i

Semiannual Report to Congress

April 1, 2007, through September 30, 2007

U.S. Department of Housing and Urban Development

Office of Inspector General
Profile of Performance

Results

$2,638,958

$258,341

Hotline Profile of Performance

for the period, April 1, 2007, through September 30, 2007

Funds Put to Better Use

Recoveries/Receivables

Results

Investigation Profile of Performance

for the period, April 1, 2007, through September 30, 2007

$14,738,892

$84,833,879

644

493

76

730

26

907

63

8

469

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

$192,726,922

$49,073,613

$21,424,955

2

Audit Profile of Performance

for the period, April 1, 2007, through September 30, 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.

$947,764,363

$68,061,089

$35,960,277

8

FY 07 Totals

$56,964,264

$275,010,163

1,338

1,055

107

1,780

50

2,684

93

15

902

FY 07 Totals

$5,155,154

$438,161

FY 07 Totals
iii

Inspector General’s Message

Inspector General’s Message

It is with great satisfaction that I present the U.S.

Department of Housing and Urban Development

Office of Inspector General (HUD OIG) Semiannual

Report to the Congress for the second half of fiscal

year 2007. HUD OIG employees - auditors, agents,

attorneys, and support staff - have been in the thick

of the issues that greatly affect our domestic life.

Whether it is Gulf Coast disaster relief, single-family

housing fraud, Section 8 rental subsidy fraud, or any

fraud against HUD programs or operations, HUD OIG

is engaged and garnering results, for which we are

justly proud.

This report marks the eleventh time I have

reported on HUD OIG's extraordinary activities, and

we just keep enhancing our efforts time after time.

During the reporting period, we had $210,104,772 in funds put to better use, questioned

costs of $49,073,613, and $85,092,220 in recoveries and receivables. This is exceptional

work by our staff that has resulted in significant positive impact on fraud and misuse of

taxpayer dollars. I am grateful to all of our staff nationwide who worked so hard this

year to achieve this milestone.

The year 2007 marks the removal of HUD's single-family mortgage insurance and

rental housing assistance programs from the Government Accountability Office's list

of agencies with high-risk programs. HUD OIG's continued cooperation and oversight

of these programs was a contributing factor to this welcome action; however, we

continue to stress that the Department place a high priority on management efficiency

and effectiveness.

I direct your attention to our high profile audits and investigations. HUD OIG staff

increased and improved their cooperation and collaboration with the Department and

as a result, developed and implemented better and more effective audit

recommendations. Agents from our Office of Investigation also enhanced their

cooperation with the Department as a new source for new investigative avenues.

For example, homebuyers in Brooklyn, NY, are a little safer with the incarceration

of the branch officers of the Brucha Mortgage Bank. Using false documents and

appraisals, these individuals flipped properties and skimmed construction funds, causing

$11.6 million in losses to HUD after 58 mortgages defaulted. Homebuyers in the Los

Angeles area are less at risk with the sentencing of the owner and staff of the Atlas

Home Loan company. Using identity fraud, false Social Security numbers, and fraudulent

employment documents, they allowed unqualified and straw borrowers to get Federal

Housing Administration (FHA)-insured mortgages, resulting in losses to HUD and the

default of 42 mortgages.
iv Inspector General’s Message

Public housing residents in Northern Illinois are better served with the conviction

of the owner of William Moorehead & Associates who embezzled nearly a million dollars

from properties the company was hired to manage. The waiting list for New York City

Housing Authority Section 8 vouchers became shorter when 31 people were arrested

for false income certifications and obtaining more than $1.1 million in housing assistance

they were not entitled to receive.

In the Gulf States, Congress has authorized more than $16 billion dollars. As those

funds start to be used, HUD OIG will be increasing its scrutiny of how the monies are

spent.

Significant HUD OIG audits show that HUD needs to improve controls over its

contract administration process and ensure that payments to contract administrators

were for work performed. An audit of manufactured housing loans showed that more

than 80 percent of recently insured Title II manufactured housing loans are on homes

with substandard foundations. In each of these audits, recommendations were made

that will significantly impact the efficiency and effectiveness of these programs and

protect the safety and financial investment of these occupants.

HUD OIG is also dedicated and committed to becoming a more efficient and

effective organization itself, better at recovering taxpayer funds and bringing to justice

people who perpetrate crimes against the citizens and government of this country.

It is with obvious and justifiable pride that I thank the staff of HUD OIG for their

tireless work in their struggle against waste, fraud, and abuse in the Nation's housing

and urban development programs.

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

Public & Indian

Housing

51%

Multifamily

Housing

18%

Community

Planning &

Development

11%

Public and Indian

Housing

39%

Multifamily

Housing

15%

Single-Family

Housing

11%

Community

Planning &

Development

26%

Other

Programs

9%

140

120

100

80

60

40

20

0

$48.2 $42.1

$122.7

$26.9

Single

Family

Housing

Multifamily

Housing

Public &

Indian

Housing

Community

Planning &

Development

Single-Family

Housing

20%
vi

Investigation Cases Opened by Program (Total: 596)

Investigation Recoveries by Program (Total: 84,833,879)

Investigation Charts

Multifamily

Housing

9% (52)

Public and Indian Housing

55% (327)

Other

7% (43)

Community Planning

& Development

17% (102)

Single-Family

Housing

12% (72)

70,000,000

60,000,000

50,000,000

40,000,000

30,000,000

20,000,000

10,000,000

0

$2,221,943

Community

Planning &

Development

Multifamily

Housing

Public &

Indian

Housing

Single

Family

Housing

Other

Programs

 $6,052,765 $8,064,369

 $64,050,725

 $4,444,077
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

GNND Good Neighbor Next Door

HHS U.S. Department of Health and Human Services

HOME Home Ownership Made Easy

HOPWA Housing Opportunities for Persons with AIDS

HUD U.S. Department of Housing and Urban Development

Acronyms List
viii

ICE Immigration and Customs Enforcement

IG Inspector General

IRS Internal Revenue Service

KDHAP Katrina Disaster Housing Assistance Program

MAP Multifamily Accelerated Processing

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 25

Audits 26

Investigations 40

Chapter 3 - HUD’s Multifamily Housing Programs 71

Audits 72

Investigations 78

Chapter 4 - HUD’s Community Planning and Development Programs 85

Audits 86

Investigations 96

Chapter 5 - Hurricane Relief Oversight 103

Introduction and Background 105

Audits 109

Investigations 111

Chapter 6 - Other Significant Audits and Investigations/OIG Hotline 119

Audits 120

Investigations 124

OIG Hotline 126

Chapter 7 - Outreach Efforts 129

Single-Family Housing Programs 130

Public Housing and Rental Assistance Programs 133

Community Planning and Development 137

Law Enforcement Outreach 138

Audit Outreach 140

HUD Staff and Other Outreach 141

Chapter 8 - Review of Policy Directives 145

Proposed Legislation 146

Final Rule 147

Proposed Rules 147

Chapter 9 - Audit Resolution 149

Significant Management Decision with Which OIG Disagrees 151

Federal Financial Management Improvement Act of 1996 151

Appendix 1 - Audit Reports Issued 153

Appendix 2 - Tables 161

Appendix 3 - Index 181

HUD OIG Operations Telephone Listing 185

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. 144-148

Section 5(a)(1)-description of significant problems, abuses, and 1-127, 144-148

deficiencies relating to the administration of programs and operations

of the Department.

Section 5(a)(2)-description of recommendations for corrective action with 7-127

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 7-127

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 7-127

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 151

decision with which the Inspector General is in disagreement.

Section 5(a)(13)-the information described under section 05(b) of the 151

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 HUD correct program weaknesses to ensure that page 9

 manufactured housing foundations meet FHA requirements.

- Recommended HUD initiate settlement negotiations with Suburban page 10

 Mortgage for actual and potential losses on loans involving overvalued

 condominiums loans with significant underwriting deficiencies.

- Recommended HUD establish and implement procedures to better page 12

 accomplish HUD's goals regarding its real estate-owned properties.

- $2.5 million forfeited and more than 2 years imprisonment imposed in a page 14

 loan origination scam

- Underwriter pleas guilty - HUD losses exceed $9.8 million page 14

- HUD direct endorsement lender goes to prison page 19

- Real Estate Settlement Procedures Act violators ordered to pay HUD page 22

 more than $200,000

- HUD issued a final rule regarding seller-funded downpayment assistance page 147

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

- Challenges resulting from an increase in FHA-insured Home Equity Conversion

 Mortgages (also known as "reverse mortgages")

- Risk-based premium pricing and FHA refinancing of subprime loans (FHA Secure)

- Gulf Coast States Homeowner’s Assistance programs

Executive Highlights
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)

- Regional Rental Assistance Fraud Initiative

- Public Housing Fugitive Felon Initiative: identify, arrest, and remove

- Sex Offender Initiative: identify, arrest, 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

- Identified excessive assistance payments due to payments for units not page 27

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

 and lack of controls

- Property manager wearing prison garb after embezzling almost $1 million page 41

- 31 New York City Housing Authority tenants arrested for theft of page 46

 government funds

- Federal employees who bilk the system page 66

- You can run but you cannot reside: HUD OIG works with U.S. Marshals page 68

 Task Force, arrests 676 fugitive felons; 64 in HUD-assisted housing

Areas of OIG Interest

- Nursing homes: equity skimming

- Adequacy of HQS inspections

- Public corruption and mismanagement in the operations of public housing and

 multifamily projects

- 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

- Disaster Housing Assistance Program (DHAP)

Executive Highlights
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

- Nationwide Hurricane/Disaster Relief Fraud program

- Inspections and evaluations of program areas

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

 local government agencies

- Department liaison

- Audits of Gulf Coast activities

Highlights: Results or Impact of Significant OIG Work

- Health care officials cause HUD losses greater than $18.4 million page 79

- Hidden costs to paint apartments page 79

- Theft from the elderly page 80

- Promissory notes hide scheme - HUD loss is $1.9 million page 83

- Recommended grantees reimburse the CDBG program and provide page 87

 supporting documentation for unsupported expenditures

- Former mayor admits to extortion page 99

Areas of OIG Interest

- Community planning and development performance monitoring

- Matching funds: grantee misuse of Federal funds

- Gulf Coast hurricane assistance fraud

Executive Highlights

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

- Implementation of DOJ Procurement Fraud Task Force at HUD

- Operation FedRent: identifying Federal employees improperly receiving rental

 assistance

Highlights: Results or Impact of Significant OIG Work

- Recommended HUD improve controls over it's contract administration page 120

 processes

- Recommended HUD implement adequate procedures and controls to page 121

 ensure that program offices comply with HUD's succession plans.

- Recommended HUD properly meets its information security page 123

 responsibilities.

Areas of OIG Interest

- Ethics and accountability in contracting

- Security and data integrity

- Management of human capital

- Risks in information technology: vulnerabilities and security

- FHA management controls

- Funds control/budgeting for Section 8 project-based contracts

- Monitoring of Ginnie Mae issuers for potential defaults

Executive Highlights

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, the Office of Inspector

General (OIG) has also conducted numerous outreach efforts. (see chapter 7, page 130)

Audits

HUD’s Single-Family Housing Programs

A Look Back for the Year

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

Performed FY 07

Region 1

Boston 6%

Region 2

New York 0%

Region 3

Philadelphia 18%

Region 4

Atlanta 6%

Region 6

Fort Worth 18%

Region 9-10

Los Angeles 18%

Region 5

Chicago 6% Region 7-8

Kansas City 28%

Key program results

- Title II Manufactured Housing Loans

- Mortgagees, Loan Correspondents, and Direct

 Endorsement Lenders

- Single-Family Real Estate-Owned Property Sales

Strategic Initiative 1: Contribute to the Reduction of Fraud

in Single-Family Insurance Programs

Questioned costs Funds put to better use

Audit $1,640,674 $46,387,668

page 9

page 9

page 11

Our

focus

9 Audits
9

Title II Manufactured Housing Loans

The U.S. Department of Housing and Urban Development (HUD) OIG, Kansas

City, MO, audited the HUD Title II manufactured housing loan program to determine

whether and to what extent the FHA Title II insured manufactured huosing loans meet

the foundation requirements.

Of the FHA Title II insured manufactured housing loans that closed from 2003

through 2005, at least 50,000 (or more than 80 percent of the financed manufactured

homes) were installed on substandard foundations. As a result, FHA's insurance fund is

not adequately protected, homeowner equity and resale values are diminished, and the

structural integrity and safety of the homes is questionable.

OIG recommended that HUD correct program weaknesses to ensure that Title II

manufactured housing foundations meet FHA requirements and avoid unnecessary

losses to the insurance fund of an estimated $44.9 million over the next year. (Audit

Report: 2007-KC-0004)

○○○○○○○○○○○○○○○○○

HUD OIG, Kansas City, MO, reviewed 205 FHA loan files to determine whether

they included the required engineer's certification of the property foundation. FHA

rules require lenders to provide the certification confirming that the foundation

complies with FHA requirements.

Lenders submitted 21 of the loans for endorsement without submitting the

engineer's certification.

OIG recommended that HUD seek indemnifications and recovery of losses incurred

from the responsible lenders unless the lenders can provide the required certifications.

(Audit Report: 2007-KC-0801)

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, HUD OIG reviewed six 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 Suburban Mortgage, Inc., a HUD-approved direct endorsement

lender in Phoenix, AZ. Special emphasis was placed on the adequacy of Suburban's

review of appraisals related to FHA-insured mortgages on individual units in two

condominium complexes.

HUD’s Single-Family Housing Programs
10

Suburban did not adequately review selected condominium appraisals and did not

comply with HUD requirements in the origination of FHA-insured single-family

mortgages. As a result, HUD insured mortgages on 38 properties that were overvalued

by approximately 40 percent, some of which did not have occupancy authorization

from the City of Phoenix. The property overvaluations resulted in a corresponding

overinsurance of the FHA-insured mortgages and an increased risk to HUD.

Additionally 7 of the 48 mortgages reviewed had significant underwriting deficiencies

that should have precluded their approval and submission to HUD for insurance.

OIG recommended that HUD initiate settlement negotiations with Suburban,

requesting reimbursement and/or indemnification for HUD's actual and potential losses

on the 38 loans involving the overvalued condominiums and the seven loans that had

significant underwriting deficiencies. Additionally, OIG recommended that Suburban

be required to obtain new appraisals on other FHA-insured mortgages that it

originated, involving the two appraisers and the seller involved with the condominium

projects reviewed, and that appropriate administrative action be taken against the two

appraisers for their failure to follow HUD appraisal requirements. (Audit Report:

2007-LA-1011)

○○○○○○○○○○○○○○○○○

HUD OIG audited single-family loan origination at the Renton, WA, branch of

Countrywide Home Loans, Inc. The Renton branch did not comply with HUD

requirements in originating 5 of 22 FHA-insured loans. By not establishing that the

borrowers had the ability and willingness to repay the mortgage debt and that the

insured property was sufficient collateral for the loan, the Renton branch exposed the

FHA insurance fund to an unnecessary risk of more than $740,000, the total insured

amount for the five loans.

OIG recommended that HUD require Countrywide to correct the deficiencies or

indemnify HUD for the five loans with original insured amounts totaling more than

$740,000. The projected loss is nearly $208,000 or 29 percent of the total unpaid

balance on the five loans. (Audit Report: 2007-SE-1002)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Plymouth Meeting, PA, branch of Countrywide Home Loans,

Inc. The branch office generally complied with HUD regulations, procedures, and

instructions in the origination and quality control review of FHA-insured single-family

loans. However, it did not properly verify the borrower's assets for 2 of the 10 loans

reviewed, which were valued at nearly $257,000, causing an unnecessary risk to the FHA

insurance fund.

 OIG recommended that HUD require Countrywide to indemnify almost $257,000

for the two loans, which it issued contrary to HUD's loan origination requirements, and

develop internal procedures to more closely monitor its underwriting process. (Audit

Report: 2007-PH-1010)

○○○○○○○○○○○○○○○○○

HUD’s Single-Family Housing Programs
HUD’s Single-Family Housing Programs 11

HUD OIG reviewed the operations at the Waters Edge branch of Alethes

Mortgage, LLC, located in Dallas, TX, due to its high default rate. The branch operated

under the name Waters Edge Mortgage, LLC.

Alethes did not notify HUD about one loan that contained an irregularity,

conducted incomplete quality control reviews, and closed loans with underwriting

deficiencies. By not alerting HUD to potential fraud or serious violations, Alethes

increased the risk to the FHA insurance fund.

OIG recommended that HUD require Alethes to indemnify one loan and

ensure that it complies with HUD's underwriting requirements. (Audit Report:

2007-FW-1010)

○○○○○○○○○○○○○○○○○

During the audit of Alethes Mortgage, LLC, in Dallas, TX (Audit Report:

2007-FW-1010), HUD OIG noted that a loan that closed in November 2005 and

defaulted in April 2006 contained a questionable rent verification. While the loan was

originated by Alethes, it was underwritten by SecurityNational Mortgage Company.

Due to this condition and HUD's not being able to provide the case file, OIG did not

include this loan in the audit findings on Alethes. OIG requested that the HUD

review this loan and determine whether it should be indemnified. (Audit Report:

2007-FW-1801)

○○○○○○○○○○○○○○○○○

HUD OIG reviewed branch number 358 of Countrywide Home Loans, Inc., a direct

endorsement lender in Houston, TX. The branch generally complied with HUD

regulations, procedures, and instructions in the origination of FHA-insured single-family

mortgages. Nine of the ten loan files reviewed contained minor deficiencies; however,

one of the files contained significant deficiencies, which placed the FHA insurance fund

at unnecessary risk.

OIG recommended that HUD require the branch to indemnify it for one loan with

an original mortgage amount of more than $112,000 that contained significant

deficiencies and to improve its policies, procedures, and controls to ensure that FHAinsured loans are originated, processed, and underwritten according to HUD

requirements. (Audit Report: 2007-FW-1009)

Single-Family Real Estate-Owned Property Sales

HUD OIG audited HUD's oversight of management and marketing contractors

under the jurisdiction of HUD's Philadelphia Homeownership Center in Philadelphia,

PA, to determine whether HUD ensured that the contractors marketed HUD's real

estate-owned properties in accordance with their contract requirements.

HUD's Philadelphia Homeownership Center's oversight of its contractors did not

ensure the effective marketing of HUD's real estate-owned properties. Its contractors

routinely failed to meet their marketing performance requirements. Marketing
12 HUD’s Single-Family Housing Programs

performance failed to meet targets because the sales goals and other objectives

measured under contract terms were inconsistent with local market conditions and

inflexible. Center staff monitored performance monthly, as required, but without overall

positive impact on inventory reduction, improved return on sales, or increased owner

occupancy of HUD real estate-owned properties. As a result, the Philadelphia

Homeownership Center did not fully accomplish HUD's national goals to expand

homeownership opportunities, strengthen neighborhoods and communities, and

ensure a maximum net return to the mortgage insurance fund.

OIG recommended that HUD establish and implement procedures to address cases

in which contractors demonstrate a pattern of not meeting their contract requirements,

assess its policies, and revise them as needed to improve the contractors' performance

and, thereby, better accomplish HUD's goals regarding its real estate-owned

properties. (Audit Report: 2007-PH-0002)

○○○○○○○○○○○○○○○○○
13

Investigations

Some investigations discussed in this report were generated from leads provided

by HUD single-family housing program staff or conducted jointly with Federal, State,

and local law enforcement agencies. The results of various significant investigations are

described below.

HUD’s Single-Family Housing Programs

A Look Back for the Year

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

Cases, Performed FY 07*

Region 1

Boston 5%

Region 2

New York 14%

Region 3

Philadelphia 14%

Region 4

Atlanta 7%

Region 6

Fort Worth 12%

Region 9-10

Los Angeles 14%

Region 5

Chicago 22% Region 7-8

Kansas City 12%

* This does not include cases in which funds misused came from Congress for hurricane relief.

(see chapter 5 for these cases)

- Loan Origination Fraud

- Identity Fraud and False Social Security Numbers

- Bankruptcy Fraud

- Other Single-Family Fraud

Strategic Initiative 1: Contribute to the Reduction of Fraud

in Single-Family Insurance Programs

page 14

page 19

page 22

page 22

Our focus

Key program

results

Investigations 171 $64,045,525

Cases

closed

$

Recovered

102

Convictions/pleas/

pretrials

118

Admin/civil

actions
14 HUD’s Single-Family Housing Programs

Loan Origination Fraud

Donald Fazio, the former branch manager and loan officer at Brucha Mortgage Bank

(Brucha), was sentenced in U.S. District Court, Brooklyn, NY, to 30 months

incarceration and 3 years probation and ordered to forfeit nearly $2.6 million and pay

HUD $708,378 and Stewart Title $440,387 in restitution for his earlier guilty plea to

conspiracy and money laundering. In addition, Gary Konstantin, also a former branch

manager and loan officer at Brucha previously sentenced for his earlier guilty pleas to

conspiracy, money laundering, and wire and insurance fraud, was debarred from

procurement and nonprocurement transactions as a participant or principal with HUD

and throughout the Executive Branch of the Federal Government for an indefinite

period. Fazio, Konstantin, and others completed minimal property renovations and

submitted false loan documents and appraisals to obtain FHA-insured mortgages and

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

$11.6 million after 58 mortgages defaulted.

○○○○○○○○○○○○○○○○○

JaVeena Harris, an underwriter at First National Funding Company, pled guilty in

U.S. District Court, Newark, NJ, to falsification of records. Harris falsified

employment documents used by borrowers who obtained FHA-insured mortgages.

HUD realized losses of more than $9.8 million after 66 mortgages defaulted.

○○○○○○○○○○○○○○○○○

Esperanza Espinoza, Jesus Jose Olivas, and Pedro Rodriguez, employees of Number

1 L.A. Real Estate, were each sentenced in U.S. District Court, Los Angeles, CA, for

their earlier guilty pleas to conspiracy, false statements, wire fraud, or money

laundering. Espinoza was sentenced to 3 years probation and 200 hours of community

service and ordered to pay HUD $301,608 in restitution, Olivas was sentenced to 4

months incarceration and 3 years supervised release and ordered to pay HUD $215,726

in restitution, and Rodriguez was sentenced to 3 months incarceration and 3 years

supervised release. Olivas purchased and resold properties to straw borrowers who

obtained FHA-insured mortgages, Espinoza prepared or purchased fraudulent

documents for unqualified borrowers who obtained FHA-insured mortgages, and

Rodriguez laundered property sales proceeds through a casino in Las Vegas, NV. HUD

realized losses in excess of $2.9 million after 189 mortgages defaulted.

○○○○○○○○○○○○○○○○○

Benedicta Gomez, owner of One Service, Inc., was sentenced in U.S. District Court,

Denver, CO, to 30 days incarceration and 3 years supervised release and ordered to pay

HUD $94,386 in restitution for her earlier guilty plea to wire fraud. Gomez prepared

fraudulent tax returns used by unqualified and undocumented immigrants who

obtained FHA-insured mortgages. HUD realized losses of $2.4 million after 51

mortgages defaulted.

○○○○○○○○○○○○○○○○○
15

Frank Mazzarese, a former loan officer at RBC Mortgage, and Raul Raygoza, an

employee of Friends Furniture, were each sentenced in U.S. District Court, Rockford,

IL, for their earlier guilty pleas to conspiracy. Mazzarese was sentenced to 4 years

probation and ordered to perform 150 hours of community service and pay HUD

$30,044 in restitution. Raygoza was sentenced to 5 years probation and ordered to

pay HUD $149,227 in restitution. Mazzarese, Raygoza, and others conspired to

provide or approve false employment, income, or other documents for unqualified

borrowers who obtained FHA-insured mortgages. HUD realized losses in excess of $2

million after more than 40 mortgages defaulted.

○○○○○○○○○○○○○○○○○

Trudy M. Peters, a former escrow officer at Ticor Title Agency; Tony Vasquez, a

former housing counselor at Chicanos Por La Causa; and Maria Felix, an assistant at

Sahara Investments, each pled guilty in U.S. District Court, Phoenix, AZ, to making

false statements to HUD or conspiracy to make false statements to defraud HUD.

Peters, Vasquez, Felix, and others conspired to defraud HUD's "preforeclosure"

program when they submitted fraudulent appraisals, falsified counseling certification

forms, or concealed debt encumbering properties. HUD realized losses in excess of

$1.8 million after 65 mortgages defaulted.

○○○○○○○○○○○○○○○○○

Nina Cameron, a former loan officer with Acclaim Mortgage; Odie Webster, a former

realtor with Metro Brokers; and Sandra Lindsey, a former FHA-insured mortgagor, were

each sentenced in U.S. District Court, Denver, CO, for their earlier guilty pleas to

conspiracy, making false statements, or aiding and abetting. Cameron was sentenced

to 6 months home detention and 60 months probation and ordered to pay HUD

$123,595 in restitution, Webster was sentenced to 4 months home detention and 60

months probation and ordered to pay HUD $75,551 in restitution, and Lindsey was

sentenced to 12 months probation. From February 1999 to July 2004, Cameron,

Webster, and others submitted or caused the submission of fraudulent documents for

Lindsey and other unqualified borrowers who obtained FHA-insured mortgages. HUD

realized losses in excess of $1.3 million after 40 mortgages defaulted.

○○○○○○○○○○○○○○○○○

Devon Bowie, the former president of Neighborhood Mortgage Bankers; Keith Miles,

owner of Mid-South Atlantic Asset Holding Company; and Peter Port, owner of Port

Abstract, each sentenced in U.S. District Court, Newark, NJ, for their earlier guilty

pleas to providing false statements, were debarred from procurement and

nonprocurement transactions as a participant or principal with HUD and throughout

the Executive Branch of the Federal Government for 3 to 5 years. Bowie, Miles, Port,

and others submitted false loan documents and appraisals for unqualified borrowers

who obtained FHA-insured mortgages. HUD realized losses in excess of $1.2 million

after 33 mortgages defaulted.

○○○○○○○○○○○○○○○○○

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

Gilbert Lugo, a former owner of Benefit Escrow, was sentenced in U.S. District Court,

Los Angeles, CA, to 6 months home detention and 3 years probation and ordered to

pay HUD $972,162 in restitution for his earlier guilty plea to conspiracy, making false

statements, and aiding and abetting. Lugo conspired with others and provided

downpayment funds for unqualified borrowers who obtained FHA-insured mortgages.

HUD realized losses of $618,678 after 43 mortgages defaulted.

○○○○○○○○○○○○○○○○○

Michael O'Keefe, Jr., owner of Citywide Mortgage Company,

was indicted in U.S. District Court, New Orleans, LA, for

conspiracy, money laundering, mail fraud, and aiding and

abetting. In addition, Calvin Davis, doing business as The

Cowboy Institute, Brothers Helping Brothers, and Dreamboat

Enterprises; Michelle Cochrane, a former loan processor and

underwriter at Citywide; Robert Green, doing business as

Parkway Tax Service and Fast Tax; and straw borrower Timothy

Falls each pled guilty to conspiracy or providing false statements

to HUD and the Internal Revenue Service. Falls was sentenced

to 6 months home confinement with electronic monitoring and

60 months probation and ordered to pay HUD $2,000 in

restitution. O'Keefe allegedly conspired with others to recruit

straw borrowers, inflate appraisals, and provide fraudulent

documents for unqualified borrowers who obtained FHAinsured mortgages; Davis, Cochrane, and Green conspired with

others to recruit straw borrowers and underwrite FHA-insured

mortgages containing fraudulent documents; and Falls, acting

as a straw borrower, obtained and later defaulted on an FHAinsured mortgage. HUD realized losses of $600,000 after 11

properties defaulted.

○○○○○○○○○○○○○○○○○

Alan Mason, a closing attorney doing business as Alan

Mason Legal Services, Inc., pled guilty in U.S. District Court,

Worcester, MA, to wire fraud and Federal income tax evasion.

Copyright, 2007. The TimesPicayune - New Orleans, LA.

Reprinted with permission.

Copyright, 2007. Telegram & Gazette - Worcester, MA. Reprinted

with permission.
17

Mason closed both FHA-insured and conventional loans, failed to pay more than $6.2

million to mortgage lien holders, and then used loan closing funds for business or

personal expenditures. HUD realized losses of $406,450 after Mason failed to

eliminate three FHA-insured liens.

○○○○○○○○○○○○○○○○○

Mario Mendoza, a former real estate broker at Weichart Realty sentenced in U.S.

District Court, Newark, NJ, for his earlier guilty plea to theft by deception, was

debarred from procurement and nonprocurement transactions as a participant or

principal with HUD and throughout the Executive Branch of the Federal Government

for 3 years. Mendoza and others submitted fraudulent loan documents for unqualified

borrowers who obtained FHA-insured mortgages. HUD realized losses in excess of

$349,000 after 12 mortgages defaulted.

○○○○○○○○○○○○○○○○○

Calvin Dalton, president of RETI Relocation Services; Larry Frazier, owner of Larry

Frazier Realty; certified appraisers Demetri Coffee, Paul Jaretsky, Rhonda Kent, and

David Bobo; and closing attorney James Stovall III each pled guilty in U.S. District Court,

Atlanta, GA, to conspiracy, money laundering, misprision of a felony, or bank or wire

fraud. From April 2000 to September 2001, the above defendants and others created

or submitted false documents or appraisals to assist straw borrowers who obtained

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

FHA-insured mortgages defaulted.

○○○○○○○○○○○○○○○○○

Peter Gatsch and David Sonner, former owners or officers of Illinois Energy

Contractors Inc. (IECI), each agreed to perform 100 hours of community service in

pretrial diversion agreements filed in U.S. District Court, Chicago, IL. Gatsch and

Sonner admitted to paying approximately $200,000 in kickbacks to property owners

who contracted home improvement services through IECI after the homeowners

obtained FHA-insured home improvement loans.

○○○○○○○○○○○○○○○○○

Pam Joi Smith, a loan officer at Countrywide Home Loans, Inc., pled guilty in U.S.

District Court, Newark, NJ, to wire fraud. Smith processed FHA-insured and

conventional mortgage loan applications that contained false income or asset

information. HUD realized losses of $197,643 after eight FHA-insured mortgages

defaulted.

○○○○○○○○○○○○○○○○○

Morgan Haines, a real estate investor sentenced in U.S. District Court, Buffalo, NY,

for his earlier guilty plea to conspiracy to provide false statements to HUD, was

debarred from procurement and nonprocurement transactions as a participant or

principal with HUD and throughout the Executive Branch of the Federal Government

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

for 3 years. In addition, Theodore Antonucci, Jr., a real estate investor sentenced for his

earlier guilty plea to conspiracy to commit bank fraud, was debarred from

procurement and nonprocurement transactions as a participant or principal with HUD

and throughout the Executive Branch of the Federal Government for 10 years. Haines,

Antonucci, Jr., and others purchased homes in the Rochester, NY, area, flipped the

properties to each other at inflated values, and then provided false documents to

secure and later default on FHA or conventional mortgages. HUD realized losses of

$186,475 after two FHA-insured mortgages defaulted.

○○○○○○○○○○○○○○○○○

Angela Sommers, owner of Sommers Financial, was sentenced in U.S. District Court,

Los Angeles, CA, to 5 months incarceration and 3 years supervised probation for her

earlier guilty plea to wire fraud and aiding and abetting. Sommers and others

purchased and used fraudulent documents to assist unqualified borrowers in obtaining

FHA-insured mortgages. HUD realized losses of $185,818 after 26 mortgages defaulted.

○○○○○○○○○○○○○○○○○

Laura Jeanne Barlow, a former underwriter at Main Street Mortgage Service and

Ark Mortgage, sentenced in U.S. District Court, Newark, NJ, for her earlier guilty plea

to conspiracy to provide false statements, was debarred from procurement and

nonprocurement transactions as a participant or principal with HUD and throughout

the Executive Branch of the Federal Government for 3 years. Barlow used her position

and in exchange for compensation, approved unqualified borrowers for FHA-insured

mortgages. HUD realized losses in excess of $76,000 after six mortgages defaulted.

○○○○○○○○○○○○○○○○○

David M. Sutton, Jr., pled guilty in U.S. District Court, Richmond, VA, to making

false statements to HUD. Sutton submitted false income documents to obtain and

later default on an FHA-insured mortgage. HUD realized a loss of $58,000 after his

mortgage defaulted.

○○○○○○○○○○○○○○○○○

James Boyle, a loan officer at RBC Mortgage, pled guilty in U.S. District Court,

Rockford, IL, to mail fraud. Boyle created and supplied fraudulent brokerage account

statements or falsified employment documents for unqualified borrowers who obtained

FHA-insured mortgages. HUD realized losses of $52,648 after two mortgages defaulted.

○○○○○○○○○○○○○○○○○

Michael Lock and Jerhonda McCray, owners of World Financial Mortgage; Kevin

Slamann, Lisa Colella, and Nicole Brown, closing agents at Excell Closing Services,

Harvard Title, Metro Title, or Nations Title; Monique Dunlop and Krista Jeray, loan

officers at Mortgage Exchange; Ruben Fields, an appraiser at Express Valuation;

Chianti Clay; and Marcus Leonard were each indicted in U.S. District Court,

Milwaukee, WI, for committing wire, mail, and bank fraud. The above defendants
19

allegedly provided fraudulent loan documents and appraisals for straw borrowers who

obtained FHA-insured or conventional mortgages on properties they leased to

Milwaukee Housing Authority Section 8 tenants. HUD losses are not yet determined.

○○○○○○○○○○○○○○○○○

John Morris, a former appraisal coordinator for now-defunct N.J. Affordable Homes

(NJAH), and William Page, an NJAH appraiser, each pled guilty in U.S. District Court,

Newark, NJ, to conspiracy to commit wire or mail fraud. Morris retained NJAH

appraisers who prepared false appraisals for nominee properties, and Page provided

false appraisals for borrowers who obtained FHA-insured or conventional mortgages.

HUD losses are not yet determined.

○○○○○○○○○○○○○○○○○

Corwin Johnson pled guilty in U.S. District Court, Buffalo, NY, to bank fraud,

aiding in the preparation of a fraudulent Federal income tax return, and violating his

supervised probation. Johnson and others prepared and submitted false Federal

income tax returns and other documents for unqualified borrowers who obtained

FHA-insured mortgages. HUD losses are not yet determined.

○○○○○○○○○○○○○○○○○

Laura Figueroa, owner of Rough Edges, LLC, and

other businesses, pled guilty in U.S. District Court,

Bristol, CT, to mail fraud and conspiracy to file false

claims for Federal income tax refunds. Figueroa and

others prepared false employment documents for

unqualified borrowers who obtained FHA-insured

mortgages and submitted false Federal income tax

returns using the identities of others. HUD losses are

not yet determined.

Identity Fraud and False Social

Security Numbers

David Calderon, owner of Atlas Home Loans, a

HUD direct endorsement lender; his wife and Atlas

office manager Baneza Calderon; his brother and Atlas

loan officer Carlos Calderon; and Atlas loan processor

Robert Cardenas were each sentenced in U.S. District

Court, Grand Terrace, CA, for their earlier guilty pleas

to making false statements, conspiracy, or misprision

of a felony. David Calderon was sentenced to 24

months incarceration and 36 months supervised release

and ordered to pay HUD more than $1.8 million in

restitution, Baneza Calderon was sentenced to 36

HUD’s Single-Family Housing Programs

Copyright, 2007. Hartford Courant -

Hartford, CT. Reprinted with

permission.
20 HUD’s Single-Family Housing Programs

months supervised release and ordered to perform 360 hours of community service

and pay HUD $370,354 in restitution, Carlos Calderon was sentenced to 10 months

incarceration and 36 months supervised release and ordered to pay HUD $273,690 in

restitution, and Cardenas was sentenced to 36 months supervised probation and

ordered to pay HUD $720,278 in restitution. David, Baneza, and Carlos Calderon and

Cardenas created fraudulent identification and employment documents for

unqualified or straw borrowers who obtained FHA-insured mortgages. HUD realized

losses in excess of $2.7 million after 42 mortgages defaulted.

○○○○○○○○○○○○○○○○○

Rosemary Diaz, a real estate agent at Familia Realty, pled guilty in U.S. District

Court, Los Angeles, CA, to mail fraud and aiding and abetting. From September 1998

to January 2002, Diaz and others created or provided false identification, employment,

credit, and other information to assist unqualified borrowers who obtained FHAinsured mortgages. HUD realized losses greater than $900,000 after 18 mortgages

defaulted.

○○○○○○○○○○○○○○○○○

Edgar De la Rosa, Maria de los Angeles Mendez, Manuel Barron-Salcido, and Ruben

Magdaleno Martinez each pled guilty in Colorado State District Court, Golden, CO, to

forging checks or commercial instruments or attempted forgery. De La Rosa,

Barron-Salcido, and Martinez were each sentenced to 36 months incarceration and 36

months probation, and Mendez was sentenced to 45 days each incarceration and

probation. The above defendants provided false SSNs and forged documents to obtain

and later default on FHA-insured mortgages. HUD realized losses of $400,000 after

nine mortgages defaulted.

○○○○○○○○○○○○○○○○○

Seven FHA-insured mortgagors were charged in Collin, Rockwall, or Ellis County

District Courts, Rockwall or Collin County, TX, with securing execution of

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

documents to obtain and later default on FHA-insured mortgages. In addition, Ignacio

Juan Jasso, a real estate broker and former loan officer at JR Mortgage, pled guilty in

U.S. District Court, Dallas, TX, to making false Federal credit institution entries,

reports, and transactions; and six FHA-insured mortgagors pled guilty to securing

execution of documents by deception and were each sentenced to 24 months

probation and collectively fined more than $3,060. Jasso assisted unqualified

borrowers who obtained FHA-insured mortgages, and the remaining defendants used

false SSNs and other documents to obtain and later default on FHA-insured mortgages.

HUD realized losses in excess of $285,845 after six mortgages defaulted.

○○○○○○○○○○○○○○○○○

Sonia Toledo, a former loan officer at Building & Loan Mortgage Company, and

Doris and Sylvia Toledo, realtors doing business as El Grupo Toledo, were each charged

in Kansas District Court, Olathe, KS, with theft, making a false writing, conspiracy, and
21

computer crimes. From 2002 to 2005, Sonia, Doris, and Sylvia Toledo allegedly

assisted undocumented immigrants who used false SSNs and obtained FHA-insured

mortgages. HUD realized losses of $131,385 after three mortgages defaulted.

○○○○○○○○○○○○○○○○○

Claudia Hernandez-Martinez, also known as Claudia Hernandez or Claudia

Martinez, and Concepcion Hernandez-Herrera, also known as Claudia Hernandez or

Claudia Hernandez H, each pled guilty in Colorado District Court, Brighton, CO, to

conspiracy to offer a false instrument for recording. The above defendants provided

fraudulent SSNs to obtain and later default on FHA-insured mortgages. HUD realized

losses in excess of $120,000 after both mortgages defaulted.

○○○○○○○○○○○○○○○○○

Rudean Cooper was sentenced in Montgomery County Circuit Court, Rockville,

MD, to 36 months supervised probation and ordered to perform 240 hours of

alternative community service and pay court costs for her earlier guilty plea to identity

theft. Cooper also provided $25,000 to HUD as settlement for a Program Fraud Civil

Remedies Act lawsuit. Cooper used a fraudulent SSN to obtain and later default on an

FHA-insured mortgage. HUD realized a loss of $58,742 after his mortgage defaulted.

○○○○○○○○○○○○○○○○○

Yolanda Weatherspoon was indicted in Franklin County Circuit Court, Rocky

Mount, VA, for making false statements, forgery, and obtaining a Department of

Motor Vehicle document by fraud. Weatherspoon allegedly used a fraudulent SSN to

obtain and later default on an FHA-insured mortgage. HUD realized a loss of $37,000

after her mortgage defaulted.

○○○○○○○○○○○○○○○○○

Rodolfo Campos, Orlando Garcia, and Norma Cortez were each indicted in U.S.

District Court, Plano, TX, for making false statements to HUD, use of fraudulent

identification documents, and Social Security Administration (SSA) fraud. Campos,

Garcia, and Cortez allegedly used false SSNs to obtain and later default on an

FHA-insured mortgage. HUD realized a loss of $35,000 after their mortgage defaulted.

○○○○○○○○○○○○○○○○○

Gennaro Thompson was sentenced in Prince George’s County District Court,

Upper Marlboro, MD, to 20 years incarceration (suspended except for one day) and 3

years probation and ordered to pay HUD $4,426 in restitution for his earlier guilty

plea to aggravated theft over $500 and identity fraud. Thompson used the identity of

his son and provided fraudulent documents to obtain and later default on an

FHA-insured mortgage. HUD realized a loss of $4,426 after his mortgage defaulted.

○○○○○○○○○○○○○○○○○

HUD’s Single-Family Housing Programs
22

Undocumented immigrants Alberto and Mabel Gutierrez were each sentenced in

U.S. District Court, Harrisonburg, VA, to 6 months incarceration and 12 months

probation, fined $3,000, and ordered to eliminate their FHA-insured mortgage and

undergo deportation hearings for their earlier guilty pleas to making false statements

to HUD. Alberto and Mabel Gutierrez used false SSNs or Immigration and

Naturalization resident alien cards to obtain and later refinance an FHA-insured

mortgage.

Bankruptcy Fraud

Donna Renae Woods Lawrence, also known as Donna Willis, the former president

of Assurety Mortgage Group, Inc. (Assurety), pled guilty in U.S. District Court,

Atlanta, GA, to conspiracy and false bankruptcy declarations. Lawrence used a stolen

SSN and obtained HUD approval to originate FHA-insured mortgages through Assurety,

fraudulently eliminated the security interest of prior lenders and received proceeds

from multiple loans on the same properties, and then filed false bankruptcy petitions

to delay lender foreclosures on mortgages valued at approximately $3.6 million. HUD

realized losses in excess of $330,000 after five mortgages defaulted.

○○○○○○○○○○○○○○○○○

John Cash, also known as Typhon Ra and doing business as Lake Shore Group, was

sentenced in U.S. District Court, Chicago, IL, to 135 months incarceration and 6 years

probation and ordered to pay numerous homeowners $187,604 in restitution for his

earlier guilty plea to bankruptcy and wire fraud. Cash collected monthly mortgage

payments from more than 30 distressed FHA, Department of Veterans Affairs (VA), or

conventional mortgagors and then failed to make their mortgage payments and filed

fraudulent bankruptcy petitions unbeknownst to the homeowners. HUD realized losses

of approximately $125,000 after five FHA-insured mortgages defaulted.

○○○○○○○○○○○○○○○○○

Carlos Castelan pled guilty in U.S. District Court, Salt Lake City, UT, to making

false statements and destroying, altering, or falsifying records in a bankruptcy or

Federal investigation. Castelan used a false SSN when he obtained an FHA-insured

mortgage and filed for bankruptcy. HUD realized a loss of $62,000 after his mortgage

defaulted.

Other Single-Family Fraud

Real estate investors Jill and Colin Reilly and Alexis and Josh Smith each pled guilty

in U.S. District Court, Tucson, AZ, to submitting false statements to HUD and FHA

Preforeclosure Real Estate Settlement Procedure Act violations. The above defendants

were each sentenced to one year probation, and Colin Reilly was ordered to pay HUD

$238,283 in restitution. Jill and Colin Reilly and Alexis and Josh Smith failed to report

payments to and from homeowners on HUD-1 settlement statements.

○○○○○○○○○○○○○○○○○

HUD’s Single-Family Housing Programs
23

Steven Marquez, a former loan officer at Primera Mortgage Company, pled guilty

in Cook County Circuit Court, Chicago, IL, to theft. Marquez was sentenced to 3

years probation and ordered to pay HUD $70,000 in restitution. Marquez deceived

two property owners and acquired ownership rights to their properties and then sold

the properties to borrowers who obtained new FHA-insured mortgages. The original

property owners believed they were refinancing their mortgages when they signed

documents and assigned their homeownership rights to Marquez. HUD realized losses

of $70,000 after both mortgages defaulted.

○○○○○○○○○○○○○○○○○

Carlos West, a teacher and HUD Officer/Teacher Next Door (O/TND) program

participant, entered into a civil settlement agreement filed in U.S. District Court,

Chicago, IL, and agreed to pay the U.S. Department of Justice $45,000. West

obtained a HUD-owned property through the O/TND program but failed to report his

ownership of additional real estate leased to Chicago Housing Authority Section 8

tenants on HUD certifications.

○○○○○○○○○○○○○○○○○

Annabel Villalobos, a correctional officer for the California Department of

Corrections and HUD Good Neighbor Next Door (GNND) program participant,

entered into a civil settlement agreement filed in U.S. District Court, Bakersfield, CA,

and paid HUD $29,000, the discounted amount for property she obtained through the

GNND program. From September 2003 to January 2006, Villalobos failed to report

her nonresidency in her GNND property on HUD certifications.

○○○○○○○○○○○○○○○○○

Lamont Harris, a former public school guidance counselor and HUD O/TND

program participant, was sentenced in U.S. District Court, Norfolk, VA, to 3 months

home detention and 3 years probation, fined $2,500, and ordered to pay HUD $23,500

in restitution for his earlier guilty plea to making false statements to HUD. Harris failed

to report his nonresidency in his O/TND property on HUD certifications.

○○○○○○○○○○○○○○○○○

Kristine Knowles, a teacher and HUD O/TND program participant, was named in a

civil complaint filed in U.S. District Court, Chicago, IL. Knowles allegedly failed to

report her ownership of additional real estate and her nonresidency in her O/TND

property on HUD certifications. HUD loss is estimated at $17,500.

○○○○○○○○○○○○○○○○○

Terry January, a Los Angeles County deputy sheriff and HUD O/TND program

participant, was convicted in U.S. District Court, Los Angeles, CA, of making false

statements. January failed to report his ownership of additional residential real estate

and his nonresidency in his O/TND property on HUD certifications. HUD loss is

estimated at $16,000.

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HUD’s Single-Family Housing Programs
24

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

and realtor Rohan A. Johnson, also known as Ato Ra Ajah El, were each sentenced in

U.S. District Court, Central Islip, NY, for their earlier guilty pleas to theft of

government property, conspiracy to commit mail fraud, or converting and conveying

property owned by HUD without authority. Gilpin was sentenced to 38 months

incarceration and 36 months supervised release and ordered to pay the victim $116,500

in restitution. Johnson was sentenced to 46 months incarceration and 36 months

supervised release and ordered to pay the above restitution jointly and severally with

Gilpin. 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-owned properties; and then sold the bank-owned property to an

unsuspecting buyer and attempted to sell HUD- and VA-owned properties to

undercover operatives. The fraudulent deeds prevented HUD from selling its

properties to legitimate buyers and banks from deeding foreclosed properties to HUD.

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Real estate investor Dariusz Przybylek, sentenced in U.S. District Court, Chicago,

IL, to 21 months incarceration and 3 years supervised release for his earlier guilty plea

to wire fraud, was arrested for failing to report to serve his sentence. Przybylek

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

the HUD appraised value by submitting fraudulent contractor affidavits and loan

documents and an inflated appraisal provided by previously indicted Erwin Espe, a

former HUD-approved appraiser. Przybylek attempted to complete the above

transaction to facilitate his receipt of $113,000 in rehabilitation funds through a straw

contractor.

HUD’s Single-Family Housing Programs

  
Chapter 2

HUD’s Public and Indian

Housing Programs
26

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

and subsidies to 4,111 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. 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 7, page 133)

Audits

HUD’s Public and Indian Housing Programs

A Look Back for the Year

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

Performed FY 07

Region 1

Boston 3%

Region 2

New York 7%

Region 3

Philadelphia 14%

Region 4

Atlanta 12%

Region 6

Fort Worth 14%

Region 9-10

Los Angeles 19%

Region 5

Chicago 21% Region 7-8

Kansas City 10%

Key program results

- 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 $16,659,793 $105,843,606

page 27

page 34

Our

focus

30 Audits
27

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. PHAs 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, Washington, DC, conducted a nationwide audit of the Housing Choice

Voucher program to determine the extent to which PHAs paid excessive subsidies for

families that were housed in rental units with more bedrooms than authorized

(overhousing). OIG also wanted to identify the causes of such overhousing and to

evaluate HUD's approach to reducing the frequency and extent of overpayments that

can result.

PHAs nationwide paid excess subsidies totaling an estimated $20 million for more

than 16,500 families to reside in assisted units with more bedrooms than people in the

family.

OIG recommended that HUD issue additional guidance to address evaluating

reasonable accommodations requests and submitting accurate data to HUD. OIG also

recommended that HUD incorporate data analysis designed to identify and correct

overhousing and related data errors into its risk assessment and monitoring

methodologies. (Audit Report: 2007-FW-0001)

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HUD OIG audited the Section 8 housing quality standards inspections of the

Housing Authority of the County of Los Angeles, Los Angeles, CA. The Authority did

not complete timely housing quality standards inspections. Of 68 program units

reviewed, 50 did not meet HUD's housing quality standards.

OIG recommended that HUD require the Authority to (1) implement adequate

procedures and controls to ensure that units meet HUD's housing quality standards to

prevent $11.5 million in program funds from being spent on units that are in material

noncompliance, (2) verify and certify that the owners took appropriate corrective

actions for all applicable housing quality standards violations and abate the rents or

terminate the housing assistance payments contracts if appropriate actions were not

taken, and (3) develop adequate controls to enforce implementation of policies and

procedures to ensure that program units are inspected at least annually to meet HUD's

housing quality standards before housing assistance payments are dispersed. (Audit

Report: 2007-LA-1007)

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HUD’s Public and Indian Housing Programs
28

HUD OIG audited the Section 8 Housing Choice Voucher program of the Newport

News Redevelopment and Housing Authority, Newport News, VA,. The Authority did

not operate its program in accordance with HUD requirements and regulations. It

failed to ensure that its program housing stock met housing quality standards, did not

adequately support housing assistance payments, and incorrectly calculated housing

assistance payments. Of the 66 housing units inspected, 54 did not meet HUD's

housing quality standards, and 28 had 98 violations that existed at the time of the

Authority's previous inspection. This condition resulted in almost $111,000 in housing

assistance payments and administrative fees paid by HUD for units that were not

decent, safe, and sanitary. Additionally, 48 of the 74 tenant files reviewed did not

contain the documentation required by HUD and the Authority's program

administrative plan, resulting in more than $262,000 in unsupported housing

assistance payments and administrative fees. The Authority also incorrectly calculated

housing assistance payments, resulting in almost $8,000 in overpayments and more

than $7,000 in underpayments.

OIG recommended that HUD require the Authority to (1) ensure that housing units

inspected during the audit are repaired to meet HUD's housing quality standards, (2)

implement adequate procedures and controls to ensure that program units meet

housing quality standards to prevent an estimated $4 million from being spent on units

with material housing quality standards violations, (3) reimburse its program from

nonfederal funds for the improper use of program funds, (4) provide documentation

or reimburse its program from nonfederal funds for unsupported housing assistance

payments and administrative fees, and (5) repay housing assistance overpayments

and reimburse tenants for housing assistance underpayments. (Audit Report:

2007-PH-1009)

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HUD’s Public and Indian Housing Programs

Copyright, 2007. Daily Press - Newport News, VA. Reprinted with permission.
29

HUD OIG audited the Housing Authority of the City of North Las Vegas, North

Las Vegas, NV. The Authority did not follow HUD requirements when administering

its Section 8 Housing Choice Voucher program funds. Although the Authority had

$4.4 million in program funds and related interest to house additional eligible

participants, its Section 8 program was significantly underleased. As a result, eligible

Section 8 participants were denied the opportunity to seek safe, decent, and quality

housing under the program.

OIG recommended that HUD require the Authority to implement adequate

controls and procedures to ensure that it does not underlease its Section 8 Housing

Choice Voucher program. (Audit Report: 2007-LA-1015)

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HUD OIG reviewed the Housing Choice Voucher program of the Housing

Authority of the County of San Mateo, Belmont, CA. The Authority did not use HUD

program funds in accordance with requirements. It used more than $573,000 in

Housing Choice Voucher program funds to overlease the Moving to Work

Demonstration (MTW) program and improperly implemented an MTW preference in

its Housing Choice Voucher program that impacted 71 families on the Housing Choice

Voucher program waiting list. The Authority improperly loaned $1.4 million in

Housing Choice Voucher program funds to pay for construction costs of the El Camino

Village low-rent public housing project and $500,000 in Midway Village

Comprehensive Improvement Assistance Program grant funds to reimburse the

Housing Choice Voucher program for its El Camino Village project construction cost

overruns. In addition, it transferred nearly $116,000 in portability administrative fees

to its nonfederal account and overdrew its Housing Choice Voucher program

operating reserve.

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

Choice Voucher program from the MTW program or from nonfederal funds for the

overleasing of the MTW program and reimburse more than $1.23 million used to house

MTW program participants moved to the Housing Choice Voucher program, (2)

reimburse the Housing Choice Voucher program $1.4 million plus interest from

nonfederal funds, (3) reimburse Midway Village $500,000 plus interest from nonfederal

funds, (4) reimburse the Housing Choice Voucher program nearly $116,000 plus

interest from nonfederal funds, and (5) implement controls and establish policies and

procedures for the accounting and use of Housing Choice Voucher program operating

reserves. (Audit Report: 2007-LA-1014)

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HUD OIG audited the Housing Choice Voucher program of the Dayton

Metropolitan Housing Authority, Dayton, OH. None of the 59 housing units selected

for inspection met HUD's housing quality standards, and 56 of the units had 214

violations that existed at the time of the Authority's previous inspections. OIG

estimates that over the next year, HUD will pay nearly $1.8 million in housing

assistance payments for units with material housing quality standards violations. In

addition, five units that failed quality control inspections also failed reinspections, but

HUD’s Public and Indian Housing Programs
30

the Authority failed to abate the program rents for the units, resulting in an improper

payment of nearly $3,900 in housing assistance and administrative fees. The Authority

also incorrectly calculated households' payments, resulting in nearly $39,000 in

overpayments and more than $1,500 in underpayments. OIG estimates that over the

next year, when corrective actions are taken, the Authority will overpay more than $1

million in housing assistance and utility allowances. Further, of the 67 household files

reviewed, 37 did not contain documentation required by HUD and the Authority's

program administrative plan to support more than $254,000 in housing assistance and

utility allowances.

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

nonfederal funds for the improper use of more than $63,000 in program funds, provide

documentation or reimburse its program more than $282,000 from nonfederal funds

for the unsupported housing assistance payments and administrative fees, and

implement adequate procedures and controls to address the findings identified to

prevent nearly $1.8 million from being spent on units with material housing quality

standards violations and more than $1 million in excessive housing assistance. (Audit

Report: 2007-CH-1008)

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HUD OIG audited the Housing Choice Voucher program of the Housing

Commission of Anne Arundel County, Glen Burnie, MD. The Commission did not

always operate its program in accordance with HUD requirements and regulations. It

did not always ensure that its program housing stock met housing quality standards.

Of the 61 units inspected, 35 did not meet HUD's housing quality standards, and 30

had 117 material violations that existed on or before the Commission's previous

inspections. The Commission paid nearly $117,000 in housing assistance for the 30

units with material violations. The Commission also did not always properly perform

rent reasonableness determinations for units it owned and, therefore, could not

support more than $733,000 in housing assistance payments. Lastly, the Commission

did not properly administer its Family Self-Sufficiency program and as a result, did not

ensure that more than $215,000, which it paid to program participants, was proper.

OIG recommended that HUD require the Commission to reimburse its program

from nonfederal funds for the improper use of funds paid for 30 units with 117 material

violations of housing quality standards and provide documentation or reimburse its

program from nonfederal funds for unsupported housing assistance payments and for

improper escrow payments made to participants in the Family Self-Sufficiency

program. OIG also recommended that HUD require the Commission to ensure that

program housing units inspected during the audit are repaired to meet HUD's housing

quality standards and implement adequate procedures and controls to ensure that

program units meet housing quality standards to prevent an estimated $2.1 million from

being spent on units with material housing quality standards violations. (Audit

Report: 2007-PH-1011)

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HUD’s Public and Indian Housing Programs
31

HUD OIG audited the Housing Choice Voucher program of the Indianapolis

Housing Agency, Indianapolis, IN. The Agency failed to comply with HUD's

requirements and its cost allocation plan regarding the allocation of administrative

expenses. It did not document its initial allocation analysis in 2005, base allocations on

actual historical data, or update its allocation percentages for 2006. It used its restricted

program administrative fees to pay more than $1.6 million for expenses that exceeded

the program's reasonable fair share, allocated expenses that were unrelated to the

program's operation, and lacked documentation to support expenses incurred. OIG

estimates that over the next year the Agency will use more than $855,000 in fees for

expenses not related to its program.

OIG recommended that HUD require the Agency to (1) reimburse its program

administrative fee reserve for the improper use of fees, (2) provide documentation to

support the reasonableness of the allocation of vehicle costs to its program or

reimburse its program administrative fee reserve from nonfederal funds for the improper

use of fees, and (3) implement adequate procedures and controls to ensure that it uses

an appropriate basis for allocating administrative expenses to its program and that

adequate expense documentation is maintained. (Audit Report: 2007-CH-1011)

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HUD OIG audited the Housing Choice Voucher program of the Plymouth

Housing Commission, Plymouth, MI. The Commission's program administration

regarding documentation to support households' eligibility for housing assistance,

housing assistance and utility allowance payments calculations, the Family SelfSufficiency program, household portability, and the cost allocation plan for indirect

costs was inadequate. The Commission was unable to support more than $138,000 in

housing assistance and utility allowance payments, overpaid nearly $10,000 and

underpaid nearly $9,000 in housing assistance and utility allowances, lacked adequate

documentation to support nearly $1,900 in reduced housing assistance and utility

allowance payments, and failed to remove from its program households that did not

receive housing assistance for more than 180 days.

Further, the Commission failed to administer its and the Dearborn Heights

Housing Commission's Family Self-Sufficiency programs according to the applicable

requirements and its family self-sufficiency action plan. As a result, the Commission

had nearly $930,000 in escrow funds that should have been paid to program

participants or reimbursed to the applicable program, misused $53,000 in Housing

Choice Voucher/Family Self-Sufficiency Program Coordinators funds, inappropriately

paid more than $14,000 in final escrow payments, could not support more than $13,000

in participants' escrow accounts, and overfunded and underfunded participants'

escrow accounts by more than $2,000.

The Commission had weaknesses in the accuracy of housing assistance and

program administrative fee payments it made to receiving housing authorities for portout households. It also failed to establish an adequate cost allocation plan and

appropriately allocate indirect costs shared by all of the housing programs it

administered.

HUD’s Public and Indian Housing Programs
32

OIG recommended that HUD require the Commission to reimburse its program

from nonfederal funds for the improper use of program funds, reimburse its

Coordinators funds from nonfederal funds for incorrectly administering its Family SelfSufficiency program, provide support or reimburse its program from nonfederal funds

for the unsupported payments, and implement adequate procedures and controls to

address the findings identified. (Audit Report: 2007-CH-1012)

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HUD OIG completed a second audit of the Housing Choice Voucher program of

the Plymouth Housing Commission, Plymouth, MI. The Commission's program

administration regarding housing unit conditions, the effectiveness of its abatement

process, rent reasonableness determinations, zero-income households, and the

procurement of consulting services was inadequate. Of 61 units inspected, 42 did not

meet HUD's housing quality standards, and 38 had 181 health and safety violations that

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

In addition, the Commission did not comply with its abatement process. Of the 40

program units that failed an annual housing or quality housing standards inspection

between October 2006 and April 2007, 13 units had emergency health and safety

violations that were not corrected in a timely manner. The Commission also failed to

abate the housing assistance for nine units and improperly abated the housing

assistance payments for eight units.

The Commission also did not properly determine the reasonableness of program

rents before approving housing assistance contracts for all 66 household files reviewed

and did not adequately determine income for 7 of 25 households that reported zero

income. Further, it did not follow its own procurement policy when it acquired the

consulting services of The Schiff Group for the administration of its program.

OIG recommends that HUD require the Commission to reimburse its program

from nonfederal funds for the improper use of nearly $61,000 in program funds and

implement adequate procedures and controls to address the findings cited. These

procedures and controls should help ensure that more than $1.4 million in program

funds is spent on housing units that meet HUD's requirements. We also recommend

that HUD restrict the Commission's ability to administer other HUD-funded programs

until the Commission substantially improves its program administration to ensure

compliance with applicable requirements. (Audit Report: 2007-CH-1016)

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HUD OIG audited the Housing Choice Voucher program at the Holyoke Housing

Authority, Holyoke, MA. The Authority generally administered the program

according to its administrative plan but not always in accordance with its annual

contributions contracts and HUD requirements. It did not (1) ensure that the required

documentation was maintained to support the eligibility of each tenant and its housing

assistance payments, (2) conduct rent reasonableness determinations according to HUD

requirements, (3) follow a prudent personnel practice regarding payment for unused

HUD’s Public and Indian Housing Programs
33

sick leave upon the death or retirement of an employee, and (4) always properly

allocate costs or account for interfund transfer transactions.

OIG recommended that HUD require the Authority to (1) implement adequate

procedures and controls over its housing assistance payments, (2) establish controls to

ensure that rent reasonableness determinations are completed in accordance with HUD

requirements, (3) revise its sick leave policy with regard to its federal programs and

reimburse its programs nearly $398,000 in unreasonable costs for employees' unused

sick leave, and (4) provide support for or reimburse to HUD more than $354,000 in

unsupported administration costs and nearly $557,000 in interprogram transactions.

OIG also recommended that HUD recapture from the Authority nearly $107,000 in

administrative fees for not performing rent reasonableness determinations in

accordance with HUD's requirements. (Audit Report: 2007-BO-1008)

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HUD OIG audited the Housing Choice Voucher program of the Peoria Housing

Authority, Peoria, IL. The Authority's program administration regarding housing unit

conditions and timeliness of annual housing unit inspections was inadequate. Of the 59

housing units inspected, 58 did not meet HUD's housing quality standards, and 28 had

88 exigent health and safety violations that existed at the time of the Authority's

previous inspections. The Authority also failed to ensure that its housing unit

inspections were conducted in a timely manner. Of the 3,062 unit inspections

conducted by the Authority from January 1, 2005, through January 31, 2007, 823 (26.8

percent) inspections were not conducted within the required one year of the previous

inspections. The number of days late ranged from 1 to 488, and 402 of the late

inspections were more than 30 days late.

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

nonfederal funds for the improper use of nearly $107,000 in program funds and

implement adequate procedures and controls to address the issues identified. These

procedures and controls should help ensure that more than $1 million in program funds

is spent on housing units that meet HUD's requirements. (Audit Report:

2007-CH-1014)

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HUD’s Public and Indian Housing Programs

Copyright, 2007. The Peoria Journal Star - Peoria, IL. Reprinted with permission.
34

HUD OIG audited the Housing Choice Voucher program of the Madison County

Housing Authority, Collinsville, IL. Of the 48 housing units inspected, 40 did not

meet HUD's housing quality standards, and 35 had 264 violations that existed at the

time of the Authority's previous inspections. The Authority incorrectly calculated

households' payments, resulting in more than $39,000 in overpayments and $13,000 in

underpayments. It did not ensure that its households' files contained required

documentation to support housing assistance and utility allowance payments. Of the

88 files reviewed, 20 did not contain documentation required by HUD and the

Authority's program administrative plan to support more than $126,000 in housing

assistance payments. The Authority also failed to adequately use HUD's Enterprise

Income Verification system to determine that reported zero-income households had

unreported income, resulting in more than $14,000 in improper housing assistance

payments.

OIG recommended that HUD require the Authority to (1) reimburse its program

from nonfederal funds for the improper use of program funds, (2) provide

documentation or reimburse its program from nonfederal funds for the unsupported

housing assistance payments and administrative fees, and (3) implement adequate

procedures and controls to address the findings identified to prevent more than

$784,000 from being spent on units with material housing quality standards violations

and excessive housing assistance. (Audit Report: 2007-CH-1010)

Public Housing Program Activities

HUD OIG audited the Navajo Housing Authority's, Window Rock, AZ, use of

subgrantees for housing development projects to determine whether the Authority's

procedures for selecting and monitoring subgrantees were adequate to ensure

compliance with Native American Housing and Self-Determination Act (NAHASDA)

program requirements.

The Authority's procedures for selecting and monitoring subgrantees failed to

ensure that NAHASDA funds were used in accordance with program requirements and

that housing production goals were achieved. As a result, the Authority failed to

prevent recurring problems, including extended project delays, unnecessary project

expenses, and misuse of NAHASDA grant funds by subgrantees and/or their

construction contractors. These failures resulted in increased costs, inefficient

housing production, and, ultimately, significantly fewer housing opportunities for the

intended program beneficiaries, Navajo citizens. For at least 14 housing projects, for

which more than $53 million has been allocated, the projects were either not started or

not finished, funds were misused by subgrantees and/or their contractors, or

construction or management problems threaten the long-term viability of the projects.

OIG recommended that HUD require the Authority to (1) consider discontinuing

the use of subgrantees for housing development activities and establish a new strategy

for more efficient and effective housing development or (2) implement additional

controls to ensure that funds provided to subgrantees are used in accordance with

NAHASDA requirements and in a manner that will ensure performance and

management goals are achieved. (Audit Report: 2007-LA-1008)

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HUD’s Public and Indian Housing Programs
35

HUD OIG audited the Housing Authority of the City of Asbury Park, Asbury Park,

NJ, to determine whether (1) capital funds were properly expended and obligated in

accordance with HUD requirements, (2) salaries and related benefits allocated to

different programs were reasonable and supported, and (3) controls over maintenance

and repairs were adequate.

The Authority did not adequately administer its capital grant program. It did not

(1) disburse funds for administrative costs within budget limitations, (2) obligate

capital grant funds in a timely manner, and (3) use prudent procurement practices. In

addition, the Authority's employee compensation cost was not always reasonable and

supported, and it could not ensure that its preventive maintenance program was

effective. As a result, it did not operate in a manner that promoted the serviceability of

the projects.

OIG recommended that HUD instruct the Authority to (1) reimburse HUD

for nearly $693,000 in excess administrative fees charged to the capital fund grant,

(2) reimburse HUD almost $722,000 related to the untimely obligation of capital funds,

(3) comply with Federal procurement requirements to ensure that the Authority

procures its goods and services in the most economical manner, (4) repay HUD more

than $190,000 for excessive employee compensation from nonfederal funds, and

(5) develop and implement procedures to ensure that units meet uniform physical

condition standards and repairs are completed and inspected before the work order is

closed. (Audit Report: 2007-NY-1006)

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HUD OIG audited the Housing Authority of the City of Hoboken, Hoboken, NJ,

to determine whether (1) the Authority administrated its capital grant program in

accordance with applicable HUD laws and regulations and (2) payments to the City of

Hoboken for police services were reasonable and supported.

The Authority did not adequately administer its capital grant program. It used

almost $819,000 of its fiscal years 2000 through 2003 capital grant funds to pay

administrative and management improvement costs in excess of the limitations

imposed by HUD and transferred a total of more than $637,000 from its fiscal years

2003-01, 2004, and 2005 capital grants to pay operating expenses for its low-rent

public housing program. Further, the Authority made total payments of more than

$333,000 to the City for police services without obtaining or maintaining adequate and

complete documentation to support the payments.

OIG recommended that HUD instruct the Authority to (1) reimburse the capital

fund program almost $819,000, (2) reduce the Authority's future capital grants by more

than $632,000, (3) transfer $5,000 from the low-rent public housing program to the

capital fund program, (4) establish and implement internal control policies and

procedures that will prevent funds allocated to site and unit improvements from being

used to pay the Authority's operating expenses, (5) provide HUD with adequate and

compete documents to support the total payments made to the City for police

services and have the City reimburse the Authority or provide the Authority with

HUD’s Public and Indian Housing Programs
36

comparable future services for any payments determined to be unsupported,

(6) establish and implement adequate internal control procedures to ensure that

contracts are conducted in compliance with HUD's requirements and Federal

regulations, and (7) ensure the accuracy of financial information entered into HUD

systems. (Audit Report: 2007-NY-1011)

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HUD OIG audited the Wilmington Housing Authority, Wilmington, NC, to

determine whether it violated requirements when it noncompetitively procured

services from its affiliate, Housing and Economic Opportunities, Inc., and whether it

returned program income to HUD in accordance with its up-front grant special

warranty deed.

The Authority did not follow requirements for selection of its affiliated nonprofit

entity to be a development partner for two of its development projects. As a result, it

inappropriately paid its affiliate more than $296,000 in HOPE VI funds. Also, in

violation of its special warranty deed with HUD's Multifamily Property Disposition

Center, the Authority inappropriately allowed its affiliate to retain more than $1.2

million in program income it received from home sales.

OIG recommended that HUD require the Authority to (1) repay $296,655 from

nonfederal funds to its HOPE VI program, (2) implement procedures to ensure that it

follows Notice: PIH-2007-15 for transactions with its affiliate, (3) return to HUD $1.2

million in program income received by its affiliate, and (4) implement procedures to

ensure that the affiliate recaptures home sales proceeds and returns the appropriate

amount to the Federal Housing Administration (FHA) insurance fund. OIG also

recommended that HUD take appropriate administrative action against the Authority

and affiliate for not complying with up-front grant special warranty deed requirements.

(Audit Report: 2007-AT-1011)

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HUD OIG audited the Harrisburg Housing Authority, Harrisburg, PA, to

determine whether it administered its low-rent public housing program in accordance

with HUD regulations.

The Authority did not administer its low-rent public housing program in

accordance with HUD regulations. It improperly disbursed nearly $835,000 in

operating funds from its low-rent public housing program to open and support the

Greater Harrisburg Community Credit Union and allowed a related conflict-ofinterest situation to exist.

OIG recommended that HUD review the issues and if appropriate, initiate action

to declare the Authority in substantial default of its consolidated annual contributions

contract and take appropriate administrative action as detailed in the contract. OIG

also recommended that HUD direct the Authority to repay its low-rent public housing

program from nonfederal funds for the ineligible disbursements related to the credit

union; develop and implement controls to ensure that disbursements of operating funds

HUD’s Public and Indian Housing Programs
37

are eligible and supported; and develop and implement controls to detect, prevent,

and resolve future conflict-of-interest situations. (Audit Report: 2007-PH-1013)

○○○○○○○○○○○○○○○○○

HUD OIG audited the District of

Columbia Housing Authority's, Washington,

DC, administration of its leased housing under

its MTW program to determine whether the

Authority adequately determined tenant

eligibility and properly calculated and

supported its leased housing assistance

payments.

The Authority did not adequately

determine tenant eligibility and did

not properly calculate and support its

leased housing assistance payments. There

were problems in all 34 tenant files

reviewed. The files did not contain many of

the key documents required by HUD

and the Authority's administrative plan,

resulting in unsupported payments totaling

nearly $310,000. The Authority also failed

to perform 5,038 (57 percent) of the 8,835

tenant reexaminations required for fiscal year

2006 and incorrectly calculated housing assistance payments, resulting in more

than $25,000 in overpayments and more than $4,000 in underpayments.

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

its program from nonfederal funds for the unsupported housing assistance payments

and administrative fees and reduce the Authority's fiscal year 2008 administrative

fees by an appropriate percentage for failing to perform the reexaminations and

(2) implement adequate procedures and controls to ensure that it follows HUD

requirements, performs required quality control reviews, and assigns sufficient staff to

administer its leased housing. OIG also recommended that the Authority reimburse

its program from nonfederal funds for the overpayment of housing assistance and

reimburse applicable tenants for housing assistance underpayments, thereby putting

these funds to better use. (Audit Report: 2007-PH-1008)

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HUD OIG audited the Butler Metropolitan Housing Authority's, Hamilton, OH,

5(h) homeownership and Turnkey III Homeownership Opportunity programs to

determine whether the Authority properly accounted for and used its programs'

proceeds in accordance with HUD requirements.

The Authority failed to properly account for nearly $400,000 of the programs'

proceeds for more than 5 years because it commingled the proceeds with funds in its

HUD’s Public and Indian Housing Programs

Copyright, 2007. The Washington Times -

Washington, DC. Reprinted with permission.
38

retained earnings account. The $400,000 consisted of more than $166,000 in 5(h) sales

proceeds and nearly $232,000 in Turnkey III proceeds. The Authority also did not use

the 5(h) proceeds in a timely manner. As a result, the programs' proceeds were not

used to assist low- and moderate-income families.

OIG recommended that HUD require the Authority to transfer from its retained

earnings account to the applicable accounts the 5(h) and Turnkey III proceeds plus

earned interest, submit a proposal(s) for HUD's approval on how the programs'

proceeds will be used, and implement procedures and controls to ensure that the

proceeds are used to support the development of affordable housing for low- and

moderate-income families in accordance with HUD requirements. (Audit Report:

2007-CH-1013)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Boyne City Housing Commission's, Boyne City, MI,

nonprofit development activities to determine whether the Commission diverted or

pledged resources subject to its annual contributions contract, other agreement, or

regulation for the benefit of non-HUD developments.

The Commission defaulted substantially on its contract when it improperly pledged

resources for the benefit of the Boyne City Nonprofit Housing Corporation and the

Boyne City Housing Commission Limited Dividend Housing Association Limited

Partnership, organizations created by the Commission, without HUD approval. The

Commission obtained two bank loans to purchase 13.47 acres of land. The loans'

promissory notes included a provision that allowed the bank to set off the amounts

owed on the loans against any and all accounts the Commission had with the bank. As

of April 2007, the Commission owed more than $137,000 on two loans.

The Commission failed to file a declaration of trust on the land to protect HUD's

interest and prevent a conveyance or encumbrance without HUD approval. It also did

not obtain HUD's approval to sell 4.82 acres of the land at more than $51,000 below fair

market value. Further, the Commission managed Deer Meadows, a 30-unit senior

housing project receiving Section 8 housing assistance from the Commission that the

Limited Partnership owned, and the Commission performed unit inspections, thus

creating a conflict of interest.

OIG recommended that HUD require the Commission to (1) amend its

promissory notes to eliminate the setoff provision to prevent the seizure of the

Commission's funds in case of default on the notes, (2) file a declaration of trust on the

remaining land to protect HUD's interest, (3) reimburse the applicable program for

the sale of part of the land at below fair market value and the improper Section 8

administrative fees received related to Deer Meadows, (4) contract with an

independent third party to perform housing quality standards inspections of Deer

Meadows as required by HUD, and (5) implement adequate procedures and controls

to address the findings identified. OIG also recommended that HUD take appropriate

action against the Commission. (Audit Report: 2007-CH-1009)

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HUD’s Public and Indian Housing Programs
39

HUD OIG audited the Housing Authority of DeKalb County's, Decatur, GA,

administration of its procurement and financial management systems to determine

whether the Authority has complied with its low-income program contractual and

regulatory requirements since being released from its memorandum of agreement with

HUD.

The Authority did not adequately monitor contract payments and did not comply

with Federal requirements or its financial management policies. Its staff did not ensure

that its financial management policies were followed, nor did all staff follow the

established procedures for processing contract payments. As a result, the Authority

incurred more than $47,000 in ineligible costs and more than $36,000 in unsupported

public housing funds.

OIG recommended that HUD require the Authority to repay its public housing

program for ineligible contract payments from nonfederal funds and either support

the unsupported contract payments or repay its public housing program from

nonfederal funds. HUD should also require the Authority to develop and implement

internal controls to ensure that contract payments are complete, accurate, and in

accordance with established procedures. In addition, HUD should ensure that the

financial management policies are followed and that all Authority staff follow the

established procedures when processing contract payment requests. (Audit Report:

2007-AT-1006)

○○○○○○○○○○○○○○○○○

HUD’s Public and Indian Housing Programs
40

Investigations

Some investigations discussed in this report were generated from leads provided

by HUD public and Indian housing program staff or conducted jointly with Federal,

State, and local law enforcement agencies. The results of various significant

investigations are described below.

HUD’s Public and Indian Housing Programs

Key program

results

- Public Housing Authority Theft/Embezzlement

- Rental Assistance Fraud

- Fed Rent Initiative

- Fugitive Felon Initiatives

- Other Fraud/Crimes

Strategic Initiative 2: Contribute to the Reduction of Erroneous

Payments in Rental Assistance

519 $7,939,052

page 41

page 46

page 66

page 68

page 70

Our focus

Investigations

Cases

closed

$

Recovered

312

Convictions/pleas/

pretrials

578

Admin/civil

actions

A Look Back for the Year

Chart 3.2: Percentage of OIG Public and Indian Housing Closed Investigation

Cases, Performed FY 07*

* This does not include cases in which funds misused came from Congress for hurricane relief.

(see chapter 5 for these cases)

Region 1

Boston 13%

Region 2

New York 10%

Region 3

Philadelphia 13%

Region 4

Atlanta 12%

Region 6

Fort Worth 11%

Region 9-10

Los Angeles 20%

Region 5

Chicago 14% Region 7-8

Kansas City 7%
HUD’s Public and Indian Housing Programs 41

Public Housing Authority Theft/Embezzlement

William Moorehead, doing business as William Moorehead and Associates, was

sentenced in U.S. District Court, Chicago, IL, to 48 months incarceration and 36 months

supervised release and ordered to pay Marion Stamps Memorial Charity Fund $19,000

for his earlier guilty plea to wire fraud. Moorehead also agreed to pay to the U.S.

Treasury $2.8 million in restitution. Moorehead, a property manager for numerous

housing authorities and privately owned Section 8 housing developments, created

fraudulent records and money transfers to hide $995,000 in embezzled or misused HUD

funds.

○○○○○○○○○○○○○○○○○

Carl Payne, the suspended Harrisburg Housing Authority (HHA) executive

director and Greater Harrisburg Community Credit Union (HCCU) president and chief

executive officer, was indicted in U.S. District Court, Harrisburg, PA, for making false

statements, providing false and misleading information, and obstruction of justice. Payne

allegedly diverted about $500,000 in HHA public housing funds to subsidize HCCU

without authorization or disclosure. HUD's Enforcement Center suspended Payne after

his indictment.

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Dora Perez, the former San Benito Housing Authority (SBHA) low-rent manager,

was sentenced in U.S. District Court, Brownsville, TX, to 24 months incarceration and

36 months probation and ordered to pay SBHA $273,591 in restitution for her previous

conviction of theft from a federally funded program. From 1998 to 2006, Perez

embezzled approximately $273,591 in tenant rents from Palmville I & II, SBHA senior

and disabled housing developments.

○○○○○○○○○○○○○○○○○

William Dearman, the former Alexandria Redevelopment and Housing Authority

(ARHA) executive director, entered into a pretrial diversion agreement with the U.S.

Attorney's Office in Alexandria, VA, and admitted to violating HUD regulations and

the Virginia Public Procurement Act. Dearman circumvented procurement

Copyright, 2007. San Benito News - San Benito, TX. Reprinted with permission.
42

regulations and awarded more than $190,000 in roofing contracts without

competition and then falsely certified ARHA annual contributions contracts. The

pretrial diversion agreement defers Dearman's prosecution for 24 months; prohibits

him from seeking or obtaining employment with any HUD-funded, -sponsored,

or -administered employer for 3 years; requires him to perform 50 hours of community

service; and orders him to pay the cost of prosecution.

○○○○○○○○○○○○○○○○○

Rebecca Sargeant, a former Springfield Housing Authority (SHA) accounts

receivable clerk, was indicted in U.S. District Court, Springfield, IL, for embezzlement

and theft of public monies. Sargeant allegedly prepared, endorsed, and negotiated

$168,000 in SHA checks for her personal use without authorization.

○○○○○○○○○○○○○○○○○

Eric Hurt, a former Hoboken Housing Authority (HHA) accounting manager, was

sentenced in U.S. District Court, Newark, NJ, to 41 months incarceration and 3 years

probation and ordered to pay HHA $111,083 and Montessori Day School $157,085 in

restitution for his earlier guilty plea to theft concerning programs receiving Federal

funds, filing false Federal income tax returns, and wire fraud. From July 2002 to

December 2003, Hurt embezzled $111,083 when he issued HHA checks to himself

without authorization, deposited the checks into his personal bank accounts, and then

used HHA funds for personal expenditures. Hurt also failed to report the embezzled

funds on his Federal income tax returns.

○○○○○○○○○○○○○○○○○

Brent Williams, the former Crow Creek Housing Authority (CCHA) executive

director; Alyce McGhee, the former CCHA finance officer; and former CCHA

employees Carla Big Eagle, Velsworth Hawk, and Terra Thompson were each indicted

in U.S. District Court, Sioux Falls, SD, for theft and conspiracy to embezzle from an

Indian tribal organization. From November 2004 through December 2005, the above

defendants allegedly submitted fictitious receipts and fabricated invoices to embezzle

$96,403 in CCHA funds.

○○○○○○○○○○○○○○○○○

Tracy Pewo, the former Kiowa Tribal Housing Program (Kiowa) executive

director, and Charles Stickler, a former Kiowa commissioner, were each indicted in U.S.

District Court, Oklahoma City, OK, for theft from an Indian tribal organization and

aiding and abetting. Stickler and Pewo allegedly took three motor vehicles purchased

with HUD funds and owned by the Kiowa Tribe of Oklahoma. HUD loss is estimated at

$87,455.

○○○○○○○○○○○○○○○○○

Ronnie Trahan, a former Opelousas Police Department (OPD) major, was sentenced

in U.S. District Court, Opelousas, LA, to 10 months home confinement and 60 months

probation and ordered to pay HUD $36,955 in restitution for his earlier conviction for

HUD’s Public and Indian Housing Programs
HUD’s Public and Indian Housing Programs 43

aiding and abetting in the filling of a false claim. From August 2000 through June 2003,

Trahan and previously convicted OPD chief Larry Caillier, while 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 they were not

entitled to receive.

○○○○○○○○○○○○○○○○○

Barbara Rawls-Ivy, the former executive director of Alliance for Strong

Communities (ASC), a Housing Authority for the City of New Haven (HANH)

nonprofit organization, was sentenced in U.S. District Court, Bridgeport, CT, to 30

days incarceration, 5 months home detention, and 3 years probation and ordered to

pay HANH $49,059 in restitution for her earlier guilty plea to theft from a program

receiving Federal funds. From 2001 through 2003, Rawls-Ivy prepared, endorsed, and

negotiated more than $49,000 in ASC checks for her personal use.

○○○○○○○○○○○○○○○○○

Betty Trent, the former Brooksville Housing Authority (BHA) executive director,

was convicted in U.S. District Court, Tampa, FL, of conspiracy to defraud the U.S.

Government, wire fraud, theft concerning programs receiving Federal funds,

embezzlement of public money, making false claims and statements, and falsification of

Federal records in an investigation. From December 2001 to September 2006, Trent

and former BHA project manager Jo Ann Bennett created fabricated invoices and

Copyright, 2007. St. Petersburg Times - St. Petersburg, FL. Reprinted with permission.

Copyright, 2007. New Haven Register - New Haven, CT. Reprinted with permission.
44

obtained more than $40,000 in BHA funds. Bennett was sentenced to 12 months and

one day incarceration and 36 months supervised release and ordered to pay BHA $40,650

in restitution for her earlier guilty plea to conspiracy to defraud the U.S. Government.

○○○○○○○○○○○○○○○○○

Faye Nystrom, the former Benson County Housing Authority (BCHA) executive

director, was sentenced in U.S. District Court, Grand Forks, ND, to 6 months

incarceration and 3 years probation and ordered to pay BCHA $82,558 in restitution

for her earlier guilty plea to embezzlement. From 2002 to 2004, Nystrom embezzled

$40,547 in BCHA funds and $23,983 in U.S. Department of Agriculture Rural

Development funds managed by BCHA. Nystrom's actions also caused BCHA to

expend $18,000 for audit expenses.

○○○○○○○○○○○○○○○○○

Anslem, Karen, and Rachelle Thompson, former employees

of Lukachukai Chapter Veterans Organization Service

Development, Inc., a nonprofit organization receiving Indian

Housing Block Grant funds from the Navajo Housing

Authority (NHA), were each indicted in U.S. District Court,

Phoenix, AZ, for conspiracy and embezzlement or theft from

an Indian tribal organization. From March 2000 through

November 2002, the above defendants allegedly embezzled

more than $42,000 in NHA funds for their personal use.

○○○○○○○○○○○○○○○○○

Frank Giannoccaro, a former Rochester Housing Authority

(RHA) contractor and owner of Plumbing and Construction,

Inc., pled guilty in U.S. District Court, Rochester, NY, to theft

of government funds. Giannoccaro submitted more than

$36,000 in fraudulent work orders and completion certifications

to RHA.

○○○○○○○○○○○○○○○○○

Cherilyn Bahe, a former administrative assistant for

Dzilna'adilii Management Corporation (DMC), a Navaho

Housing Authority contractor, pled guilty in U.S. District Court,

Albuquerque, NM, to forging endorsements on a private

entity check. Bahe forged authorized signatures on 31 DMC

checks totaling $23,957 and then negotiated the checks

and used DMC funds for personal expenses.

○○○○○○○○○○○○○○○○○

HUD’s Public and Indian Housing Programs

Copyright, 2007. The Gallup

Independent - Gallup, NM.

Reprinted with permission.
HUD’s Public and Indian Housing Programs 45

Rosemary Kappes, the former Housing

Authority of Salt Lake City (HASLC)

executive director, was indicted in U.S.

District Court, Salt Lake City, UT, for

theft concerning programs receiving

Federal funds and mail and health care

fraud. Kappes allegedly used $22,000

in HASLC funds to obtain health insurance

benefits for her former spouse.

○○○○○○○○○○○○○○○○○

Guy Copes, the former Housing

Authority of the Town of Beaufort (HATB)

executive director, was charged in

Carteret County Superior Court, Beaufort,

NC, with larceny by an employee,

malfeasance of a corporate officer,

and embezzlement. Copes allegedly used

about $10,000 in HATB funds for personal

expenses.

○○○○○○○○○○○○○○○○○

Angelene Gaskins, a former Tampa Housing Authority (THA) project manager, was

arrested and charged in the Tenth Judicial Circuit County Court, Tampa, FL, with grand

theft and committing a scheme to defraud. Gaskins allegedly negotiated about $3,945

in THA tenant money orders or checks and used THA funds for personal expenses.

○○○○○○○○○○○○○○○○○

Tonya Cramier-Oncza, a former Westland Housing Commission (WHC)

bookkeeper, pled guilty in Wayne County Circuit Court, Detroit, MI, to

embezzlement and uttering and publishing a false document. Cramier-Oncza was

sentenced to 3 years supervised probation and ordered to pay WHC and the court

$1,140. Cramier-Oncza embezzled WHC funds when she diverted WHC tenant rents

into her personal bank account.

○○○○○○○○○○○○○○○○○

Bertha Muniz, the former Bayard Housing Authority (BHA) executive director, pled

guilty in Grant County State Court, Silver City, NM, to embezzlement. Muniz was

sentenced to 18 months probation and ordered to pay BHA $1,126 in restitution. Muniz

authorized BHA maintenance personnel to perform repairs at her and other BHA

employees' residences using materials purchased with BHA funds.

○○○○○○○○○○○○○○○○○

Copyright, 2007. The Salt Lake Tribune - Salt

Lake City, UT. Reprinted with permission.
46

Princess Reaves, a City of Paterson (Paterson) deputy court administrator, and

Victor Ortiz, a Paterson employee, were each indicted in U.S. District Court, Newark,

NJ, for soliciting and accepting bribes. In addition, Paterson Housing Authority

Section 8 caseworkers Marisol Cortez, Flora Cruz, and Elisa Griffin; Paterson

employees Marie Rosa, Yolanda Lane, and Javier Nunez; Paterson building inspector

Standley Williams; and Passaic Valley Water Commission employees Robert

Schweiderick and George Morgan each pled guilty to soliciting and accepting cash

payments intending to be influenced in connection with transactions of a local

government or agency or soliciting and accepting corrupt payments under color of

official right. Reaves and Ortiz allegedly and the remaining defendants admittedly

solicited and accepted bribes from an unnamed conspirator in exchange for steering

Section 8 tenants to specific properties, expediting building inspections, or rejecting

tenant complaints filed in municipal court. HUD losses are not yet determined.

○○○○○○○○○○○○○○○○○

Spencer Jenkins, owner of JP Services, a property management agent for Johnston

County Housing Authority (JCHA), and Patsy L. Narron, a mortgage loan settlement

agent, were each indicted in the Eleventh Judicial District Court, Smithfield, NC, for

obtaining property by false pretenses. Narron was also charged with larceny by an

employee. Jenkins and Narron allegedly provided false information and documents to

obtain mortgage loans on properties purchased through a straw borrower, and then

Jenkins allegedly placed JCHA Section 8 tenants in three of the fraudulently acquired

properties. HUD losses are not yet determined.

○○○○○○○○○○○○○○○○○

James Lozano, a former project manager for Columbia Highlands Company, a

Housing Authority of New Orleans (HANO) subcontractor through Honore

Construction Company, was sentenced in U.S. District Court, New Orleans, LA, to 3

months incarceration and 9 months home confinement with electronic monitoring,

fined $5,000, and ordered to perform 100 hours of community service and pay Habitat

for Humanity $15,000 in restitution for his earlier guilty plea to soliciting and

accepting bribes. Lozano solicited and accepted bribes while working on a HANO

construction project.

Rental Assistance Fraud

Thirty-one New York City Housing Authority (NYCHA) Housing Choice Voucher

program participants were arrested after their indictments in U.S. District Court,

New York City, NY, for theft of government funds. The above defendants

allegedly failed to report income on NYCHA certifications and obtained more than

$1.1 million in NYCHA housing assistance they were not entitled to receive.

○○○○○○○○○○○○○○○○○

Anthony Morman, Keith Thacker, Lawrence Howard, John White, Corey Jones,

Jason Boyd, John Williams, Walter Powell, and Kameron Beckum, Indianapolis

Housing Authority (IHA) Section 8 landlords, were each charged in Marion County

HUD’s Public and Indian Housing Programs
HUD’s Public and Indian Housing Programs 47

Superior Court, Indianapolis, IN, with conspiracy to commit welfare fraud, welfare

fraud, and theft. The above defendants allegedly failed to report their criminal

histories or true property ownership, fraudulently purchased properties leased to IHA,

or omitted IHA housing contract payments on bankruptcy petitions. In addition,

Kimberly McGuire and Willie Ferrell, also IHA Section 8 landlords, were each charged

in Indiana Superior Court with welfare fraud and theft. McGuire and Ferrell allegedly

failed to report vacant, fire damaged, or ownership transfers of properties they leased

to IHA Section 8 tenants. Collectively, the above defendants obtained $677,634 in IHA

housing assistance contract payments they were not entitled to receive.

○○○○○○○○○○○○○○○○○

Jozef Hajeczka, Etta May Morrison, and Blanca Martinez, also known as Mabel

Medina, former Yonkers Municipal Housing Authority (YMHA) Section 8 tenants, were

each arrested and charged in New York State Court, New York City, NY, with grand

larceny. Hajeczka, Morrison, and Martinez allegedly used false Social Security

numbers on YMHA certifications and obtained $127,640 in YMHA housing assistance

they were not entitled to receive. In addition, Denise Hendrickson-Peterkin, a former

YMHA Section 8 tenant, and her husband, Gary Peterkin, each pled guilty in

Westchester County Court to grand larceny and agreed to pay YMHA $64,000 in

restitution. Hendrickson-Peterkin failed to report her actual marital status or the

residency of her husband on YMHA certifications and obtained $64,000 in YMHA

housing assistance she was not entitled to receive. Collectively, the above defendants

caused HUD losses of $191,640.

○○○○○○○○○○○○○○○○○

David Braun, Joseph Berger, Michael and Reizel Herman, and Moshe and Rachel

Huss, Kiryas Joel Housing Authority (KJHA) Housing Choice Voucher program

participants, were each arrested and charged in New York State Court, Monroe, NY,

Copyright, 2007. The Journal News - New York, NY. Reprinted with permission.
48

with grand larceny. The above defendants allegedly failed to report income or assets on

KJHA certifications and collectively obtained about $181,000 in KJHA housing

assistance they were not entitled to receive.

○○○○○○○○○○○○○○○○○

Ernestine Lewis and Julie Harris, former Chicago Housing Authority (CHA)

Section 8 tenants, were each sentenced in U.S. District Court, Chicago, IL, for their

earlier guilty pleas to theft or making false statements. Lewis was sentenced to 4 years

probation and ordered to pay HUD $38,679 in restitution. Harris was sentenced to 5

years probation and ordered to pay HUD $32,272 in restitution. Lewis, a Chicago

Police Department employee, simultaneously applied for and obtained about $66,014

in CHA public housing and Section 8 housing assistance, and Harris failed to report

income on CHA certifications and obtained $32,272 in CHA housing assistance she was

not entitled to receive. In addition, former CHA Section 8 tenant Lilia Pabon was

ordered to pay HUD $130,257 in a civil judgment arising from her previous conviction

for making false statements. Pabon failed to report income on CHA certifications and

obtained $75,572 in CHA housing assistance she was not entitled to receive.

Collectively, the above defendants caused HUD losses of $141,586.

○○○○○○○○○○○○○○○○○

Shannon Larkin, Carmaline Stewart, Maria Guadalupe Moreno, Dexter Prather,

Patricia Cooney, Roberta Martin, Sanya Smith, Barbara Robinson, and Rose Pires, San

Diego Housing Commission (SDHC) Section 8 tenants, were each charged in San Diego

County Superior Court, San Diego, CA, with making false statements and grand theft.

The above defendants allegedly failed to report employment, income, or unauthorized

residents on SDHC certifications and collectively obtained $122,795 in SDHC housing

assistance they were not entitled to receive.

○○○○○○○○○○○○○○○○○

Ayub Abdul Aziz Smith, also known as Robert Smith; Tina Harring; Barbara

Singleton-Pradia; and Larry Pradia, former Rochester Housing Authority (RHA)

Section 8 tenants or landlord, were each sentenced in U.S. District Court, Rochester,

NY, for their earlier guilty pleas to conspiracy to commit HUD and Social Security

Administration (SSA) fraud or theft of government funds. Smith was sentenced to 5

years probation and ordered to pay HUD $14,163 and SSA $23,442 in restitution, Harring

was sentenced to 5 years probation and ordered to pay HUD $22,202 in restitution,

Singleton-Pradia was sentenced to 6 months home confinement and 5 years probation

and ordered to pay HUD $55,933 in restitution, and Pradia was sentenced to 5 years

probation and ordered to pay the above restitution jointly and severally with

Singleton-Pradia. The above defendants failed to report income or accurate household

composition on RHA certifications and collectively obtained $107,202 in RHA

housing assistance they were not entitled to receive.

○○○○○○○○○○○○○○○○○

HUD’s Public and Indian Housing Programs
HUD’s Public and Indian Housing Programs 49

Mayra Montano, a former Islip Housing Authority (IHA) Section 8 tenant, pled

guilty in New York State Superior Court, Central Islip, NY, to grand larceny. Montano

failed to report her ownership of her IHA subsidized property and obtained $107,000

in IHA housing assistance she was not entitled to receive.

○○○○○○○○○○○○○○○○○

Diane Griggs, Tamika Issac, Emma Florence, and Koreen Scott, former Georgia

Department of Community Affairs (DCA) Section 8 tenants, were each indicted in U.S.

District or Coweta or Douglas County Courts, Macon, Newnan, or Douglas County,

GA, for false statements, theft by deception, or committing fraud in obtaining public

assistance. The above defendants allegedly failed to report income on DCA

certifications and obtained $73,809 in DCA housing assistance they were not entitled

to receive. In addition, Richard Swindle and Betty Jenkins, former DCA Section 8

tenants, each pled guilty to making false statements, theft by deception, and

committing fraud in obtaining public assistance. Swindle and Jenkins failed to report

income or actual household composition on DCA certifications and obtained $28,895

in DCA housing assistance they were not entitled to receive. Collectively, the above

defendants caused HUD losses of $102,704.

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Niasha King, a St. John the Baptist Housing Authority (SJBHA) public housing

tenant; Joseph Pierre; and Orlando and B.J. Brown were each arrested and charged in St.

John Parish District Court, LaPlace, LA, with simple arson and conspiracy to commit

arson. King allegedly conspired with Pierre and Orlando and B.J. Brown to set a fire in

her SJBHA public housing unit. HUD realized losses in excess of $100,000 after the

fire destroyed two SJBHA public housing units.

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Glory Ann Davenport, a former Tampa Housing Authority (THA) Section 8 tenant,

pled guilty in U.S. District Court, Tampa, FL, to theft of government funds. In

addition, THA Section 8 tenants Tara Roberts, Sherrine Roberts, and Damaryes

Villanueva were each sentenced for their earlier guilty pleas to committing public

assistance or organized fraud or a pretrial diversion agreement. Tara Roberts was

sentenced to 12 months house arrest and 14 years probation and ordered to perform 20

months community service and pay THA $21,548 in restitution, Sherrine Roberts was

sentenced to 60 months probation and ordered to pay THA $21,815 in restitution, and

Villanueva agreed to pay THA $7,181 in restitution. The above defendants failed to

report employment, income, accurate marital status, or their nonresidency in a

subsidized unit on THA certifications and collectively obtained $95,817 in THA

housing assistance they were not entitled to receive.

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Henrietta Hartshorn, Belinda De Leon Gortarez, and Ernesto Rodriguez, former

Garden Grove Housing Authority (GGHA) Section 8 tenants, were each charged in
50

Orange County Superior Court, Westminster, CA, with grand theft. Gortarez pled

guilty and was sentenced to 6 months incarceration and ordered to pay the City of

Garden Grove $50,756 in restitution. Hartshorn and Rodriguez allegedly and Gortarez

admittedly failed to report their previous criminal history on GGHA certifications and

collectively obtained more than $90,000 in GGHA housing assistance they were not

entitled to receive.

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Eleven Lucas County Metropolitan Housing Authority (LCMHA) Section 8

tenants and James Foster, an LCMHA landlord, were each charged in Lucas County

Court of Common Pleas, Toledo, OH, with theft, grand theft, and tampering with

records. The LCMHA Section 8 tenants allegedly failed to report income, accurate

household composition, or subleasing of their subsidized units on LCMHA

certifications; and Foster allegedly failed to report his residency in his leased LCMHA

subsidized unit. Collectively, the above defendants obtained $85,800 in LCMHA

housing assistance they were not entitled to receive.

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Tawanda Gulley, a former Pinellas County Housing Authority (PCHA) Section 8

tenant, entered into a pretrial diversion agreement filed in U.S. District Court, Tampa,

FL, and agreed to 9 months of supervised probation and to pay HUD $12,319 in

restitution. In addition, Lucner St. Louis, an unauthorized resident in both PCHA and

Clearwater Housing Authority (CHA) public housing units, pled guilty to reentry of

an undocumented immigrant after deportation, immigration document fraud, and

aggravated identity theft; and former PCHA Section 8 tenant Lamesha Ware was

sentenced to 5 years probation and 6 months home detention and ordered to pay HUD

$36,997 in restitution for her earlier guilty plea to making false statements. Gulley

failed to report assets on PCHA certifications; St. Louis resided with his spouse in both

PCHA and CHA public housing units without authorization; and Ware obtained two

Florida drivers licenses showing different addresses and then conspired with her mother,

previously sentenced Saint Petersburg Housing Authority Section 8 tenant Mary

Martin, to obtain $16,900 in PCHA and $36,997 in Saint Petersburg housing assistance

they were not entitled to receive. Collectively, the above defendants caused HUD losses

in excess of $74,122.

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Bonnie Thomas, a King County Housing Authority (KCHA) Section 8 tenant, and

Terrell Dorsey, an unauthorized resident in her KCHA subsidized unit, were each

charged in King County Superior Court, Seattle, WA, with theft. Thomas allegedly

failed to report Dorsey's residency or income on KCHA certifications and obtained

$16,680 in KCHA housing assistance she was not entitled to receive. In addition, Toma

Lelea, a former KCHA Section 8 tenant, pled guilty in U.S. District Court to

committing SSA fraud and theft of public money. Lelea failed to report income or

assets on KCHA and SSA certifications and obtained $53,009 in KCHA housing

HUD’s Public and Indian Housing Programs
51

assistance and $29,735 in SSA benefits he was not entitled to receive. Collectively, the

above defendants caused HUD losses of $69,689.

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Brenda Duke and Douglas Cronin, former California Department of Housing and

Community Development (CHCD) Section 8 landlord and tenant, were each indicted

in U.S. District Court, Sacramento, CA, for theft of government property or making

false statements to HUD. Cronin and Duke allegedly failed to report their joint

residency in Cronin's CHCD subsidized unit and together obtained $68,837 in CHCD

housing assistance they were not entitled to receive.

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Nancy Vu and her husband Chien Van Nguyen, former Anaheim Housing

Authority (AHA) Section 8 recipients, were each charged in Orange County Superior

Court, Santa Ana, CA, with grand theft and perjury. Vu and Nguyen allegedly failed to

disclose investment income on AHA certifications and together obtained more than

$66,000 in AHA housing assistance they were not entitled to receive.

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Baneta Martin-Williams, a former Charlotte Housing Authority (CHA) Housing

Choice Voucher program participant, was arrested after her indictment in U.S.

District Court, Charlotte, NC, for theft of government funds and making false

statements to HUD. In addition, Kawanna Rucker and Sonya Douglas, former CHA

Housing Choice Voucher program participants, each pled guilty to making false

statements to HUD or theft of government funds. Martin-Williams allegedly and Rucker

and Douglas admittedly failed to report employment or income on CHA certifications

and collectively obtained $63,451 in CHA housing assistance they were not entitled to

receive.

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Kim Johnson, Loretta Sullivan, and Lisa Foster, former Lake County Housing

Authority (LCHA) Section 8 tenants, each pled guilty in Lake County Circuit Court,

Chicago, IL, to forgery, theft, or state benefits fraud. Johnson was sentenced to 30

months probation and ordered to perform 100 hours of community service and pay

HUD $31,689 in restitution, Sullivan was sentenced to 30 days incarceration and 30

months probation and ordered to pay HUD $4,987 in restitution, and Foster was

sentenced to 30 months probation and ordered to perform 200 hours of community

service and pay HUD $26,000 in restitution. The above defendants failed to report

income on LCHA certifications and collectively obtained $62,676 in LCHA housing

assistance they were not entitled to receive.

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Mercy Stringfield and Bing King, Housing Authority of the City of Los Angeles

(HACLA) Section 8 tenants, were each arrested and charged in Los Angeles County

HUD’s Public and Indian Housing Programs
52

Superior Court, Los Angeles, CA, with welfare fraud, perjury, grand theft, or making

false statements and representations. Stringfield allegedly used several aliases, and King

allegedly failed to report his undocumented immigrant status on HACLA certifications.

Together they obtained about $61,650 in HACLA housing assistance they were not

entitled to receive.

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Latisha Green, Israel Bonilla Hernandez, and Lonnie Brown, former Las Vegas

Housing Authority (LVHA) Section 8 tenants, were each charged in Clark County

Justice Court, Las Vegas, NV, with theft by misrepresentation or possession of a

document to establish a false identity or status. From 2002 to 2007, Green, Hernandez,

and Brown allegedly failed to report income or actual household composition on LVHA

certifications and collectively obtained $58,765 in LVHA housing assistance they were

not entitled to receive.

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Carla Francis, a City of Oceanside Housing and Neighborhood Services

Department (OHND) Section 8 tenant, was charged in San Diego County Superior

Court, San Diego, CA, with making false statements and grand theft. Francis allegedly

failed to report assets owned by household members on OHND certifications and

obtained $51,981 in OHND housing assistance she was not entitled to receive.

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Gladys Cabrera, a former Revere

Housing Authority (RHA), Boston

Housing Authority (BHA), and

Metropolitan Boston Housing Partnership

(MBHP) Section 8 tenant, pled guilty in

U.S. District Court, Boston, MA, to

conspiracy, bank and mail fraud, theft and

receipt of stolen mail, and theft of

government benefits. Cabrera and

previously indicted Esther Arias allegedly

took U.S. mail belonging to others and

then used stolen identifications to obtain

$51,916 in RHA, BHA, and MBHP housing

assistance they were not entitled to

receive.

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Angela Mendieta, a Hawthorne Housing Authority (HHA) Section 8 tenant, pled

guilty in Los Angeles County Superior Court, Hawthorne, CA, to grand theft. Mendieta

was sentenced to 3 years probation and ordered to pay HHA restitution in an amount

HUD’s Public and Indian Housing Programs

Copyright, 2007. The Brockton Enterprise -

Brockton, MA. Reprinted with permission.
53

not yet determined. Mendieta failed to report employment or income on HHA

certifications and obtained more than $50,000 in HHA housing assistance she was not

entitled to receive.

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Julie Delgado, Marie Lucero, and Flora Gallegos, Bernalillo County Housing

Authority (BCHA) Housing Choice Voucher program landlord or participants, were

each charged in Bernalillo County State Court, Albuquerque, NM, with fraud. Delgado,

her sister Lucero, and Gallegos allegedly failed to report familial relationships or

income on BCHA certifications and collectively obtained $49,287 in BCHA housing

assistance they were not entitled to receive.

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Sima Noor, a Torrance City Housing Authority (TCHA) Housing Choice Voucher

program participant, was convicted in Los Angeles County Superior Court, Torrance,

CA, of attempting to file a false or forged instrument. Noor was sentenced to 5 years

probation and ordered to pay TCHA $27,034 in restitution. From 1992 to 2006, Noor

provided false information on TCHA applications and obtained more than $48,000 in

TCHA housing assistance she was not entitled to receive.

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Pamela Jenkins, a former Hampton Redevelopment and Housing Authority (HRHA)

Section 8 tenant, pled guilty in Hampton Circuit Court, Hampton, VA, to welfare fraud

and making false statements to obtain public assistance. Jenkins was sentenced to 5

years probation and ordered to pay the Virginia Department of Social Services $16,468

in restitution. Jenkins failed to report the residency or income of her spouse on HRHA,

SSA, or Virginia Department of Social Services certifications and obtained about $43,000

in HRHA housing assistance and $21,220 in SSA and other benefits she was not entitled

to receive.

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Charlene Philbrook, a former Malden Housing Authority (MHA) public housing

tenant, pled guilty in Malden District Court, Malden, MA, to larceny. Philbrook was

sentenced to 5 years probation and ordered to pay MHA $41,691 in restitution. From

September 2000 through September 2005, Philbrook 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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Aserine Blevins and Terry Ann Littlepage, former Cook County Housing Authority

(CCHA) Section 8 tenant and fictitious landlord, were each sentenced in U.S. District

Court, Chicago, IL, to 3 years probation and ordered to pay HUD $36,800, jointly and

severally, for their earlier guilty pleas to making false statements and theft of public

monies. Blevins was also ordered to serve 6 months home confinement. Blevins and

HUD’s Public and Indian Housing Programs
54

Littlepage hid Blevins ownership interest in her CCHA subsidized property and

together obtained $36,800 in CCHA housing assistance they were not entitled to

receive. In addition, Eugene and Wilma Hardney, former CCHA Section 8 landlords

previously convicted of making false statements and barred from conducting business

with HUD, each pled guilty in Cook County Circuit Court to committing loan fraud,

deceptive practices, and theft. The Hardneys were sentenced to 2 and 4 years

incarceration, respectively. Eugene and Wilma Hardney provided false information

and documents to obtain conventional mortgages on two properties and then leased

the properties to CCHA Section 8 tenants and collected $4,000 in CCHA housing

assistance contract payments after one property went into foreclosure and became

lender owned. Collectively, the above defendants caused HUD losses of $40,800.

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Blondine Wynn and La'Vine Reid, former Greensboro Housing Authority (GHA)

Housing Choice Voucher program participants, were each sentenced in U.S. District

Court, Greensboro, NC, for their earlier guilty pleas to making false statements to HUD

or the U.S. Department of Health and Human Services. Wynn was sentenced to 5 years

probation and ordered to pay GHA $14,461 in restitution. Reid was sentenced to 2

days incarceration, 8 months home confinement, and 3 years supervised release and

ordered to pay GHA $26,145 in restitution. Wynn and Reid failed to report income or

accurate household composition on GHA certifications and together obtained more

than $40,000 in GHA housing assistance they were not entitled to receive. In addition,

Johnnie Mae Brooks, a former GHA Section 8 tenant sentenced for her earlier guilty

plea to false statements, was arrested after violating the terms of her probation.

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Elaine Pritchett and Walter Melton, former Cleveland Metropolitan Housing

Authority (CMHA) Section 8 tenant and landlord, were each indicted in U.S. District

Court, Cleveland, OH, for theft. Pritchett allegedly failed to report her familial

relationship to Melton or her previous ownership interest in her CMHA subsidized

property on CMHA certifications, and Melton allegedly failed to report his familial

relationship to Pritchett or his prior criminal history. Collectively, the above

defendants allegedly obtained about $38,300 in CMHA housing assistance they were

not entitled to receive.

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Rochelle Varner, a Cuyahoga Metropolitan Housing Authority (CMHA) Section 8

tenant, pled guilty in Cuyahoga County Court of Common Pleas, Cleveland, OH, to

securing writings by deception and tampering with records. Varner used the identity

of her minor child to obtain an ownership interest in real property, failed to report her

property ownership on CMHA certifications, and obtained $38,211 in CMHA housing

assistance she was not entitled to receive.

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HUD’s Public and Indian Housing Programs
55

Sharon Diggs and Antionette Smith, former Clark County Housing Authority

(CCHA) Section 8 tenants, were each charged in Clark County Justice Court, Las

Vegas, NV, with theft by misrepresentation. In addition, Youland Criggley, a former

CCHA Section 8 tenant, was sentenced in Clark County District Court to 12 months

incarceration (suspended) and 36 months probation and ordered to perform 20 hours

of community service per month (if not employed full time) and pay CCHA $11,881 in

restitution for her earlier guilty plea to fraudulently obtaining public assistance. Diggs

and Smith allegedly and Criggley admittedly failed to report income or actual

household composition on CCHA certifications. Collectively, the above defendants

obtained $38,145 in CCHA housing assistance they were not entitled to receive.

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Darlyn Cooper, a former Santa Monica Housing Authority (SMHA) Housing Choice

Voucher program participant, pled guilty in Los Angeles Superior Court, Santa Monica,

CA, to grand theft. Cooper was sentenced to 2 years probation and ordered to

perform 60 days of community service and pay SMHA $13,027 in restitution. From

July 2005 through March 2006, Cooper failed to report income on SMHA

certifications and obtained $34,493 in SMHA housing assistance she was not entitled

to receive.

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Erica Wren, Tiffany Miles, Connie Terrell, and Joy Parker-Stapleton, former

Kankakee Housing Authority (KHA) Section 8 tenants, were each charged in Kankakee

County Circuit Court, Kankakee, IL, with theft by deception. The above defendants

allegedly failed to report income on KHA certifications and collectively obtained $33,877

in KHA housing assistance they were not entitled to receive.

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Emad Duar, a San Francisco Housing Authority (SFHA) Section 8 tenant, pled guilty

in U.S. District Court, San Francisco, CA, to theft of government funds. From

October 2001 through November 2003, Duar failed to report income on SFHA

certifications and obtained $33,000 in SFHA housing assistance he was not entitled to

receive.

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Wilhermina Rodriguez, also known as Muriel Rodriguez, a former Portland

Housing Authority (PHA) Section 8 tenant, pled guilty in Cumberland County

Superior Court, Portland, ME, to theft by deception and making unsworn

falsifications. Rodriguez agreed to pay PHA $32,928 in restitution. Rodriguez failed to

report income on PHA and other certifications and obtained $32,928 in PHA housing

assistance and $44,461 in welfare and food stamp benefits she was not entitled to

receive.

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HUD’s Public and Indian Housing Programs
56

Jean Andrews, a Chester County Housing Authority (CCHA) public housing

tenant, was charged in Chester County Court of Common Pleas, Phoenixville, PA, with

theft by deception and unsworn falsifications. Andrews allegedly failed to report

income on CCHA certifications and obtained $32,591 in CCHA housing assistance she

was not entitled to receive.

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As a result of "Operation Raincheck," 59 Michigan State Housing Development

Authority or Lansing, Benton Harbor, Kalamazoo, Battle Creek, Holland, Eaton County,

or Dowagiac Housing Commission Section 8 tenants were each charged in their

respective County District Courts in Kalamazoo, Battle Creek, Benton Harbor, or

Lansing, MI, with larceny by conversion and false pretenses. The above defendants

allegedly failed to report income on housing certifications and collectively obtained

more than $30,000 in housing assistance they were not entitled to receive.

○○○○○○○○○○○○○○○○○

Laura Rivas, a former Housing Authority of the County of Santa Clara (HACSC)

Section 8 tenant, was charged in Santa Clara County Superior Court, San Jose, CA,

with grand theft. Rivas allegedly failed to report the unauthorized residency of her

spouse on HACSC certifications and obtained $29,127 in HACSC housing assistance

she was not entitled to receive.

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Carolyn Brown, Maurice Bennett, and Bonny Morgan, Montgomery County

Housing Opportunities Commission (MHOC) Section 8 tenants, were each charged in

Montgomery County District Court, Silver Spring or Rockville, MD, with theft by

deception and making false statements. Brown, Bennett, and Morgan allegedly failed

to disclose the registered sex offender status of Bennett or another unauthorized

resident on MHOC certifications and collectively obtained $28,819 in MHOC housing

assistance they were not entitled to receive.

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Alfred Filion, a former Schuylkill County Housing Authority (SCHA) Housing

Choice Voucher program participant, was indicted in U.S. District Court, Scranton,

PA, for making false statements. Filion allegedly failed to report his prior criminal

history or registered sex offender status on SCHA certifications and obtained $3,200

in SCHA housing assistance he was not entitled to receive. In addition, former SCHA

Housing Choice Voucher program participant Tarkita Reeves was sentenced to 3 years

probation and ordered to pay HUD $23,811 in restitution for her earlier guilty plea to

making false statements. Reeves failed to report an unauthorized resident on SCHA

certifications and obtained $23,811 in SCHA housing assistance she was not entitled to

receive. Collectively, the above defendants caused HUD losses of $27,011.

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HUD’s Public and Indian Housing Programs
57

Dris Mitchell, a former Mississippi Regional Housing Authority (MRHA) Section 8

tenant and employee of the Mississippi Attorney General's Office, was sentenced in

U.S. District Court, Jackson, MS, to 36 months probation and ordered to pay HUD

$3,750 in restitution for her earlier guilty plea to filing a false claim. In addition, former

MRHA Section 8 tenant Denice Peters was sentenced to 10 months probation and

ordered to perform 40 hours community service and pay MRHA $23,106 in restitution

for her earlier guilty plea to making false statements. Mitchell and Peters failed to

report income on MRHA certifications and together obtained $26,865 in MRHA

housing assistance they were not entitled to receive.

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Suezanne Bruce, a Boston Housing Authority (BHA) Section 8 tenant, was charged

in Roxbury District Court, Boston, MA, with larceny. Bruce allegedly failed to report

income on BHA certifications and obtained $26,382 in BHA housing assistance she was

not entitled to receive.

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Michele Verrall, a former Butte Housing Authority (BHA) public housing tenant,

pled guilty in U.S. District Court, Missoula, MT, to making false statements to HUD.

From December 1998 to December 2005, Verrall failed to report income on BHA

certifications and obtained $26,000 in BHA housing assistance she was not entitled to

receive.

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Serena Priddy, a former Maricopa County Housing Authority (MCHA) Section 8

tenant, was sentenced in Maricopa County Superior Court, Phoenix, AZ, to 36 months

probation and ordered to pay MCHA $25,620 in restitution for her earlier guilty plea

to attempted fraudulent schemes and practices. From March 2002 through April 2005,

Priddy failed to report income on MCHA certifications and obtained $25,620 in MCHA

housing assistance she was not entitled to receive.

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Antonio Carter, a Seattle Housing Authority (SHA) public housing tenant, was

charged in King County Superior Court, Seattle, WA, with theft. Carter allegedly failed

to report income on SHA certifications and obtained about $25,000 in SHA housing

assistance he was not entitled to receive.

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Kynia Morris, a former North Las Vegas Housing Authority (NLVHA) Section 8

tenant, was sentenced in Clark County District Court, Las Vegas, NV, to 12 months

incarceration (suspended) and 3 years probation and ordered to perform 20 hours of

community service and pay NLVHA and Nevada Welfare $26,017 in restitution for her

previous conviction for attempted theft. From 2003 to 2006, Morris failed to report

HUD’s Public and Indian Housing Programs
58

income or accurate household composition on NLVHA certifications or other

documents and obtained $22,762 in NLVHA housing assistance and $4,255 in welfare

benefits she was not entitled to receive.

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Abbie Richardson, a Tri County Community Council (TCCC) Section 8 tenant,

was sentenced in U.S. District Court, Pensacola, FL, to 5 years probation and ordered

to pay HUD $21,101 in restitution for her earlier guilty plea to theft of government

funds. Richardson failed to report income on TCCC certifications and obtained $21,101

in TCCC housing assistance she was not entitled to receive.

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Krista James, a former Davis County Housing Authority (DCHA) Housing Choice

Voucher program participant, pled guilty in Utah State Court, Farmington, UT, to

fraudulently obtaining housing benefits. James was sentenced to 36 months probation

and ordered to pay HUD $15,817 in restitution. In addition, former DCHA Housing

Choice Voucher program participant Mckenzie Davis was sentenced to 36 months

probation and ordered to perform 50 hours community service and pay HUD $4,818 in

restitution for her earlier guilty plea to fraudulently obtaining housing benefits. James

failed to report an unauthorized resident, and Davis failed to report a registered sex

offender residing in their DCHA subsidized units. Together they obtained $20,635 in

DCHA housing assistance they were not entitled to receive.

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Shannon French, a former Richland Housing Authority (RHA) Section 8 tenant,

was charged in Benton County Superior Court, Pasco, WA, with theft. From

September 2000 to September 2005, French allegedly failed to report income or

actual household composition on RHA certifications and obtained $20,256 in RHA

housing assistance she was not entitled to receive.

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Shari Hunter, a former Fayette County Housing Authority (FCHA) Section 8

tenant, pled guilty in Fayette County Court, Connersville, IN, to welfare fraud. Hunter

was sentenced to two concurrent terms of 8 years incarceration (suspended) and 4

years probation and ordered to pay FCHA $19,997 in restitution. Hunter failed to

report income or her actual marital status on FCHA certifications and obtained $19,997

in FCHA housing assistance she was not entitled to receive.

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Teresa Pearson, a former Montgomery County Housing Authority (MCHA)

Housing Choice Voucher program participant, was sentenced in U.S. District Court,

Philadelphia, PA, to 5 years probation and ordered to pay MCHA $19,606 in

restitution for her previous conviction of making false statements to HUD. Pearson

HUD’s Public and Indian Housing Programs
59

failed to report employment or income on MCHA certifications and obtained $19,606

in MCHA housing assistance she was not entitled to receive.

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Elaine Close, a Johnstown Housing Authority (JHA) Section 8 tenant, was

indicted in U.S. District Court, Johnstown, PA, for making false statements.

From 2003 to 2005, Close allegedly failed to report income on JHA certifications

and obtained more than $18,000 in JHA housing assistance she was not entitled

to receive.

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Wilhemenia Jefferson, a former Bucks County Housing Authority (BCHA)

Housing Choice Voucher program participant, was convicted in Bucks County Court

of Common Pleas, Doylestown, PA, of theft by deception and receiving stolen

property. Jefferson was sentenced to 36 months probation and ordered to pay BCHA

$17,406 in restitution. From 2001 to 2006, Jefferson omitted income on BCHA

certifications and obtained $17,406 in BCHA housing assistance she was not entitled to

receive.

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Kenneth Christenot, a former Billings

Housing Authority (BHA) Section 8 landlord,

was sentenced in U.S. District Court,

Billings, MT, to 18 months incarceration

and 3 years probation and ordered to

pay HUD $19,382 in restitution for

his previous conviction for making false

statements and theft. Christenot failed to

report his residency in his BHA subsidized

property and obtained $19,382 in BHA

housing contract payments he was not entitled

to receive.

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Cathleen Farnham and her mother, Beverly

Shier, Taylor Housing Commission (THC)

Section 8 tenant and landlord, were each

charged in Monroe County Court, Taylor, MI,

with theft. Farnham allegedly failed to report

Shier's residency in or her purchase of real

estate and subsequent abandonment of her

subsidized unit. Shier allegedly failed to report her familial relationship to and

residency with Farnham or the subsequent subleasing of Farnham's subsidized unit to

HUD’s Public and Indian Housing Programs

Copyright, 2007. Billings Gazette - Billings, MT.

Reprinted with permission.
60

others. Collectively, Shier and Farnham obtained about $17,000 in THC housing

assistance they were not entitled to receive.

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Nancy Savitch, a former Fall River Housing Authority (FRHA) Section 8 tenant,

was sentenced in U.S. District Court, Boston, MA, to 3 years probation and ordered to

pay HUD $16,411 and SSA $39,956 in restitution for her earlier guilty plea to theft of

government funds and SSA fraud. Savitch failed to report income on FRHA and SSA

certifications and obtained $16,411 in FRHA housing assistance and $39,956 in SSA

benefits she was not entitled to receive.

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Luzcelenia Watson and Kristal Allen, former Worcester Housing Authority (WHA)

Section 8 tenant and landlord, each pled guilty in Worcester District Court,

Worcester, MA, to conspiracy and making false claims or larceny over $250. Watson

was sentenced to 12 months probation and ordered to pay WHA $3,500 in restitution.

Allen was sentenced to 5 years probation and ordered to pay WHA $9,000 in

restitution. Watson, while receiving WHA Section 8 housing assistance, obtained an

ownership interest in a WHA subsidized property and, in conjunction with the former

owner, concealed her property ownership and failed to report rental income on WHA

certifications. Allen failed to report income on WHA certifications and obtained $9,000

in WHA housing assistance she was not entitled to receive. Collectively, the above

defendants caused HUD losses of $16,070.

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Jesenia Sosa, a City of Buenaventura Housing Authority (CBHA) Housing Choice

Voucher program participant, was arrested and charged in Ventura County Superior

Court, Ventura, CA, with grand theft and welfare fraud. Sosa allegedly failed to report

income or an unauthorized resident on CBHA certifications and obtained $16,044 in

CBHA housing assistance she was not entitled to receive.

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Dawn Maniscalco, a former Belmont Shelters Corporation (BSC) Housing Choice

Voucher program participant, was sentenced in U.S. District Court, Buffalo, NY, to 3

years probation and ordered to pay HUD $15,898 in restitution for her earlier guilty

plea to making false entries involving HUD transactions. Maniscalco failed to report

income on BSC certifications and obtained $15,898 in BSC housing assistance she was

not entitled to receive.

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Chantira Watkins, a former DuPage Housing Authority (DHA) Section 8 tenant,

pled guilty in DuPage County Circuit Court, DuPage, IL, to attempted forgery. Watkins

was sentenced to 24 months probation and ordered to pay HUD $13,700 in restitution.

HUD’s Public and Indian Housing Programs
61

Watkins failed to report income on DHA certifications and obtained $15,718 in DHA

housing assistance she was not entitled to receive.

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Tirania Swann, a Baltimore City Housing Authority (BCHA) public housing

tenant, was charged in Baltimore Circuit Court, Baltimore, MD, with theft. Swann

allegedly failed to report income or assets on BCHA certifications and obtained $15,528

in BCHA housing assistance she was not entitled to receive.

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Joseph and Jasmine Landrin, former Massachusetts Department of Housing and

Community Development (DHCD) landlords, were each charged in Gardner District

Court, Gardner, MA, with larceny over $250 by false pretense and making false claims

to a government agency. From August 2005 to August 2006, Joseph and Jasmine Landrin

allegedly concealed their familial relationship to the DHCD Section 8 tenant leasing

their property and obtained $14,666 in DHCD housing contract payments they were

not entitled to receive.

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Philomina Shalo, a former Olathe Housing Authority (OHA) Section 8 tenant, pled

guilty in Johnson County District Court, Olathe, KS, to stealing. Shalo was sentenced

to 180 days confinement and 12 months probation and ordered to pay HUD $2,439 in

restitution. Shalo failed to report income on OHA certifications and obtained $13,738

in OHA housing assistance she was not entitled to receive.

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Bunnie Light, a former Rural Resources Community Action (RRCA) Section 8

tenant, was charged in Stevens County Superior Court, Colville, WA, with theft.

Michael Bouchard, a fictitious RRCA Section 8 landlord, pled guilty to theft and was

sentenced to 12 months incarceration and ordered to pay RRCA $1,000 in restitution.

From April 2004 to May 2005, Light allegedly failed to report income or Bouchard's

residency in her RRCA subsidized unit, and Bouchard fraudulently claimed he was a

landlord of Light's RRCA subsidized property and hid his relationship to and residency

in her RRCA subsidized unit. Collectively, Light and Bouchard obtained $13,602 in

RRCA housing assistance they were not entitled to receive.

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Samantha Boyd, a former Maryland Department of Housing and Community

Development (MHCD) Housing Choice Voucher program participant, was charged in

Maryland District Court, Salisbury, MD, with theft by deception and making false

statements. Boyd allegedly failed to report employment or income on MHCD

certifications and obtained $13,085 in MHCD housing assistance she was not entitled

to receive.

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HUD’s Public and Indian Housing Programs
62

Linda Hill and Lewis Lacy, former Fluvanna-Louissa Housing Foundation (FLHF)

Section 8 tenant and landlord, each pled guilty in Fluvanna County Circuit Court,

Fluvanna County, VA, to welfare fraud. Hill and Lacy were each sentenced to 5 years

incarceration (suspended) and ordered to pay FLHF $12,994 in restitution. Hill and

Lacy failed to report their joint residency on FLHF certifications and together obtained

$12,994 in FLHF housing assistance they were not entitled to receive.

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Michelle Legette, a former Housing Authority of Winston Salem (HAWS) Section

8 tenant and Forsyth County detention officer, was arrested after her indictment in

U.S. District Court, Greensboro, NC, for making false statements to HUD and theft of

government funds. From March 2005 to August 2006, Legette allegedly failed to

report income on HAWS certifications and obtained $11,880 in HAWS housing

assistance she was not entitled to receive.

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Freddie Maestes, a Taos County Housing Authority (TCHA) Section 8 tenant, pled

guilty in Taos County State Court, Taos, NM, to failure to disclose facts to obtain

public assistance. Maestes was sentenced to 3 years deferred adjudication and

supervised probation. From August 2003 to August 2004, Maestes and his previously

convicted wife, Patricia Maestes, failed to report income on TCHA certifications and

together obtained $11,718 in TCHA housing assistance they were not entitled to

receive.

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Charlotte Washington, a former Alexandria Housing Authority (AHA) Section 8

tenant, was sentenced in U.S. District Court, Lafayette, LA, to 3 years probation, fined

$1,000, and ordered to perform 100 hours of community service and pay AHA $7,952

in restitution for her earlier guilty plea to making false statements. Washington failed

to report income on AHA certifications and obtained $11,664 in AHA housing

assistance she was not entitled to receive.

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Toy Cook, a Sacramento Housing and Redevelopment Agency (SHRA) Housing

Choice Voucher program participant, pled nolo contendre in Sacramento County

Superior Court, Sacramento, CA, to violating welfare and institutional codes. In

addition, La Mica Barnett, a former unauthorized resident in a SHRA subsidized unit,

was sentenced to 365 days incarceration and 5 years probation and ordered to pay HUD

$12,541 in restitution for her earlier nolo contendre plea to grand theft and welfare fraud.

Cook allegedly failed to report income, and Barnett allegedly failed to report her

unauthorized residency or the authorized tenant's abandonment of the SHRA

subsidized unit on SHRA certifications. Together they obtained about $16,220 in SHRA

housing assistance they were not entitled to receive.

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HUD’s Public and Indian Housing Programs
63

Gail Bush, a former Area Housing Authority of the County of Ventura (AHACV)

Housing Choice Voucher program participant, was sentenced in Ventura County

Superior Court, Thousand Oaks, CA, to 5 months incarceration and 36 months

supervised release and ordered to pay AHACV $10,587 in restitution for her earlier

guilty plea to grand theft and perjury. From June 2002 to February 2003, Bush

reported false income amounts on AHACV certifications and obtained $10,587 in

AHACV housing assistance she was not entitled to receive.

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Nichole Harrison and Tina Schavers, former Pomona Housing Authority (PHA)

Section 8 tenants, were each sentenced in Los Angeles County Superior Court, Pomona,

CA, for their earlier guilty pleas to making false statements, grand theft, or welfare

fraud. Harrison was sentenced to 3 months incarceration and 36 months probation

and ordered to pay PHA $200 in restitution. Schavers was sentenced to 3 years

probation and ordered to perform 30 days community service and pay PHA $7,630 in

restitution. Harrison and Schavers omitted income or accurate household

compositions on PHA certifications and together obtained $10,438 in PHA housing

assistance they were not entitled to receive.

○○○○○○○○○○○○○○○○○

Michelle Palardy, a Southern Middlesex Opportunity Council (SMOC) Section 8

tenant, was charged in Middlesex District Court, Framingham, MA, with larceny and

forgery. Palardy allegedly failed to report income on SMOC and SSA certifications and

obtained $10,007 in SMOC housing assistance and $6,125 in SSA benefits she was not

entitled to receive.

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Kathy Frazier, a former Richmond Redevelopment and Housing Authority (RRHA)

public housing tenant, pled guilty in Richmond Circuit Court, Richmond, VA, to petit

larceny. Frazier was sentenced to 5 years probation and ordered to pay RRHA $9,352

in restitution. Frazier failed to report income on RRHA certifications and obtained

more than $9,352 in RRHA housing assistance she was not entitled to receive.

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Bernadette Wagner, a former Emmons County Housing Authority (ECHA) public

housing tenant, pled guilty in U.S. District Court, Bismarck, ND, to making false

statements to HUD. From November 1993 to September 2005, Wagner failed to

report income on ECHA certifications and obtained $9,000 in ECHA housing

assistance she was not entitled to receive.

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Harold and Donna Owen, former Brunswick Housing Authority (BHA) Section 8

tenants, were each charged in Cumberland County Superior Court, Portland, ME, with

theft. From June 2001 through March 2005, Harold and Donna Owen allegedly failed

HUD’s Public and Indian Housing Programs
64

to report welfare benefits on BHA certifications and together obtained $7,257 in BHA

housing assistance they were not entitled to receive.

○○○○○○○○○○○○○○○○○

William Foster, Jr., an authorized aide for a former Kentucky Housing Corporation

(KHC) Section 8 tenant, now deceased, pled guilty in U.S. District Court, Louisville,

KY, to wire fraud. From June 2004 to June 2005, Foster claimed the deceased KHC

Section 8 tenant on KHC certifications and obtained $7,196 in KHC housing assistance

he was not entitled to receive.

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Candy McCourt, a former Salina Housing Authority (SHA) public housing tenant,

was charged in Salina County Court, Salina, KS, with making false statements and theft.

McCourt allegedly failed to report an unauthorized resident or the resident's income

on SHA certifications and obtained $7,129 in SHA housing assistance she was not

entitled to receive.

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Teresa Reid, a former Franklin Housing Authority (FHA) employee and Section 8

tenant, pled guilty in Virginia Circuit Court, Franklin, VA, to forging a public record.

Reid was sentenced to 5 years incarceration (suspended) and 5 years probation and

ordered to pay FHA $4,918 in restitution. Reid omitted income on FHA certifications

and then fraudulently recertified herself and obtained more than $7,000 in FHA

housing assistance she was not entitled to receive.

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Kristie and Dale Weinand, former Minot Housing Authority (MHA) Section 8

tenants, were each sentenced in U.S. District Court, Bismarck, ND, to 36 months

probation and ordered to pay HUD $2,000 in restitution, jointly and severally, for their

earlier guilty pleas to making false statements to HUD. Kristie and Dale Weinand failed

to report income on MHA certifications and together obtained $6,826 in MHA

housing assistance they were not entitled to receive.

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Tamicka Janigan, a former Auburn Housing Authority (AHA) Section 8 tenant, was

charged in Lee County Court, Auburn, AL, with intentionally obtaining by deception

services known by her to be available only for compensation. Janigan allegedly failed to

report income on AHA certifications and obtained $3,924 in AHA housing assistance

she was not entitled to receive.

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Mehdi Ghaemi, owner of Arborz Real Estate Company, and Hamidullah Sarwary, a

former Littleton Housing Authority (LHA) Section 8 tenant, each pled guilty in

Colorado State District Court, Englewood, CO, to fraudulently obtaining housing

HUD’s Public and Indian Housing Programs
65

benefits. Ghaemi was sentenced to 24 months deferred adjudication and ordered to

pay LHA $3,760 in restitution. Sarwary was sentenced to 24 months probation and

ordered to perform 96 hours of community service and pay LHA $3,760 in restitution,

jointly and severally with Ghaemi. Ghaemi assisted Sarwary in hiding his property

ownership from LHA, and Sarwary failed to report his property ownership on LHA

certifications and obtained $3,760 in LHA housing assistance he was not entitled to

receive.

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Mary Lesher, a former Atchison Housing Authority (AHA) Housing Choice Voucher

program participant, pled guilty in Atchison County Court, Atchison, KS, to theft.

Lesher was ordered to pay AHA $3,242 in restitution. From July 2005 to October

2006, Lesher failed to report income on AHA certifications and obtained $3,242 in

AHA housing assistance she was not entitled to receive.

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Gloria Dutton, a former Augusta Housing Authority (AHA) Section 8 tenant, pled

guilty in Kennebec County Superior Court, Augusta, ME, to theft by deception. Dutton

failed to report her ownership interest in her AHA subsidized property and obtained

$3,028 in AHA housing assistance she was not entitled to receive.

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Maria Mireles, a former Harlingen Housing Authority (HHA) low-rent tenant, was

sentenced in Cameron County State Court, Harlingen, TX, to 12 months probation

and ordered to perform 125 hours of community service and pay HHA $2,062 in

restitution for her earlier guilty plea to committing fraud. Mireles failed to report

income on HHA certifications and obtained $2,062 in HHA housing assistance she was

not entitled to receive.

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Dondi Morrell, a former Enfield Housing Authority (EHA) Section 8 tenant, was

arrested and charged in Superior Court, Enfield, CT, with committing forgery and

larceny. Morrell allegedly altered and negotiated an EHA check and obtained $2,286 in

EHA funds she was not entitled to receive.

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Felix Ortiz-Garcia, a Harrisburg Housing Authority (HHA) public housing tenant,

was indicted in U.S. District Court, Harrisburg, PA, for the sale and distribution of

narcotics, making false statements, and possession of a firearm. Ortiz-Garcia and

others allegedly distributed heroin and other illegal narcotics from his HHA public

housing unit, caused the drug-overdose deaths of four individuals, and failed to report

either his drug trafficking operation or income on HHA certifications. HUD losses are

not yet determined.

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HUD’s Public and Indian Housing Programs
66

Wesley Thompson, a former Auburn Housing Authority (AHA) Section 8 tenant

previously indicted in U.S. District Court, Portland, ME, for theft of public funds and

fraud against both HUD and SSA, was ordered to refrain from contacting a government

witness who testified against him in an ongoing criminal matter.

Fed Rent Initiative

Constituting its primary appropriated activity, HUD's housing assistance programs

served more than 4.8 million households and expended more than $24 billion in fiscal

year 2003. Recent studies indicate that an estimated 60 percent of all subsidized

housing rents are miscalculated, and approximately $3.2 billion in erroneous payments

and $2 billion in net annual subsidy overpayments are a result of both errors in

program administration and tenants underreporting income.

In an effort to combat administrative and tenant subsidy overpayments, HUD and

HUD OIG commenced "Operation FedRent," a joint effort to address rental assistance

fraud in HUD's public or Section 8 and Housing Choice Voucher programs by Federal

employees. Operation FedRent compares HUD tenant information to Federal employee

and retiree data maintained by the U.S. Office of Personnel Management. After the

comparison, an income eligibility determination is made and Social Security numbers

for family members six years of age and older are verified. If a discrepancy exists, an

investigation is opened, and appropriate administrative or legal actions are initiated to

collect any overpaid housing assistance. Results of Operation FedRent during this

semiannual reporting period are described below.

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Lauton Joshua, a U.S. Army employee, and her grandmother Helen Lowe, former

San Francisco Housing Authority (SFHA) Section 8 tenant and landlord, were each

indicted in U.S. District Court, San Francisco, CA, for mail fraud. Joshua and Lowe

allegedly failed to report employment, income, assets or their familial relationship on

SFHA certifications and obtained about $127,000 in SFHA housing assistance they were

not entitled to receive.

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Sahia Seaman, a U.S. Postal Service (USPS) employee and former Charlotte

Housing Authority (CHA) Housing Choice Voucher program participant, was arrested

after her indictment in U.S. District Court, Charlotte, NC, for making false statements

and theft of government funds. In addition, Temeria Alexander, Lavoris McIver, and

Victoria Walker, also USPS employees and former CHA Housing Choice Voucher

program participants, each pled guilty to making false statements or theft of government funds. Seaman allegedly and Alexander, McIver, and Walker admittedly failed to

report employment or income on CHA certifications and collectively obtained $72,249

in CHA housing assistance they were not entitled to receive.

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HUD’s Public and Indian Housing Programs
67

Marjorie Chatman, an SSA employee and former Richmond Housing Authority

(RHA) Section 8 tenant, pled guilty in U.S. District Court, Oakland, CA, to theft of

government funds. From April 1997 through November 2006, Chatman failed to

report income on RHA certifications and obtained $64,000 in RHA housing assistance

she was not entitled to receive.

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Chanel Brown, Towanda Good, Darlene Thomas, and Erica Anthony, SSA or

Department of Veterans Affairs employees and Baltimore City Housing Authority

(BCHA) Housing Choice Voucher program participants, were each charged or pled

guilty in Maryland State Court, Baltimore, MD. Brown and Good were charged with

theft, and Thomas and Anthony each pled guilty to theft. Thomas was sentenced to 3

years supervised probation, and Thomas and Anthony were collectively ordered to pay

BCHA $13,128 in restitution. Brown and Good allegedly and Thomas and Anthony

admittedly failed to report income on BCHA certifications and collectively obtained

$61,147 in BCHA housing assistance they were not entitled to receive.

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Ramona Cushenberry, a U.S. Department of Homeland Security employee and

Housing Authority of the County of Los Angeles (HACOLA) Section 8 tenant, was

indicted in U.S. District Court, Los Angeles, CA, for making false statements.

Cushenberry allegedly failed to report income or disability benefits on HACOLA

certifications and obtained about $25,000 in HACOLA housing assistance she was not

entitled to receive.

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Audrey Boyd, a USPS employee and Baltimore County Housing Authority (BCHA)

Housing Choice Voucher program participant, pled guilty in Maryland Circuit Court,

Baltimore, MD, to theft. Boyd was sentenced to 5 years probation and ordered to pay

BCHA $24,382 in restitution. Boyd failed to report employment or income on BCHA

certifications and obtained $24,382 in BCHA housing assistance she was not entitled

to receive.

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Shellette Jackson, a U.S. Department of State employee and former Washington,

DC, Housing Authority (DCHA) Section 8 tenant, pled guilty in U.S. District Court,

Washington, DC, to making false claims and fraudulently obtaining public assistance.

Jackson failed to report income on DCHA and DC Department of Human Services

certifications and obtained $22,705 in DCHA housing assistance and $27,679 in

Medicaid, food stamps, and other benefits she was not entitled to receive.

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HUD’s Public and Indian Housing Programs
68

Denise Mayes, a USPS employee and former Detroit Housing Commission (DHC)

Section 8 tenant, entered into a pretrial diversion agreement in U.S. District Court,

Detroit, MI, and agreed to pay HUD $19,356 in restitution. Mayes failed to report

income on DHC certifications and obtained $19,356 in DHC housing assistance she was

not entitled to receive.

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Andres DeZubiria, a Transportation Security Administration security screener and

former Seattle Housing Authority (SHA) public housing tenant, was charged in King

County Superior Court, Seattle, WA, with theft. DeZubiria allegedly failed to report

income on SHA certifications and obtained $16,242 in SHA housing assistance he was

not entitled to receive.

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Judy Bell, a USPS employee and former Greensboro Housing Authority (GHA)

Housing Choice Voucher program participant, was sentenced in U.S. District Court,

Greensboro, NC, to 3 years supervised probation and ordered to pay GHA $10,659 in

restitution for her earlier guilty plea to making false statements to HUD. Bell failed to

report income on GHA certifications and obtained more than $10,000 in GHA housing

assistance she was not entitled to receive.

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Shavonne Coleman-Modest, an Internal Revenue Service employee and former

Michigan State Housing Development Authority (MSHDA) Section 8 tenant, entered

into a pretrial diversion agreement filed in U.S. District Court, Detroit, MI. She agreed

to perform 40 hours of community service and pay HUD $8,498 in restitution.

Coleman-Modest failed to report income on MSHDA certifications and obtained $8,498

in MSHDA housing assistance she was not entitled to receive.

○○○○○○○○○○○○○○○○○

Marietta Sims, a USPS employee and former Houston Housing Authority (HHA)

Section 8 tenant, was sentenced in 174th District Court, Houston, TX, to 5 years

deferred adjudication and ordered to pay HUD $3,957 and the U.S. Department of

Health and Human Services $1,116 in restitution for her earlier guilty plea to theft. Sims

failed to report employment or income on HHA certifications and obtained $5,073 in

HHA housing assistance and $1,463 in food stamp benefits she was not entitled to

receive.

Fugitive Felon Initiatives

Enacted into law in 1996, Section 903 of Public Law 104-193, "Elimination of

Housing Assistance with Respect to Fugitive Felons and Probation and Parole

Violators," allows for the termination of housing subsidies for public or assisted

housing tenants who flee to avoid prosecution, avoid confinement after conviction of a

HUD’s Public and Indian Housing Programs
69

felony, or violate conditions of their parole or probation. The law also authorizes

Federal, State, and local law enforcement agencies to exchange information and

perform data matches.

OIG supports a Fugitive Felon Initiative (FFI) by matching HUD

housing assistance information with crime data from the National Crime

Information Center, U.S. Marshals Service (USMS), and other participating

law enforcement data banks. In addition, OIG special agents actively

participate in the USMS "Operation FALCON," a joint Federal, State, city, and

county law enforcement effort to locate and apprehend fugitive felons wanted

for violent crimes. Conducted in most major cities throughout the United

States and its territories, Operation FALCON places a strong emphasis on

apprehending fugitive felons involved in gangs, homicides, sexual assaults,

or crimes against the elderly and children. Since the inception of OIG's

FFI, hundreds of cases have been opened and closed resulting in more

than 8,092 arrests. OIG strongly supports Operation FALCON in an effort

to make HUD public and assisted housing safe places for families to live.

FFI results during this semiannual reporting period are described below.

○○○○○○○○○○○○○○○○○

HUD OIG participated in Operation FALCON IV, a USMS action

initiated to identify, locate, and apprehend violent fugitives, including those

charged with sex crimes, in Essex and Hudson Counties, NJ; Dallas, TX; Kansas

City, KS; and Kansas City, MO. As a result, 676 individuals were arrested

on outstanding felony warrants, 64 of whom resided in HUD-assisted housing.

○○○○○○○○○○○○○○○○○

Staniford Griswold was indicted in U.S. District Court, Kansas City, MO,

for assaulting a Federal officer and unlawful transportation of a firearm.

Griswold allegedly assaulted a HUD OIG special agent during Operation

FALCON IV.

○○○○○○○○○○○○○○○○○

Todd Jefferson, Gene Stone, Robert Castello, and Jose Santos, public housing

or Section 8 tenants at Bayonne, Union County, North Bergen, or Weehawken

Housing Authorities, were each arrested in Hudson County, NJ, on outstanding

State or local warrants issued for burglary, domestic violence, or parole violations.

○○○○○○○○○○○○○○○○○

Jeffrey Brooks, an unauthorized resident in a Housing Authority of New

Orleans (HANO) subsidized unit, was arrested in New Orleans, LA, on an outstanding

felony warrant for simple battery.

HUD’s Public and Indian Housing Programs
70

Other Fraud/Crimes

Douglas and Cassandra Williams, doing business as WET National Relocation

Services, each pled guilty in Clark County District Court, Las Vegas, NV, to theft or

conspiracy to commit theft. From July 2006 through January 2007, Douglas and

Cassandra Williams created and sold fraudulent Section 8 vouchers to numerous

victims, and then Douglas Williams, a former Las Vegas Housing Authority inspector,

conducted unauthorized inspections to further their scheme.

○○○○○○○○○○○○○○○○○

Rex Wetzel, a Blackfeet Housing Authority (BHA) homeownership program

participant, pled guilty in U.S. District Court, Great Falls, MT, to theft. Wetzel

obtained $12,000 from BHA to use as a downpayment on the purchase a home, but

instead of purchasing the property, Wetzel forged the seller's signature, negotiated

the check, and used the BHA funds for personal expenditures.

○○○○○○○○○○○○○○○○○

Phyllis Moor, the former Lakeland Housing Authority (LHA) land acquisition

director, pled guilty in the Tenth Judicial Circuit Court, Bartow, FL, to making false

statements. Moor was sentenced to 12 months probation and ordered to perform 100

hours of community service. Moor concealed her criminal history and falsified her LHA

employment application to obtain LHA employment.

  

HUD’s Public and Indian Housing Programs
Chapter 3

HUD’s Multifamily

Housing Programs
72

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.

Audits

HUD’s Multifamily Housing Programs

A Look Back for the Year

Chart 4.1: Percentage of OIG Multifamily Housing Audit Reports,

Performed FY 07

Region 1

Boston 16%

Region 2

New York 16%

Region 3

Philadelphia 11%

Region 4

Atlanta 6%

Region 6

Fort Worth 17%

Region 9-10

Los Angeles 11%

Region 5

Chicago 6% Region 7-8

Kansas City 17%

Key program results

- Project-Based Section 8 Contract Administrators

- Multifamily Accelerated Processing Procedures

- Owner and Management Agent Operations

- HUD Mortgage Insurance Program

Strategic Initiative 2: Contribute to the Reduction of Erroneous

Payments in Rental Assistance

Questioned costs Funds put to better use

Audit $9,743,360 $31,671,293

page73

page 74

page 74

page 77

Our

focus

12 Audits
73

Project-Based Section 8 Contract Administrators

The HUD Office of Inspector General (OIG) reviewed HUD's payments to projectbased Section 8 contract administrators relating to three incentive-based performance

standards. The audit objectives were to determine whether HUD (1) acted

appropriately when it allowed contract administrators to bill for tasks for which HUD

no longer required activity, (2) had adequate procedures in place to ensure that

Federal advances made for housing assistance payments were invested in interestbearing accounts, and (3) had adequate procedures in place to recover interest earned

on Federal advances.

HUD paid contract administrators $27.2 million during fiscal year 2006 for work

that HUD had eliminated, but which was still included in the contracts. Additionally,

HUD did not ensure that housing assistance payment advances were kept in

interest-bearing accounts, resulting in more than $54,000 in interest not earned, and

did not recover almost $133,000 in interest earned on advances kept in interestbearing accounts.

OIG recommended that HUD (1) revise the annual contributions contract when

renewing contracts so that it properly reflects the work required to be performed,

(2) include in the revised annual contributions contract a method for adjusting fees

when HUD modifications change or eliminate work for which contract administrators

are specifically paid, (3) develop and implement procedures for monitoring the use of

interest-bearing accounts, (4) ensure that contract administrators are told that they

are still required to use an interest-bearing account when HUD waives the contract

requirement for use of a depository agreement, and (5) develop and implement

procedures to recover interest earned on housing assistance payment advances. (Audit

Report: 2007-SE-0001)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Trumbull Metropolitan Housing Authority's, Warren, OH,

project-based Section 8 housing assistance activities with its related nonprofit

organizations.

The Warren Housing Development Corporation, a nonprofit entity created by the

Authority, received more than $2.2 million in housing assistance payments from July 1,

2005, through February 28, 2007, contrary to HUD's requirements. The Corporation

was created in May 1977 as a nonprofit instrumentality of the Authority. However, it

revised its articles of incorporation in June 2005 and was no longer an instrumentality

of the Authority. According to HUD's regulations, the project must be owned by a

public housing agency (instrumentality) throughout the term of the housing assistance

payments contract. The Authority revised the Corporation's articles of incorporation

on March 13, 2007, to reinstate the Corporation as an instrumentality of the Authority.

OIG recommended that HUD require the Authority to implement procedures and

controls to ensure that it follows HUD's requirements regarding Section 8 housing

assistance payments to its instrumentality. (Audit Report: 2007-CH-1007)

○○○○○○○○○○○○○○○○○

HUD’s Multifamily Housing Programs
74

Multifamily Accelerated Processing Procedures

OIG audited Capmark Finance, Inc.'s underwriting and processing of the mortgage

loan for Asbury Square Apartments, located in Tulsa, OK, to determine whether

Capmark followed multifamily accelerated processing (MAP) and HUD requirements

when underwriting and processing the Asbury loan.

Capmark misrepresented Asbury's financial and physical situation to HUD in its

underwriting narrative. Further, it did not exercise the amount of due diligence

required to support its recommendation for HUD endorsement. The Asbury

mortgage loan, as recommended by Capmark, did not provide enough funds to restore

the project to a financially viable condition. While Capmark complied with most MAP

requirements when underwriting the loan, its underwriting narrative lacked material

financial information and analysis. In addition, Capmark did not perform its property

site inspection in keeping with MAP requirements. As a result, Asbury defaulted on

the loan before final closing, causing HUD a possible loss of more than $5.9 million.

OIG recommended that HUD (1) refer Capmark to the Mortgagee Review Board

for appropriate action and (2) establish a MAP Lender Review Board that would

address and resolve violations by Capmark, which could cause losses exceeding $5.9

million to HUD's Federal Housing Administration (FHA) insurance fund, and

deficiencies in Capmark's quality control plan. (Audit Report: 2007-FW-1011)

○○○○○○○○○○○○○○○○○

HUD OIG reviewed HUD's MAP procedures to determine how effectively HUD

has implemented processes for reviewing and monitoring MAP lenders' underwriting

of loans.

MAP is an effective way of processing multifamily mortgage insurance applications.

HUD has maintained a careful balance between expedited processing and ensuring an

acceptable level of risk for its mortgage insurance programs. However, it has not

processed MAP applications within established timeframes, and the MAP Guide is not

current.

OIG recommended that HUD examine the MAP processing timeframes to

determine what practical improvements it can make to achieve faster processing and

implement the improvements. OIG also recommended that HUD update and issue a

revised MAP Guide and implement a system to ensure that new requirements are

implemented formally. (Audit Report: 2007-BO-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

HUD’s Multifamily Housing Programs
75

agreement and HUD requirements. The results of OIG's more significant audits are

described below.

○○○○○○○○○○○○○○○○○

HUD OIG audited the Cathedral Foundation of Jacksonville, Inc., Jacksonville, FL,

concerning its involvement as owner and/or manager of four elderly multifamily

housing projects. The Foundation used more than $2.65 million in project funds for

questioned costs while the projects had no surplus cash and without the required HUD

approval. The questioned amount included $1.35 million, which the Foundation repaid

itself without HUD approval for project advances, and $1.3 million for questioned

salaries, fringe benefits, janitorial services, a retirement plan, parking fees, and other

costs. The questioned costs violated Federal statutes, regulations, contracts, and other

HUD requirements. The Foundation and subsidized project owners also collected nearly

$94,000 in prohibited parking fees from tenants, placing an unjustified financial

burden on the tenants.

OIG recommended that HUD (1) require the Foundation and project owners to

deposit into the project's residual receipts accounts more than $2.5 million for

ineligible, unreasonable, or unnecessary costs and repay any portion of the more than

$147,000 in unsupported costs that it cannot document as reasonable and necessary

costs for the projects; (2) require the Foundation and the owners of the projects to

reimburse tenants who paid prohibited parking fees; and (3) take appropriate

administrative action against the Foundation and project owners for not complying

with requirements. (Audit Report: 2007-AT-1010)

○○○○○○○○○○○○○○○○○

HUD OIG audited Elders Place II, Incorporated, Philadelphia, PA, the owner of a

40-unit housing project funded under the Section 202 program. Elders Place II did not

(1) maintain complete and accurate books and records to support the receipt and

disbursement of HUD funds, (2) deposit all HUD funds intended for the construction

of the project into the project's construction account, (3) maintain adequate control

over the disbursement of project funds, (4) establish an escrow account to cover

additional construction costs, and (5) submit an acceptable cost certification to bring

the project to final closing. As a result, it made ineligible disbursements of nearly $88,000

and unsupported disbursements totaling more than $605,000 and drastically delayed

the process of bringing the project to final closing.

OIG recommended that HUD direct Elders Place II to repay the project from

nonfederal funds for the ineligible costs identified by the audit, provide

documentation to support the questioned costs or reimburse the project for any

unsupported costs from nonfederal funds, deposit more than $95,000 into an escrow

account to cover the additional construction costs, and develop and implement

written procedures to ensure that disbursements of HUD funds are eligible and

consistent with applicable HUD and Federal regulations, thereby preventing nearly

$46,000 from being disbursed improperly over the next year. (Audit Report:

2007-PH-1006)

○○○○○○○○○○○○○○○○○

HUD’s Multifamily Housing Programs
76

HUD OIG audited the records for Moosup Gardens Apartments, Moosup, CT, a

HUD-insured multifamily project. OIG identified questioned costs and opportunities

for funds to be put to better use totaling more than $730,000. These cost exceptions

were due to weak internal controls, a lack of policies for related company transactions,

and inadequate accounting procedures. As a result, the owners (1) repaid advances when

the project was in a non-surplus-cash position, charged ineligible costs, and did not

adequately support payments to their related company; (2) paid their related

company more than $230,000 in unreasonable and unsupported relocation services

costs when the project was in a non-surplus-cash position; (3) included more than

$280,000 in unreasonable and unsupported expenses in their HUD-insured mortgage

cost certification; and (4) did not properly manage the HUD-assisted learning center.

OIG recommended that HUD require the owners to (1) repay the project for

ineligible use of operating funds while the project was in a non-surplus-cash position

and pay down the project's mortgage for unsupported development costs, (2) repay

the project for unreasonable and unsupported relocation costs, (3) make a principal

payment to pay down the project's mortgage for unreasonable relocation costs and

provide support for or make a principal payment to pay down the project's mortgage

for unsupported operations expenses included in the mortgage amount HUD insured,

and (4) establish and implement a business plan which ensures that the project's

learning center delivers effective programs in an economical and efficient manner and

becomes self-sufficient without HUD funding. Further, OIG recommended that HUD

pursue administrative sanctions as appropriate against the responsible parties for the

unreasonable and unsupported disbursements identified. (Audit Report:

2007-BO-1006)

○○○○○○○○○○○○○○○○○

HUD OIG audited the owner and previous management agent of Fallbrook

Apartments in Houston, TX. The owner and/or previous management agent made

unauthorized distributions of the project's funds, totaling more than $367,000, when

the project was in a non-surplus-cash position and could not adequately support six

disbursements totaling nearly $32,000. However, the previous management agent did

not fully pay itself nearly $68,000 in management fees, and the owner repaid a total of

$150,000 to the project's operating bank account while OIG was conducting the audit,

which reduced the amount of funds owed to the project. Also, the owner did not

submit the 2005 and 2006 annual audited financial statements as required. The owner

fully funded the tenant security deposit account in March 2006 when the current

management agent took over.

OIG recommended that HUD require the owner to (1) repay the project more than

$149,000 for unauthorized distributions and put that amount plus the $150,000 in

repaid funds in a restricted escrow account to ensure that the owner uses the funds

only for eligible project expenses, (2) provide support for the unsupported costs or

repay the project, and (3) submit the 2005 and 2006 annual audited financial

statements. HUD should pursue double damages remedies against the responsible

HUD’s Multifamily Housing Programs
77

parties and pursue administrative sanctions and civil money penalties against the owner

for repeatedly violating the project's regulatory agreement. (Audit Report:

2007-FW-1012)

HUD Mortgage Insurance Program

HUD OIG audited excess funds generated by the HUD mortgage insurance

program. Excess funds are the amounts remaining under the trust indenture after the

trustee uses mortgage insurance proceeds to redeem all outstanding bonds related to

an assigned mortgage. The audit objective was to determine whether HUD properly

identified, claimed, and collected excess funds.

HUD had inadequate controls over origination and assignment of bond-financed

mortgages. As a result, for 33 projects reviewed, HUD failed to claim and collect $2

million in excess funds.

OIG recommended that HUD take appropriate actions to strengthen controls and

ensure that excess funds are identified, claimed, and collected. (Audit Report:

2007-KC-0003)

○○○○○○○○○○○○○○○○○

HUD’s Multifamily Housing Programs
78

Investigations

Some investigations discussed in this report were generated from leads provided

by HUD multifamily housing program staff or conducted jointly with Federal, State,

and local law enforcement agencies. The results of various 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

96 $6,030,312

page 79

page 81

page 83

Our focus

Investigations

Cases

closed

$

Recovered

40

Convictions/pleas/

pretrials

79

Admin/civil

actions

Region 1

Boston 13%

Region 2

New York 8%

Region 3

Philadelphia 15%

Region 4

Atlanta 7%

Region 6

Fort Worth 13%

Region 9-10

Los Angeles 11%

Region 5

Chicago 18% Region 7-8

Kansas City 15%

A Look Back for the Year

Chart 4.2: Percentage of OIG Multifamily Housing Closed Investigation Cases,

Performed FY 07*

* This does not include cases in which funds misused came from Congress for hurricane relief.

(see chapter 5 for these cases)
79

Theft/Embezzlement

Antonio Giordano, owner of Suburban Mortgage and four

HUD-insured nursing homes located in Rhode Island and

known as Coventry Health Center, Mount St. Francis Health

Center, Edmunds Place, and Hillside Health Center; and John

Montecalvo, administrator of the above nursing homes, each

pled nolo contendre in Superior Court, Providence, RI, to

embezzlement over $100,000, conspiracy, and patient

neglect at Hillside Health Center. Giordano and Montecalvo

were each sentenced to 10 years incarceration (one year

simultaneous with their current Federal prison terms) and

9 years probation; fined $500,000; and ordered to pay

Rhode Island Medicaid $500,000, Alliance for Better Long

Term Care $100,000, and 10 victims $30,000 in restitution

and pay the Rhode Island State Attorney General's Office

$8,000 for prosecution costs. Giordano, Montecalvo, and

others illegally diverted income or funds from the above

nursing homes to themselves or identity-of-interest

companies. HUD realized losses of approximately $14

million when Giordano defaulted on both the Coventry

Health Center and Edmunds Place Federal Housing

Administration (FHA)-insured mortgages.

○○○○○○○○○○○○○○○○○

David Forgy, chief executive officer of RM&G and doing business as Heartland

Health Care Group of Oklahoma (Heartland), a HUD-insured nursing home, pled guilty

in U.S. District Court, Oklahoma City, OK, to misprision of equity skimming and

aiding and abetting. From March 2001 through December 2002, Forgy disbursed funds

from Heartland project accounts for his personal benefit while Heartland was in a

non-surplus-cash position and then defaulted on Heartland's HUD-insured mortgage

and caused HUD losses in excess of $4.4 million.

○○○○○○○○○○○○○○○○○

Iris Baez, the former board president of Co-Op City, a HUD-funded 15,372-unit

housing development, and Nickhoulas Vitale, also known as Nicky Vitale, a former

Co-Op City painter, were each arrested after their indictments in U.S. District Court,

New York City, NY, for bribery and conspiracy. Baez and others allegedly awarded a

$3.5 million painting contract to Vitale's current employer, Stadium Interior Painting,

in exchange for $100,000 in kickbacks.

○○○○○○○○○○○○○○○○○

Jeffrey Williams, a former Arbor Management, Inc. (AMI), property manager at

Kimberton and Carleton Court Apartments, HUD-funded multifamily housing

developments, was sentenced in U.S. District Court, Wilmington, DE, to 6 months

HUD’s Multifamily Housing Programs

Copyright, 2007. The Providence

Journal - Providence, RI.

Reprinted with permission.
80

incarceration and 5 years supervised release and ordered to pay AMI $60,000 in

restitution for his earlier guilty plea to theft of Federal program funds. Williams

created and submitted fabricated maintenance and landscaping invoices to embezzle

approximately $60,000 in HUD funds from AMI.

○○○○○○○○○○○○○○○○○

Charles Sitter, a former property manager at East Main Street Apartments, a

HUD-funded elderly housing development, was sentenced in Seneca County Court,

Waterloo, NY, to 6 months incarceration and 5 years probation and ordered to pay the

victim $50,000 in restitution for his earlier guilty plea to grand larceny. Sitter extorted

$60,000 from an elderly housing tenant after he threatened her with eviction.

○○○○○○○○○○○○○○○○○

Nina Donehue, a board member of and Section 8 tenant at Northridge Cooperative

Homes (NCH), a HUD-funded multifamily housing development, was indicted in U.S.

District Court, San Francisco, CA, for embezzlement. Donehue allegedly used a NCH

bank card to obtain cash and purchase a vehicle and other items without authorization.

HUD's loss is estimated at $34,983.

○○○○○○○○○○○○○○○○○

Denise Toce, a former manager at Luther Ridge Apartments, a HUD-funded

multifamily housing development, was arrested and charged in Connecticut Superior

Court, Middletown, CT, with larceny. Toce allegedly embezzled about $25,000 in

tenant rents and security deposits from prospective tenants.

 ○○○○○○○○○○○○○○○○○

Brian Smallwood, a former property manager at Yorktown Senior Housing I & II,

Inc. (YSH), HUD-funded elderly housing developments, pled guilty in U.S. District

Court, Louisville, KY, to embezzlement. Smallwood embezzled more than $5,000 in

YSH funds for personal expenditures.

HUD’s Multifamily Housing Programs

Copyright, 2007. The Hartford Courant - Hartford, CT. Reprinted with permission.
81

Rental Assistance Fraud

Five Section 8 tenants at Woodland Village Apartments (WVA), a HUD-funded

multifamily housing development, were arrested and charged in Leavenworth District

Court, Leavenworth, KS, with making false statements. The above defendants

allegedly failed to report income on housing certifications and obtained approximately

$59,537 in housing assistance they were not entitled to receive. In addition, 20 WVA

tenants were arrested on outstanding felony and misdemeanor warrants.

○○○○○○○○○○○○○○○○○

Jorge Hernandez Cruz, a former manager at Casa De Las Hermanitas Apartments

(CDLH), a HUD-funded elderly and disabled housing development, was convicted in

Los Angeles County Superior Court, Los Angeles, CA, of theft. Cruz obtained more

than $16,320 from nine elderly or disabled families for priority placement in CDLH

subsidized units. In addition, Wan Shih Chen, a CDLH Section 8 tenant, was charged

with grand theft and making false representations. Chen allegedly concealed assets on

CDLH certifications and obtained more than $38,043 in CDLH housing assistance he

was not entitled to receive.

○○○○○○○○○○○○○○○○○

Maria Delgado, a former Section 8 tenant at Winn Residential Apartments, a

HUD-funded multifamily housing development, entered into a civil settlement

agreement with the U. S. Attorney's Office in Providence, RI, and agreed to pay HUD,

the U.S. Department of Justice, and the Providence Housing Authority $74,000 in

restitution. Delgado failed to report income and assets on housing certifications and

obtained $34,000 in housing assistance she was not entitled to receive.

○○○○○○○○○○○○○○○○○

Tara Lycurgus, a former Section 8 tenant at Pear Tree Park Apartments, a

HUD-funded multifamily housing development, was sentenced in U.S. District Court,

Norfolk, VA, to 5 years probation and ordered to pay HUD $25,505 in restitution for

her earlier guilty plea to making false statements. Lycurgus failed to report income on

housing certifications and obtained $25,505 in housing assistance she was not entitled

to receive.

○○○○○○○○○○○○○○○○○

Mary Brown, a former Section 8 tenant at Cedar Park Apartments, a HUD-funded

multifamily housing development, and her husband, Michael Scalf, were each indicted

in U.S. District Court, Davenport, IA, for conspiracy to defraud HUD and making false

statements. Between 2001 and 2005, Brown allegedly failed to report the residency or

income of Scalf on housing or State certifications and obtained $19,036 in housing

assistance and $90,569 in State benefits she was not entitled to receive.

○○○○○○○○○○○○○○○○○

HUD’s Multifamily Housing Programs
82

Rhoda Wright, a Section 8 tenant at Monte Vista Apartments, a HUD-funded

multifamily housing development, pled guilty in U.S. District Court, Harrisburg, PA, to

making false statements to HUD. From 2003 to 2006, Wright failed to report income on

housing certifications and obtained approximately $17,000 in housing assistance she was

not entitled to receive.

○○○○○○○○○○○○○○○○○

Elsa Ondina Herrera-Martinez, a former Section 8 tenant at High Point Village, a

HUD-funded multifamily housing development, was sentenced in U.S. District Court,

Boston, MA, to 2 years incarceration and 3 years supervised release and ordered to pay

High Point Village $15,651 in restitution for her previous conviction of theft of government

funds, aggravated identity theft, and illegally obtaining a Social Security number.

Herrera-Martinez and previously indicted Rafael Rosario acquired and used the identity of

another to obtain more than $15,000 in housing assistance they were not entitled to receive.

○○○○○○○○○○○○○○○○○

Glendale Stevenson, a Section 8 tenant at

Southwood Patio Homes, a HUD-funded

multifamily housing development, was sentenced in

U.S. District Court, New Orleans, LA, to 8 months

home confinement and 5 years supervised release and

ordered to pay HUD $8,430 in restitution for her

earlier guilty plea to making false statements.

Stevenson failed to report income on housing

certifications and obtained $14,820 in housing

assistance she was not entitled to receive.

○○○○○○○○○○○○○○○○○

Ellen Yoder, a Section 8 tenant at Hillside Village

Apartments, a HUD-funded multifamily housing

development, pled guilty in U.S. District Court,

Harrisburg, PA, to making false statements to HUD.

Yoder allegedly concealed her prior criminal history

on housing applications and obtained more than

$8,000 in housing assistance she was not entitled to

receive.

○○○○○○○○○○○○○○○○○

Fallon Tooley, a former Section 8 tenant at

Walnut Grove Apartments, a HUD-funded

multifamily housing development, was sentenced

in Clay County Court, Liberty, MO, to 3 years probation and ordered to pay HUD $7,307

in restitution for her earlier guilty plea to stealing. Tooley failed to report income on

housing certifications and obtained $7,307 in housing assistance she was not entitled to

receive.

HUD’s Multifamily Housing Programs

Copyright, 2007. The Times-Picayune - New

Orleans, LA. Reprinted with permission.
83

  

Other Fraud/Crimes

Berne Watkins, the former owner of three FHA-insured multifamily properties sold to

previously indicted Aaron Dare, pled guilty in U.S. District Court, Albany, NY, to wire fraud

and making false statements to HUD. In 2000 and 2001, Watkins and Dare executed two

promissory notes to create the appearance that Dare held equity worth $2.5 million, and

then Dare used the fraudulent promissory notes to obtain and later default on three

FHA-insured mortgages. HUD realized losses of $1.9 million after the mortgages defaulted.

○○○○○○○○○○○○○○○○○

Patrick Crislip, a former HUD multifamily construction analyst, was indicted in U.S.

District Court, Kansas City, KS, for conspiracy to conceal a conflict of interest. Crislip

allegedly obtained $49,900 from Alpha Property Management, Inc., a HUD multifamily

management agent for Sunflower Park and Silver City Apartments, after he conducted

official HUD inspections of the buildings during their $1.7 million rehabilitation.

○○○○○○○○○○○○○○○○○

Golam Mostafa, owner of Mostafa Contracting and T&MTT, was sentenced in U.S.

District Court, New York City, NY, to 63 months incarceration and 3 years supervised

release and ordered to pay the Internal Revenue Service more than $2.9 million in

restitution for his previous conviction of Federal income tax evasion and filing a false

Federal income tax return. From 1997 through 2003, Mostafa Contracting and T&MTT

obtained more than $17.7 million in HUD funds to renovate HUD-owned multifamily

buildings and units through ARCO, a former contractor overseeing HUD multifamily

properties. Mostafa violated his HUD/ARCO contract when he subcontracted the

building renovations to ARCO employees and evaded payment of Federal income tax when

he remitted $7 million to Bangladesh via a money remitter and claimed these funds as

business expenses.

○○○○○○○○○○○○○○○○○

Kristie, Alethia, and Sierra Kilgore; Angela Garrett; Tracy Patton; and Lena Shaw, HUD

multifamily Housing Choice Voucher program participants, were each indicted in U.S.

District Court, Cleveland, OH, for conspiracy and uttering counterfeit obligations. From

May 2006 through January 2007, the above defendants and others allegedly created and

distributed more than $68,890 in counterfeit securities from their HUD-subsidized

housing units.

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Edward Boppert, a former housing assistance recipient at Stony Crest Towers, a

HUD-funded multifamily housing development, was sentenced in Middlesex Superior Court,

Middletown, CT, to 8 years incarceration and 10 years probation for his earlier guilty plea

to possession of child pornography. Boppert possessed 322 images of child pornography in

his HUD-subsidized unit.

Chapter 4

HUD’s Community Planning

and Development Programs
86

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 7, page 137)

Audits

HUD’s Community Planning and Development Programs

Key program results

- Community Development Block Grant Programs

- HOME Investment Partnerships Program

- Supportive Housing Program Grants

Strategic Initiative 3: Contribute to the Strengthening of Communities

Questioned costs Funds put to better use

Audit $18,569,481 $8,297,119

page 87

page 91

page 94

Our

focus

20 Audits

Region 1

Boston 13%

Region 2

New York 27%

Region 3

Philadelphia 7%

Region 4

Atlanta 7%

Region 6

Fort Worth 0%

Region 9-10

Los Angeles 23%

Region 5

Chicago 10% Region 7-8

Kansas City 13%

A Look Back for the Year

Chart 5.1: Percentage of OIG Community Planning and Development

Audit Reports, Performed FY 07
87

OIG audits the Community Development Block Grant (CDBG) program,

Supportive Housing Program grants, and the HOME Investment Partnerships Program

(HOME). 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

HUD OIG audited the City of Newark's, Newark, NJ, CDBG program. The City

did not (1) maintain proper supporting documents for payments made on a bond

obligation, (2) report and adequately account for program income, and (3) maintain

adequate supporting documents for its drawdowns. As a result, more than $10 million

in bond and other payments is unsupported, more than $261,000 in disbursements are

ineligible, and the City cannot ensure that more than $9.7 million in future bond

payments will be an efficient use of funds. In addition, the City's financial management

system did not ensure that (1) administrative costs were expended in proportion to

delivery costs, (2) adequate time distribution records were used to allocate personnel

expenses to various programs, (3) accounting records were accurate, and (4) key

positions had adequate separation of duties. The City also did not implement proper

program controls to adequately administer and monitor its CDBG programs.

OIG recommended that HUD instruct the City to (1) reimburse the CDBG

program from nonfederal funds almost $247,000 paid in excessive bond drawdowns

and (2) provide supporting documentation for more than $9.8 million in disbursements

made related to bond payments or reimburse the CDBG program for any amounts not

supported from nonfederal funds. (Audit Report: 2007-NY-1008)

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HUD OIG audited the Municipality of Toa Baja's, Toa Baja, PR, CDBG program.

The Municipality improperly used CDBG funds for ineligible new housing

construction; did not ensure that units were adequate, safe, and sanitary; and lacked

adequate documentation to support program accomplishments. Therefore, program

expenditures of more than $77,000 are ineligible, and more than $1 million is

considered unsupported pending an eligibility determination by HUD. In addition,

the Municipality's financial management system did not properly allocate more than

$297,000 in administrative expenditures, did not support the allowability of more than

$107,000 in program disbursements, could not account for more than $84,000 in CDBG

receipts, and allowed the use of more than $12,000 for ineligible expenditures. The

Municipality also awarded six contracts, totaling more than $231,000, without

following HUD procurement requirements, did not support the reasonableness of more

than $167,000 in CDBG disbursements, and paid more than $5,000 for excessive

expenditures.

OIG recommended that HUD require the Municipality to (1) repay the program

more than $89,000 in ineligible expenditures and more than $5,000 in excessive costs;

(2) provide all supporting documentation showing the appropriateness and eligibility

HUD’s Community Planning and Development Programs
88

of more than $1.72 million in CDBG disbursements; (3) develop and implement an

internal control plan to ensure that the CDBG program has controls and procedures

which ensure that the housing rehabilitation activities meet the program objectives, a

financial management system that complies with HUD requirements, and procurement

procedures which ensure that goods and services are obtained at the most

advantageous terms and in a manner providing full and open competition; and (4)

ensure that CDBG expenditures are properly accounted for, reconciled with HUD's

disbursement system, and in compliance with requirements. (Audit Report:

2007-AT-1007)

○○○○○○○○○○○○○○○○○

OIG audited the Office of Housing and Community Development, City of New

Bedford's, New Bedford, MA, administration of its CDBG and HOME programs. The

City generally administered its CDBG and HOME programs in accordance with HUD

regulations. However, it failed to ensure that two of its subrecipients followed HUD

requirements for full and open competition regarding procurements for construction

work and did not ensure that another subrecipient attained its program objectives of

issuing the required number of loans and creating the required number of new jobs. In

addition, the City did not ensure that this subrecipient properly collateralized CDBG

funds on deposit in the same bank or made loans that did not involve conflicts of

interest. As a result, there is a lack of assurance that subrecipient procurements were

fair and equitable and that the most favorable contract prices were obtained for

$750,000 in construction funding, more than $1 million in CDBG funding for loans and

job creation may not have been the best use of HUD funds, CDBG funds totaling more

than $188,000 were not adequately safeguarded against loss, and a subrecipient approved

two loans that created apparent conflicts of interest.

OIG recommended that HUD require the City to (1) obtain a cost analysis for each

subrecipient to support the funding provided for construction contracts, (2) ensure

that the future use of CDBG funds creates the number of new jobs necessary to fulfill

the requirements of past and current agreements to put current funding of $285,000

to better use, (3) obtain and provide evidence that CDBG funds in excess of Federal

Deposit Insurance Corporation (FDIC) limits for the subrecipient are fully

collateralized, and (4) ensure that the subrecipient establishes adequate policies

addressing conflicts of interest including requirements for providing full disclosure.

(Audit Report: 2007-BO-1005)

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HUD OIG audited the operations of the Town of Alexandria, Alexandria, NY,

regarding its administration of a Small Cities Community Development Block Grant

obtained in September 1999 under HUD's Canal Corridor Initiative.

 The grantee disbursed CDBG funds for project costs that were necessary,

reasonable, and in accordance with Federal regulations; however, it did not ensure that

its use of the grant proceeds complied with program objectives. Specifically, its use of

CDBG funds did not result in job creation, the program objective for which HUD

provided the funds.

HUD’s Community Planning and Development Programs
89

OIG recommended that HUD follow up on the grantee's progress toward meeting

its job creation goal for the project and set a specified deadline for meeting the goal, use

the $50,000 per job standard to determine how much of the $600,000 in CDBG funds

are eligible costs, and require the grantee to reimburse the program from nonfederal

funds for any amounts determined to be ineligible. (Audit Report: 2007-NY-1009)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Lower Manhattan Development Corporation's (LMDC)

administration of the CDBG Disaster Recovery Assistance funds provided to the State

of New York as a result of the September 11, 2001, terrorist attacks on the World Trade

Center in New York City, NY. LMDC disbursed approximately $76.7 million of these

funds from April 1 through September 30, 2006.

LMDC generally disbursed the funds in accordance with HUD-approved action

plans, expended funds for eligible planning and administrative expenses in accordance

with applicable laws and regulations, and maintained a financial management system

that adequately safeguarded the funds. However, LMDC can strengthen its

monitoring of Small Firm Attraction and Retention Grant program recipients'

compliance with retention requirements and provide greater assurance that funds

disbursed in the Cultural Enhancement Fund program further program objectives.

OIG recommended that HUD (1) ensure the recovery of $6,000 in erroneous Small

Firm Attraction and Retention Grant payments, (2) require LMDC to strengthen

controls in the Small Firm Attraction and Retention Grant program to more effectively

identify any grant recipients that do not remain at eligible business premises for the

minimum 5-year term, and (3) monitor and evaluate the outcome-based performance

measures established for the Cultural Enhancement Fund program to ensure that funded

activity will have a positive impact upon the long-term revitalization of lower

Manhattan. (Audit Report: 2007-NY-1005)

○○○○○○○○○○○○○○○○○

During the period, HUD OIG also reported on the Lower Manhattan Development

Corporation's (LMDC), New York, NY, administration of the CDBG Disaster

Recovery Assistance funds disbursed from October 1, 2006, through March 31, 2007.

During this period, LMDC disbursed approximately $98.7 million of the $2.783 billion

in funds appropriated. The audit objectives were to determine whether LMDC (1)

disbursed Disaster Recovery Assistance funds in accordance with the guidelines

established under HUD-approved partial action plans, (2) expended Disaster

Recovery Assistance funds for eligible administration and planning expenses in

accordance with applicable laws and regulations, and (3) had a financial management

system in place that adequately safeguarded funds and prevented misuse.

LMDC generally disbursed the $98.7 million in Disaster Recovery Assistance funds

in accordance with HUD-approved action plans, expended funds for eligible

administration and planning expenses in accordance with applicable laws and

regulations, and maintained a financial management system that adequately safeguarded

funds and prevented misuse. However, the audit disclosed an internal control

HUD’s Community Planning and Development Programs
90

weakness that resulted in the drawdown of more than $1.2 million in Utility

Restoration and Infrastructure Rebuilding program funds by a subrecipient without

LMDC's written approval as required.

OIG recommended that HUD require LMDC to strengthen its drawdown controls

over the Utility Restoration and Infrastructure Rebuilding program to ensure that its

subrecipient complies with the subrecipient agreement. (Audit Report:

2007-NY-1013)

○○○○○○○○○○○○○○○○○

In addition to the above two audits of the Lower Manhattan Development

Corporation (LMDC) in New York City, NY, HUD OIG audited the Utility

Restoration and Infrastructure Rebuilding (URIR) program. The objectives were to

determine whether certain activities, for which funds have been disbursed and

additional funds are planned to be disbursed, represent an appropriate expense of the

program.

An analysis is warranted to determine whether URIR category two costs, approved

via an amendment of internal program guidelines, should have been approved via the

action plan process. Further, when the amended action plan S-2 is submitted for

approval, the proposed additional southern site costs warrant careful review to

determine whether they are costs that were contemplated by the original program and

whether some of those planned expenditures more appropriately should be charged to

another program.

OIG recommended that HUD instruct LMDC to provide documentation so that

HUD can determine whether the southern site activity added via program guidelines

meets the criteria necessary to be included as part of the initial URIR program's

objectives and whether the utility work outlined for the southern site should have gone

through the same action plan procedures as other activities. If the southern site

disbursements do not meet the criteria of the program, LMDC should be instructed to

seek repayment of the funds already advanced and, when the amended partial action

plan S-2 is submitted for HUD approval, provide additional specifics as to the activity

to be funded via the proposed amendments to the partial action plan so that a

determination can be made as to whether it is consistent with the congressional intent

for the URIR program. (Audit Report: 2007-NY-0802)

○○○○○○○○○○○○○○○○○

HUD OIG reviewed the CDBG and HOME programs administered by the

Community Development Agency, City of Fall River, MA. The City generally

administered its CDBG and HOME programs in compliance with HUD requirements.

The City's (1) internal controls over its management process, accounting, and data

processing were adequate; (2) CDBG funds were used for national objectives; (3) CDBG

and HOME program funds were used for eligible activities and were adequately

supported; and (4) CDBG and HOME program income was properly accounted for.

OIG made no formal recommendations, and no further action is necessary. (Audit

Report: 2007-BO-1007)

HUD’s Community Planning and Development Programs
91

HOME Investment Partnerships Program

HUD OIG audited the State of Utah's HOME program administered by the Utah

Department of Community and Culture, Division of Housing and Community

Development.

The Division incorrectly used more than $1 million in HOME funds when program

income funds were available for use. It generated so much program income that it did

not effectively expend its entitlement funds and could lose more than $4 million in

entitlement funds because it did not establish and complete HOME projects within

the required periods. It also did not conduct the required monitoring of the contract

recipients' HOME activities. It used about $300,000 in HOME funds to pay expenses

for the Utah Capacity Building Collaborative without substantiating that the expenses

were for HOME-related activities.

OIG recommended that HUD (1) require the Division's management to establish

and implement written policies and procedures for the HOME functions and the Olene

Walker Housing Loan Fund's board to bring its goal into agreement with its objective

and HUD requirements, (2) determine whether the questionable costs were necessary

and require the Division to repay any unnecessary costs, and (3) monitor the Division's

HOME activities and provide technical assistance. (Audit Report: 2007-DE-1006)

○○○○○○○○○○○○○○○○○

HUD OIG audited the City of Passaic's, Passaic, NJ, HOME program. The City did

not follow HUD and HOME regulations regarding the receipt and disbursement of

program income. It also did not always document compliance with HUD and local

program regulations regarding rehabilitation, acquisition, new construction, and

monitoring activities. Further, it did not follow Federal procurement regulations

regarding a professional service contract and a funding agreement to provide

rehabilitation and acquisition services.

OIG recommended that HUD instruct the City to record almost $529,000 in

program income in HUD's Integrated Disbursement and Information System (IDIS),

provide adequate support for more than $53,000 in disbursements of program income,

and expend the balance of almost $476,000 in its two local accounts before making

additional drawdowns from HOME funds. Also, the City should reimburse HOME from

nonfederal funds almost $98,000 related to the ineligible acquisition and new

construction costs incurred, provide documentation for almost $584,000 in

unsupported activities, and ensure that annual monitoring reviews are performed so

that more than $790,000 will be put to better use. Finally, the City should provide

contracts/written agreements for the unsupported disbursements of almost $205,000,

implement proper bidding procedures and obtain a current funding agreement with

its community housing development organization to ensure that future expenditures

of more than $360,000 will be put to better use, and repay more than $4,000 paid

for rehabilitation services incurred in excess of contract limits. (Audit Report:

2007-NY-1012)

○○○○○○○○○○○○○○○○○

HUD’s Community Planning and Development Programs
92

HUD OIG audited the City of Jersey City's, Jersey City, NJ, HOME program. The

City failed to (1) enter into a contract for new construction and ensure that financing

was available before disbursing funds, (2) ensure that funds disbursed were adequately

secured, (3) repay funds related to two terminated projects, and (4) enter accurate

information into IDIS.

OIG recommended that the HUD require the City to submit all supporting

documentation to HUD regarding almost $355,000 in HOME funds disbursed without

a contract so that HUD can make an eligibility determination. Any amounts

determined to be ineligible should be repaid from nonfederal funds. In addition, the

City should repay almost $268,000 plus interest for the two terminated rehabilitation

projects and establish and implement controls to ensure that HOME funds are used in

accordance with all program requirements and written agreements, periodic

monitoring is performed on the activities so that appropriate action can be taken when

performance problems arise, amounts disbursed are properly recorded on mortgage

notes and agreements, and accurate information is entered into IDIS. (Audit Report:

2007-NY-1007)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Cook County, IL, HOME program. The County did not

effectively administer HOME and violated HUD's HOME requirements. It did not

comply with HUD's regulations and/or its manual of administrative procedures for

residential rehabilitation and/or policies and procedures for lead-based paint in

housing programs in providing housing rehabilitation assistance for owner-occupied

single-family rehabilitation projects and/or American Dream Downpayment Initiative

activities' assistance with downpayments and closing costs. It inappropriately provided

more than $100,000 in HOME funds to assist two projects that did not qualify as

affordable housing, using $15,000 in HOME funds for excessive project delivery costs

for two projects, and was unable to support its use of nearly $828,000 in HOME and

Initiative funds for projects and activities.

OIG recommended that HUD require the County to reimburse HOME from

nonfederal funds for the improper use of funds, provide support or reimburse HOME

from nonfederal funds for the unsupported payments, and implement adequate

procedures and controls to address the issues identified. These procedures and

controls should help ensure that nearly $154,000 in HOME funds is used over the next

year for projects that qualify as affordable housing. (Audit Report: 2007-CH-1015)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Tacoma Consortium HOME program, in Tacoma, WA. The

Consortium generally administered HOME in accordance with HUD requirements but

violated HOME regulations when it drew down funds for a homeowner who was not

low income, a homeowner whose income was not adequately documented, projects that

were not completed to code, luxury improvements, and rehabilitation activities that

were not compliant with HUD requirements or its own written rehabilitation

standards. In addition, contrary to HUD procurement regulations, the Consortium

HUD’s Community Planning and Development Programs
93

did not perform an independent estimate or cost analysis to determine whether

contract change orders were reasonable.

OIG recommended that HUD require the Consortium to repay HOME from

nonfederal funds more than $187,000 in ineligible costs, provide supporting

documentation or repay from nonfederal funds more than $48,000 in unsupported costs,

and implement policies and procedures so that its grant activities are carried out in

accordance with applicable laws, regulations, and Consortium rehabilitation standards

to put more than $263,000 in homeowner rehabilitation funds to better use over the

next year. (Audit Report: 2007-SE-1004)

○○○○○○○○○○○○○○○○○

HUD OIG audited the City of Milwaukee's,

Milwaukee, WI, HOME program. The City did

not ensure that its owner-occupied singlefamily rehabilitation projects and American

Dream Downpayment Initiative activities met

HUD's and/or the City's property standards

and did not maintain an effective system of

controls over its contracting processes for

projects. It used more than $300,000 in HUD

funds for projects and activities that did not

meet HUD's and/or the City's standards.

OIG recommended that HUD require the

City to ensure that housing rehabilitation work

and required repairs are completed or

reimburse HOME and the Initiative from

nonfederal funds for the projects and an

activity that did not meet HUD's and/or the

City's standards and implement adequate

procedures and controls to address the issues

identified. These procedures and controls should help to ensure that at least $120,000

in HOME funds is appropriately used over the next year for projects that meet HUD's

and the City's standards. (Audit Report: 2007-CH-1018)

 ○○○○○○○○○○○○○○○○○

HUD OIG audited the City of Cincinnati's, Cincinnati, OH, HOME program. The

City did not effectively administer HOME and violated HUD's requirements. It did

not comply with HUD's regulations in providing housing rehabilitation assistance for

owner-occupied single-family rehabilitation projects and/or downpayments, closing

costs, homebuyer counseling, and home inspections for American Dream Downpayment

Initiative activities. It inappropriately provided more than $225,000 in HOME funds

to assist three projects that either did not qualify as affordable housing or in which the

household was not income eligible, inappropriately provided $41,000 in Initiative funds

to assist five households that were not income eligible, and was unable to support its

use of nearly $1.4 million in HOME and Initiative funds for projects and activities.

HUD’s Community Planning and Development Programs

Copyright, 2007. Milwaukee Journal Sentinel -

Milwaukee, WI. Reprinted with permission.
94

OIG recommended that HUD require the City to reimburse HOME and the

Initiative from nonfederal funds for the improper use of funds, provide support or

reimburse HOME and the Initiative from nonfederal funds for the unsupported

payments, and implement adequate procedures and controls to address the issues

identified. These procedures and controls should help to ensure that more than $134,000

in HOME and Initiative funds is appropriately used over the next year. (Audit Report:

2007-CH-1017)

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HUD OIG audited the State of Maryland's HOME program. The State did not

always administer its HOME-assisted single-family homeownership assistance program

in accordance with Federal regulations and written agreements. OIG found no

violations of conflict-of-interest and modest home provisions, and the State adequately

enforced the recapture provisions by securing liens against the assisted properties

through deeds of trusts. However, the State did not have adequate internal controls to

effectively monitor its subrecipients' administration of the program. It did not

adequately monitor its subrecipients' performance to ensure that (1) records to

support property standard compliance were maintained, (2) hazard insurance

requirements were enforced, and (3) income eligibility was properly determined. As a

result, it awarded $73,000 in unsupported HOME funds.

OIG recommended that HUD require the State to submit all supporting

documentation to HUD to support the HOME funds awarded. Any amounts

determined to be ineligible should be repaid from nonfederal funds. Also, OIG

recommended that the State establish and implement written monitoring policies to

ensure adequate monitoring of its subrecipients' compliance with all Federal

requirements and written agreements to include periodic in-house reviews and on-site

monitoring of its subrecipients. (Audit Report: 2007-PH-1012)

Supportive Housing Program Grants

HUD OIG audited the Central City Lutheran Mission's, San Bernardino, CA,

Supportive Housing Program grant funding. The Mission lacked the capacity to

properly administer multiple Supportive Housing Program grants. In addition, it spent

more than $294,000 for unsupported and ineligible expenses and failed to fully

support that it provided required matching funds for more than $429,000 in grant

funds. It also prematurely sold two apartment buildings purchased with $280,000 in

grant funds without HUD's written approval. Finally, while the Mission correctly

verified the eligibility of its clients, it failed to collect more than $13,000 in funds

because the rents were not calculated correctly.

OIG recommended that HUD (1) not provide the Mission with any future funding

until it has implemented adequate systems and controls and (2) require the Mission to

reimburse the grants and/or repay HUD from nonfederal funds for more than $699,000

in unsupported expenses and more than $304,000 in ineligible expenses and to

HUD’s Community Planning and Development Programs
95

implement effective procedures and controls to ensure that all income and expenses

are properly considered so that rent calculations are correct. (Audit Report:

2007-LA-1012)

○○○○○○○○○○○○○○○○○

HUD OIG audited A Community of Friends', Los Angeles, CA, Supportive

Housing Program cash match program. The Community did not always administer its

Supportive Housing Program cash match in compliance with HUD requirements. It

failed to meet its supportive services cash match requirements for 1 of 15 grants

reviewed. The grant did not meet the 25 percent cash match requirements and

included ineligible expenses as cash match. A second grant, while still active, was

deficient in the amount of cash match provided during the first four months of the

grant term. As a result, neither HUD nor the Community was assured that the

Community maximized the effectiveness of the Supportive Housing Program's intent.

OIG recommended that HUD require the Authority to repay the $71,318 balance of

the grant funds expended. (Audit Report: 2007-LA-1016)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Los Angeles Homeless Authority's, Los Angeles, CA,

Supportive Housing Program grant funding. The Authority neglected to perform

on-site fiscal monitoring of its project sponsors and failed to properly perform its 100

percent source documentation desk review for at least two of its project sponsors to

ensure that cash match funding was eligible and supported. Of the two project

sponsors reviewed, one had applied ineligible expenses as cash match, while the other

was unable to support its cash match due to a poor financial management system.

OIG recommended that HUD require the Authority to comply with HUD's

requirements regarding on-site fiscal monitoring of its project sponsors, reexamine its

desk review procedures to ensure that reviews are performed to adequately monitor its

project sponsors' cash match, reevaluate its current risk analysis matrix to better

identify the more problematic project sponsors, and establish and implement written

monitoring procedures. (Audit Report: 2007-LA-1013)

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HUD’s Community Planning and Development Programs
96

Investigations

Some investigations discussed in this report were generated from leads provided

by HUD CPD program staff or conducted jointly with Federal, State, and local law

enforcement agencies. The results of various significant investigations are described

below.

Key program

results

- Theft/Embezzlement

- Other Fraud Crimes

Strategic Initiative 3: Contribute to the Strengthening of Communities

38 $2,072,741

page 97

page 100

Our focus

Investigations

Cases

closed

$

Recovered

36

Convictions/pleas/

pretrials

22

Admin/civil

actions

Region 1

Boston 18%

Region 2

New York 30%

Region 3

Philadelphia 6%

Region 4

Atlanta 6%

Region 6

Fort Worth 15%

Region 9-10

Los Angeles 5%

Region 5

Chicago 10% Region 7-8

Kansas City 10%

A Look Back for the Year

Chart 5.2: Percentage of OIG Community Planning and Development Closed

Investigation Cases, Performed FY 07*

* This does not include cases in which funds misused came from Congress for hurricane relief.

(see chapter 5 for these cases)

HUD’s Community Planning and Development Programs
HUD’s Community Planning and Development Programs 97

Theft/Embezzlement

Frank DeSantis, president of Community Partnership Development Corporation

(CPDC), a HUD-funded nonprofit administering a $16.9 million Low Income Housing

Preservation and Resident Homeownership Act grant, was indicted in U.S. District

Court, Los Angeles, CA, for obstructing a Federal audit. DeSantis allegedly provided

fabricated time sheets and certifications to justify nearly $3.2 million in overstated and

unapproved construction fees paid to CPDC employees during the rehabilitation of

three multifamily housing projects.

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Leroy Brown, a former financial manager for the Salvation Army sentenced in U.S.

District Court, Newark, NJ, for his earlier guilty plea to conspiracy to steal from an

organization receiving Federal funds and Federal income tax evasion, was debarred from

procurement and nonprocurement transactions as a participant or principal with HUD

and throughout the Executive Branch of the Federal Government for 3 years. Brown

and others created fraudulent documents, issued bogus landlord payments, and

embezzled $385,760 from a Salvation Army bank account funded in part with HUD

Housing Opportunities for Persons with Aids (HOPWA) funds.

○○○○○○○○○○○○○○○○○

Angel Guzman, a former operations manager for Friends of the

Homeless, Inc. (FOH), a HUD-funded nonprofit, and former FOH

intake supervisor Michael Hallahan were each sentenced in U.S.

District Court, Springfield, MA, for their earlier guilty pleas to mail

fraud and conspiracy to commit mail fraud. Guzman was sentenced

to 10 months incarceration and 36 months probation and ordered

to pay FOH $40,665 in restitution. Hallahan was sentenced to 2

years probation, ordered to perform 400 hours community service,

and fined $3,240. Guzman and previously convicted FOH executive

director Francis Keough falsely certified FOH unit occupancy

certifications and obtained about $38,000 in FOH housing assistance

for unqualified tenants. Hallahan, while employed at FOH and

during FOH working hours, assisted Keough with the construction

of his personal residence. HUD losses are estimated at $145,000.

○○○○○○○○○○○○○○○○○

Phyllis Tate, the HOME grant administrator at Golden Triangle

Planning and Development District (Golden), a HUD-funded

organization; her daughter, Keina Tate; Josh Brown, a Golden

building inspector; Jason Clark, owner of J-Max Construction; and

Richard Ramsey, owner of RB&J Construction, were each indicted

in U.S. District Court, Starkville, MS, for conspiracy, embezzlement,

Copyright, 2007. The

Republican - Springfield, MA.

Reprinted with permission.
98

money laundering, structuring financial transactions, and aiding and abetting. Ramsey

and Brown each pled guilty to embezzlement, money laundering, or conspiracy. Phyllis

and Keina Tate and Clark allegedly and Ramsey and Brown admittedly created

fictitious invoices and building inspections for nonexistent homes, deposited Golden

payments into bank accounts controlled by J-Max Construction or RB&J

Construction, and used about $120,000 in HUD HOME funds for personal gain.

○○○○○○○○○○○○○○○○○

Elischa Campbell, the former director of Just-a-Sister-Away (JASA) House of Texas,

Inc., a HUD-funded Supportive Housing Program nonprofit, pled guilty in State

District Court, Houston, TX, to misappropriation of fiduciary property or property of

a financial institution. Campbell was sentenced to 4 years probation and ordered to

perform 240 hours of community service and pay HUD $47,500 in restitution. Campbell

submitted false documents to support the use of $47,500 in JASA funds to purchase

property, but no property was acquired.

○○○○○○○○○○○○○○○○○

Ebony Davis, a former HOPWA case manager

for Volusia and Flager Counties AIDS Coalition, a

HUD-funded organization, pled guilty in U.S.

District Court, Orlando, FL, to embezzlement.

Davis falsified HOPWA recipient lease agreements,

generated payments to fabricated landlords, and

embezzled more than $11,036 in HOPWA funds.

○○○○○○○○○○○○○○○○○

George Crawford, Derrick Ward, and Abdullah

Aziz, also known as Marion Gaillard, were each

indicted in U.S. District Court, New York City, NY,

for conspiracy to defraud HUD and theft of

government funds. Crawford, Ward, and Aziz

allegedly submitted false applications and obtained

more than $8,800 in Business Recovery Grant funds

from Empire State Development Corporation, a

Copyright, 2007. Starkville Daily News - Starkville, MS. Reprinted with permission.

HUD’s Community Planning and Development Programs

Copyright, 2007. The Daytona Beach News Journal -

Daytona Beach, FL. Reprinted with permission.
HUD’s Community Planning and Development Programs 99

HUD-funded nonprofit established to provide assistance to businesses in lower

Manhattan after the September 11, 2001, terrorist attacks.

○○○○○○○○○○○○○○○○○

William Walker, the former director of New Brunswick's Neighborhood

Preservation and Housing Rehabilitation Programs (BNP/BHR), HUD-funded

organizations, was arrested after his indictment in U.S. District Court, Newark, NJ, for

extortion under color of official right and soliciting and accepting corrupt payments.

Walker allegedly accepted $112,500 in bribes from Friendly Maintenance Group and

TAJ Maintenance, construction and maintenance companies under contract with BNP/

BHR. In addition, Richard Kaplan, the former director of New Brunswick Department

of Community Planning and Economic Development (BCPED); Linda Carol Roach, a

former supervisory clerk at BCPED; and Prakash George Karot, a City of Perth Amboy

housing inspector and maintenance manager at TAJ, each pled guilty to bribery, aiding

and abetting, or receiving corrupt payments. Kaplan received kickbacks from

contractors in exchange for monthly rehabilitation contracts, expedited and lenient

inspections, and accelerated contract payments. Roach accepted cash payments from

BCPED contractors in exchange for expedited contract payments. Karot, while under

contract with BCPED, provided kickbacks to BCPED employees. HUD losses are not

yet determined.

○○○○○○○○○○○○○○○○○

Sharpe James, the former mayor of Newark, NJ, and Tamika Riley, a former New

Jersey Department of Community Affairs (NJDCA) housing assistance recipient, were

each indicted in U.S. District Court, Newark, NJ, for misuse of government credit cards,

fraudulent sales of government property, fraud involving a local government receiving

Federal funds, and wire and mail fraud. James allegedly arranged the sale of discounted

municipal real estate to Riley, who then allegedly resold the properties to developers

and shared the gains with James. James also allegedly used city-issued credit cards for

personal expenses, and from December 2001 until September of 2005, Riley allegedly

submitted false information on NJDCA certifications and obtained NJDCA housing

assistance she was not entitled to receive. HUD losses are not yet determined.

○○○○○○○○○○○○○○○○○

Richard A. Goyette, the former mayor of Chicopee, MA, pled guilty in U.S. District

Court, Springfield, MA, to extortion. Goyette extorted $5,000 as a campaign

Copyright, 2007. The Republican - Springfield, MA. Reprinted with permission.
100

contribution from a developer under contract with Chicopee's Office of Economic

Development (CED), a HUD-funded entity, and in return, Goyette promised to

approve and then modify and extend the CED contract to benefit the developer.

○○○○○○○○○○○○○○○○○

Anthony Ardolino, the former chief of staff for the

mayor of Springfield, MA; his brother and former

Springfield police officer Chester Ardolino; and

Matthew Campagnari were each sentenced in U.S.

District Court, Springfield, MA, for their earlier guilty

pleas to conspiracy, filing false Federal income tax

returns, and witness intimidation. Anthony and

Chester Ardolino were each sentenced to 12 months

plus one day incarceration and 2 years supervised

release and fined $10,000. Campagnari was sentenced

to 18 months incarceration and 2 years probation, fined

$20,000, and ordered to perform 200 hours of

community service. The above defendants conspired

to influence the awarding of HUD CDBG funds

available through the City of Springfield's Façade

program to businesses owned by Campagnari, Chester

Ardolino, and other Ardolino family members.

Other Fraud/Crimes

James Middleton, the former executive director of Southside Community

Development and Housing Corporation, a HUD-funded nonprofit, pled guilty in U.S.

District Court, Richmond, VA, to mail fraud. Middleton provided fraudulent

applications to private corporations and obtained $300,000 in grants and loans to pay

cost overruns on Southside building projects.

○○○○○○○○○○○○○○○○○

Timothy Giggey and Douglas Hersom were each sentenced in U.S. District Court,

Portland, ME, for their earlier guilty pleas to maliciously damaging or destroying a

building by means of fire. Giggey was sentenced to 95 months incarceration and 3 years

supervised release and ordered to pay Peerless Insurance Company $351,333 in

restitution. Hersom was sentenced to 151 months incarceration and 3 years supervised

release and ordered to pay Peerless Insurance Company $351,333 in restitution, jointly

and severally with Giggey. Giggey, Hersom, and others 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.

○○○○○○○○○○○○○○○○○

HUD’s Community Planning and Development Programs

Copyright, 2007. The Republican -

Springfield, MA. Reprinted with permission.
HUD’s Community Planning and Development Programs 101

Wendell France, a former Baltimore County Housing Authority (BCHA) HOPWA

Section 8 tenant and BCHA landlord, was arrested and charged in Baltimore County

Circuit Court, Baltimore, MD, with theft. France allegedly failed to report

employment, business income, assets, or his receipt of BCHA landlord payments on

BCHA HOPWA certifications and obtained $18,659 in BCHA HOPWA housing

assistance he was not entitled to receive.

○○○○○○○○○○○○○○○○○

Jeffrey T. Mallinson, an unauthorized resident in a subsidized housing unit

provided by Virginia Supportive Housing (VSH), a HUD-funded organization, pled

guilty in Chesterfield District Court, Chesterfield County, VA, to obtaining money by

false pretenses and failing to appear. Mallinson was sentenced to 12 years incarceration

(suspended) and indeterminate probation and ordered to pay VSH $1,076 and two

financial institutions $1,731 in restitution. Mallinson accessed a VSH bank account and

used $1,076 in VSH funds for personal Internet purchases. VSH terminated the

subsidized housing recipient with whom Mallinson resided.

  

Chapter 5

Hurricane Relief

Oversight
104

Cases Closed by Program Area, Performed FY 07*

* Total number of hurricane-related cases, some of which may have been worked in different States due to relocation

of evacuees.

45

40

35

30

25

20

15

10

5

0

SF PIH MF CPD

3

12

5

45

Hurricane Relief Oversight
105

Introduction and Background

The U.S. Department of

Housing and Urban Development

(HUD), Office of Inspector General

(OIG), successfully established the

Gulf Coast regional Offices of Audit

and Investigation in the Gulf Coast

disaster areas to prevent, detect, and

combat fraud, waste, and abuse of

HUD program disaster funds.

HUD received supplemental

appropriations of approximately

$17 billion. HUD has approved

numerous State action plans and distributed billions of dollars in the form of HUD

Community Development Block Grants (CDBG) for housing and other needs. In

addition, HUD has been preparing to provide temporary housing assistance for

Federal Emergency Management Agency (FEMA) households from the declared

disaster areas, under a FEMA interagency agreement, using FEMA funds. HUD has

also provided a variety of public housing program funds for repair and reconstruction

of severely damaged public housing properties.

The HUD OIG Office of Audit continues to be diligent in its efforts to pursue fraud,

waste, and abuse in the audits of the $17 billion in HUD's emergency supplemental

funding provided to the Gulf Coast States. The HUD OIG Office of Audit Gulf Coast

Region now has completed five audits of disaster recovery efforts including an internal

audit of HUD's emergency contracting process. Currently, auditors are evaluating the

control processes for the two largest contractors of the homeowner grant programs for

the States of Louisiana and Mississippi. Funding for Louisiana's Road Home Program

(RHP) exceeds $6.25 billion, and the amount obligated for Mississippi's homeowner

program totals $3.25 billion.

The Office of Investigation has concentrated on hurricane fraud in the Gulf Coast

by focusing its resources in the recently established Gulf Coast Region headquartered

in New Orleans, LA, and the Disaster Relief Oversight Division in Washington, DC.

The Gulf Coast Region consists of 10 special agents (including a special agent in charge),

five forensic auditors (including a supervisory forensic auditor), and one

administrative officer. The Gulf Coast Region conducted the majority of our

investigations, although it should be noted that there have been criminal investigations

related to Hurricane Katrina fraud throughout the country.

The Office of Investigation has provided training, presentations, and outreach on

HUD disaster recovery funding and investigative matters to prosecutors, law

enforcement, and State agencies. In the Gulf Coast Region, we have been working with

the State agencies and grantees to implement antifraud measures, which they have

utilized in their disbursement of disaster funds. For example, the State agencies in

Louisiana, Mississippi, and Texas have established fraud controls recommended by HUD

OIG for their homeowner assistance grant programs. The Gulf Coast Region is also

Hurricane Relief Oversight
106

actively participating in the U.S. Department of Justice (DOJ) Hurricane Katrina Fraud

Task Force in Baton Rouge, LA, which receives approximately 1,000 hotline calls

monthly related to hurricane fraud.

The Disaster Relief Oversight Division (DROD) consists of two supervisory special

agents (including a special agent in charge) that monitor and assist with all disaster

investigations nationwide. DROD supports the Gulf Region and conducts a variety of

important activities for the HUD OIG Office of Investigation, including the

coordination of public corruption and contract fraud matters with DOJ. DROD works

closely with the Office of Audit to monitor and conduct research on all HUD disaster

program funds. DROD continues to implement fraud prevention measures within HUD

and in the affected States of the Gulf Coast Region.

Hurricane Financial Profiles of HUD Community

Development Block Grant Funds

The following provides the status as of September 30, 2007, of the HUD CDBG

disaster funds appropriated to the five Gulf States and a summary of the homeowners

programs for Mississippi and Louisiana. HUD's distribution of the funds and the

receipt and use of the funds by State agencies, contractors, consultants, homeowners,

and evacuees are being tracked and monitored for waste, fraud, and abuse by the HUD

OIG Office of Audit and Office of Investigation.

Disaster Community Development Block Grant

Hurricane Relief Oversight

States

$95,613,574

Allocation Disbursement

1st & 2nd

Supplemental Total

Balance

$8,342,871 $87,270,703

Alabama

1st & 2nd $182,970,518

Supplemental Total

$441,936 $182,528,582

Florida

1st & 2nd $10,410,000,000

Supplemental Total

$4,521,777,327 $5,888,222,673

Louisiana

1st & 2nd $5,481,221,059

Supplemental Total

$1,628,702,618 $3,852,518,441

Mississippi

1st & 2nd $503,194,849

Supplemental Total

$8,195,457 $494,999,392

Texas

Totals $16,673,000,000 $6,167,460,209 $10,505,539,791
Hurricane Relief Oversight 107

State of Louisiana

The Road Home Program

 (Authorized $6.25 Billion; Disbursed $4.16 Billion)

The Road Home program is the major program set up 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. However, 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 FEMA repair funds. The status of the Road Home program is stated

below.

State of Louisiana Homeowner Program Status

State of Mississippi

Homeowner Grant Assistance Program

 (Authorized $3.25 Billion; Disbursed $1.2 Billion)

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 Grant Assistance program is designed to provide compensation to those

impacted by the hurricane.

There is no requirement that the homeowner occupy the property after

replacement/rehabilitation work is completed. After certain deductions, the

homeowners have complete discretion of the use of grant funds, as allowable by State

and Federal law, as they work through their personal disaster recovery situation. The

status of the Mississippi homeowner program is reflected in the table below.

Community Planning and Development

Community Development Fund

The Road Home Snapshot

Analysis of the Homeowner Applications

State of Louisiana

Status as September 30, 2007

Total applications received and recorded to date 184,667

Line items Totals

Closings held 54,088

Average award $66.5 thousand

Source of funds: Emergency Supplemental Appropriations I & II (P.L. 109-148 and P.L. 109-234)
108 Hurricane Relief Oversight

State of Mississippi Homeowner Program Status

○○○○○○○○○○○○○○○○○

Homeowner Program Snapshot

Analysis of the Homeowner Applications

State of Mississippi

Status as September 26, 2007

Applications received 19,794

Line items Totals

Grants paid 13,938

Dollar value of grants paid $1.008 billion

Source of funds: Emergency Supplemental Appropriations I & II (P.L. 109-148 and P.L. 109-234)

Average grant paid $72.3 thousand
109

Audit

During this period, OIG issued one new audit report on Mississippi's Homeowner

Grant Assistance program. To date, HUD OIG has completed five hurricane-related

audits, which have resulted in management recommendations and questioned costs.

There are four ongoing audits that are close to completion with other audits being

planned.

Emerging Oversight Trends

The Office of Audit is continuing to pursue audits of Louisiana's largest disaster

grant program, the Road Home program. There are also four ongoing audits close to

completion that address other areas such as the disaster voucher program, contract

compliance, cost reviews, and Mississippi's homeowner assistance program. More

audits of the Road Home Program, however, are currently being planned to determine

- Whether the State has a process in place that has been implemented to offset

and/or recapture Road Home grant funds due to homeowners' insurance

settlements (e.g., subrogation).

- The impact of the Additional Compensation Grant and the eligibility of its

recipients.

- Whether grant recipients received duplicate benefits from various Federal

agencies (e.g., HUD, FEMA, Small Business Administration (SBA), the U.S.

Department of Agriculture).

- The process used to assess the amount of property damage used as a basis for

determining the compensation award amount.

Final Audit Products

Audit Report No.: 2007-AO-1001 (Issue Date: May 7, 2007)

Title: The State of Mississippi's Homeowner Grant Assistance Program,

 Jackson, Mississippi

HUD OIG audited the State of Mississippi's calculation of homeowners' grant

amounts and monitoring of the implementation of its Homeowner Grant Assistance

program. The objectives were to determine whether the State appropriately

calculated the homeowners' grant amounts and monitored the implementation of its

program.

The State did not appropriately calculate the homeowners' grant amounts when it

allowed its contractor, Reznick Group, to deduct unnecessary costs such as unpaid

State income taxes, State unemployment taxes, and local ad valorem or property taxes

from the homeowners' grant amounts. The State also did not monitor Reznick Group's

implementation of its Homeowner Grant Assistance program.

OIG recommended that HUD require the State to immediately (1) cease

withholding or deducting unnecessary tax debts from homeowners' grant amounts,

Hurricane Relief Oversight
110 Hurricane Relief Oversight

(2) recalculate the grant amounts for those homeowners who have already received

assistance and refund such homeowners a total of more than $159,000 in State and/or

local taxes inappropriately withheld or deducted from their grants, and (3) confirm

with State and local tax agencies the delinquent taxes the homeowners owed such

agencies.

HUD officials concur with all proposed management decisions and target dates for

the four recommendations.

○○○○○○○○○○○○○○○○○
Hurricane Relief Oversight 111

Investigations

During this reporting period,

OIG opened 92 and closed 52

investigations in the Gulf Region

disaster relief program areas.

Judicial action taken on these cases

included $78,339 in investigative

recoveries; more than $2.3 million

in funds put to better use; 41

indictments or informations; 39

convictions, pleas, or pretrial

diversions; 24 administrative

actions; and 43 arrests.

The Office of Investigation continued to work with the U.S. Department of

Homeland Security (DHS) OIG in conducting FEMA fraud investigations involving

residents of HUD-funded developments. The Office of Investigation has increased the

number of homeowner grant fraud investigations involving both the Louisiana Road

Home and Mississippi Housing Assistance Grant programs. These grant programs

offer grants of up to $150,000 to homeowners affected by hurricane disasters. As these

funds have been disbursed to homeowners, we have identified an increase in fraud

regarding the grants.

 In addition to proactive investigations of homeowner grant fraud and reactive

investigations involving FEMA fraud by residents of HUD-funded developments, HUD

OIG investigates allegations of wrongdoing involving businesses and others receiving

HUD disaster funds through contracts and procurements or as a result of public

corruption. With approximately $2.7 billion in HUD CDBG funds designated for the

repair and restoration of infrastructure and businesses or government agencies in

Louisiana and Mississippi, the Office of Investigation is developing a "contractor

intelligence database" for the Hurricane Katrina Fraud Task Force (Task Force)

members and evaluating computer-matching agreements with other Federal agencies.

HUD OIG plays an integral role in the Task Force, which is comprised of

traditional Federal, State, and local enforcement agencies, along with personnel from

the Inspector General community. Created to promote cooperation among agencies,

the Task Force coordinates investigations to prevent duplication of law enforcement

efforts, identifies fraud through the use of computer databases, and coordinates fraud

referrals from hotlines. The Task Force has screened and referred more than 14,000

fraud-related complaints or allegations of disaster fraud. HUD OIG and the Task Force

coordinate fraud matters with ICF International, KPMG, and other disaster

contractors and the Louisiana Legislative Auditor and personnel from the Offices of

Community and Economic Development.

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

Federal, State, and local law enforcement agencies including the Task Force. Following

the Attorney General's policy of "zero tolerance" in relation to Hurricane Katrina fraud,
112 Hurricane Relief Oversight

OIG pursues all allegations of waste, fraud, and abuse in HUD's Hurricanes Katrina,

Rita, and Wilma benefit programs. The results of various significant investigations are

described below:

Homeowner Grant Fraud

Christina Moses pled guilty in U.S. District Court, Jackson, MS, to making false

statements and claims. Moses applied for and attempted to obtain $150,000 in CDBG

disaster recovery funds through the Mississippi Development Authority (MDA) for

hurricane-damaged residential property, but the property damaged was not her

primary residence. In addition, Moses fraudulently applied for and received $24,937 in

FEMA assistance.

○○○○○○○○○○○○○○○○○

Vincent Pempeit pled guilty in U.S. District Court, Gulfport, MS, to making false

statements and filing a false claim. Pempeit applied for and attempted to obtain

$150,000 in CDBG disaster recovery funds through MDA for hurricane-damaged

residential property, but the property damaged was not his primary residence.

○○○○○○○○○○○○○○○○○

Joseph Pugh pled guilty in U.S. District Court, Gulfport, MS, to theft of

government funds and making false statements; charges against his wife Debbie Pugh

were dismissed. Pugh applied for and attempted to obtain $150,000 in CDBG disaster

recovery funds through MDA for hurricane-damaged residential property, but the

property damaged was not his primary residence. In addition, Pugh fraudulently

applied for and received $12,107 in FEMA assistance.

○○○○○○○○○○○○○○○○○

Disera Desselles was indicted in U.S. District Court, Jackson, MS, for making false

statements and claims, theft of government funds, and wire and mail fraud. Desselles

allegedly applied for and attempted to obtain $144,800 in CDBG disaster recovery funds

through MDA for hurricane-damaged residential property, but the property damaged

was not her primary residence. In addition, Desselles allegedly applied for and

fraudulently received more than $23,000 in FEMA assistance.

○○○○○○○○○○○○○○○○○

Jerry Wiegand was convicted in U.S. District Court, Gulfport, MS, of theft of

government funds. Wiegand applied for and attempted to obtain about $108,136 in

CDBG disaster recovery funds through MDA for hurricane-damaged residential

property, but the property damaged was not his primary residence.

○○○○○○○○○○○○○○○○○

Pamelia Conroy pled guilty in U.S. District Court, Gulfport, MS, to making false

statements, filing false claims, and theft of government funds. Conroy applied for and

attempted to obtain $100,000 in CDBG disaster recovery funds through MDA for
Hurricane Relief Oversight 113

hurricane-damaged residential property, but the property damaged was not her

primary residence. In addition, Conroy fraudulently applied for and received $5,200 in

FEMA assistance.

○○○○○○○○○○○○○○○○○

William and Deane Palmer each pled guilty in U.S. District Court, Gulfport, MS,

to making false statements and filing false claims. William and Deane Palmer applied

for and attempted to obtain $68,780 in CDBG disaster recovery funds through MDA

for hurricane-damaged residential property, but the property damaged was not their

primary residence. In addition, William and Deane Palmer fraudulently applied for

and received $56,706 in FEMA and SBA assistance.

○○○○○○○○○○○○○○○○○

Debra Savage pled guilty in U.S. District Court, Gulfport, MS, to making false

statements and filing a false claim. Savage applied for and attempted to obtain $39,616

in CDBG disaster recovery funds through MDA for hurricane-damaged residential

property, but the property damaged was not her primary residence.

○○○○○○○○○○○○○○○○○

Mario LeLeaux pled guilty in U.S. District Court, Gulfport, MS, to theft of

government funds, making false statements, filing a false claim, and unauthorized

acquisition of food stamps. LeLeaux agreed to forfeit $52,918. LeLeaux applied for and

received $35,413 in CDBG disaster recovery funds through MDA for hurricanedamaged residential property, but the property damaged was not his primary residence.

In addition, LeLeaux fraudulently applied for and received $17,505 in FEMA, SBA, and

food stamp assistance.

FEMA Fraud by HUD Tenants

HUD OIG partnered with DHS OIG and identified individuals who resided in HUDsubsidized housing who fraudulently applied for FEMA disaster relief assistance.

○○○○○○○○○○○○○○○○○

Erica Prince, a Houston Housing Authority (HHA) Section 8 tenant; Daniel Ellis;

and eight additional conspirators were each indicted in U.S. District Court, Houston,

TX, for conspiracy to submit false, fictitious, or fraudulent claims; embezzlement or

theft of public money, property, or records; and mail fraud. Ellis pled guilty to

conspiracy to file false, fictitious, or fraudulent claims. Prince and the remaining

defendants allegedly and Ellis admittedly conspired with others and filed 77 fraudulent

FEMA disaster assistance applications for individuals who obtained $92,958 in FEMA

assistance they were not entitled to receive.

○○○○○○○○○○○○○○○○○

Willie C. Blackmon, a former unauthorized Mississippi Regional Housing

Authority (MRHA) Section 8 tenant, pled guilty in U.S. District Court, Jackson, MS,
114

to making false statements, theft of government funds, mail fraud, and aiding and

abetting. In addition, Ernestine Lewis, a former MRHA Section 8 tenant, and Willie

Lewis, an unauthorized resident in a MRHA subsidized unit, each pled guilty to

making false statements. Ernestine and Willie Lewis were each sentenced to 36 months

probation and ordered to perform 40 hours of community service and collectively pay

FEMA $4,715 in restitution. Blackmon and Ernestine and Willie Lewis applied for and

received $31,302 in FEMA disaster assistance after they claimed residency in Biloxi

Housing Authority (BHA) subsidized units during Hurricane Katrina, but none of the

above defendants was a BHA tenant before the storm.

○○○○○○○○○○○○○○○○○

Antoinette Perea, a San Francisco Housing Authority (SFHA) Section 8 tenant, pled

guilty in U.S. District Court, San Francisco, CA, to theft of government funds. In

addition, Kaneshaeia Boyd and Michael Haney, SFHA public housing tenants; Lawana

Wyatt, an Alameda County Housing Authority (ACHA) public housing tenant; and

Merolyn Wilson, a Section 8 tenant at All Hallows Garden Apartments, a HUD-funded

multifamily housing development, were each sentenced for their earlier guilty pleas to

theft of government funds or property. Boyd was sentenced to one year probation and

ordered to pay FEMA $2,000 in restitution, Haney and Wilson were each sentenced to

2 years probation and ordered to pay FEMA $2,000 in restitution, and Wyatt was

sentenced to 2 years probation and ordered to perform 138 hours of community

service and pay FEMA and the Red Cross $13,714 in restitution. The above defendants

applied for and received FEMA disaster assistance after they claimed to be displaced

victims of Hurricane Katrina, but each defendant resided in SFHA, ACHA, or other

subsidized housing units in the San Francisco area during the storm.

○○○○○○○○○○○○○○○○○

Loretta Russell, Tammy Dabney, and

Mark Johnson, former Baton Rouge

Housing Authority (BRHA) Section 8 or

public housing tenants, each pled guilty

in U.S. District Court, Baton Rouge, LA,

to making false claims. The above

defendants applied for and received

$12,016 in FEMA disaster assistance after

they claimed hurricane damage to

personal property or Hurricane Katrina

 evacuee status, but BRHA suffered

 no storm damage, nor were tenants

 evacuated.

○○○○○○○○○○○○○○○○○

Hurricane Relief Oversight

Copyright, 2007. The Advocate -

New Orleans, LA. Reprinted with permission.
Hurricane Relief Oversight 115

Naisha Davis, a Sacramento Housing and Redevelopment Agency (SHRA) Housing

Choice Voucher program participant, pled guilty in U.S. District Court, Sacramento,

CA, to theft of government property, submitting false claims, and making false

statements. In addition, SHRA Housing Choice Voucher program participants Jerry

Davis, Trudy Davis, and Lawrence Williams were each sentenced for their earlier guilty

pleas to theft of government property, submitting false claims, or making false

statements. Jerry Davis was sentence to 4 years probation, and Trudy Davis and

Williams were each sentenced to 4 months incarceration and 3 years supervised

release. The above defendants applied for and received FEMA disaster assistance after

they claimed residency in a Louisiana declared disaster area, but each defendant

resided in California during Hurricane Katrina.

○○○○○○○○○○○○○○○○○

Ashley Clark and Shannon Sylvester, former Morgan City Housing Authority

(MCHA) public housing tenants, were each sentenced in U.S. District Court, Morgan

City, LA, for their earlier guilty pleas to theft of public monies. Clark was sentenced to

4 months home detention and 5 years probation and ordered to pay FEMA $6,665 in

restitution. Sylvester was sentenced to 3 years probation and ordered to pay FEMA

$2,000 in restitution. Clark and Sylvester applied for and received FEMA disaster

assistance, but MCHA sustained no hurricane damage, nor were residents evacuated

during the storm.

○○○○○○○○○○○○○○○○○

Aretha Morris and Lawanda Clark, Section 8 tenants at Scotland Square

Apartments (Scotland), a HUD-funded multifamily housing development, were each

indicted in U.S. District Court, Baton Rouge, LA, for making false statements,

submitting false claims, or mail fraud. Morris and Clark allegedly applied for and

received $3,749 in FEMA disaster assistance after they claimed personal property

damage from Hurricane Katrina, but Scotland suffered no storm damage, nor were

tenants evacuated. In addition, Latoya Dunn, a former Scotland Section 8 tenant, was

sentenced to 3 years probation and ordered to pay FEMA $2,100 in restitution for her

earlier guilty plea to submitting false claims. Dunn applied for and received FEMA

disaster assistance after she fraudulently claimed personal property damage from

Hurricane Katrina.

○○○○○○○○○○○○○○○○○

Linda Southall, a Thibodaux Housing Authority (THA) public housing tenant, was

indicted in U.S. District Court, New Orleans, LA, for theft of government funds.

Southall allegedly applied for and received $2,377 in FEMA disaster assistance after she

claimed personal property damage from Hurricane Katrina, but THA suffered no storm

damage, nor were tenants evacuated. In addition, Pamela Courtney, a THA public

housing tenant, pled guilty to theft of government funds. Courtney applied for and

received $500 in FEMA disaster assistance after she fraudulently claimed personal

property damage from Hurricane Katrina.

○○○○○○○○○○○○○○○○○
116 Hurricane Relief Oversight

Leslie Smith, a Renton Housing Authority (RHA) Section 8 tenant, pled guilty in

U.S. District Court, Seattle, WA, to making false statements. Smith applied for and

received $4,000 in FEMA disaster assistance after she claimed residency in a Louisiana

declared disaster area during Hurricane Katrina, but Smith resided in Renton, WA,

during the storm.

○○○○○○○○○○○○○○○○○

Shantelle Griffin, a Section 8 tenant at Himbola Manor Apartments (Himbola), a

HUD-funded multifamily housing development, pled guilty in U.S. District Court,

Lafayette, LA, to submitting a false claim. Griffin applied for and received $2,000 in

FEMA disaster assistance after she claimed personal property damage from Hurricane

Katrina, but Himbola suffered no storm damage, nor were tenants evacuated.

○○○○○○○○○○○○○○○○○

Travis Frank and Regina Dewey each pled guilty in U.S. District Court, Houston,

TX, to conspiracy. Frank applied for and received FEMA disaster assistance after he

claimed residency in a Housing Authority of New Orleans (HANO) subsidized housing

unit during Hurricane Katrina, but Frank never resided in HANO assisted housing.

Dewey provided fraudulent documents and falsely verified Frank's residency in a HANO

subsidized unit.

○○○○○○○○○○○○○○○○○

Latasha Maloid pled guilty in U.S. District Court, Baton Rouge, LA, to submitting

a false claim. Maloid applied for and received $2,000 in FEMA disaster assistance after

she claimed to be a Housing Authority of New Orleans evacuee, but Maloid resided in

Baton Rouge, LA, during Hurricane Katrina.

○○○○○○○○○○○○○○○○○

Sharon Dailey, a Fairfield Housing Authority (Fairfield) Section 8 applicant, was

indicted in U.S. District Court, Sacramento, CA, for submitting or making false claims,

statements, and representation of a Social Security number (SSN); aggravated identity

theft; and bank, mail, and credit application fraud. Dailey allegedly claimed she was a

Hurricane Katrina victim and applied for and received FEMA disaster assistance, but

Dailey resided in California during the storm. Daily also allegedly used a false SSN to

apply for Fairfield housing assistance, obtain a bank loan, and cash fraudulent checks.

○○○○○○○○○○○○○○○○○

Joy Carter was indicted in U.S. District Court, Meridian, MS, for making false

statements, filing false claims, and embezzlement. Carter allegedly applied for and

received $2,000 in FEMA disaster assistance after she fraudulently claimed property

damage from Hurricane Katrina.
Hurricane Relief Oversight 117

Hurricane-Related Outreach

Louisiana Outreach:

Special Agent in Charge (SAC) Larry Amaker, SAC Thomas Luke, and Special Agent

(SA) Dan Min provided presentations on Louisiana and Mississippi CDBG programs

and disaster recovery investigations at a Public Corruption and Disaster Fraud

conference hosted by the Federal Bureau of Investigation (FBI) in New Orleans, LA.

Special agents, analysts, and forensic auditors representing Federal, State, and local law

enforcement agencies attended.

○○○○○○○○○○○○○○○○○

SAC Thomas Luke provided an overview of HUD OIG single-family investigations

at a meeting of Louisiana and Mississippi U.S. Bankruptcy Court Trustees in New

Orleans, LA. In addition, SAC Luke described CDBG disaster recovery funding and

homeowner reporting requirements for the Louisiana Road Home and Mississippi

homeowner assistance programs.

○○○○○○○○○○○○○○○○○

SAC Thomas Luke and Senior Forensic Auditor Windell Durant provided

information on current Federal Housing Administration (FHA) foreclosures, grant

closings within the Louisiana Road Home program, efforts to identify fraudulent claims

and bankruptcy filings, and law enforcement coordinated efforts at a meeting of U.S.

Bankruptcy Court Trustees from the Eastern and Middle Districts of Louisiana in New

Orleans, LA. Approximately 12 U.S. Bankruptcy Court Trustees attended.

 Mississippi Outreach:

SAC Thomas Luke met with officials from Camp, Dresser, and McKee (CDM), the

contractor overseeing $100 million for the rebuilding of Mississippi public housing

developments affected by Hurricane Katrina in Gulfort, MS. SAC Luke provided

information on typical fraud schemes and pitfalls during the contracting process, and

CDM officials agreed to work closely with HUD OIG throughout the rebuilding

efforts.

○○○○○○○○○○○○○○○○○

HUD OIG continues to be an active member and participates in the Mississippi

Fraud Working Group in Gulfport, MS. The Mississippi Fraud Working Group,

comprised of personnel from the United States Attorney's Office; Mississippi

Attorney General's Office; and various Federal, State, and local law enforcement

agencies, coordinates and synchronizes disaster fraud investigations in the State of

Mississippi.
118

  

Texas Outreach:

SAC Daniel Salas, Assistant Special Agent in Charge (ASAC) Juan Juarez, and SA

Gail Keller provided a fraud prevention seminar for members of the Deep East Texas

and Houston-Galveston Area Councils of Government, South East Texas Regional

Planning Commission, and Texas Department of Housing and Community Affairs in

Houston, TX. The colloquium described avenues to prevent fraud in CDBG disaster

recovery funding awarded to 29 Texas counties after Hurricanes Katrina and Rita.

Approximately 13 Councils of Governments representatives attended.

○○○○○○○○○○○○○○○○○

SAC Daniel Salas; ASACs Juan Juarez, Michael Wilson, and Kevin Whalen; and SAs

Gail Keller and Alisha Mahabir provided an overview of Hurricanes Katrina and Rita

CDBG disaster recovery funding for representatives of the Southern and Eastern

Districts of Texas U.S. Attorney's Office, Texas Department of Housing and

Community Affairs, Texas Office of Rural and Community Affairs, FBI, U.S. Postal

Inspection Service, and OIG personnel from the Departments of Homeland Security

and Labor and the Small Business and Social Security Administrations in Houston, TX.

Approximately 29 individuals attended the presentation.

○○○○○○○○○○○○○○○○○

SAC Daniel Salas, ASAC Juan Juarez, and SA Gail Keller provided a hurricane fraud

prevention briefing to Candye Anderson, disaster field representative for Texas

Department of Housing and Community Affairs, in Beaumont, TX. After the briefing,

Anderson provided a tour of local areas suffering from hurricane damage, including

Magnolia Gardens, a Beaumont Housing Authority public housing development.

○○○○○○○○○○○○○○○○○

ASAC Juan Juarez and SA Gail Keller provided disaster recovery fraud prevention

briefings to staff members of the Texas Department of Housing and Community

Affairs; Texas Office of Rural and Community Affairs; East Texas, Deep East Texas, and

Houston-Galveston Councils of Government; Southeast Texas Rural Planning

Commission; city and county elected officials and consultants; representatives of

multifamily organizations; and law enforcement personnel in Austin, Beaumont,

Houston, Jasper, Kilgore, and Onalaska, TX. ASAC Juarez and SA Keller presented

proactive concepts to prevent contractor fraud and other illegal activity involving

disaster recovery funding awarded to 29 Texas counties after Hurricanes Katrina and

Rita. Approximately 135 representatives from the above organizations attended the

briefings.

Hurricane-Related OIG Hotline

During this reporting period, the Hotline received and processed 74 complaints

related to Hurricanes Katrina, Rita, and Wilma.

Hurricane Relief Oversight
Chapter 6

Other Significant HUD

Audits and Investigations/

OIG Hotline
120 Other Significant 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 7, pages 138, 140, and 141)

Audit

Review of HUD's Contract Administration

HUD OIG, Washington, DC, audited HUD's contract administration process to

determine whether HUD had adequate controls to ensure that it effectively and

efficiently administered its contracts and followed requirements.

While HUD has implemented or is in the process of implementing several

improvements, additional improvements are needed. Because HUD did not have

adequate controls over some processes, (1) contract statements of work were

sometimes poorly written, (2) it did not adequately assess whether there was a

continuing need for goods an services, (3) it paid contractors for questionable costs,

and (4) it did not properly evaluate or report contractor performance. As a result, for

the 17 contracts OIG reviewed, HUD paid about $8 million for services without

obtaining the desired outcome and will spend $900,000 more than necessary by

September 30, 2007, for other services that are not needed. In addition, HUD

unnecessarily paid about $197,000 for a contract that had an overstated estimated need

and then exercised an unnecessary option year for which it will pay the contractor

another $250,000.

Key program results

- Review of HUD's Contract Administration

- Review of HUD's Succession Planning

- Review of HUD's Information Technology Security

 Program

- Review of HUD's Personal Identification Verification

 and Privacy Program

- Network Vulnerability Assessment

- OIG Response to Questions from the Office of

 Management and Budget under the Federal

 Information Security Management Act of 2002

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 -- $368,283

page 120

page 121

 page 121

page 122

 page 123

 page 123

Our

focus

7 Audits
Other Significant HUD Audits and Investigations/OIG Hotline 121

OIG recommended that HUD implement initiatives currently planned, which

include but are not limited to an acquisition planning policy and the "HUD

Procurement Transformation" initiative, including developing a HUD Integrated

Acquisition Management System. OIG also recommended that HUD implement

additional policies and procedures to (1) improve HUD's ability to adequately express

its needs, provide guidance to contractors, and employ appropriate contracting

strategies in its contract statements of work; (2) ensure that the required analyses of

contracts are performed to assess continued need and cost appropriateness before

exercising option periods; (3) provide for the formal review of government technical

representatives and government technical monitors; and (4) ensure that staff comply

with contractor performance reporting requirements by implementing systems such

as automated alerts that notify staff when evaluations are due. Further, HUD should

not exercise the final option year for contract C FTW 00398. (Audit Report:

2007-AT-0001)

Review of HUD's Succession Planning

HUD OIG, Washington, DC, reviewed HUD's management of human resources to

determine whether HUD had initiated adequate succession planning to address future

staff concerns.

HUD had not fully initiated adequate succession planning to address future staff

concerns. Although three of the five program offices reviewed had initiated adequate

succession planning, two of the offices had failed to identify and/or support the actions

taken to fully implement HUD's succession plan. As a result, HUD cannot be assured

that, when key members of its workforce retire over the next several years, they will be

succeeded by qualified employees with the skills, knowledge, and abilities needed to

continue its mission.

OIG recommended that HUD implement adequate procedures and controls to

ensure that its program offices initiate succession planning to comply with its

succession plan. (Audit Report: 2007-CH-0001)

Review of HUD's Information Technology Security

Program

HUD OIG audited HUD's information security program's compliance with Federal

requirements.

HUD has continued its progress in implementing a comprehensive, entity-wide set

of information system security program policies and procedures. However, (1) HUD's

program offices and system owners are not performing their Federal Information

Security Management Act (FISMA) roles and responsibilities related to the updating

of security documentation, obtaining role-based training, and testing their applications'

technical security controls; and (2) HUD has not fully implemented an effective,

entity-wide information security program.
122 Other Significant HUD Audits and Investigations/OIG Hotline

OIG recommended that HUD properly meet its information security

responsibilities by (1) updating security documents to comply with Federal

requirements, (2) obtaining training in line with its information security roles and

responsibilities, (3) continuing the effort to properly categorize systems it manages

and oversees, and (4) developing office-specific guidance and procedures as necessary.

OIG also recommended that HUD fully implement an effective information security

program by (1) completing the role-based training program for staff with significant

security information technology responsibilities, (2) completing the resolution of the

current open security vulnerabilities on the general support systems, and (3) providing

resources and guidance needed for program offices and system owners to perform

technical security control testing on their high-impact applications. (Audit Report:

2007-DP-0005)

Review of HUD's Personal Identification Verification

and Privacy Program

HUD OIG audited HUD's efforts to implement the common identification

standards for contractors and Federal employees specified in Homeland Security

Presidential Directive 12 (HSPD 12) and assessed whether those efforts complied with

Federal laws and guidelines governing privacy, personnel security, and information

technology security.

While HUD has made progress in implementing the personal identity verification

requirements of HSPD 12, several matters require management attention to ensure the

successful implementation and long-term security of HUD's personal identity

verification and privacy program. Specifically, (1) HUD did not meet all deadlines for

establishing its personal identity verification process as mandated by the Office of

Management and Budget (OMB); (2) HUD did not follow the personal identity

proofing, registration, and issuance process required by OMB; and (3) HUD did not

take appropriate steps to ensure adequate security over the systems supporting its

personal identity verification and privacy program.

OIG recommended that HUD (1) ensure that HSPD 12 requirements are fully

implemented by establishing formal agreements among its offices to confirm

understanding of their responsibilities under HSPD 12 and (2) ensure that the personal

identity verification process and supporting information systems, including all

components, are properly certified and accredited in accordance with National

Institute of Standards and Technology (NIST) requirements before being placed into

full-scale production. OIG also recommended that HUD ensure that (1) systems with

personally identifiable information are categorized properly by program offices and

(2) all HUD systems comply with backup requirements stated in NIST Special

Publication 800-53, especially systems with moderate and high impact levels. In

addition, OIG recommended that HUD develop a process to ensure that contracting

officers include language to implement HSPD 12 standards for all applicable new and

existing contracts. (Audit Report: 2007-DP-0006)
Other Significant HUD Audits and Investigations/OIG Hotline 123

Network Vulnerability Assessment

HUD OIG, Washington, DC, conducted a network vulnerability assessment of HUD

to evaluate whether HUD's network security systems, including security controls and

practices, adequately protect the integrity, confidentiality, and availability of data and

information from unauthorized access to HUD's systems through the performance of

penetration testing.

Although HUD has implemented controls to protect its network from external

intruders, internal testing identified security configuration and technical control

deficiencies.

OIG determined that the results of the assessment would not be appropriate for

public disclosure and, therefore, has limited their distribution to selected HUD

officials. (Audit Report: 2007-DP-0007)

OIG Response to Questions from the Office of

Management and Budget under the Federal Information

Security Management Act of 2002

In accordance with the FISMA, HUD OIG, Washington, DC, performed an annual

independent evaluation of HUD's information security program and practices.

OIG determined that the results of the evaluation would not be appropriate for

public disclosure and has, therefore, limited their distribution to selected officials.

(Audit Report: 2007-DP-0801)

○○○○○○○○○○○○○○○○○
124 Other Significant HUD Audits and Investigations/OIG Hotline

Investigations

Some of the investigations discussed in this report were generated from leads

provided by HUD program staff or conducted jointly with Federal, State, and local law

enforcement agencies. The results of various significant investigations are described

below.

United States Attorney Gretchen

Shappert, along with Special Agent in

Charge Michael Powell and Special Agent

Mark Heinbach, presented a $4,423,966.40

check to Government National Mortgage

Association (GNMA) representatives in

Charlotte, NC. The check represents the

liquidated value of more than $12 million in

assets recovered through the Federal Asset

Forfeiture Program after the Fourth Circuit

Court of Appeals affirmed the 2002

convictions of James and Macy McLean, former owners of now-defunct First Beneficial

Homes and First Beneficial Mortgage Corporation, and others. James and Macy McLean

and others, previously convicted of conspiracy, wire and bank fraud, making false

statements or entries, and money laundering, were sentenced to more than 50 years

incarceration and ordered to pay GNMA more than $23 million in restitution for their

roles in a mortgage fraud scheme involving more than 200 victims including GNMA.

○○○○○○○○○○○○○○○○○

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 39 $4,444,077

Cases

closed

$

Recovered

3

Convictions/pleas/

pretrials

9

Admin/civil

actions

Copyright, 2007. The Charlotte Observer - Charlotte, NC. Reprinted with permission.
125

Isaac Lee and Regina Bailey Woods, owners and officers of Woodbai, Inc., a

mortgage lender doing business as Unlimited Financial Resources, and Timothy

Benjamin were each sentenced in U.S. District Court, Greenville, NC, for their earlier

convictions of or guilty pleas to conspiracy, wire fraud, false statements, money

laundering, attempted witness tampering, or aiding and abetting. Isaac Wood was

sentenced to 84 months incarceration and 5 years supervised release and ordered to

pay HUD more than $1.2 million in restitution, Regina Woods was sentenced to 24

months incarceration and 5 years supervised release and ordered to pay the above

restitution jointly and severally with her husband. and Benjamin was sentenced to 8

months incarceration and 3 years supervised release. Isaac and Regina Woods created

phony mortgages and then electronically submitted the bogus mortgages to the

secondary mortgage market and caused GNMA to guarantee $1.4 million in

counterfeit investments. Benjamin, a defense witness in the Woods' trial, uttered

materially false declarations while under oath and attempted to influence or prevent a

government witness from testifying.

○○○○○○○○○○○○○○○○○

Former HUD employee Tracyee Martan pled guilty in Prince George's County

Circuit Court, Upper Marlboro, MD, to forgery of private documents, uttering false

documents, and theft over $500. Martan cashed a $5,000 counterfeit cashiers check

and was arrested as she attempted to negotiate another $5,000 counterfeit cashiers

check at Bank of America. Martan was removed from Federal service.

○○○○○○○○○○○○○○○○○

Other Significant HUD Audits and Investigations/OIG Hotline
126

OIG Hotline

The HUD Office of Inspector General (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 12,586

complaints -- 80 percent received by telephone, 14 percent by mail, and 6 percent by

e-mail. Every allegation received by the Hotline is logged into a database and tracked.

Of the complaints received, 1,634 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 6.1: Hotline Cases Opened by Program Area

Other HUD

Offices

2%

Community

Planning &

Development

2%

Public and

Indian

Housing

63%

Single-Family

Housing

4%

Multifamily

Housing

15%

The Hotline closed 2,462 cases this reporting period. The closed Hotline cases

included 160 substantiated allegations. The substantiated allegations resulted in six

administrative sanctions against investors for improprieties involved in the purchase of

a home. The Department also took 154 corrective actions that resulted in $258,341 in

recoveries of losses and more than $2.6 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 in order to qualify for rental assistance.

OIG Audit &

Investigation

14%

 Other Significant HUD Audits and Investigations/OIG Hotline
Other Significant HUD Audits and Investigations/OIG Hotline 127

Chart 6.2: Hotline Dollar Impact from Program Offices

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

Public & Indian

Housing

Multifamily

Housing

Other HUD

Offices

$2,251,615

$196,628

$353,215

$61,713 $34,128

Recoveries Funds Put to Better Use

Chart 6.3: Substantiated Cases by Type of Complaint Received by Hotline

Rental Fraud and

Improprieties

88%

Other

4%

Owner/Occupant

Violations

4%

Mismanagement

4%

  

$0

Chapter 7

Outreach
130 Outreach

To foster cooperative, informative, and mutually beneficial relationships 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)

participates in special outreach efforts. The outreach efforts described below

complement routine coordination with Federal, State, and local law enforcement

agencies, various congressional committees or subcommittees, and other OIGs.

During outreach efforts, OIG personnel present information about HUD OIG's role

and function, provide audit and investigative results, and discuss desired goals and

objectives.

Single-Family Housing Programs

Special Agent in Charge (SAC) Daniel Salas and Assistant Special Agent in Charge

(ASAC) Michael Wilson described loan origination fraud and the effects of predatory

lending and identity theft at a HUD-sponsored Federal Housing Administration (FHA)

roundtable conference held in Fort Worth, TX. Approximately 30 mortgage industry

officials and HUD program directors attended.

○○○○○○○○○○○○○○○○○

SAC Barry McLaughlin presented an overview of HUD OIG's mission and role at

the Illinois Association of Mortgage Brokers annual conference in Rosemont, IL. SAC

McLaughlin, together with Assistant U.S. Attorney Brian Netols, Assistant U.S. Trustee

Sandra Rasnak, and Federal Bureau of Investigation (FBI) Special Agent (SA) Ron Carver,

also described mortgage fraud investigations and "red flag" fraud indicators to more

than 70 mortgage brokers in attendance.

○○○○○○○○○○○○○○○○○

Acting SAC Brad Geary and ASAC Nadine Gurley provided "Rescue and

Foreclosure" fraud training for U.S. Trustee Office personnel from the Middle and

Northern Districts of Georgia in Macon and Atlanta, GA. The training described

current fraud schemes and their effects on the mortgage industry, FHA insurance fund,

and bankruptcy courts. More than 130 bankruptcy court and law enforcement

personnel from various Federal agencies attended.

○○○○○○○○○○○○○○○○○

SAC Barry McLaughlin hosted the quarterly meeting of the Illinois Mortgage Fraud

Working Group in Chicago, IL. Allison Massey, a TransUnion Credit Services

investigator, provided a presentation on credit scams and identity theft. More than 40

representatives of the Illinois Department of Professional Regulation, U.S Trustees

Office, Illinois Attorney General's Office, and Federal and State law enforcement

agencies attended.

○○○○○○○○○○○○○○○○○

SAC Anthony Medici participated as a panelist on the radio program, "Mortgage

Radio: Detecting Fraud," in Washington, DC. Targeting an audience consisting of
Outreach 131

mortgage industry professionals, the radio program illustrated mortgage fraud schemes,

identified areas of risk and internal controls, described tools and technology to detect

fraud, and provided organizational strategies for uncovering identity theft and fraud in

the mortgage loan closing process.

○○○○○○○○○○○○○○○○○

SAC Barry McLaughlin and ASAC Brad Geary described bankruptcy and mortgage

fraud schemes at an Association of Insolvency and Restructuring Advisors meeting in

Chicago, IL. Approximately 40 members representing attorneys, certified public

accountants, and bankruptcy restructuring consultants attended.

○○○○○○○○○○○○○○○○○

ASAC Nadine Gurley and Assistant United States Attorney Gale Mckenzie

provided an overview of mortgage fraud schemes and described recent mortgage and

bankruptcy fraud investigations for approximately 50 realtors, appraisers, and lenders

attending a mortgage fraud seminar sponsored by Southlake Mortgage Corporation in

Atlanta, GA.

○○○○○○○○○○○○○○○○○

ASAC Brad Geary and representatives from the U.S. Attorney's Office, FBI, and U.S.

Secret Service presented an overview of real estate, mortgage, bank, and identity fraud

schemes; explained requirements for preserving closing files; and described

investigative testimonials at a Chicago Title & Trust meeting in Chicago, IL.

Approximately 50 employees attended the presentation.

 ○○○○○○○○○○○○○○○○○

Assistant Regional Inspector General for Audit (ARIGA) Helen Sparks and Senior

Auditor James Brady of the San Francisco Office of Audit made a presentation to the

Bay Area Escrow Association in San Francisco, CA. ARIGA Sparks and Auditor Brady

provided background information on HUD OIG and FHA, "red flag" indicators of

single-family mortgage fraud, and several examples of types of fraud found at escrow

companies. The presentation was attended by more than 60 escrow officers from Marin,

San Francisco, and San Mateo Counties.

○○○○○○○○○○○○○○○○○

ASACs Ray Espinosa and Brad Geary provided a presentation, entitled "The Latest

Trends in Mortgage and Real Estate Fraud," and discussed mortgage fraud "red flag"

indicators and current schemes at a meeting sponsored by Lorman Education Services

in Chicago, IL. Approximately 15 loan officers, attorneys, and banking officials attended.

○○○○○○○○○○○○○○○○○

SA James Carrieres described FHA mortgage fraud and recent real estate schemes

in a presentation, entitled "Arizona Real Estate Fraud," at an Arizona Bankers
132

Association meeting in Phoenix, AZ. Approximately 100 financial institution representatives and law enforcement personnel attended.

○○○○○○○○○○○○○○○○○

SA Robert Jones presented an overview of FHA and conventional mortgage fraud

to Cedar Hill Mayor's Office staff in Cedar Hill, TX. SA Jones described current FHAinsured mortgage fraud schemes to include property flipping, the role of straw buyers,

and the use of false Social Security numbers by undocumented immigrants. City

Manager Alan Simms and Assistant City Manager Greg Porter also attended.

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SA Heather Yannello provided HUD OIG's mission, role, and function and described

single-family mortgage fraud investigations at a Halt Abusive Lending Transactions

(HALT) summit in Buffalo, NY. Initiated by Governor Spitzer as a cooperative effort

between the New York Banking Department and the Attorney General's Office, HALT

was created to combine numerous resources and combat predatory lending and

mortgage fraud. More than 150 mortgage brokers, bankers, State and local officials,

and community advocacy group members participated in the conference.

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SA Michael Wagenhauser provided an overview of HUD OIG's mission and described

document and appraisal fraud, property flipping and equity skimming, identity theft,

and Real Estate Settlement Procedures Act violations at a Richmond Association of

Realtors seminar held in Richmond, VA. Approximately 75 members attended.

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SA James Carrieres participated in a panel discussion, entitled "Fraud and

Foreclosure Rescue Schemes," at a "Preserving Homeownership" meeting hosted by the

Federal Reserve and Wells Fargo Banks in Phoenix, AZ. SA Carrieres provided an

overview of a recent FHA preforeclosure investigation and current rescue fraud schemes

within Arizona. More than 100 mortgage industry and government and nonprofit agency

representatives attended.

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SA Linda Cisco presented an overview of HUD OIG's mission and described

single-family fraud schemes at a mortgage fraud conference sponsored by the

Maryland Mortgage Bankers Association in Towson, MD. SA Cisco also hosted a

question and answer forum for approximately 50 mortgage brokers, appraisers,

bankers, and loan officers and processors in attendance.

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SA Kedric McKnight presented an overview of HUD OIG's mission and role and

described HUD program investigations at the fourth annual Housing Summit hosted

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by HUD in Fort Worth, TX. Approximately 150 representatives from financial

institutions, real estate agencies, and title companies attended.

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SA Jim Siwek provided a presentation on current trends in mortgage fraud schemes,

along with foreclosures and the bankruptcy system, to Eastern District of Wisconsin

U.S. Trustee personnel in Milwaukee, WI. In addition, SA Siwek described bankruptcy

fraud statutes and fraud involving the bankruptcy process and provided examples of

bankruptcy prosecutions. Approximately 15 U.S. Trustees and office staff attended.

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SA Robert Jones provided an overview of mortgage fraud and identity theft schemes

at a National Association of Hispanic Real Estate Professionals conference held in

Dallas, TX. After the presentation, SA Jones hosted a question and answer forum and

provided avenues available for reporting FHA, U.S. Department of Veterans Affairs (VA)

and conventional mortgage fraud. Approximately 50 mortgage and realty

professionals attended.

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SAs Jim Siwek and Manny Colin provided an overview of mortgage fraud trends and

current schemes to Citimortgage employees and supervisors in Chicago, IL. SAs Siwek

and Colin also explained mortgage fraud "red flag" indicators, provided examples of

documents used in current fraud schemes, and supplied contacts for reporting

suspected mortgage fraud. Approximately 25 Citimortgage employees attended the

presentation.

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SA Robert Jones provided an overview of FHA mortgage fraud at a Trinity Real

Estate Solutions' roundtable forum held in Dallas, TX. More than 20 representatives of

the mortgage and home building industry attended.

Public Housing and Rental Assistance Programs

Inspector General (IG) Kenneth Donohue was a guest speaker at a Public Housing

Safety Initiative (PHSI) conference sponsored by the U.S. Department of Justice in

New Orleans, LA. IG Donohue described the importance of the PHSI program and

the need for both law enforcement and community development efforts, emphasized

HUD OIG's commitment to PHSI in 10 major metropolitan areas, and highlighted the

successful Armory Project in New York City. Other presenters included participating

U.S. Attorney's Offices and State and local law enforcement and community

development agencies.

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134

SAC Barry McLaughlin and Regional Inspector General for Audit (RIGA) Heath

Wolfe presented HUD OIG Section 8 and nonprofit audit findings and internal

controls for public housing authorities at the Indiana National Association of Housing

and Redevelopment Officials (NAHRO) annual conference in South Bend, IN.

Approximately 35 public housing officials attended.

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SAC Rene Febles and SA Miguel Collazo presented an overview of HUD OIG's

Fugitive Felon, Sex Offender, and Section 8 fraud initiatives at a Westchester County

Section 8 Administrators Association meeting in White Plains, NY. Approximately 18

housing association members attended.

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SAC James Todak and ASAC Lori Chan presented an overview of HUD OIG and

described current Indian housing authority investigations and initiatives at a Nevada/

California Indian Housing Association training session in Crystal Bay, NV. Following

their presentation, SAC Todak and ASAC Chan hosted a questions and answer forum

for approximately 30 Indian housing authority representatives in attendance.

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SAC Barry McLaughlin and RIGA Heath Wolfe presented an overview of necessary

internal controls and common audit findings in Section 8 and nonprofit development

audits at the Illinois Association of Housing Authorities annual conference in

Springfield, IL. Approximately 60 association members attended.

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SAC Anthony Medici provided a presentation, entitled "Procurement Fraud in

Public Housing," at the Mississippi Association of Housing and Redevelopment

Officials meeting in Jackson, MS. SAC Medici described HUD OIG's involvement with

the U.S. Department of Justice Procurement Fraud Task Force, best practices in the

procurement process, and ethical considerations in procurement actions and provided

examples of public housing authority corruption investigations involving procurement

fraud. ASAC Fernando Ramos assisted in the procurement fraud presentation, and

ARIGA Warren Wood discussed internal controls in the procurement process.

Approximately 200 individuals attended the presentation.

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SAC Barry McLaughlin and RIGA Heath Wolfe presented an overview of necessary

internal controls and common audit findings in Section 8 and nonprofit development

audits at a Minnesota NAHRO conference in St. Cloud, MN. Approximately 35

housing and redevelopment officials attended.

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135

RIGA Frank Baca and Auditor Danita Wade gave a presentation at the New Mexico

NAHRO Conference in Ruidoso, NM. RIGA Baca and Auditor Wade explained the

organization and function of HUD OIG and discussed issues arising from recent

Section 8 audits.

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ASAC Diane DeChellis and SA Alexander Rosania provided an overview of HUD

OIG's mission and priorities at a Section 8 Administrators Association training seminar

held at Holy Cross College in Worcester, MA. ASAC DeChellis and SA Rosania also

described successful public and multifamily housing investigations.

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ASAC Suzanne Steigerwald provided an overview of HUD OIG's mission and

authority and described fraud detection and enforcement methods used to

successfully prosecute investigations at a NAHRO conference held in Colorado Springs,

CO. More than 50 members attended.

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ASAC Michael Powell provided an overview of HUD OIG's mission and authority

and described fraud detection and enforcement methods used to successfully

prosecute investigations at a NAHRO conference held in Osage Beach, MO. More than

50 members attended.

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AASAC Kathleen Hatcher and SA Lori DiCriscio provided an overview of HUD OIG's

mission and priorities at a joint Maryland Association of Housing and Redevelopment

Agencies and NAHRO regional conference held in Ocean City, MD. ASAC Hatcher

and SA DiCriscio also described tenant and landlord "red flag" fraud indicators and hosted

a question and answer forum for approximately 300 housing representatives in

attendance.

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ARIGA Charles Johnson gave a presentation to the Western Intergovernmental

Audit Forum in Los Angeles, CA, on Native American housing programs and the

significant problems found in a recent audit of the Navajo Housing Authority's use of

nonprofit organizations to develop new housing under the Native American Housing

Assistance and Self Determination Act. Additionally, he provided a brief overview of

the OIG Office of Audit and the entities and programs it audits. There were

approximately 100 local, State, and Federal governmental audit and accountability

professionals at the conference from throughout the Western United States.

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136

SA Brian Gosselin provided an overview of HUD OIG's mission and described

public housing waste, fraud, and abuse at a Maine Occupancy Association meeting in

Bath, ME. Approximately 28 housing occupancy specialists attended.

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SA Alisha Mahabir presented an overview of HUD OIG's mission and described

HUD program investigations at the first annual Houston HUD Partners' Housing

Symposium in Houston, TX. Approximately 90 public housing authority employees

and representatives of multifamily management companies and nonprofit agencies

attended.

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SA Joshua Stockman provided an overview of HUD OIG and described rental

assistance fraud investigations at an Arizona NAHRO training conference in Tucson,

AZ. Approximately 30 housing and redevelopment officials attended.

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SA Malinda Antonik provided an overview of tenant eviction issues and described

HUD OIG investigations at the Florida Association of Housing and Redevelopment

Officials annual convention on Captiva Island, FL. Approximately 40 housing and

redevelopment officials attended.

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SAs Timothy Lishner and Nelson Sanchez provided an overview of HUD OIG's

mission and authority and described fraud detection and enforcement methods at a

fraud symposium sponsored by the Grand Junction Housing Authority, Mesa County

Department of Human Services, and Colorado's 21st Judicial District Attorney's Office

in Grand Junction, CO. More than 50 assisted housing, community social services, or

law enforcement personnel attended.

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An article on OIG's data mining initiatives by Computer Audit Specialist Cliff Cole

was published in the Fall/Winter 2006/2007 issue of the The Journal of Public Inquiry.

Entitled, "Digging for the Gold," 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 fugitives and the identification of approximately 3,500 Federal and U.S.

Postal Service employees who may have falsely reported their incomes to obtain HUD

housing assistance. Also in fiscal year (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.

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137

SAC Anthony Medici and ARIGA Warren Wood took part in the Procurement

Workshop held in Jackson, MS. SAC Medici made a presentation on procurement

fraud. ARIGA Wood made a presentation entitled "Who We Are, What We Do, and

Why."

Community Planning and Development

SAC Barry McLaughlin and RIGA Heath Wolfe provided an overview of HUD OIG's

mission, role, "red flag" fraud indicators, and common audit findings at a HUD CPD

grantee entitlement conference in Springfield, IL. Approximately 50 HUD CPD

grantees attended.

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RIGA Ron Hosking and ARIGA Carrie Gray met with Auditor of State David Vaudt

and Deputy Auditor of State Tami Kusian at the State Capitol in Des Moines, IA. RIGA

Hosking and ARIGA Gray explained the OIG mission and staffing; audit planning,

selection, and reporting; and the success of OIG's prior joint efforts with the City

Auditor of Kansas City, MO. They discussed the possibility for joint efforts in the

future regarding Community Development Block Grant and HOME Investment

Partnerships Program funds and cooperation between the two offices in referring audit

leads to each other and agreed to consult periodically to evaluate joint audit subjects.

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ASAC Lori Chan presented an overview of HUD OIG and provided information on

detecting and reporting fraud at a HUD CPD training session, entitled "Fund

Accounting," held in Oakland and San Francisco, CA. Approximately 95 individuals

representing nonprofit organizations and local governmental agencies attended.

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SA James Luu presented an overview of HUD OIG; described housing fraud

detection, prevention, and investigative challenges; and provided a brief discussion on

CPD investigations to Mendocino County's Community Development Commission

members and deputy district attorneys in Ukiah, CA.

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SA Richard Salom presented an overview of HUD OIG and provided information

on detecting and reporting fraud at a HUD CPD training session, entitled "Fund

Accounting," in San Jose, CA. Approximately 35 individuals representing nonprofit

and local governmental agencies attended.

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Outreach
138

SA Dan Ronski provided an overview of HUD OIG's role and mission, described

HUD's CPD Supportive Housing Program, and hosted a question and answer forum for

approximately 78 HUD CPD grantees meeting in Chicago, IL.

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RIGA Rose Capalungan and Auditor Kimberly Sandifer made a presentation

during HUD's Center for Faith Based and Community Initiatives training held in Baton

Rouge, LA. The event was attended by officials/staff of HUD, the U.S. Department of

Agriculture, nonprofit organizations, banks, and other business entities.

Law Enforcement Outreach

Deputy Inspector General Michael Stephens was an invited guest at the annual

"National Missing Children's Day" award ceremony sponsored by the U.S. Department

of Justice in Washington, DC. Former Attorney General Alberto Gonzales provided

the keynote address, which focused on the vital importance of Federal, State, and local

programs to deter and capture child predators and recover missing and exploited

children. The annual awards ceremony recognized the outstanding accomplishments

of individuals supporting these efforts.

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ASAC Maureen Nelting and SAs Gene Westerlind and Jessica Piecuch

participated in a Federal Law Enforcement Officers Association (FLEOA)-sponsored

"National Missing Children's Day" event in support of the National Center for Missing

and Exploited Children in Boston, MA. Approximately 50 children at JFK and O'Neill

Federal Building childcare centers were fingerprinted and photographed.

 ○○○○○○○○○○○○○○○○○

ASAC Lori Chan and SAs James

Luu, Richard Salom, Eric Huhtala,

and Jesse Barragan participated in

a FLEOA- sponsored "National

Missing Children's Day" event

in support of the National

Center for Missing and Exploited

Children. Approximately 600

children at the Presidio in San

Francisco, CA, were fingerprinted

and photographed.

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Senior SA Kevin McBride participated in the National Organization of Black Law

Enforcement Executives-sponsored "National Missing Children's Day" event in support

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139

of the National Center for Missing and Exploited Children in Washington, DC.

Approximately 40 children at Plummer Elementary School were fingerprinted and

photographed.

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SAs Marco Ponce and Joshua

Stockman participated in a FLEOAsponsored "National Missing

Children's Day" event in support

of the National Center for

Missing and Exploited Children

in Phoenix, AZ. Approximately

400 children from the Thomas J.

Pappas Elementary School, a

school for homeless children in

central Phoenix, were fingerprinted

and photographed.

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SA Louis Mancini, Jr., participated in the Arthur Ashe Tennis Association- and

Philadelphia Youth Cultural PTA-sponsored "National Missing Children's Day" event

in support of the National Center for Missing and Exploited Children. Approximately

100 children attending a child safety event at Conestoga Recreation Field in

Philadelphia, PA, were fingerprinted and photographed.

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SAs Edward Redmond and Stephen Tufts participated in a FLEOA-sponsored

"National Missing Children's Day" event in support of the National Center for Missing

and Exploited Children in Manchester, NH. Children attending the New Hampshire

Fisher Cats minor league baseball game were fingerprinted and photographed.

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SAs Jennifer Landon and Leonard de Vera participated in a FLEOA-sponsored

"National Missing Children's Day" event in support of the National Center for Missing

and Exploited Children in Commerce, CA. Several hundred children from the greater

Los Angeles area were fingerprinted and photographed.

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SAs Mark Heinbach, Anthony Troeger, and Brian Rymill participated in a FLEOAsponsored "National Missing Children's Day" event in support of the National Center

for Missing and Exploited Children in Greensboro, NC. Approximately 125 children

from Kiser Middle School were fingerprinted and photographed.

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Outreach
140

SA Charles Grace participated in a FLEOA-sponsored "National Missing Children's

Day" event in support of the National Center for Missing and Exploited Children in

Sumner and Lake Tapps, WA. Approximately 500 children from the Daffodil and

Crestwood Elementary Schools were fingerprinted and photographed.

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ASAC Diane DeChellis provided an overview of HUD OIG's mission and priorities

and described successful investigations at an annual meeting of the Bridgewater State

College Criminal Advisory Board in Bridgewater, MA. Plymouth County District

Attorney Timothy Cruz and several law enforcement and academia officials attended.

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SA Dan Ronski hosted an Association of Financial Crimes Investigators monthly

meeting in Chicago, IL. Approximately 26 financial investigators representing

financial, retail, and law enforcement organizations met to discuss current bank fraud

schemes and investigations.

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SA Anthony Troeger presented an interviewing training session for North Carolina

Department of Social Services program integrity investigators at their annual

conference in Greensboro, NC. At the conclusion of training, SA Troeger provided

contact information for HUD OIG, U.S. Department of Health and Human Services

OIG, and U.S. Department of Agriculture Fraud Hotline personnel. More than 30

program integrity investigators attended.

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SAs Greg Moyer and Melissa McFadden participated in the Kansas Law

Enforcement Torch Run to support Special Olympics held in Kansas City, KS.

Approximately 20 law enforcement agencies participated in the 23K run.

Audit Outreach

ARIGA Fred Smith and Senior Auditor Beth Archibald met with Dennis Gallagher,

City and County of Denver Auditor; Dawn Sully, Deputy Auditor; Kip Memmott,

Director of Internal Audit; and Denis Berckefeldt, Director of Communications and

Prevailing Wage, at the City Auditor's Office, Denver, CO. ARIGA Smith informed the

participants about OIG's structure, goals, and priorities. The participants discussed

common audit topics and interests and the possibility of conducting joint efforts in the

future. The participants agreed that such joint efforts could be beneficial to both the

City and HUD. They agreed to periodically evaluate joint audit subjects.

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RIGA John Dvorak and ARIGA Mike Motulski met with H. Cris Der Vartanian,

Chief of the Bureau of Audits, and Dennis Ziroli, Associate Director and

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141

Superintendent of Banking, Division of Banking for the State of Rhode Island, in

Providence, RI. RIGA Dvorak and ARIGA Motulski explained the role of HUD OIG,

developed lines of communication, and provided information on the organizational

structure and functions of the Offices of Audit and Investigation. The top management

challenges were discussed, and recent relevant HUD OIG audit and investigation

results were shared. Additionally, information on the IG audit reports was provided,

along with OIG's Web site address for obtaining access to OIG external audit reports

and other information. Mr. Der Vartanian and Mr. Ziroli shared information regarding

responsibilities of their offices and discussed the audit reports issued by the State. The

presentation provided an opportunity to explore the possibility of leveraging resources

and sharing information between organizations.

HUD Staff and Other Outreach

SAC Rene Febles and ASAC Jeanne Daumen presented an overview of HUD OIG's

FY 2007 goals and initiatives at a congressional briefing held at the HUD Newark field

office in Newark, NJ. In addition, ASAC Daumen provided an overview of HUD OIG's

investigative mission and working relationship with other law enforcement agencies;

described investigative initiatives relating to single family, assisted housing, Fugitive

Felon, and CPD programs; and illustrated the results from cooperative links between

HUD and HUD OIG. Representatives from the New Jersey Senate and congressional

offices attended.

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SAC James Todak and ARIGA Tanya Schulze provided an overview of HUD OIG's

mission, organizational structure, and current priorities at a congressional briefing

hosted by the HUD Los Angeles field office in Los Angeles, CA. Approximately 40

individuals including congressional staff representatives from Southern California

attended.

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SAC Barry McLaughlin and RIGA Heath Wolfe provided HUD OIG's mission, goals,

priorities, and initiatives and described the function of the Offices of Investigation and

Audit to eight congressional staffers meeting in Detroit, MI.

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RIGA Heath Wolfe participated, along with the Chicago regional office, in a

briefing for congressional staffers at HUD's Springfield, IL, field office. RIGA Wolfe

presented information about HUD OIG's mission and priority areas. Twelve Illinois

congressional staffers were in attendance.

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RIGA Joan Hobbs and SAC James Todak attended the Region IX HUD Regional

Managers Conference in Henderson, NV, during which a presentation was made on the

audit process, audits issued to date for FY 2007, the audit plan for FY 2008, and issues

Outreach
142 Outreach

of concern for the Offices of Audit and Investigation regarding HUD programs. About

40 HUD managers were in attendance.

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RIGA Ronald J. Hosking addressed the 2007 HUD Region VII Regional Managers

Conference in Kansas City, KS. RIGA Hosking provided a history and overview of

HUD OIG. He distributed copies of OIG's Semiannual Report to Congress and

described the purpose of the report, highlighting the significant information contained

in the report. He also explained the audit planning, execution, and resolution

processes.

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RIGA Heath Wolfe and SA Barry McLaughlin gave a presentation to HUD's Grand

Rapids, MI, field office. The presentation consisted of an overview of HUD OIG,

including a brief background of OIG's missions and goals. There were approximately

25 HUD employees in attendance.

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RIGA Heath Wolfe and ARIGA Ron Farrell participated in Marshall University's

2007 Spring Intern and Career Expo in Huntington, WV. RIGA Wolfe and ARIGA

Farrell spoke with students about OIG's mission and the benefits of pursuing student

volunteer and career positions with HUD OIG. They accepted resumes from students

interested in both the student volunteer program at OIG's Columbus, OH, Office of

Audit and careers with HUD OIG.

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ASAC Tony Meeks and ARIGA Tanya Schulze provided HUD OIG's mission and

role; described fraud, waste, and abuse in HUD programs; and explained HUD OIG's

Hotline at a meeting of Southern California Congressional District Representatives in

Los Angeles, CA.

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ASAC Lori Chan provided an overview of HUD OIG's mission, organizational

structure, current priorities, and the fraud referral process at a congressional briefing

hosted by the HUD San Francisco field office in San Francisco, CA. Approximately 15

congressional staff representatives and others attended.

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ARIGAs Tanya Schulze and Vince Mussetter attended a graduate and alumni job

fair at California State University, Northridge, in Los Angeles, CA. ARIGAs Schulze

and Mussetter spoke with nearly 100 individuals about possible career opportunities

with OIG and obtained resumes from those expressing interest in careers with the

Offices of Audit and Investigation.

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Outreach 143

ARIGA Kim Randall participated in a high school job shadow day in Kansas City,

KS, which was designed to give high school students a taste of the career field that they

want to pursue in college. Simone Woods, a junior at Versailles High School in Versailles,

MO, shadowed ARIGA Randall for a day and learned what it is like to be an auditor with

OIG. Simone learned how OIG gets ideas for audits; auditors plan, conduct, and

document audits; reports are written and provided to Congress; and auditors use their

accounting skills to accomplish audits. Several auditors shared their thoughts on

recent audits, and the HUD Regional Directors for Multifamily Housing and Public

Housing explained the duties their accountants perform and how their staffs interact

with OIG.

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ARIGA Tanya Schulze and Senior Auditor Ratronda Gowdy attended a career expo

at the Los Angeles Convention Center in Los Angeles, CA, sponsored by Jobing.com.

The event was attended by thousands of individuals seeking job opportunities. ARIGA

Schulze and Auditor Gowdy spoke with at least 200 individuals about the Federal

Government, and OIG and provided them with information about possible career

opportunities.

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ARIGA Nikita Irons and Auditor Alexandra Burgess participated in the Walsh

College Career Fair in Novi, MI. They spoke to students about the benefits of

pursuing student volunteer and auditing positions with HUD OIG. Students were

informed that OIG has student volunteer opportunities in Detroit, MI. Eighteen

resumes were submitted.

○○○○○○○○○○○○○○○○○

SA Jorge Reyes, Jr., and Senior Auditor Darlene Haniak presented an overview of

HUD OIG's mission and role and described HUD program investigations and audits at

a "Grant Writing Workshop" presented by the HUD Office of Faith Based and

Community Initiatives in Houston, TX. Approximately 300 representatives from

nonprofit organizations attended.

○○○○○○○○○○○○○○○○○

SAs Nicholas Fasciglione and Cortez Richardson provided HUD OIG's mission and

role at a Central Oklahoma Clearinghouse Association meeting held in Oklahoma City,

OK. Approximately 30 association members representing financial and retail

establishments, along with State and local law enforcement personnel, attended.

○○○○○○○○○○○○○○○○○

SA Anthony Troeger provided an overview of HUD OIG and described employee

misconduct investigations at a program integrity investigators meeting in

Winston-Salem, NC. Approximately 35 representatives from varied social services

departments attended.

○○○○○○○○○○○○○○○○○
144 Outreach

SAs Cortez Richardson and Nicholas Fasciglione provided an overview of HUD OIG's

mission and role at Lawton and Tulsa Metropolitan Area Fraud Information

Association meetings in Lawton and Tulsa, OK. Approximately 40 association

members representing financial and retail establishments and local law enforcement

agencies attended.

○○○○○○○○○○○○○○○○○

SA Thomas Redmann participated in a student outreach program during a career

day event held at Jesuit High School in New Orleans, LA. SA Redmann provided

information on Federal Government employment and law enforcement career

opportunities.

○○○○○○○○○○○○○○○○○

SA Amy Durso was a guest speaker at a "Breakfast with the Experts" event held at

Liberty Junior High School in Liberty, MO. SA Durso provided an overview of HUD

OIG, HUD OIG special agents, and the pros and cons of a law enforcement career. Other

guest speakers included law enforcement personnel from the Drug Enforcement Agency,

Platte County Prosecutor's Office, and North Kansas City Police Department, along

with individuals from other human service professions.

○○○○○○○○○○○○○○○○○

CAS Cliff Cole participated in the Mid-Atlantic Intergovernmental Audit Forum's

annual spring/summer meeting in Ocean City, MD, as a keynote panelist and speaker.

The Forum is a consortium of Federal, State, and local audit executives from the

District of Columbia and the States of Delaware, Maryland, Pennsylvania, Virginia, and

West Virginia. CAS Cole represented HUD OIG as the panel's Federal Government

spokesman in its discussion on "How Audit Software Can Help Improve Our Data

Analysis and Data Mining." He provided an overview of HUD OIG's organizational

structure and mission as a backdrop for a detailed discussion on OIG's progressive use

of data mining techniques and computer-assisted analytics.

  
Chapter 8

Review of Policy Directives
146

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 118

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 fiscal year

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

- Modify 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 July 18, 2007, the Inspector General testified on the modernization proposal

before the United States Senate Committee on Banking, Housing, and Urban Affairs.

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 Downpayments: FHA has experienced higher default and claim rates on

seller-funded nonprofit downpayment assisted loans. When sales prices are

inflated to fund the downpayment "gifts," these loans are effectively zero

downpayment loans (100 percent loan to value). As reported by the

Government Accountability Office (GAO), the probability of such loans

resulting in an insurance claim was 76 percent higher than that of comparable

loans without such assistance. It is reasonable to conclude that zero

downpayment loans would represent a comparable insurance risk.

Review of Policy Directives
147

- 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.

Final Rule

Seller-Funded Downpayment Assistance

OIG has previously expressed its concerns that seller-funded nonprofit

downpayment assistance transactions 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

the Government Accountability Office. Also, the Internal Revenue Service issued a

revenue ruling in 2006 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 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. HUD published a proposed rule in the Federal

Register on May 11, 2007. In late September 2007, the FHA Commissioner announced

the final rule, which was published in the Federal Register on October 1, 2007.

Proposed Rules

Mortgagee Letters

OIG nonconcurred with an initial draft of Mortgagee Letter 2007-29, Refinancing

of Non-FHA Adjustable Rate Mortgages Following "Re-Set," and Appraisal Practices

for Declining Markets. After considering our input, FHA agreed to changes that would

better clarify the circumstances under which non-FHA mortgages could be refinanced

under this initiative, referred to as "FHA Secure."

OIG nonconcurred with the proposed mortgagee letter announcing the

immediate acceptance of electronic signatures, in accordance with the Electronic

Signatures in Global and National Commerce Act (ESIGN), Pub. Law No. 106-229, "on

documents when originating, servicing, and making certifications on FHA-insured loans."

However, the Office of Housing has not established necessary standards related to the

Review of Policy Directives
148

  

submission, authentication, retention, backup, HUD OIG access, and security of

mortgage-related documents. Moreover, it appears that the adoption of such required

protocols should be implemented via notice and comment rule making. Accordingly,

HUD OIG must nonconcur with respect to the proposed mortgagee letter. OIG is

working with HUD to resolve our nonconcurrence.

Manufactured Home Installation Program

OIG nonconcurred on this proposed final rule. OIG strongly recommends that

the proposed rule include that the installer certifies, on a HUD-approved form, that

the foundation and installation meet the required specification and that the

foundation was properly installed. OIG issued a report which concluded that more than

80 percent of the manufactured homes insured by FHA had foundations that did not

meet HUD's requirements. After the close of the semiannual reporting period, OIG

and HUD resolved the nonconcurrence.

Review of Policy Directives
Chapter 9

Audit Resolution
150

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 September 30, 2007."

Audit Reports Issued before Start of Period with No

Management Decision as of September 30, 2007

Office of Housing, Washington, DC

Single-Family Mortgage Insurance Claims 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. The Office of

Housing submitted two proposals to OIG on March 30 and June 11, 2007, respectively.

We rejected the proposals as in our opinion neither adequately provided for the

development of procedures to take appropriate actions for all claims with inadequate

documentation and essentially renders the recommendations ineffective. Since June

2007, we have received no further correspondence from the Office of Housing on this

matter. The recommendations remain open, without management decisions, 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
151

Significant Management Decision with

Which OIG Disagrees

There are no reports issued before the beginning of the reporting period for which

a management decision had not been made by the end of the period.

Federal Financial Management

Improvement Act of 1996

In fiscal year 2006, HUD did not substantially comply with FFMIA. In this regard,

HUD's financial management systems did not substantially comply with Federal

financial management system requirements.

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 42 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
154

Internal Reports

11 Audit Reports

Administration (2 Reports)

2007-CH-0001 HUD Did Not Fully Implement Succession Planning, 09/29/2007.

2007-DP-0006 Review of HUD's Personal Identity Verification and Privacy Program,

08/28/2007.

Chief Information Officer (2 Reports)

2007-DP-0005 Review of HUD's Information Technology Security Program,

04/05/2007.

2007-DP-0007 Vulnerability Assessment of HUD's Computer Network, 09/19/2007.

Chief Procurement Officer (1 Report)

2007-AT-0001 HUD Needs to Improve Controls Over Its Contract

Administration Processes, 09/19/2007. Better Use: $368,283.

Housing (5 Reports)

2007-BO-0002 HUD Did Not Process Multifamily Accelerated Processing

Applications within Established Processing Goals and the

Multifamily Accelerated Processing Guide Is Outdated, 05/21/2007.

2007-KC-0003 HUD Did Not Recapture Excess Funds from Assigned

Bond-Financed Projects, 04/30/2007. Better Use: $1,988,066.

2007-KC-0004 More Than 80 Percent of Recently Insured Title II Manufactured

Housing Loans Are on Homes With Substandard Foundations,

09/24/2007. Better Use: $44,909,590.

2007-PH-0002 HUD's Oversight of Contractors' Marketing of Its Real

Estate-Owned Properties, 08/17/2007.

2007-SE-0001 HUD Did Not Ensure That Payments to Contract Administrators

Were for Work Performed or That Interest Was Earned on

Advances and Recovered, 06/07/2007. Questioned: $15,101;

Better Use: $27,424,605.

Public and Indian Housing (1 Report)

2007-FW-0001 Overpayments in the Housing Choice Voucher Program Occurred

When Public Housing Agencies Subsidized Rental Units with

More Bedrooms Than Authorized, 09/28/2007. Better Use:

$20,076,492.

Audit-Related Memorandums1

Community Planning and Development(1 Report)

2007-NY-0802 CDBG Disaster Recovery Assistance Funds Lower Manhattan

Development Corporation, New York, NY, 04/03/2007.

Audit Reports Issued

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.
155

Chief Information Officer (1 Report)

2007-DP-0801 OIG Response to Questions From the OMB Under the FISMA,

09/28/2007.

Housing (1 Report)

2007-KC-0801 Lenders Submitted Title II Manufactured Housing Loans for

Endorsement without the Required Foundation Certifications,

09/24/2007. Questioned: $1,529,723; Better Use: $223,164.

Audit Reports Issued
156

External Reports

64 Audit Reports

Community Planning and Development (20 Reports)

2007-AO-1001 The State of Mississippi's Homeowner's Assistance Grant Program Did

Not Appropriately Calculate Grants and Monitor the Program, Jackson,

MS, 05/07/2007. Better Use: $159,172.

2007-AT-1007 The Municipality of Toa Baja Needs to Improve Its CDBG Program

Administration, Toa Baja, PR, 04/11/2007. Questioned: $1,821,513;

Unsupported: $1,726,377; Better Use: $34,091.

2007-BO-1005 The City of New Bedford Did Not Meet Certain Requirements of HUD's

CDBG Program, New Bedford, MA, 04/23/2007. Questioned: $750,000;

Unsupported: $750,000; Better Use: $473,177.

2007-BO-1007 The City of Fall River Generally Administered Its Block Grant and

HOME Programs in Accordance with HUD Requirements, Fall River,

MA, 08/24/2007.

2007-CH-1015 Cook County Lacked Adequate Controls over Its HOME Investment

Partnerships Program, Chicago, IL, 09/26/2007. Questioned: $943,476;

Unsupported: $827,507; Better Use: $153,805.

2007-CH-1017 The City of Cincinnati Lacked Adequate Controls over Its HOME

Investment Partnerships Program, Cincinnati, OH, 09/30/2007.

Questioned: $1,639,241; Unsupported: $1,373,156; Better Use: $134,455.

2007-CH-1018 The City of Milwaukee Needs to Improve Existing Controls over Its

HOME Program Regarding Housing Conditions and Contracting,

Milwaukee, WI, 09/30/2007. Questioned: $301,563; Better Use: $120,000.

2007-DE-1006 The State of Utah Did Not Comply with HOME Investment

Partnerships Program Requirements, Salt Lake City, UT, 08/10/2007.

Questioned: $306,648; Better Use: $4,000,000.

2007-LA-1009 The City of Chula Vista Generally Administered Its HOME Investment

Partnership Program in Accordance with HUD Requirements, Chula

Vista, CA, 04/10/2007.

2007-LA-1012 Central City Lutheran Mission Did Not Properly Administer Its

Supportive Housing Program Grants, San Bernardino, CA, 06/04/2007.

Questioned: $1,003,540; Unsupported: $699,438; Better Use: $13,183.

2007-LA-1013 The Los Angeles Homeless Services Authority Did Not Perform On-Site

Fiscal Monitoring of Its Project Sponsors, Los Angeles, CA, 06/08/2007.

2007-LA-1016 A Community of Friends Did Not Always Administer Its Cash Match in

Compliance with HUD Requirements, Los Angeles, CA, 09/21/2007.

Questioned: $71,318.

2007-NY-1005 Lower Manhattan Development Corporation CDBG Disaster Recovery

Assistance Funds, New York, NY, 04/17/2007. Questioned: $6,000.

2007-NY-1007 The City of Jersey City Did Not Always Adequately Administer Its

HOME Investment Partnerships Program, Jersey City, NJ, 06/13/2007.

Questioned: $622,128; Unsupported: $354,581; Better Use: $487,137

2007-NY-1008 The City of Newark Did Not Always Administer Its CDBG Program in

Accordance with HUD Requirements, Newark, NJ, 06/22/2007.

Questioned: $10,425,604; Unsupported: $10,164,376; Better Use:

$991,171.

Audit Reports Issued
Audit Reports Issued 157

2007-NY-1009 The Town of Alexandria's Small Cities CDBG Program Did Not Meet

Its Program Objective of Job Creation, Alexandria, NY, 06/29/2007.

Questioned: $600,000; Unsupported: $600,000.

2007-NY-1012 The City of Passaic's Community Development Department Has

Weaknesses in Its HOME Investment Partnerships Program,

Passaic, NJ, 09/12/2007. Questioned: $942,993; Unsupported:

$841,366; Better Use: $1,626,642.

2007-NY-1013 Lower Manhattan Development Corporation CDBG Disaster

Recovery Assistance Funds, New York, NY, 09/28/2007.

2007-PH-1012 The State of Maryland Did Not Always Administer Its

Homeownership Assistance Program in Accordance with Federal

Regulations and Written Agreements, Crownsville, MD, 08/27/2007.

Questioned: $73,000; Unsupported: $73,000.

2007-SE-1004 The Tacoma Consortium Did Not Properly Administer its HOME

Investment Partnerships Grants, Tacoma, WA, 09/30/2007.

Questioned: $435,613; Unsupported: $248,214; Better Use: $263,458.

General Counsel (1 Report)

2007-FW-1012 Fallbrook Apartments' Owner and/or Management Agent Made

Unauthorized Distributions of the Project's Funds, Houston, TX,

07/06/2007. Questioned: $330,887; Unsupported: $31,625.

Housing (13 Reports)

2007-AT-1010 The Cathedral Foundation of Jacksonville Used More Than $2.65 Million

in Project Funds for Questioned Costs, Jacksonville, FL, 08/14/2007.

Questioned: $2,651,810; Unsupported: $147,277; Better Use: $93,677.

2007-BO-1006 Multifamily Project Deficiencies Resulted in More Than $730,000 in

Cost Exceptions for Moosup Gardens Apartments, Moosup, CT,

07/25/2007. Questioned: $670,265; Unsupported: $113,636; Better Use:

$63,038.

2007-CH-1007 Trumbull Metropolitan Housing Authority Did Not Ensure Its

Nonprofit Followed HUD's Section 8 Housing Requirements, Warren,

OH, 04/30/2007. Better Use: $1,367,630.

2007-DE-1005 Rocky Mountain Mutual Housing Association Paid Ineligible Owner

Expenses, Denver, CO, 04/10/2007. Questioned: $27,936.

2007-FW-1009 Countrywide Home Loans, Inc., Generally Complied with HUD

Requirements in Originating FHA-Insured Single-Family Mortgages,

Houston, TX, 05/10/2007. Better Use: $32,549.

2007-FW-1010 Alethes Mortgage, LLC, and Its Dallas, Texas, Branch, Waters Edge

Mortgage, LLC, Did Not Comply with All HUD Underwriting

Requirements, Dallas, TX, 06/08/2007. Better Use: $48,824.

2007-FW-1011 Capmark Finance, Inc. Misrepresented Asbury Square Apartments'

Financial and Physical Condition When Underwriting the $9.098

Million Loan, Tulsa, OK, 07/02/2007. Questioned: $5,249,414; Better

Use: $684,698.

2007-LA-1011 Suburban Mortgage Company Did Not Comply with HUD

Requirements in the Origination of FHA-Insured Single-Family

Mortgages, Phoenix, AZ, 05/29/2007. Questioned: $62,222;

Unsupported: $19,463; Better Use: $890,839.

2007-NY-1010 Amistad Management's Administration of Grace Houses Generally

Complied with HUD Regulations, Jamaica, NY, 07/05/2007.

Questioned: $389; Better Use: $2,347.
158

2007-PH-1006 Elders Place II, Incorporated, Did Not Properly Administer HUD Funds

in Accordance with HUD Requirements, Philadelphia, PA, 04/19/2007.

Questioned: $788,414; Unsupported: $605,166; Better Use: $45,843.

2007-PH-1007 Oak Mound Associates Improperly Billed HUD for Section 8 Subsidies,

Clarksburg, WV, 06/19/2007. Questioned: $9,144; Unsupported: $5,671;

Better Use: $1,389.

2007-PH-1010 Countrywide Home Loans Generally Complied with HUD

Requirements in Originating FHA-Insured Single-Family Loans,

Plymouth Meeting, PA, 07/26/2007. Better Use: $74,395.

2007-SE-1002 The Renton Branch of Countrywide Home Loans, Inc., Did Not

Comply with HUD Guidelines in Underwriting Five FHA-Insured

Loans, Renton, WA, 04/11/2007. Better Use: $207,947.

Policy Development and Research (1 Report)

2007-DE-1007 Sitting Bull College Generally Met Requirements While Administering

Its Tribal Colleges and Universities Program Assistance Award, Fort

Yates, ND, 09/04/2007.

Public and Indian Housing (29 Reports)

2007-AT-1006 The Housing Authority of DeKalb County Did Not Adequately Monitor

Contract Payments, Decatur, GA, 04/10/2007. Questioned: $83,455;

Unsupported: $36,404.

2007-AT-1008 The Housing Authority of DeKalb County Section 8 Units Generally

Met Housing Quality Standards, Decatur, GA, 04/30/2007.

2007-AT-1009 The Charleston Housing Authority Needs to Improve Controls Over

Credit Card Use, Travel, and Petty Cash, Charleston, SC, 05/02/2007.

Questioned: $7,941; Unsupported: $2,054.

2007-AT-1011 The Wilmington Housing Authority Did Not Follow HUD

Requirements for Its Nonprofit Development Activities, Wilmington,

NC, 09/26/2007. Questioned: $1,519,663.

2007-BO-1008 Holyoke Housing Authority Needs to Improve Its Internal Controls over

the Voucher Program, Cost Allocations and Transfers, Holyoke, MA,

08/29/2007. Questioned: $1,022,614; Unsupported: $915,784;

Better Use: $397,950.

2007-CH-1008 The Dayton Metropolitan Housing Authority Did Not Effectively

Operate Its Section 8 Housing Choice Voucher Program, Dayton, OH,

06/19/2007. Questioned: $345,727; Unsupported: $282,085; Better Use:

$2,854,106.

2007-CH-1009 The Boyne City Housing Commission Failed to Follow HUD's

Requirements for Its Nonprofit Development Activities, Boyne City, MI,

07/17/2007. Questioned: $82,642; Better Use: $366,773.

2007-CH-1010 The Madison County Housing Authority Did Not Effectively

Administer Its Section 8 Housing Choice Voucher Program, Collinsville,

IL, 07/20/2007. Questioned: $224,789; Unsupported: $140,521; Better

Use: $798,058.

2007-CH-1011 The Indianapolis Housing Agency Lacked Adequate Controls over

Expenses Charged to Its Section 8 Program, Indianapolis, IN,

 07/23/2007. Questioned: $1,650,863; Unsupported: $10,545; Better

Use: $855,818.

Audit Reports Issued
159

2007-CH-1012 The Plymouth Housing Commission Needs to Improve Its Section 8

Housing Choice Voucher Program Administration, Plymouth, MI,

08/03/2007. Questioned: $258,292; Unsupported: $214,422; Better Use:

$1,157,922.

2007-CH-1013 The Butler Metropolitan Housing Authority Lacked Adequate Controls

over Its Homeownership Proceeds, Hamilton, OH, 09/20/2007. Better

Use: $652,638.

2007-CH-1014 The Peoria Housing Authority Did Not Effectively Administer Its

Section 8 Housing Choice Voucher Program, Peoria, IL, 09/24/2007.

Questioned: $106,445; Better Use: $1,090,476.

2007-CH-1016 The Plymouth Housing Commission Failed to Adequately Administer

Its Section 8 Housing Choice Voucher Program, Plymouth, MI,

09/28/2007. Questioned: $63,790; Unsupported: $2,939; Better Use:

$1,468,640.

2007-FW-1008 The San Antonio Housing Authority Overhoused Tenants and Paid

Excessive Housing Assistance Payments in its Section 8 Housing Choice

Voucher Program, San Antonio, TX, 04/19/2007. Questioned: $78,838;

Better Use: $7,333.

2007-KC-1006 The Mansfield Housing Authority Misspent Public Housing Funds and

Did Not Fulfill Its Section 8 Program Contract Administrator

Requirements, Mansfield, MO, 07/09/2007. Questioned: $28,231;

Unsupported: $4,020.

2007-KC-1007 St. Clair County Housing Authority Did Not Properly Calculate

Housing Assistance Payments, Belleville, IL, 08/17/2007. Questioned:

$26,010; Better Use: $82,095.

2007-LA-1007 The Housing Authority of the County of Los Angeles Did Not

Adequately Conduct Housing Quality Standards Inspections, Los

Angeles, CA, 04/03/2007. Better Use: $11,542,524.

2007-LA-1008 The Navajo Housing Authority Should Discontinue Its Use of

Subgrantees for Development Projects or Implement Additional

Program Controls, Window Rock, AZ, 04/09/2007. Better Use:

$53,419,143.

2007-LA-1010 The Housing Authority of the County of Contra Costa Admitted an

Overincome Family to the Section 8 Housing Choice Voucher Program,

And Did Not Adequately Screen and Document Eviction Histories,

Martinez, CA, 05/07/2007. Questioned: $2,559.

2007-LA-1014 The Housing Authority of the County of San Mateo Did Not Use HUD

Program Funds in Accordance with HUD Requirements, San Mateo,

CA, 07/27/2007. Questioned: $3,913,830; Unsupported: $1,400,000.

2007-LA-1015 The Housing Authority of the City of North Las Vegas Significantly

Underleased Its Section 8 Housing Choice Voucher Program, North Las

Vegas, NV, 09/04/2007. Better Use: $4,419,629.

2007-NY-1004 Family Self-Sufficiency and Section 8 Programs Weaknesses at the City

of Poughkeepsie, NY, 04/02/2007. Questioned: $783,371; Unsupported:

$750,000; Better Use: $162,697.

2007-NY-1006 The Housing Authority of the City of Asbury Park Requires Improved

Controls Over Capital Funds, Salary, and Maintenance, Asbury Park,

NJ, 05/24/2007. Questioned: $1,605,030; Unsupported: $48,246; Better

Use: $278,361.

Audit Reports Issued
160

2007-NY-1011 The Hoboken Housing Authority Requires Improved Controls Over Its

Capital Fund Program and Cash Disbursement Process, Hoboken, NJ,

08/17/2007. Questioned: $1,788,819; Unsupported: $333,244.

2007-PH-1008 The District of Columbia Housing Authority Did Not Adequately

Administer Leased Housing under Its MTW Program, Washington, DC,

07/13/2007. Questioned: $786,086; Unsupported: $309,914; Better Use:

$4,470.

2007-PH-1009 The Newport News Redevelopment and Housing Authority Did Not

Effectively Operate Its Housing Choice Voucher Program, Newport

News, VA, 07/24/2007. Questioned: $380,660; Unsupported: $262,287;

Better Use: $4,086,712.

2007-PH-1011 The Housing Commission of Anne Arundel County Did Not Always

Operate Its Housing Choice Voucher Program in Accordance with

Federal Requirements, Glen Burnie, MD, 08/14/2007. Questioned:

$1,065,169; Unsupported: $948,647; Better Use: $2,121,769.

2007-PH-1013 The Harrisburg Housing Authority Did Not Properly Administer Its

Low-Rent Public Housing Program, Harrisburg, PA, 09/27/2007.

Questioned: $834,969.

2007-SE-1003 The Vancouver Housing Authority Lacks Quality Control Processes in

Its Housing Choice Voucher Program, Vancouver, WA, 09/05/2007.

Audit-Related Memorandums2

Housing (1 Report)

2007-FW-1801 Security National Mortgage Company, Dallas, TX, 07/30/2007.

 Questioned: $48,729; Unsupported: $48,729.

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
162

Table A

Audit Reports Issued Prior to Start of Period with No

Management Decision at 09/30/2007

* Significant Audit Reports Described in Previous Semiannual Reports

Report Number Reason for Lack of Issue Date/Target

& Title Management Decision for Management

 Decision

Tables

2006-SE-0001

Single Family

Mortgage Insurance

Claims

See Chapter 9, page 149 01/07/2007
163

Table B

Significant Audit Reports Described in Previous

Semiannual Reports For Which Final Action Had Not Been

Completed as of 09/30/2007

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2001-CH-1007

2002-KC-0002

2002-PH-1005

2003-SE-1002

2003-DE-0001

2003-NY-1005

2004-BO-1004

2004-FO-0003

2004-AO-0001

2004-PH-1003

2004-DP-0002

Detroit Housing Commission,

Hope VI Program, Detroit, MI

Nationwide Survey of HUD’s

Office of Housing Section 232

Nursing Home Program

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

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

Danbury Housing Authority,

Capital Fund Program,

Boston, MA

HUD Financial Statements

FY 2003 and 2002

Award and Administration of

Lead-Based Paint Hazard

Reduction Grants

The Congress of National

Black Churches, Incorporated,

Housing Counseling Program,

Washington, DC

Application Control Review

of the Tenant Rental

Assistance Certification

System

05/16/2001

07/31/2002

09/30/2002

12/02/2002

03/31/2003

09/30/2003

12/05/2003

12/19/2003

02/06/2004

02/19/2004

02/25/2004

09/13/2001

11/22/2002

03/31/2003

03/31/2003

03/31/2003

01/28/2004

04/05/2004

07/20/2004

06/30/2004

06/18/2004

07/14/2004

06/30/2011

03/31/2008

04/01/2008

04/01/2008

Note 1

12/31/2007

12/01/2008

10/15/2007

04/01/2008

11/15/2008

08/30/2008

Tables
164

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2004-PH-1008

2004-AT-1012

2004-CH-1803

2004-CH-1008

2004-PH-1012

2004-FW-1009

2004-LA-1008

2005-AT-1004

2005-CH-1003

2005-AT-1005

2005-FW-1004

2005-AT-1007

2005-PH-0001

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

United States Veterans

Initiative, Inc., Inglewood, CA

Housing Authority of the

City of Durham, NC

Royal Oak Township Housing

Commission, Public Housing

Program, Ferndale, MI

Pan American Financial

Corporation, Non-Supervised

Direct Endorsement Lender,

Guaynabo, PR

American Property Financial,

Non-Supervised Loan

Correspondent, San Antonio,

TX

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

06/03/2004

08/02/2004

08/09/2004

09/10/2004

09/10/2004

09/17/2004

09/27/2004

11/19/2004

11/29/2004

01/27/2005

01/28/2005

03/15/2005

03/29/2005

08/31/2004

11/29/2004

08/09/2004

01/05/2005

01/06/2005

02/23/2005

03/31/2005

03/15/2005

03/29/2005

05/17/2005

05/27/2005

08/04/2005

07/27/2005

03/28/2008

12/31/2020

07/31/2009

Note 2

Note 2

05/15/2008

04/15/2013

03/15/2015

10/31/2007

01/31/2008

Note 2

12/30/2007

Note 2

Tables
165

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2005-DE-1004

2005-DE-0001

2005-FW-1010

2005-CH-1012

2005-CH-1013

2005-BO-1006

2005-LA-0001

2005-AT-1013

2005-SE-1007

2005 -SE-1008

2005-CH-1017

2005-FW-1018

Aspen Home Loans, American

Fork, UT

HUD’s Controls Over FHA

Claims Payments

Broad Street Mortgage

Company, Subsidiary of

Fieldstone Mortgage Company,

San Antonio, TX

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

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

05/06/2005

05/12/2005

05/26/2005

08/04/2005

08/05/2005

09/06/2005

09/13/2005

09/15/2005

09/16/2005

09/16/2005

09/23/2005

09/27/2005

08/31/2005

09/09/2005

07/13/2006

12/28/2005

12/28/2005

01/03/2006

01/10/2006

01/11/2006

12/20/2005

03/31/2006

01/20/2006

01/24/2006

Note 2

Note 2

Note 2

02/29/2008

02/29/2008

01/31/2008

Note 2

11/21/2007

12/20/2007

Note 2

01/20/2016

12/31/2007

Tables
166

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2005-AT-1015

2005-CH-1020

2005-BO-0002

2006-CH-0001

2006-PH-1003

2006-PH-0001

2006-PH-1005

2006-AT-1004

2006-KC-1004

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

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

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 Did Not

Ensure Section 8 Subsidy

Payments Were for Eligible

Units, Tenants, and

Landlords, Prichard, AL

Major Mortgage Improperly

Submitted Late Requests for

Endorsement of FHA Loans,

Cheyenne, WY

09/29/2005

09/29/2005

09/30/2005

11/30/2005

11/30/2005

12/07/2005

01/10/2006

01/13/2006

01/20/2006

01/12/2006

01/25/2006

12/20/2005

01/10/2006

03/28/2006

08/25/2006

04/28/2006

04/25/2006

05/08/2006

10/31/2007

12/31/2052

12/31/2007

11/30/2008

04/01/2008

Note 2

10/31/2007

12/31/2008

Note 2

Tables
167

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2006-SE-1001

2006-DP-0003

2006-NY-1002

2006-NY-1003

2006-AT-1006

2006-LA-1009

2006-LA-1010

2006-BO-1005

2006-CH-1007

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

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

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

01/26/2006

01/31/2006

01/31/2006

02/14/2006

02/23/2006

03/03/2006

03/03/2006

03/10/2006

03/15/2006

05/23/2006

04/19/2006

05/11/2006

08/17/2006

05/15/2006

03/17/2006

06/23/2006

07/07/2006

09/18/2006

12/31/2008

06/30/2008

10/30/2007

12/31/2008

12/30/2007

09/15/2008

11/30/2007

07/31/2008

08/10/2008

Tables
168

03/23/2006

03/28/2006

03/30/2006

03/31/2006

03/31/2006

04/18/2006

05/11/2006

05/18/2006

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2006-PH-1009

2006-FW-1006

2006-AT-1007

2006-CH-1008

2006-FW-1007

2006-CH-1009

2006-FW-1010

2006-LA-1011

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

The Youngstown

Metropolitan Housing

Authority Did Not Use Public

Housing Operating Funds

Effectively and Efficiently,

Youngstown, OH

Deer Creek Apartments’

Previous Management Agent

Paid Itself Unsupported Fees,

Houston, TX

Sundial Care Center Used

$659,746 in Project Funds for

Ineligible and Undocumented

Costs and Was Unable to

Account for Revenue Totaling

$407,454, Modesto, CA

05/24/2006

07/14/2006

07/20/2006

09/18/2006

08/18/2006

08/16/2006

05/11/2006

09/14/2006

04/30/2008

12/31/2007

07/31/2011

08/14/2008

10/01/2007

03/30/2008

10/24/2007

07/20/2008

Tables
169

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2006-PH-0002

2006-NY-0001

2006-FW-1011

2006-KC-0003

2006-KC-1011

2006-KC-1012

2006-BO-1008

2006-NY-1008

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

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

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

05/31/2006

06/08/2006

06/16/2006

06/19/2006

06/29/2006

06/29/2006

06/30/2006

06/30/2006

10/24/2006

01/08/2007

12/20/2006

09/13/2006

09/06/2006

08/31/2006

10/25/2006

12/01/2006

10/24/2007

04/30/2008

10/31/2007

09/30/2008

05/31/2008

10/30/2007

10/25/2007

10/31/2007

Tables
170

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2006-BO-1009

2006-BO-0001

2006-CH-0002

2006-LA-1013

2006-LA-1015

2006-CH-0003

2006-CH-1013

2006-LA-1017

2006-AT-1015

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

HUD Incorrectly Approved

$42 Million in Operating

Subsidies for Phase-Down for

Demolition Add-On Funding

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

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

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 Municipality of Bayamon

Housing Authority Did Not

Ensure Section 8-Assisted

Units Were Decent, Safe, and

Sanitary, Bayamon, PR

10/24/2006

10/13/2006

07/13/2006

11/09/2006

11/16/2006

11/16/2006

11/15/2006

11/09/2006

11/17/2006

12/01/2009

10/01/2008

12/31/2009

11/08/2007

11/16/2007

10/20/2007

12/31/2016

10/30/2007

11/17/2007

07/06/2006

07/11/2006

07/13/2006

07/17/2006

07/19/2006

07/21/2006

07/21/2006

07/21/2006

07/27/2006

Tables
171

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2006-AT-1016

2006-SE-0002

2006-KC-1013

2006-DP-0005

2006-FW-1015

2006-AT-1019

2006-PH-1013

2006-NY-1010

2006-NY-1011

The Municipality of Humacao

Did Not Administer Its

CDBG in Accordance with

HUD Requirements,

Humacao, PR

The Office of Single Family

Housing Expanded Late

Endorsement Eligibility

Without Studying Associated

Risks

The Columbus Housing

Authority Improperly

Expended and Encumbered

Its Public Housing Funds,

Columbus, NE

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 Commonwealth of

Virginia Did Not Ensure

HOME Funds Were

Disbursed and Used in

Accordance with Federal

Regulations, Richmond, VA

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

07/28/2006

08/16/2006

08/30/2006

08/31/2006

09/01/2006

09/06/2006

09/18/2006

09/20/2006

09/20/2006

11/17/2006

03/30/2007

10/17/2006

11/17/2006

02/01/2007

12/11/2006

01/16/2007

01/18/2007

01/18/2007

11/02/2007

Note 2

12/31/2007

12/31/2007

10/31/2007

12/11/2007

01/11/2008

10/31/2007

10/31/2007

Tables
172

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2006-DP-0802

2006-NY-1012

2006-PH-1014

2006-CH-1016

2006-CH-1017

2006-KC-1014

2006-CH-1018

2006-CH-1021

2007-KC-1001

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

Housing Authority of the

County of Cook Had Weak

Controls Over Its Section 8

Housing Choice Voucher

Program, Chicago, IL

The City of St. Louis Did Not

Meet HUD's Requirements

for Creating and Retaining

Jobs, St. Louis, MO

11/24/2006

01/19/2007

01/22/2007

12/18/2006

03/12/2007

01/11/2007

01/19/2007

01/26/2007

02/06/2007

10/30/2007

08/30/2037

01/15/2014

12/18/2007

03/31/2009

01/31/2008

12/31/2021

09/30/2037

04/30/2008

09/21/2006

09/22/2006

09/25/2006

09/26/2006

09/26/2006

09/27/2006

09/28/2006

09/30/2006

10/11/2006

Tables
173

2007-DE-1001

2007-LA-1001

2007-PH-1001

2007-AT-1002

2007-KC-1003

2007-FO-0002

2007-LA-0001

2007-FO-0003

2007-FW-1002

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

The City and County of

Denver, CO, Did Not Comply

with HOME Investment

Partnerships Program

Requirements, Denver, CO

The Associates Group Pioneer

Pines Park Did Not Follow

the Provisions of the

Regulatory Agreement,

Bakersfield, CA

The Housing Authority of the

County of Beaver Needed to

Improve Controls over HUD

Assets, Beaver, PA

Pine State Mortgage

Company Did Not Always

Comply with FHA

Underwriting and Quality

Control Requirements,

Atlanta, GA

PlainsCapital McAfee

Mortgage Did Not Follow

HUD Underwriting

Requirements and Originated

Loans from Unregistered

Branch Offices, Lubbock, TX

Audit of the FHA's Financial

Statements for FY 2006 and

2005

Tax Credit Project Owners

Are Allowed to Charge Higher

Rents for Tenant-Based

Section 8 Voucher Households

than Non-Voucher

Households

Additional Details to

Supplement Our Report on

HUD's FY 2006 and 2005

Financial Statements

The Lubbock Housing

Authority Inappropriately

Advanced Federal Funds to

Support Its Nonprofit

Entities, Lubbock, TX

10/18/2006

10/20/2006

10/31/2006

11/03/2006

11/06/2006

11/08/2006

11/08/2006

11/14/2006

11/28/2006

02/09/2007

02/15/2007

02/22/2007

03/02/2007

04/13/2007

04/10/2007

07/05/2007

03/07/2007

03/19/2007

10/18/2007

02/15/2008

02/28/2008

11/30/2007

03/31/2008

Note 2

10/01/2010

10/31/2007

02/11/2008

Tables
174

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2007-BO-1002

2007-LA-1002

2007-LA-1003

2007-CH-1001

2007-PH-1002

2007-LA-1004

2007-NY-1002

2007-SE-1001

2007-DP-0002

Mortgage Amenities

Corporation Did Not Comply

with Certain HUD

Requirements in

Administering Its FHA

Insured Loan Programs,

Lincoln, RI

First Magnus Financial

Corporation Did Not Comply

with HUD Guidelines When

Operating and Managing Net

Branches, Scottsdale, AZ

The City of Long Beach Did

Not Administer Its

Continuum of Care

Supportive Housing Program

in Compliance with HUD

Requirements, Long Beach,

CA

The Marion Housing

Authority Improperly Used

HUD Funds for Nonprofit

Development Activities,

Marion, IN

The Montgomery County

Housing Authority

Improperly Used HUD Funds

to Purchase, Renovate, and

Maintain Its Main Office,

Norristown, PA

The Housing Authority of the

County of Contra Costa Did

Not Adequately Determine

and Support Section 8 Rents,

Martinez, CA

The City of Amsterdam Needs

to Make Improvements in

Administering Its Section 108

Loan Guarantee Program,

Amsterdam, NY

The YWCA of Seattle, King

and Snohomish Counties, Did

Not Properly Administer Its

Supportive Housing Program

Grants, Seattle, WA

Review of HUD's Information

Technology Services

Contracts

03/23/2007

04/10/2007

04/10/2007

04/05/2007

04/12/2007

02/27/2007

04/18/2007

05/10/2007

05/25/2007

12/01/2007

11/30/2007

04/10/2008

07/01/2027

02/08/2008

02/27/2008

10/05/2007

03/31/2008

05/30/2008

12/01/2006

12/12/2006

12/12/2006

12/13/2006

12/13/2006

12/15/2006

12/20/2006

01/12/2007

01/18/2007

Tables
175

2007-CH-1002

2007-DP-0003

2007-KC-0002

2007-AT-1003

2007-BO-0001

2007-CH-1003

2007-LA-1005

2007-DP-0004

2007-FW-1005

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

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

Review of HUD's

Procurement Systems

HUD Can Improve Its Use of

Residual Receipts to Reduce

Housing Assistance Payments

Gwinnett County

Subrecipients Did Not

Provide Funds Required by

Their Contracts,

Lawrenceville, GA

The Hartford CPD Did Not

Always Adequately Monitor

CDBG Program Participants

or Follow HUD Requirements

The Housing Authority of the

City of Evansville Needs to

Improve Its Section 8 Housing

Choice Voucher Program

Administration, Evansville,

IN

Oakland Housing Authority

Did Not Comply with

Procurement and Contracting

Requirements, Oakland, CA

FY 2006 Review of

Information Systems

Controls in Support of the

Financial Statements Audit

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

01/25/2007

01/25/2007

01/29/2007

01/31/2007

02/12/2007

02/13/2007

02/14/2007

02/22/2007

02/22/2007

05/25/2007

05/25/2007

01/29/2007

03/26/2007

04/02/2007

06/11/2007

06/14/2007

06/21/2007

05/23/2007

12/15/2008

12/31/2008

10/15/2007

12/31/2007

11/05/2007

12/31/2016

01/01/2009

09/30/2008

12/31/2007

Tables
176

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2007-FW-1006

2007-AT-1004

2007-CH-1004

2007-LA-1006

2007-BO-1003

2007-BO-1004

2007-CH-1005

2007-CH-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

The Wilmington Housing

Authority Needs to Improve

Internal Controls Over Its

Program, Wilmington, NC

The Columbus Metropolitan

Housing Authority Failed to

Adequately Operate Its

Section 8 Housing Choice

Voucher Program, Columbus,

OH

The Housing Authority of the

County of Santa Clara Did

Not Adequately Determine

and Support Section 8 Rents,

San Jose, CA

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

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

The Housing Authority of the

City of Gary Lacked Adequate

Controls over Refunding

Savings, Gary, IN

Colony Mortgage

Corporation, Supervised

Lender, Did Not Always

Comply with HUD's

Requirements Regarding

Underwriting of Loans and

Quality Control Reviews,

Fairview Park, OH

05/22/2007

06/25/2007

05/24/2007

09/28/2007

07/19/2007

05/24/2007

07/19/2007

09/27/2007

07/23/2008

06/28/2010

02/28/2008

09/28/2008

10/30/2007

12/27/2007

12/31/2056

08/31/2009

03/07/2007

03/09/2007

03/15/2007

03/16/2007

03/21/2007

03/22/2007

03/23/2007

03/26/2007

Tables
Tables 177

AUDITS EXCLUDED:

43 audits under repayment plans

33 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.

Report

Number

Report Title Issue

Date

Decision

Date

Final

Action

2007-AT-1005

2007-FW-1007

The Puerto Rico Department

of Housing Did Not

Effectively Administer Its

Section 8 Housing Program,

San Juan, PR

The Jacksonville Housing

Authority Mismanaged

Public Housing Capital Fund

Program Funding,

Jacksonville, AR

03/29/2007

03/30/2007

07/16/2007

05/30/2007

06/30/2008

03/30/2008
178 Tables

Table C

Inspector General Issued Reports with Questioned and

Unsupported Costs at 09/30/2007

(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

15,974

28,022

887

200

47,986

0

93,069

22,087

3,749

16,490

1,848

29,630

41,352

<41,009>4

22

11

-

1

50

0

84

381

112

28

63

11

35

<106>4

1 24 audit reports also contain recommendations with funds be put to better use.

2 1 audit report also contains recommendations with funds due program participants.

3 6 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.

10,849

17,182

99

0

24,291

0

52,421

14,859

2,105

12,402

352

17,230

20,332

<20,300>4
Tables 179

Table D

Inspector General Issued Reports with Recommendations That

Funds be Put to Better Use at 09/30/2007

(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

18

9

-

0

49

0

76

371

152

24

63

9

30

<58>4

1 24 audit reports also contain recommendations with questioned costs.

2 3 audit reports also contain recommendations with funds due program participants.

3 5 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

350,514

116,946

0

0

192,727

0

660,187

236,102

207,678

26,367

2,057

90,852

333,233

< 333,233>4
180 Tables

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.

  
Appendix 3

Index
182

Index

State Page Numbers

Alabama 64

Arizona 9, 15, 22, 34, 44, 57, 132, 136, 139

California 14, 16, 18, 19, 20, 23, 27, 29, 48, 50, 51, 52, 53, 55,

56, 60, 62, 63, 66, 67, 80, 81, 94 95, 97, 114, 115, 116,

131, 135, 137, 138, 139, 141, 142, 143

Colorado 14, 15, 20, 21, 64, 135, 136, 140

Connecticut 19, 43, 65, 76, 80, 83

Delaware 79

District of Columbia 27, 37, 67, 120, 121, 123, 130, 138, 139, 150

Florida 43, 45, 49, 50, 58, 70, 75, 98, 136

Georgia 17, 22, 39, 49, 130, 131

Illinois 15, 17, 18, 22, 23, 24, 33, 34, 41, 42, 48, 51, 53, 55,

60, 92, 130, 131, 133, 134, 137, 138, 140, 141

Indiana 31, 47, 58, 134

Iowa 81, 137

Kansas 20, 61, 64, 65, 69, 81, 83, 140, 142, 143

Kentucky 64, 80

Louisiana 16, 42, 46, 49, 62, 69, 82, 106, 114, 115, 116, 117, 133,

138, 144

Maine 55, 63, 65, 66, 100, 136

Maryland 21, 30, 56, 61, 67, 101, 125, 132, 135, 144

Massachusetts 16, 32, 52, 53, 57, 60, 61, 63, 70, 82, 88, 90, 97, 99,

100, 135, 138, 140

Michigan 31, 32, 38, 45, 56, 59, 68, 141, 142, 143

Mississippi 57, 97, 112, 113, 116, 117, 134, 137

Missouri 9, 69, 82, 135, 137, 143, 144

Montana 57, 59, 70

Nevada 29, 52, 55, 57, 70, 134, 141

New Hampshire 139

New Jersey 14, 15, 17, 18, 19, 35, 42, 46, 69, 87, 91, 92, 97, 99, 141

New Mexico 44, 45, 53, 62, 135

New York 14, 17, 19, 24, 44, 46, 47, 48, 49, 60, 79, 80, 83, 88, 89,

90, 98, 132, 134

North Carolina 36, 45, 46, 51, 54, 62, 66, 68, 124, 125, 139, 140, 143

Ohio 29, 37, 50, 54, 75, 83, 93

Oklahoma 42, 76, 79, 143, 144

Pennsylvania 10, 12, 36, 41, 56, 58, 59, 65, 77, 82, 139

Index
183

State Page Numbers

Puerto Rico 87

Rhode Island 79, 81, 141

South Dakota 42

Texas 11, 20, 21, 22, 41, 65, 68, 69, 78, 98, 113, 116, 118, 130,

132, 133, 136, 143

Utah 22, 45, 58

Virginia 18, 21, 22, 23, 28, 41, 53, 62, 63, 64, 71, 81, 100, 101, 132

Washington 10, 50, 57, 58, 61, 68, 92, 116, 140

West Virginia 142

Wisconsin 18, 93, 133

Index

  

HUD OIG Operations

Telephone Listing
186

Office of Audit

Headquarters Office of Audit, Washington, DC 202-708-0364

Region 1 Boston, MA 617-994-8380

Hartford, CT 860-240-4800

Region2 New York, NY 212-264-4174

Albany, NY 518-464-4200

Buffalo, NY 716-551-5755

Newark, NJ 973-622-7900

Region 3 Philadelphia, PA 215-656-0500

Baltimore, MD 410-962-2520

Pittsburgh, PA 412-644-6372

Richmond, VA 804-771-2100

Region 4 Atlanta, GA 404-331-3369

Miami, FL 305-536-5387

Greensboro, NC 336-547-4001

Jacksonville, FL 904-232-1226

Knoxville, TN 865-545-4369

San Juan, PR 787-766-5202

Region 5 Chicago, IL 312-353-7832

Columbus, OH 614-469-5745

Detroit, MI 313-226-6190

Region 6 Fort Worth, TX 817-978-9309

Houston, TX 713-718-3199

Oklahoma City, OK 405-609-8606

San Antonio, TX 210-475-6898

Regions 7/8 Kansas City, KS 913-551-5870

St. Louis, MO 314-539-6339

Denver, CO 303-672-5452

Regions 9/10 Los Angeles, CA 213-894-8016

Phoenix, AZ 602-379-7250

San Francisco, CA 415-489-6400

Seattle, WA 206-220-5360

Gulf Coast Region 504-671-3715

HUD OIG Operations Telephone Listing
187

Office of Investigation

Headquarters Office of Investigation, Washington, DC 202-708-0390

Region 1 Boston, MA 617-994-8450

Hartford, CT 860-240-4800

Manchester, NH 603-666-7988

Region 2 New York, NY 212-264-8062

Buffalo, NY 716-551-5755

Newark, NJ 973-776-7347

Region 3 Philadelphia, PA 215-656-3410

Baltimore, MD 410-962-4502

Pittsburgh, PA 412-644-6598

Richmond, VA 804-882-4890

Region 4 Atlanta, GA 404-331-3359

Miami, FL 305-536-3087

Greensboro, NC 336-547-4000

Knoxville, TN 865-545-4000

San Juan, PR 787-766-5868

Tampa, FL 813-228-2026

Region 5 Chicago, IL 312-353-4196

Cleveland, OH 216-522-4421

Columbus, OH 614-469-6677

Detroit, MI 313-226-6280

Indianapolis, IN 317-226-5427

Minneapolis-St. Paul, MN 612-370-3130

Region 6 Arlington, TX 817-652-6980

Houston, TX 713-718-3196

Oklahoma City, OK 405-609-8601

San Antonio, TX 210-475-6819

Region 7/8 Kansas City, KS 913-551-5866

St. Louis, MO 314-539-6559

Denver, CO 303-672-5276

Billings, MT 406-247-4080

Salt Lake City, UT 801-524-6090

Region 9/10 Los Angeles, CA 213-894-0219

San Francisco, CA 415-489-6683

Phoenix, AZ 602-379-7255

Sacramento, CA 916-930-5691

Las Vegas, NV 702-366-2144

Seattle, WA 206-220-5380

HUD OIG Operations Telephone Listing
188

Gulf Coast Region New Orleans, LA 504-671-3701

Arlington, TX 817-978-5440

Baton Rouge, LA 225-334-4913

Hattiesburg, MS 601-299-4279

Houston, TX 713-718-3196

Jackson, MS 601-965-5772

Washington, DC 202-708-0390

  

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

E-mailing 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

April 1, 2007, through September 30, 2007

www.hud.gov/offices/oig

No. 58 HUD-2007-04-OIG