

2004-PH-1012

2004-FW-1009

HUD Offices of Multifamily

Housing Assistance

Restructuring’s Oversight of

the Section 514 Program

Activities

Empire State Development

Corporation, CDBG Disaster

Assistance Funds, New York,

NY

East Meyer Community

Association, Kansas City, MO

Danbury Housing Authority,

Capital Fund Program,

Boston, MA

HUD Financial Statements

FY 2003 and 2002

Public Housing Agency

Development Activities

Award and Administration of

Lead-Based Paint Hazard

Reduction Grants

Application Control Review

of the Tenant Rental

Assistance Certification

System

Safe Haven Outreach

Ministry, Incorporated,

Washington, DC

Housing Authority of the

City of Durham, NC

Somerset Point Nursing

Home, Multifamily Equity

Skimming, Shaker Heights,

OH

Cornerstone Mortgage Group,

Limited Non-Supervised Loan

Correspondent, Inverness, IL

Mortgage America Bankers,

LLC, Non-Supervised Loan

Correspondent, Kensington,

MD

Mays Property Management,

Inc., Multifamily

Management Agent, Little

Rock, AR

03/31/2003

09/30/2003

11/24/2003

12/05/2003

12/19/2003

01/13/2004

02/06/2004

02/25/2004

06/03/2004

08/02/2004

08/09/2004

09/10/2004

09/10/2004

09/17/2004

03/31/2003

01/28/2004

03/29/2004

04/05/2004

07/20/2004

05/20/2004

06/30/2004

07/14/2004

08/31/2004

11/29/2004

08/09/2004

01/05/2005

01/06/2005

02/23/2005

Note 1

Note 2

07/17/2007

12/01/2008

10/15/2007

04/20/2007

08/01/2007

01/30/2008

06/29/2007

12/31/2020

12/31/2007

Note 2

09/27/2007

05/15/2008

Tables
161

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2004-LA-1008

2005-CH-1001

2005-AT-1004

2005-CH-1003

2005-PH-1004

2005-AT-1005

2005-FW-1004

2005-LA-1002

2005-AT-1007

2005-PH-0001

2005-PH-1009

2005-BO-1003

United States Veterans

Initiative, Inc., Inglewood, CA

Prestige Mortgage Group,

Inc., Non-Supervised Loan

Correspondent, Springfield,

OH

Housing Authority of the

City of Durham, NC

Royal Oak Township Housing

Commission, Public Housing

Program, Ferndale, MI

Corrective Action Verification

Review of the Housing

Authority of Baltimore City,

MD, Section 8 Certificate and

Voucher Programs, Audit

Report Number 2001-PH1003

Pan American Financial

Corporation, Non-Supervised

Direct Endorsement Lender,

Guaynabo, PR

American Property Financial,

Non-Supervised Loan

Correspondent, San Antonio,

TX

Housing Authority of

Maricopa County, Mixed

Finance Development

Activities, Phoenix, AZ

Interstate Financial Mortgage

Group Corporation, NonSupervised Direct

Endorsement Lender, Miami,

FL

Criteria Governing Local

Government Participation in

HUD’s Single Family Property

Disposition Discount Sales

Program

Richmond Redeveloment and

Housing Authority Did Not

Always Properly Use HUD

Funds, Richmond, VA

Milford Housing Authority,

Selected Programs, Milford,

CT

09/27/2004

10/27/2004

11/19/2004

11/29/2004

12/21/2004

01/27/2005

01/28/2005

03/14/2005

03/15/2005

03/29/2005

04/08/2005

04/25/2005

03/31/2005

10/29/2004

03/15/2005

03/29/2005

04/20/2005

05/17/2005

05/27/2005

07/11/2005

08/04/2005

07/27/2005

07/28/2005

10/07/2005

04/15/2013

10/17/2007

03/15/2015

10/31/2007

04/30/2007

05/31/2007

05/31/2007

08/31/2007

12/30/2007

Note 2

04/30/2007

04/17/2007

Tables
162

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2005-DE-1004

2005-DE-0001

2005-LA-1003

2005-FW-1010

2005-NY-1005

2005-LA-1006

2005-BO-1004

2005-CH-1012

2005-CH-1013

2005-BO-1006

2005-LA-0001

2005-AT-1013

Aspen Home Loans, American

Fork, UT

HUD’s Controls Over FHA

Claims Payments

First Source Financial USA,

Henderson, NV

Broad Street Mortgage

Company, Subsidiary of

Fieldstone Mortgage Company,

San Antonio, TX

The Housing Authority of the

City of Newark, Bond

Financing Activities and

Section 8 Housing Choice

Administrative Fee Reserves,

Newark, NJ

Maricopa Home Consortium

Home Program, Mesa, AZ

Housing Choice Voucher and

Low-Income Public Housing

Program Deficiencies at the

Bridgeport Housing

Authority Resulted in $3.8

Million in Questioned Costs,

Bridgeport, CT

Savanna Trace Apartments

Multifamily Equity

Skimming, Kalamazoo, MI

Ivan Woods Senior

Apartments Multifamily

Equity Skimming, Lansing,

MI

The Hartford Housing

Authority Improperly Used

$3.7 Million in Public

Housing Operating Subsidies

for Its State and Other

Federal Programs, Hartford,

CT

Single Family Preforeclosure

Sale Program

Corporacion Para el Fomento

Economico de la Ciudad

Capital Did Not Administer

Its Independent Capital Fund

in Accordance with HUD

Requirements, San Juan, PR

05/06/2005

05/12/2005

05/12/2005

05/26/2005

05/26/2005

07/28/2005

07/29/2005

08/04/2005

08/05/2005

09/06/2005

09/13/2005

09/15/2005

08/31/2005

09/09/2005

09/08/2005

07/13/2006

09/23/2005

11/22/2005

11/25/2005

12/28/2005

12/28/2005

01/03/2006

01/10/2006

01/11/2006

08/31/2007

Note 2

05/31/2007

07/16/2007

07/31/2007

08/31/2007

05/24/2007

02/29/2008

02/29/2008

01/31/2008

Note 2

07/11/2007

Tables
163

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2005-NY-1007

2005-SE-1007

2005 -SE-1008

2005-CH-1017

2005-FW-1018

2005-NY-1008

2005-AT-1015

2005-CH-1020

2005-BO-0002

2005-KC-1009

2006-BO-1001

Security Atlantic Mortgage

Company, Inc., Did Not

Always Comply with HUD/

FHA Loan Origination

Requirements, Edison, NJ

City Bank Puyallup, WA

Idaho Housing and Finance

Association, Boise, ID

Flint Housing Commission,

Section 8 Housing Program,

Flint, MI

The Housing Authority of the

City of Houston Violated

HUD Regulations Concerning

Section 8 Housing Choice

Voucher Tenants and Units,

Houston, TX

Lower Manhattan

Development Corporation,

CDBG Program Disaster

Assistance Fund, New York,

NY

The Municipality of San Juan

Housing Authority Did Not

Properly Administer its

Section 8 Housing Choice

Voucher Program, San Juan,

PR

Housing Authority of the

City of Gary, Section 8

Housing Program, Gary, IN

HUD Did Not Conduct a

Front-End Risk Assessment

and, Therefore, Fully

Implement Controls for the

Public Housing Mortgages

and Security Interest Program

Washington Mutual Bank

Did Not Follow HUD

Regulations When

Underwriting Six Loans,

Seattle, WA

The Division of Grants

Management, City of

Hartford, Paid $1,039,296 for

Ineligible CDBG Activities

and Failed to Return Income

to the Program, Hartford, CT

09/16/2005

09/16/2005

09/16/2005

09/23/2005

09/27/2005

09/27/2005

09/29/2005

09/29/2005

09/30/2005

09/30/2005

10/07/2005

01/13/2006

12/20/2005

03/31/2006

01/20/2006

01/24/2006

08/22/2006

01/12/2006

01/25/2006

12/20/2005

01/11/2006

02/02/2006

Note 2

06/20/2007

Note 2

01/20/2016

12/31/2007

Note 2

09/30/2007

12/31/2052

12/31/2007

Note 2

06/30/2007

Tables
164

10/31/2005

11/30/2005

11/30/2005

12/07/2005

12/13/2005

12/30/2005

01/10/2006

01/11/2006

01/13/2006

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2006-LA-1001

2006-CH-0001

2006-PH-1003

2006-PH-0001

2006-FW-1002

2006-CH-1005

2006-PH-1005

2006-AT-1002

2006-AT-1004

Ryland Mortgage Company

Did Not Follow HUD

Requirements in the

Origination of Insured Loans,

Tempe, AZ

Real Estate Assessment

Center’s Physical Condition

Assessment Was

Compromised

The Franklin Redevelopment

and Housing Authority Did

Not Adequately Administer

Its Section 8 Program,

Franklin, VA

HUD Did Not Properly

Award FY 2004 Healthy

Homes and Lead Hazard

Control Grants

Baytown Housing Authority

Improperly Advanced,

Transferred, and Encumbered

Its Public Housing Funds,

Baytown, TX

Fairfield Metropolitan

Housing Authority Used

Annual Contributions

Contract Funds for

Development Activities

Outside Its Annual

Contributions Contract,

Lancaster, OH

The Housing Authority of the

County of Butler Used HUD

Assets Improperly to Develop

and Support Its Nonfederal

Entities, Butler, PA

The Housing Authority of the

City of Prichard’s Controls

Over the Sale of Affordable

Housing Units, Use of Sales

Proceeds, and Expenditure of

Low-Income Funds Were

Inadequate, Prichard, AL

The Housing Authority of the

City of Prichard Did Not

Ensure Section 8 Subsidy

Payments Were for Eligible

Units, Tenants, and

Landlords, Prichard, AL

07/13/2006

01/10/2006

03/28/2006

08/25/2006

04/07/2006

04/28/2006

04/28/2006

05/11/2006

04/25/2006

07/16/2007

11/30/2008

10/30/2007

06/30/2007

04/07/2007

04/27/2007

05/01/2007

05/11/2007

12/31/2008

Tables
165

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2006-KC-1004

2006-FW-1004

2006-SE-1001

2006-DP-0003

2006-NY-1002

2006-NY-1003

2006-NY-1004

2006-AT-1006

2006-LA-1009

Major Mortgage Improperly

Submitted Late Requests for

Endorsement of FHA Loans,

Cheyenne, WY

K Hovnanian American

Mortgage, LLC, Violated

Underwriting Requirements

and Did Not Meet All Quality

Control or Branch

Requirements, Plano, TX

Idaho Housing and Finance

Association Did Not Monitor

Subsidized Multifamily

Projects in Accordance with

Regulations or Its Annual

Contributions Contract with

HUD, Boise, ID

Vulnerability Assessment of

HUD’s Computer Network

WomenRising, Inc., Did Not

Always Comply with HUD’s

Supportive Housing Program,

Jersey City, NJ

The Housing Authority of the

City of Newark’s Controls

Over Bond Financing

Activities, Obtaining

Supporting Documentation,

and Legal Settlements

Require Improvement,

Newark, NJ

Mount Vernon Urban

Renewal Agency, Section 8

Housing Choice Voucher

Program, Has Administrative

and Financial Management

Weaknesses, Mount Vernon,

NY

The Municipality of San Juan

Housing Authority Did Not

Ensure Section 8 Assisted

Units Were Decent, Safe, and

Sanitary, San Juan, PR

Fontana Native American

Indian Center Did Not

Adequately Administer Its

Supportive Housing Program

Grant, Fontana, CA

01/20/2006

01/26/2006

01/26/2006

01/31/2006

01/31/2006

02/14/2006

02/16/2006

02/23/2006

03/03/2006

05/08/2006

5/25/2006

05/23/2006

04/19/2006

05/11/2006

08/17/2006

06/23/2006

05/15/2006

03/17/2006

05/08/2007

05/15/2007

12/31/2008

06/30/2008

04/30/2007

12/31/2008

06/20/2007

05/15/2007

Note 2

Tables
166

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2006-LA-1010

2006-BO-1005

2006-CH-1007

2006-PH-1009

2006-FW-1006

2006-AT-1007

2006-CH-1008

2006-FW-1007

The Owner and Agent of

Holiday Apartments, LA PRO

30, and Two Worlds II

Mismanaged Project Finances

and Operations, Los Angeles,

CA

Hartford Housing Authority

Had Housing Choice Voucher

Program Deficiencies

Resulting in More Than $2.6

Million in Costs Exceptions,

Hartford, CT

Huntington National Bank,

Supervised Lender, Generally

Complied with Requirements

Regarding Submission of Late

Requests for Endoresement

and Underwriting of Loans,

Columbus, OH

The Housing Autority of the

City of Annapolis Did Not

Adequately Administer Its

Section 8 Waiting List,

Annapolis, MD

America’s Mortgage Resource,

Inc., Branch Manager Formed

an Identity-of-Interest Entity

That Provided Gift Funds;

and Did Not Always Meet

HUD Loan Origination and

Quality Control Plan

Requirements. Metairie, LA

The Housing Authority of the

City of Winston-Salem Used

More Than $4.9 Million in

Operating Subsidies for Other

Programs, Winston-Salem,

NC

US Bank NA, Supervised

Lender, Did Not Always

Comply with HUD’s

Requirements Regarding Late

Requests for Endorsements

and Underwriting of Loans,

Minneapolis, MN

BSM Financial LP Originated

Loans on Overvalued

Properties to Less Than

Creditworthy Borrowers,

Putting Borrowers and HUD

at Risk, Allen, TX

06/23/2006

07/07/2006

09/18/2006

05/24/2006

07/14/2006

07/20/2006

09/18/2006

08/18/2006

05/01/2007

04/30/2007

08/10/2008

05/24/2007

10/31/2007

07/31/2011

08/14/2008

10/01/2007

03/03/2006

03/10/2006

03/15/2006

03/23/2006

03/28/2006

03/30/2006

03/31/2006

03/31/2006

Tables
167

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2006-CH-1009

2006-PH-1010

2006-FW-1010

2006-AT-1009

2006-CH-1010

2006-AT-1010

2006-PH-0002

2006-NY-0001

The Youngstown

Metropolitan Housing

Authority Did Not Use Public

Housing Operating Funds

Effectively and Efficiently,

Youngstown, OH

The Housing Authority of the

County of Butler Needed to

Improve Administration of Its

Section 8 Housing Choice

Voucher Program, Butler, PA

Deer Creek Apartments’

Previous Management Agent

Paid Itself Unsupported Fees,

Houston, TX

The Metropolitan

Development and Housing

Agency Did Not Ensure

Section 8-Assisted Units

Were Decent, Safe and

Sanitary, Nashville, TN

The Benton Harbor Housing

Commission Lacked

Supporting Documentation

and Did Not Follow

Procurement Requirements

Regarding Its Public Housing

Capital Fund Program,

Benton Harbor, MI

The Orlando Housing

Authority Did Not Ensure

That All Section 8 Units Met

Housing Quality Standards

and Paid Excessive Subsidies

for Some Units, Orlando, FL

HUD Improperly Admitted

the Housing Authority of

Baltimore City into the MTW

Demonstration Program,

Baltimore, MD

HUD’s Controls Over the

Reporting, Oversight, and

Monitoring of the Housing

Counseling Assistance

Program Were Not Adequate

04/18/2006

04/20/2006

05/11/2006

05/18/2006

05/18/2006

05/31/2006

05/31/2006

06/08/2006

08/16/2006

08/18/2006

05/11/2006

08/04/2006

09/08/2006

09/21/2006

10/24/2006

01/08/2007

07/30/2007

08/01/2007

05/11/2007

04/30/2007

10/01/2007

04/03/2007

06/30/2007

10/31/2007

Tables
168

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2006-FW-1011

2006-KC-0003

2006-NY-1007

2006-LA-1012

2006-AT-1012

2006-KC-1011

2006-KC-1012

2006-BO-1008

2006-NY-1008

Premier Mortgage Funding,

Inc. and Its Sponsor,

JPMorgan Chase, Did Not

Comply with HUD

Underwriting Requirements

and Did Not Meet All Quality

Control Requirements,

Austin, TX

HUD Did Not Ensute That

the Omaha Housing

Authority Repaid Its Public

Housing Programs $2.7

Million, Omaha, NE

First Suffolk Mortgage

Corporation Did Not Always

Comply with HUD

Underwriting Requirements,

North Babylon, NY

The Housing Authority of the

City of Los Angeles Did Not

Adequately Determine and

Support Section 8 Tenant

Eligibility, Los Angeles, CA

The Miami Dade Housing

Agency Paid Housing Choice

Voucher Program Funds for

Some Overhoused Tenants,

Miami, FL

The Owner of Wellston

Townhouses in St. Louis

County Violated Its

Regulatory Agreement,

Wellston, MO

The Owner of HDC

Retirement Village in St.

Louis Violated Its Regulatory

Agreement, St. Louis, MO

Hall Commons Inc. Did Not

Administer Its $4.1 Million

Section 202 Capital Advance

Construction Grant in

Accordance With Federal

Requirements, Bridgeport, CT

The Freeport Housing

Autority Has Financial and

Management Control

Weaknesses, Freeport, NY

12/20/2006

09/13/2006

09/14/2006

10/11/2006

10/04/2006

09/06/2006

08/31/2006

10/25/2006

12/01/2006

07/31/2007

09/30/2008

07/31/2007

05/31/2007

06/25/2007

10/30/2007

10/30/2007

04/25/2007

10/31/2007

06/16/2006

06/19/2006

06/19/2006

06/20/2006

06/28/2006

06/29/2006

06/29/2006

06/30/2006

06/30/2006

Tables
169

2006-BO-1009

2006-CH-1011

2006-BO-0001

2006-CH-1012

2006-CH-0002

2006-LA-1013

2006-DE-1004

2006-LA-1015

2006-CH-0003

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

The Rhode Island Housing

and Mortgage Finance

Corporation Incorrectly Made

More Than $1.8 Million in

Section 8 Subsidy Payments

and Released More Than

$900,000 from Restricted

Residual Receipts Accounts,

Providence, RI

The Columbus Metropolitan

Housing Authority Did Not

Effectively Operate Its Section

8 Housing Program,

Columbus, OH

HUD Incorrectly Approved

$42 Million in Operating

Subsidies for Phase-Down for

Demolition Add-On Funding

The Housing Authority of the

County of Cook Needs to

Improve Its Section 8 Housing

Program Administration,

Chicago, IL

PIH is Taking Action to

Oversee the Section 202

Mandatory Conversion

Program, Washington, DC

The Child Abuse Prevention

Council of Sacramento Did

Not Adequately Administer

Its Healthy Homes Initiative

Grant, North Highlands, CA

Juniper Communities Did

Not Comply with Its

Regulatory Agreement or

HUD Regulations in

Managing Its FHA-Insured

Projects, Bloomfield, NJ

Institute for Urban Research

and Development Did Not

Properly Administer Its

Supportive Housing Program

Grants, El Monte, CA

The Congressional Grants

Division’s Oversight of

Economic Development

Initiative-Special Purpose

Grants Needs to be Improved,

Washington, DC

07/06/2006

07/06/2006

07/11/2006

07/11/2006

07/13/2006

07/17/2006

07/18/2006

07/19/2006

07/21/2006

10/24/2006

11/02/2006

10/13/2006

11/06/2006

07/13/2006

11/09/2006

10/04/2006

11/16/2006

11/16/2006

12/01/2009

12/31/2007

10/01/2008

03/31/2017

12/31/2009

11/08/2007

05/17/2007

11/16/2007

10/20/2007

Tables
170

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2006-CH-1013

2006-LA-1017

2006-FW-1013

2006-AT-1015

2006-AT-1016

2006-CH-1014

2006-NY-1009

2006-SE-0002

The Ann Arbor Housing

Commission’s

Administration of Its Section

8 Housing Choice Voucher

Program Needs to be

Improved, Ann Arbor, MI

The Housing Authority of the

City of Las Vegas Did Not

Comply with Contracting

and Grant Use Requirements,

Las Vegas, NV

The Housing Authority of the

City of Denton Made Subsidy

Calculation Errors and

Overhoused Tenants, Denton,

TX

The Municipality of Bayamon

Housing Authority Did Not

Ensure Section 8-Assisted

Units Were Decent, Safe, and

Sanitary, Bayamon, PR

The Municipality of Humacao

Did Not Administer Its

CDBG in Accordance with

HUD Requirements,

Humacao, PR

National City Mortgage

Company, Nonsupervised

Lender Did Not Comply with

HUD’s Requirements

Regarding Underwriting of

Loans and Quality Control

Reviews, Miamisburg, OH

First Residential Mortgage

Services Corporation Did Not

Always Comply with HUD/

FHA Loan Origination

Requirements, Englewood

Cliffs, NJ

The Office of Single Family

Housing Expanded Late

Endorsement Eligibility

Without Studying Associated

Risks

11/15/2006

11/09/2006

11/08/2006

11/17/2006

11/17/2006

01/31/2007

12/12/2006

03/30/2007

12/31/2016

11/30/2007

04/30/2007

06/30/2007

07/01/2007

07/31/2007

08/31/2007

06/30/2007

07/21/2006

07/21/2006

07/26/2006

07/27/2006

07/28/2006

07/31/2006

08/14/2006

08/16/2006

Tables
171

2006-BO-1011

2006-AT-0001

2006-KC-1013

2006-DE-1006

2006-DP-0005

2006-FW-1015

2006-AT-1019

2006-LA-1019

2006-PH-1013

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

The Portland Housing

Authority Did Not Use

Reserve Funds or Properly

Allocate Employee Costs,

Resulting in Questioned

Costs of More Than $850,000,

Portland, ME

The Procurement Office Did

Not Maintain Complete

Contract Files

The Columbus Housing

Authority Improperly

Expended and Encumbered

Its Public Housing Funds,

Columbus, NE

Nexgen Lending, Inc.’s

Lakewood Branch Did Not

Follow HUD Requirements in

Underwriting Two Insured

Loans, Lakewood, CO

Review of HUD’s Information

Technology Contingency

Planning and Preparedness

The Housing Authority of the

City of Austin Overhoused

Tenants and Paid Excessive

HAPs in the Section 8

Housing Choice Voucher

Program, Austin, TX

The Municipality of Tao Baja

Did Not Administer Its

Section 108 Loan Guarantee

Assistance Program in

Accordance with HUD

Requirements, Tao Baja, PR

The City of Modesto Did Not

Always Administer Its CDBG

in Compliance with

Government Regulations,

Modesto, CA

The Commonwealth of

Virginia Did Not Ensure

HOME Funds Were

Disbursed and Used in

Accordance with Federal

Regulations, Richmond, VA

08/28/2006

08/29/2006

08/30/2006

08/31/2006

08/31/2006

09/01/2006

09/06/2006

09/07/2006

09/18/2006

12/19/2006

12/22/2006

10/17/2006

11/08/2006

11/17/2006

02/01/2007

12/11/2006

02/12/2007

01/16/2007

06/19/2007

06/30/2007

12/31/2007

08/31/2007

11/30/2007

07/01/2007

08/07/2007

01/31/2008

01/11/2008

Tables
172

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2006-NY-1010

2006-NY-1011

2006-DP-0802

2006-NY-1012

2006-PH-1014

2006-CH-1016

2006-CH-1017

2006-KC-1014

2006-CH-1018

Orange City Housing

Authority Has Weakness in

Its Housing Choice Voucher

Program, Orange, NJ

Orange City Housing

Authority Incorrectly Paid the

City’s Street Lighting Costs

and Improperly Wrote-off a

Receivable, Orange, NJ

Assessment of HUD’s

Compliance with OMB

Memorandum M-06-16,

“Protection of Sensitive

Agency Information”

The Housing Authority of the

City of Passaic Has

Allegations of

Mismanagement That Need

to be Addressed, Passaic, NJ

The Housing Authority of the

City of McKeesport Needed to

Improve Its Low-Rent

Housing Maintenance

Program, McKeesport, PA

Pickaway Metropolitan

Housing Authority

Improperly Used

Homeownership Sales

Proceeds to Fund Its

Nonprofit Development

Activities, Circleville, OH

Community Cantral Bank,

Supervised Lender, Generally

Complied with HUD’s

Requirements Regarding

Underwriting of Loans but

Not Its Quality Control

Reviews, Mount Clemens, MI

The Columbus Housing

Authority Improperly Spent

and Encumbered Public

Housing Funds for Its NonHUD Development Activities,

Columbus, NE

Saginaw Housing

Commission Improperly

Used Public Housing Funds

to Purchase Property,

Saginaw, MI

01/18/2007

01/18/2007

11/24/2006

01/19/2007

01/22/2007

12/18/2006

03/12/2007

01/11/2007

01/19/2007

07/31/2007

07/31/2007

10/30/2007

12/31/2007

01/15/2014

10/01/2007

03/31/2009

01/31/2008

12/31/2021

09/20/2006

09/20/2006

09/21/2006

09/22/2006

09/25/2006

09/26/2006

09/26/2006

09/27/2006

09/28/2006

Tables
173

2006-CH-1019

2006-CH-1020

2006-CH-1021

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

Lucas Metropolitan Housing

Authority Did Not Effectively

Operate Its Section 8 Housing

Choice Voucher Program,

Toledo, OH

Rockford Housing Authority

Needs to Improve Its

Controls Over Program

Housing Assistance and

Utility Allowance Payments,

Rockford, IL

Housing Authority of the

County of Cook Had Weak

Controls Over Its Section 8

Housing Choice Voucher

Program, Chicago, IL

09/29/2006

09/29/2006

09/30/2006

12/07/2006

01/25/2007

01/26/2007

06/01/2007

09/30/2052

09/30/2037

AUDITS EXCLUDED:

39 audits under repayment plans

31 audits under formal judicial

review, investigation, or legislative

solution

NOTES:

1 Management did not meet the

 target date. Target date is over

 1 year old.

2 Management did not meet the

 target date. Target date is under

 1 year old.

3 No Management decision.

Tables
174

Table C

Inspector General Issued Reports with Questioned and

Unsupported Costs at March 31, 2007

(Thousands)

Audit Reports Number of Questioned Unsupported

 Audit Reports Costs Costs

A1

A2

A3

A4

B1

B2

C

D

E

For which no management

decision had been made by the

commencement of the reporting

period

For which litigation, legislation

or investigation was pending at

the commencement of the

reporting period

For which additional costs were

added to reports in beginning

inventory

For which costs were added to

non-cost reports

Which were issued during the

reporting period

Which were reopened during

the reporting period

Subtotals (A+B)

For which a management

decision was made during the

reporting period

(1) Dollar value of disallowed

 costs:

 - Due HUD

 - Due program participants

(2) Dollar value of costs not

 disallowed

For which management decision

had been made not to determine

costs until completion of

litigation, legislation or

investigation

For which no management

decision had made by the end of

the reporting period

63,410

30,312

281

0

18,707

0

112,710

68,715

45,038

22,535

1,142

28,022

15,973

< 14,260 >4

47

12

-

0

33

0

92

591

232

40

123

11

22

< 68 >4

1 41 audit reports also contain recommendations with funds be put to better use.

2 7 audit reports also contain recommendations with funds due program participants.

3 9 audit reports also contain recommendations with funds agreed to by management.

4 The figures in brackets represent data at the recommendation level as compared to the report level.

 See Explanations of Tables C and D.

32,392

18,652

26

0

12,174

0

63,244

35,214

19,893

14,714

607

17,182

10,848

< 9,754 >4

Tables
175

Table D

Inspector General Issued Reports with Recommendations That

Funds be Put to Better Use at March 31, 2007

(Thousands)

Audit Reports Number of Dollar

 Audit Reports Value

For which no management decision had

been made by the commencement of the

reporting period

For which litigation, legislation or

investigation was pending at the

commencement of the reporting period

For which additional costs were added to

reports in beginning inventory

For which costs were added to non-cost

reports

Which were issued during the reporting

period

Which were reopened during the reporting

period

Subtotals (A+B)

For which a management decision was

made during the reporting period

(1) Dollar value of recommendations that

 were agreed to by management:

 - Due HUD

 - Due program participants

(2) Dollar value of recommendations that

 were not agreed to by management

For which management decision had been

made not to determine costs until

completion of litigation, legislation or

investigation

For which no management decision had

made by the end of the reporting period

34

10

-

0

32

0

76

491

152

32

113

9

18

< 29 >4

1 41 audit reports also contain recommendations with questioned costs.

2 1 audit report also contains recommendations with funds due program participants.

3 8 audit reports also contain recommendations with funds agreed to by management.

4 The figures in brackets represent data at the recommendation level as compared to the report level.

 See Explanations of Tables C and D.

A1

A2

A3

A4

B1

B2

C

D

E

271,079

117,298

23

0

755,015

0

1,143,415

675,955

571,513

83,823

20,619

116,946

350,514

< 241,722 >4

Tables
176

Explanations of Tables C and D

The Inspector General Act Amendments of 1988 require Inspectors General and

agency heads to report cost data on management decisions and final actions on audit

reports. The current method of reporting at the "report" level rather than at the

individual audit "recommendation" level results in misleading reporting of cost data.

Under the Act, an audit "report" does not have a management decision or final action

until all questioned cost items or other recommendations have a management decision

or final action. Under these circumstances, the use of the "report" based rather than the

"recommendation" based method of reporting distorts the actual agency efforts to

resolve and complete action on audit recommendations. For example, certain cost items

or recommendations could have a management decision and repayment (final action)

in a short period of time. Other cost items or nonmonetary recommendation issues in

the same audit report may be more complex, requiring a longer period of time for

management's decision or final action. Although management may have taken timely

action on all but one of many recommendations in an audit report, the current "all or

nothing" reporting format does not take recognition of their efforts.

The closing inventory for items with no management decision on Tables C and D

(Line E) reflects figures at the report level as well as the recommendation level.

  

Tables
Appendix 3

Index
178

Index

State Page Numbers

Alabama 33, 62, 66, 105

Arizona 11, 17, 53, 55, 130, 140

Arkansas 43, 68

California 15, 16, 18, 19, 20, 22, 23, 24, 28, 36, 37, 39, 51, 52, 55,

56, 57, 58, 59, 62, 64, 65, 67, 75, 87, 107, 109, 126, 129,

130, 131, 132, 134, 135, 136

Colorado 15, 16, 17, 18, 21, 22, 23, 24, 65, 71, 88, 129

Connecticut 48, 51, 68, 70, 82, 86, 124, 136

Delaware 63

District of Columbia 33, 64, 112, 113, 116, 117, 118

Florida 19, 49, 50, 52, 56, 60, 63, 66, 70, 93, 124, 125, 127, 128,

135

Georgia 9, 14, 20, 24, 25, 56, 70, 86, 93, 95, 132, 137

Hawaii 139

Illinois 14, 16, 26, 27, 29, 43, 50, 53, 55, 61, 81, 90, 108, 124,

125, 126, 131, 135, 137

Indiana 35, 40, 44, 47, 90

Iowa 11

Kansas 19, 23, 29, 58, 64, 81, 136

Kentucky 67

Louisiana 21, 48, 49, 70, 99, 104, 106, 108, 109, 110, 112

Maine 59, 67, 81, 95, 140

Maryland 24, 71, 131, 132

Massachusetts 18, 46, 53, 58, 60, 64, 69, 70, 79, 80, 81, 85, 91, 94

Michigan 16, 25, 26, 28, 41, 55, 72, 80, 128, 132, 135

Mississippi 48, 59, 70, 82, 99, 105, 108, 111

Missouri 16, 50, 59, 62, 63, 64, 72, 82, 85, 93, 125, 139

Montana 62

Nebraska 61, 88

Nevada 54, 59, 61, 127

New Hampshire 96, 134

New Jersey 17, 20, 21, 47, 70, 91, 94, 95, 139

New Mexico 51

New York 14, 20, 27, 28, 29, 38, 54, 66, 69, 71, 75, 77, 79, 81, 82,

86, 92, 94, 127

North Carolina 14, 40, 47, 52, 63, 70, 120, 132, 133, 134, 140

Ohio 10, 34, 54, 60, 68, 94, 126

Index
179

State Page Numbers

Oklahoma 51, 57, 76, 79, 133, 134, 138

Oregon 134

Pennsylvania 9, 19, 38, 43, 61, 63, 64, 72, 92, 110, 125, 129, 132, 137

Puerto Rico 34

Rhode Island 11, 76, 133, 140

South Carolina 126

South Dakota 51, 67

Texas 10, 22, 23, 28, 36, 37, 42, 46, 50, 61, 67, 79, 82, 93, 99,

110, 112, 127, 133, 135, 136, 137, 138

Utah 25, 62, 65, 71, 128

Vermont 60

Virginia 24, 25, 27, 28, 41, 57, 58, 61, 66, 71

Virgin Islands 49

Washington 58, 87, 110, 128, 138, 140

Wisconsin 47

Index

  

HUD OIG Operations

Telephone Listing
182

Office of Audit

Headquarters Office of Audit, Washington, DC 202-708-0364

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HUD OIG Operations Telephone Listing
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Office of Investigation

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HUD OIG Operations Telephone Listing

Report fraud, waste, and mismanagement

 in HUD programs and operations by:

Calling the OIG Hotline: 1-800-347-3735

Faxing the OIG Hotline: 202-708-4829

Sending written information to:

Department of Housing and Urban Development

Inspector General Hotline (GFI)

451 7th Street, SW

Washington, DC 20410

Emailing the OIG Hotline: hotline@hudoig.gov

Internet:

http://www.hud.gov/complaints/fraud_waste.cfm

All information is confidential,

and you may remain anonymous.
Semiannual Report to Congress

October 1, 2007, through March 31, 2007

www.hud.gov/offices/oig

No. 57 HUD-2007-02-OIG