Office of Inspector General

U.S. Depar . Department of tment of tment of Housing and Urban De g and Urban Development elopment elopment

April 1, 2006, through September 30, 2006

Semiannual Report

to Congress
Profile of ofile of ofile of Performance

For the Period, April 1, 2006, through September 30, 2006

Audit and Investigation Results Audit Investigation Last 6 Months

Recommendations That Funds Be Put to Better Use1-2 $322,886,137 $327,400,322

Recommended Questioned Costs1-2 $68,039,117

Civil Actions 20 20

Investigative Recoveries/Receivables $81,878,572Funds Put to Better UseCollections from Audits $14,474,522Administrative Sanctions3 950

Personnel Actions 16 16

Arrests4 2,034 2,034

Search Warrants

Hotline

Indictments/Informations 712 712

44 44

Convictions/Pleas/Pre-Trial Diversions 512 512

$68,039,117

$81,726,077 $152,495

$48,608,555 $48,608,555

$14,474,522

3 947

Weapons Seized 4 4

Subpoenas Issued 431 437 6

$4,514,185

1 This represents all cost transactions during the period in which dollar amounts were reported with any recommendation.2 For recommendations that Funds Be Put To Better use, $210,642,087 had Management Decisions. Of

 the Recommended Questioned Costs, $39,449,411 had Management Decisions. Recommended and Management Decision amounts differ because not

 all Recommendations had received final determination at the end of the period, and there were some management decisions agreed to on recommendations from previous periods.

3 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.

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

FY 2006

$120,262,848

53

$247,314,466

$42,685,397

2,137

40

1,459

3,570

955102

$116,084,299

7

889

$919,640,953
Inspector General’s Message iii

Inspector General’ Inspector General’ Inspector General’s Messa s Messa s Message

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

Housing and Urban Development (HUD) Office of Inspector

General (OIG) Semiannual Report to the Congress for the second

half of fiscal year 2006.

During the reporting period, we had $327.4 million in funds

put to better use, $68 million in questioned costs, and $81.8

million in recoveries and receivables. This is exceptional work by

our staff that has resulted in a significant positive impact on fraud

and misuse of taxpayer dollars. I am grateful to the auditors,

agents, and evaluators who worked so hard this year to achieve

this milestone.

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.

At this time, HUD OIG has taken inventory of our various interests and concerns

regarding HUD programs. We have several concerns in each program area, but I will

relate only our chief issues.

The largest HUD program in terms of economic impact is the Federal Housing

Administration (FHA) mortgage insurance program. A recent audit found that HUD

paid billions for claims in the single-family FHA mortgage insurance program, a large

percentage of which were for mortgages that did not meet program requirements. 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, or 3) was creditworthy. We estimate that final HUD costs for claims that did

not meet program requirements totaled $356 million.

HUD’s most well-known program is its public and assisted housing. Presently, we

are concerned with the adequacy of the Department’s inspections of public housing

authorities (PHA) for compliance with the national housing quality standards. We are

finding that PHAs are not satisfying their responsibility to ensure that units are decent,

safe, and sanitary.

We are also concerned with oversight of public housing operations. A case in point is a

Chicago Housing Authority Section 8 landlord who was also a Chicago police officer, as well

as a former president of a nonprofit organization approved by HUD to acquire discounted

HUD properties. An investigation by HUD OIG led to a conviction on seven counts of

bankruptcy fraud. This landlord did not report her nonprofit business, extensive proceeds

from the resale of HUD properties, Section 8 rental assistance payments, or income from her

employment with the Chicago Police Department and various nursing companies on two

distinct bankruptcy petitions.

HUD’s Community Development Block Grant program has not shown consistency in

monitoring the performance of communities that get these funds for development. HUD
iv Inspector General’s Message

OIG believes that implementation of performance standards for grantees and a

restructuring of enforcement procedures/remedies is needed.

During the months ahead, HUD OIG is increasing its efforts to ensure the

administrative health and vitality of HUD’s programs and activities. I know that with the

hard work of the staff, we will continue a pattern of improved oversight and enforcement.

We are justifiably proud of the staff of HUD OIG for their tireless work and activities

against waste, fraud, and abuse in the Nation’s housing and urban development programs.

Kenneth M. Donohue

Inspector General
Strategic Plan v

Strategic Plan gic Plan

Vision

We are a trusted and respected resource for HUD, Congress, and the American

public in ensuring the integrity, efficiency, and effectiveness of HUD

programs and operations. We are committed to working jointly with

HUD management to achieve their goals.

Mission

 Promote the integrity, efficiency, and effectiveness of HUD programs and

operations to assist the Department in meeting its mission.

 Detect and prevent waste, fraud, and abuse.

 Seek administrative sanctions, civil recoveries and/or criminal prosecution

of those responsible for waste, fraud, and abuse in HUD programs and

operations.

Goal 1

Effectiveness

Help HUD resolve its “Major

Management Challenges”

by being a relevant and

problem-solving advisor to

HUD and our Stakeholders.

Goal 2

Efficienc Efficiency

Maximize results and

provide responsive audit

and investigative work

for mandated, requested,

or self-initiated efforts.

Goal 3

Our Emplo Our Employees

Become the “Employer

of Choice” among

Offices of Inspectors

General.

 Contribute to Improving

the Integrity in Single

Family Insurance

Programs.

 Contribute to a Reduction

in Erroneous Payments in

the Rental Assistance

Programs.

 Contribute to Improving

HUD’s Execution and

Accountability of Fiscal

Responsibilities.

 Contribute to resolving

significant issues raised

or confronted by HUD

and our Stakeholders.

 Objecti Objectives

 Achieve a highest

Return on Investment

(ROI) with available

resources.

 Provide quality

results to customers

in a timely manner.

 Invest in people.

 Invest in the

organization.
vi Strategic Goals

Strategic Goals gic Goals gic Goals

Goal 1 - Eff Goal 1 - Effectiveness

Objectives:

 Contribute to improving the integrity of single-family insurance programs.

 Contribute to a reduction in erroneous payments in the rental assistance

programs.

 Contribute to improving HUD’s fiscal accountability.

 Contribute to resolving other significant issues raised or confronted by HUD and our

stakeholders.

Target

Key Measurements

75% 3 75% of the recommendations reach management decisions within 120 days.

85% 3 85% of the dollars associated with recommendations are sustained.

80% 80% of all audits conducted are targeted at areas of significant interest to

either HUD or OIG stakeholders.

3

80% 3 80% of stakeholders rate OIG products and services good or better.

66% 66% investigations referred for criminal, civil, or administrative action will

focus on FHA single-family mortgage fraud and Section 8 rental assistance

overpayment.

3

Goal 2 - Efficienc Goal 2 - Efficiency

Objectives:

 Maintain a high return on investment (ROI).

 Provide timely and quality results to customers.

Target As of

September

30, 2006

Key Measurements

8:1 3 Sustain a return on investment (ROI) of 8:1.

70% 3 70% of external audits completed within 2000 hours.

4/6

Actions

per FTE

Regional investigative performance for regions without forensic auditors

will average 4 actions per FTE per year. Regions with forensic auditors will

average 6 actions per FTE per year..

3

Goal 3- Emplo Goal 3- Employer of Choice

Objectives:

 Invest in people.

 Invest in the organization.

Target

Key Measurements

FY 07 On Schedule Implement a leadership development program for succession planning.

80% NEW 80% of employees rate organization good or better.

As of

September

30, 2006

As of

September

30, 2006
Audit Charts vii

Audit Repor Audit Reports Issued by Program

Monetar Monetary Benefits Identified by Program

Monetar Monetary Benefits Identified in Millions of y Benefits Identified in Millions of Dollars

Public and Indian

Housing

53%

Multifamily

Housing

9%

Single-Family

Housing

19% Community

Planning &

Development

12%

Other

Programs

4%

Single-Family

Housing

56%

Public & Indian

Housing

28%

Multifamily

Housing

12%

Community

Planning

& Development

4%

250

200

150

100

50

0

$219

$47

$108

$15 $0

Single

Family

Housing

Multifamily

Housing

Public and

Indian

Housing

Community

Planning &

Development

Hurricane

Relief

Oversight

Hurricane Relief

Oversight

3%

Hurricane Relief

Oversight

0%

Other Programs

0%

$1

Other

Programs
viii Investigation Charts

Investigation Cases Opened by Program (Total: 576) ram (Total: 576)

Single-Family

Housing

13% (77)

Public and Indian Housing

68% (388)

Other/GNMA

3% (15)

Community Planning

& Development

7% (42)

Multifamily

Housing

9% (54)

Investigation Recoveries by Program (Total: 81,726,077) ram (Total: 81,726,077)

Public & Indian

Housing

10% ($7,855,917)

Multifamily

Housing

8% ($6,472,308)

Community Planning &

Development

6% ($4,617,997)

Single-Family

Housing

76% ($62,779,855)
Acronyms List ix

AIGA Assistant Inspector General for Audit

AIGI Assistant Inspector General for Investigations

ARIGA Assistant Regional Inspector General for Audit

ASAC Assistant Special Agent in Charge

ATFE Bureau of Alcohol, Tobacco, Firearms, and Explosives

CAS Computer Audit Specialist

CDBG Community Development Block Grants

CID Criminal Investigation Division

CPD Community Planning and Development

DAIGA Deputy Assistant Inspector General for Audit

DAIGI Deputy Assistant Inspector General for Investigation

DEA Drug Enforcement Administration

DHS Department of Homeland Security

DIG Deputy Inspector General

DoD Department of Defense

DOE Department of Education

DOJ U.S. Department of Justice

DROD Disaster Relief Oversight Division

DUI Driving Under the Influence

EIV Enterprise Income Verification

FBI Federal Bureau of Investigation

FDIC Federal Deposit Insurance Corporation

FEMA Federal Emergency Management Agency

FFMIA Financial Management Improvement Act of 1996

FHA Federal Housing Administration

FIRMS Facilities Integrated Resources Management System

FISMA Federal Information Security Management Act of 2002

FY Fiscal Year

GAO Government Accountability Office

HHS U.S. Department of Health and Human Services

HOME Home Ownership Made Easy

HOPWA Housing Opportunities for Persons with AIDS

HUD U.S. Department of Housing and Urban Development

Acronyms List yms List yms List
ICE Immigration and Customs Enforcement

IG Inspector General

IRS Internal Revenue Service

KDHAP Katrina Disaster Housing Assistance Program

MTW Moving to Work

NAHRO National Association of Housing and Redevelopment Officials

OA Office of Audit

OI Office of Investigation

OIG Office of Inspector General

OMB Office of Management and Budget

OTND Officer/Teacher Next Door

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

Integrity and Efficiency

PFCRA Program Fraud Civil Remedies Act

PHA Public Housing Authorities

PHSI Public Housing Safety Initiatives

PIH Office of Public and Indian Housing

REO Real Estate Owned

RHIIP Rental Housing Integrity Improvement Project

RIGA Regional Inspector General for Audit

SA Special Agent

SAC Special Agent in Charge

SBA Small Business Administration

SFA Supervisory Forensic Auditor

SSA Social Security Administration

SSN Social Security Number

TSA Transportation Security Administration

USAO U.S. Attorney’s Office

USDA U.S. Department of Agriculture

USMS U.S. Marshals Service

USPS U.S. Postal Service

USPIS U.S. Postal Inspection Service

VA U.S. Department of Veterans Affairs

x Acronyms List
Table of Contents xi

Table of able of able of Contents Contents Contents

Chapter 1 - HUD’s Management and Performance Challenges 1

The HUD Office of Inspector General 2

Major Issues Facing HUD 2

Chapter 2 - HUD’s Single Family Housing Programs 9

Audits 10

Investigations 16

Chapter 3 - HUD’s Public and Indian Housing Programs 31

Audits 32

Investigations 49

Chapter 4 - HUD’s Multifamily Housing Programs 75

Audits 76

Investigations 80

Chapter 5 - HUD’s Community Planning and Development Programs 85

Audits 86

Investigations 91

Chapter 6 - Hurricane Relief Oversight 97

Chapter 7 - Other Significant Audits and Investigations/OIG Hotline 117

Audits 118

Investigations 120

OIG Hotline 120

Chapter 8 - Outreach Efforts 123

Chapter 9 - Review of Policy Directives 137

Proposed Rules 138

Notices 138

Mortgagee Letter 138

Chapter 10 - Audit Resolution 141

Delayed Actions 142

Federal Financial Management Improvement Act of 1996 143

Appendix 1 - Audit Reports Issued 145

Appendix 2 - Tables 153

Appendix 3 - Index 173

HUD OIG Operations Telephone Listing 177
xii Reporting Requirements

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. 137-139

Section 5(a)(1)-description of significant problems, abuses, and 1-122, 137-143

deficiencies relating to the administration of programs and operations

of the Department.

Section 5(a)(2)-description of recommendations for corrective action with respect 9-122

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 9-122

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 9-122

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 No Instances

decision with which the Inspector General is in disagreement.

Section 5(a)(13)-the information described under section 05(b) of the 143

Federal Financial Management Improvement Act of 1996.

Reporting Requir g Requir g Requirements
Chapter 1 Chapter 1

HUD’s Management

and Perf and Perf and Performance Challen mance Challenges
2 HUD’s Management and Performance Challenges

The HUD Office of he HUD Office of he HUD Office of

Inspector General Inspector General Inspector General

The U.S. Department of Housing and

Urban Development (HUD) Inspector

General is one of the original 12 Inspectors

General authorized under the Inspector

General Act of 1978. Over the years, the

Office of Inspector General (OIG) has forged

a strong alliance with HUD personnel

in recommending ways to improve

departmental operations and in prosecuting

program abuses. OIG strives to make a

difference in HUD’s performance and

accountability. OIG is committed to its

statutory mission of detecting and

preventing fraud, waste, and abuse and

promoting the effectiveness and efficiency

of government operations. While

organizationally located within the

Department, OIG operates independently

with separate budgetary authority. This

independence allows for clear and objective

reporting to the Secretary and the Congress.

OIG’s activities seek to

 Promote efficiency and effectiveness in

programs and operations,

 Detect and deter fraud and abuse,

 Investigate allegations of misconduct

by HUD employees, and

 Review and make recommendations

regarding existing and proposed

legislation and regulations affecting

HUD.

The Executive Office and the Offices of

Audit, Investigation, Counsel, and

Management and Policy are located in

Headquarters. Also, the Offices of Audit

and Investigation have staff located in eight

regions and numerous field offices.

Major Issues F Major Issues Facing HUD

The Department’s primary mission is to

expand housing opportunities for American

families seeking to better their quality of life.

HUD seeks to accomplish this through a

wide variety of housing and community

development grant, subsidy, and loan

programs. HUD’s fiscal year (FY) 2007

budget request is about $34 billion.

Additionally, HUD assists families in

obtaining housing by providing Federal

Housing Administration (FHA) mortgage

insurance for single-family and multifamily

properties. At the end of FY 2006, FHA’s

outstanding mortgage insurance portfolio

was about $396 billion. The Government

National Mortgage Association, also known

as Ginnie Mae, through its mortgage-backed

securities program, gives issuers access to

capital markets through the pooling of

federally insured loans.

HUD relies upon numerous partners for

the performance and integrity of a large

number of diverse programs. Among these

partners are hundreds of cities that manage

HUD’s Community Development Block

Grant (CDBG) funds, hundreds of public

housing authorities that manage assisted

housing funds, thousands of HUDapproved lenders that originate and service

FHA-insured loans, and hundreds of Ginnie

Mae mortgage-backed securities issuers that

provide mortgage capital.

Achieving HUD’s mission continues to

be an ambitious challenge for its limited

staff, given the agency’s diverse mission, the

thousands of program intermediaries

assisting the Department in this mission,

and the millions of beneficiaries in its

housing programs. HUD’s management

problems have for years kept it on the

Government Accountability Office’s (GAO)

list of agencies with high-risk programs.

More specifically, HUD must focus

improvements on rental housing assistance

programs and single-family housing
HUD’s Management and Performance Challenges 3

mortgage insurance programs, two areas in

which financial and programmatic exposure

are the greatest. The fact that HUD’s

reported management challenges are

included as part of the President’s

Management Agenda’s governmentwide

and program initiatives is indicative of

HUD’s important role in the federal sector.

HUD’s current administration places a high

priority on achieving presidential and

secretarial initiatives as well as correcting

weaknesses that put HUD on GAO’s highrisk list.

As of the end of FY 2006, HUD’s

President’s Management Agenda scoring

status for the nine applicable initiatives

consisted of three “green,” four “yellow,”

and two “red” baseline goal scores. Based

upon a comprehensive set of standards, an

agency is “green” if it meets all of the

standards for success, “yellow” if it has

achieved some but not all of the criteria, and

“red” if it has one of a number of serious

flaws. HUD’s baseline score for Improved

Financial Performance remains at “red”

until HUD eliminates its two remaining

material weaknesses. However, HUD’s

progress indicator is green since HUD has

completed its planned actions, including

reaching an agreement with the Office of

Management and Budget (OMB) on HUD’s

Integrated Financial Management

Improvement Project (HIFMIP) acquisition

strategy and replacing its noncompliant

Loan Accounting System (LAS) with a

compliant commercial off-the-shelf

package. It is also noteworthy that HUD

was the first agency to receive a “green”

baseline goal score on the Eliminating

Improper Payments initiative and has also

achieved “green” baseline goal scores for the

E-Government and Faith-Based Community

initiatives.

Each year in accordance with the

Reports Consolidated Act of 2000, HUD OIG

is required to submit a statement to the

Secretary with a summary assessment of the

most serious challenges facing the

Department. OIG submitted its latest

assessment on October 19, 2006. These

reported challenges are the continued focus

of our audit and investigative efforts. HUD

is working to address these challenges and

in some instances, has made significant

progress in correcting them. The

Department’s management challenges and

current efforts to address these challenges

are as follows.

Financial Management Systems. Since

FY 1991, OIG has annually reported on the

lack of an integrated financial system in

compliance with all federal financial

management system requirements,

including the need to enhance FHA’s

management controls over its various

insurance and other financial systems.

During the past several years, HUD has

made progress, implementing a new

financial system at FHA and addressing

most of the weaknesses that OIG identified,

including initiating a vision statement for a

departmentwide fully integrated financial

system. These improvements enabled OIG

to reclassify the weakness in financial

management system requirements from a

material weakness to a reportable condition.

The remaining weaknesses noted in OIG’s

audit of HUD’s FY 2005 financial statements

were as follows:

 FHA needs to continue progress to

integrate its financial management

systems.

 HUD’s ability to prepare financial

statements and other financial

information requires extensive

compensating procedures.

 HUD has limited availability of

information to assist management in

effectively managing operations on an

ongoing basis.

For the past several years, OIG’s

financial audits have also reported
weaknesses in internal controls and security over HUD’s general data processing

operations and specific applications. The

effect of these weaknesses is that HUD

cannot be reasonably assured that system

information will remain confidential,

protected from loss, and available to those

who need it without interruption. HUD has

completed certification and accreditation for

all financial management systems and

general support systems. However, the

quality of the underlying documents and the

actual certification and accreditation process

varied by application. While a number of

vulnerabilities were closed, additional

vulnerabilities, identified through oversight

activities, were not corrected before

accreditation. Correction of approximately

85 percent of the vulnerabilities identified

on financial management systems within

FHA has been delayed with no projected

resolution date. Finally, HUD has not tested

and evaluated all of the technical

information security controls for the

financial management systems categorized

as high impact.

FHA Single Family Origination. FHA’s

single-family mortgage insurance programs

enable millions of first-time, minority,

low-income, elderly, and other underserved

households to realize the benefits of

homeownership. HUD manages about $341

billion in single-family insured mortgages.

Effective management of this high-risk

portfolio represents a continuing challenge

for the Department. The President’s

Management Agenda has committed HUD

to tackling long-standing management

problems that expose FHA homebuyers to

fraudulent practices. HUD has taken a

number of recent actions to reduce risks

including the following:

 Providing advisory guidance to Home

Equity Conversion Mortgage (HECM)

counselors on warning prospective

borrowers about mortgage fraud

schemes and how to avoid becoming

victims.

 Publishing a final rule that

changes HUD’s delinquency-reporting

requirement, thereby enabling the

Department’s Single Family Default

Monitoring System to track significant

key events between the beginning of a

default episode and its resolution.

 Publishing a final rule prohibiting

property flipping in HUD’s singlefamily mortgage insurance programs.

 Providing special expanded loss

mitigation authority to lenders to

reduce insurance claim losses and

assist borrowers that lost homes due

to hurricane damage in the Gulf Coast

region.

 At OIG’s urging and in light of a

recent Internal Revenue Service

ruling regarding nonprofits that

provide seller-funded downpayment

assistance, proposing a rule that would

establish specific standards regarding

a borrower ’s investment in the

mortgaged property when a gift is

provided by a nonprofit organization.

While GAO and OIG have reported

improved monitoring of lender

underwriting and default tracking and

expanded loss mitigation to help reduce

mortgage foreclosures, HUD needs to

further strengthen lender accountability and

take strong enforcement actions against

program abusers that victimize first-time

and minority homebuyers. The audit of

FHA’s FY 2005 financial statements also

reported a need to

 Incorporate better risk factors and

monitoring tools into FHA’s singlefamily insured mortgage program risk

analysis and liability estimation

process and

4 HUD’s Management and Performance Challenges
 Continue improvement in the review

over the credit reform estimation

process.

OIG’s internal audits focused on HUD’s

improving its oversight of the claims

payment process and the late endorsement

of loans. OIG’s review of HUD’s oversight

of single-family mortgage insurance claims

found documentation omissions and other

lender noncompliance with program

requirements at insurance endorsement.

Therefore, OIG recommended that HUD

independently verify the eligibility for

insurance of inadequately documented loan

files and seek recovery or satisfactory

support for final HUD costs. In another

audit, OIG assessed the impact of a recent

policy change regarding eligibility for late

endorsements and found that HUD’s

underlying risk assumption was flawed.

OIG recommended that HUD reevaluate the

policy using appropriate and available

information.

In support of HUD and the President’s

Management Agenda, OIG’s Strategic Plan

for FY 2004 to 2009 gives priority to detecting

and preventing fraud in FHA mortgage

lending through targeted audits and

investigations. OIG’s audits target lenders

with high default rates. OIG’s detailed

testing typically focuses on mortgage loans

that defaulted and resulted in FHA

insurance losses. Results from these audits

have noted significant lender underwriting

deficiencies, prohibited late endorsed loans,

inadequate quality controls, and other

operational irregularities. During FY 2006,

OIG completed 33 external audits of FHAapproved mortgage lenders as well as five

internal audits of single-family program

activities. OIG recommended monetary

recoveries, civil remedies, and funds that

could be put to better use totaling $259

million. During FY 2006 in the single-family

housing program area, judicial actions taken

on Office of Investigation cases included 366

indictments/informations.

Public and Assisted Housing Program

Administration. HUD provides housing

assistance funds under various grant and

subsidy programs to public housing

agencies and multifamily project owners.

These intermediaries, in turn, provide

housing assistance to benefit primarily lowincome households. HUD monitors these

intermediaries’ administration of the

assisted housing programs.

Accurate and timely information about

households participating in HUD housing

programs is necessary to allow HUD to

monitor the effectiveness of the program,

assess agency compliance with regulations,

and analyze the impacts of proposed

program changes. The level of reporting is

a criterion for housing agencies’

performance in both the Public Housing

Assessment System and the Section 8

Management Assessment Program.

Housing agencies must have a minimum 95

percent reporting rate or be subject to

sanctions.

HUD’s ability to effectively monitor

housing agencies and assisted multifamily

projects continues to present challenges in

achieving the intended statutory purposes

of the housing assistance funds. These

weaknesses have been reported for a

number of years in OIG’s annual audits of

HUD’s financial statements. However, HUD

has demonstrated significant progress in

addressing weaknesses impacting the

accuracy of payments made under these

programs. Most notably, HUD was the first

agency to receive a “green” baseline goal

score on the President’s Management

Agenda – Eliminating Improper Payments

initiative and has maintained this score.

The estimate of erroneous payments

that HUD reports in its Performance and

Accountability Report relates to HUD’s

inability to ensure or verify the accuracy of

subsidy payments being determined and

paid to assisted households. HUD has

surpassed interim goals for reducing the FY

HUD’s Management and Performance Challenges 5
6 HUD’s Management and Performance Challenges

1

 Loss estimates for both the single-family and multifamily programs were being finalized at the

time of this report and are to be included in FHA’s audited FY 2006 financial statements.

2000 estimated $2 billion in net annual rental

housing assistance overpayments. HUD’s

interim goals were for a 15 percent

reduction in FY 2003, 30 percent reduction

in FY 2004, and 50 percent reduction in FY

2005. These goals were established

based on the FY 2000 estimates of

improper payments attributed to both

housing administrator errors in subsidy

determinations and tenant underreporting

of income upon which benefits are based.

Although 60 percent of all subsidy

determinations were found to be in error in

2000, that number declined to 41 percent in

FY 2003 and 34 percent in FY 2004. The

baseline estimate of gross annual improper

payments has been reduced from $3.2

billion in 2000 to $1.6 billion in 2003 and $1.2

billion in 2004. HUD is finalizing updated

estimates to include in its FY 2006

Performance and Accountability Report.

Paralleling HUD efforts, our

investigative and audit focus is

concentrating on fraudulent practices and

the lack of compliance with the Section 8

program statute and requirements. To

comply with a congressional request, OIG

conducted 51 external audits of the Section

8 Housing Choice Voucher program during

FY 2006. OIG also has professional

appraisers on staff to assist in evaluating

housing quality requirements as part of our

audit efforts. In total, these external audits

addressed whether housing agencies are

correctly calculating subsidy amounts,

correctly determining family income,

complying with housing quality standards,

fully using authorized vouchers, and

implementing controls to prevent

duplicative and fraudulent housing

assistance payments. OIG’s audits

identified questioned costs of more than $16

million and reported more than $112 million

that could be put to better use.

Administering Programs Directed

Toward Victims of Hurricanes Katrina,

Rita, and Wilma. In the aftermath of

Hurricanes Katrina, Rita, and Wilma, the

operations of HUD have been thoroughly

tested in the Gulf Coast area and have

created extraordinary challenges for the

residents, HUD employees, and the business

community. The potential losses to HUD

and its housing and community

development programs are significant.

Congress estimates that damage to

residential structures will range from $17 to

$33 billion. In the Presidentially Declared

Disaster Areas, HUD’s FHA single-family

insurance fund insured more than 328,000

mortgages having an unpaid principal

balance of $23 billion. The hurricanes

affected 79 Ginnie Mae issuers, causing

Ginnie Mae to assess a $500 million risk of

loss to its investment portfolio. FHA’s

multifamily program in the Presidentially

Declared Disaster Areas insured 528 projects

with an amortized principal balance of $3

billion. Of these, 112 or 21 percent sustained

more than minor damage, resulting in

significant potential losses.1

 Assets of HUD’s

public housing program suffered

tremendous damage, affecting both

property structures and housing of almost

120,000 families. The Housing Authority of

New Orleans received a $21.8 million grant

from the public housing capital fund reserve

for the cost and repair of its public housing

inventory before a full assessment could be

performed. HUD allowed States to

reprogram $380 million from existing

community planning and development

funds for the disaster areas. To expedite the

process, HUD issued numerous waivers to

streamline its grant programs including

the HOME Investment Partnerships,

Emergency Shelter Grants, and CDBG

programs.
  

HUD’s Management and Performance Challenges 7

HUD’s response to Hurricanes Katrina

and Rita falls into three separate categories:

(1) use of existing appropriations on the

ground just before hurricane impact, (2) new

appropriations for hurricane relief, and (3)

Federal Emergency Management Agency

funds administered by HUD in support of

mission-critical assignments. HUD is

administering the Katrina Disaster Housing

Assistance and Disaster Voucher Programs,

which were funded at levels of $79 million

and $390 million, respectively. In addition,

Congress appropriated $16.7 billion in

emergency CDBG funds in two emergency

supplemental appropriations. Of this total,

$10.4 billion and $5.5 billion have been

allocated to the States of Louisiana and

Mississippi, respectively. The remaining

funds were allocated to the States of

Alabama, Florida, and Texas.

Each state was required to submit a plan

to HUD outlining how the state intended to

spend its supplemental disaster funding.

However, the subsequent waivers of CDBG

program requirements, while granted by

HUD in accordance with the provisions of

the supplemental appropriations to facilitate

the ease and expediency of funding, may

have created vulnerabilities. For example,

Mississippi and Louisiana opted to use

portions of their overall CDBG funding for

one-time grants to assist homeowners, who

are not obligated to repair or rebuild their

homes but may choose to use the grant in

any legal way to work through their

personal recovery situations. OIG has

concerns about how a “compensation” plan

that basically reimburses homeowners’

losses will spur the rebuilding of now

blighted communities.

There are also continuing problems with

the execution of data matching among

federal agencies. It took months for OIG to

finalize a protocol with the Federal

Emergency Management Agency to use its

data for matching purposes to detect

potentially fraudulent payments. The

problems that OIG has encountered would

be greatly mitigated if the Privacy Act

included an exception for postdisaster data

matching or if alternative legislation

required federal agencies to engage in data

matching as a routine procedure in their

provision of disaster assistance.

See chapter 6 of this Semiannual Report

for further information on the challenges

HUD faces in responding to these disasters,

along with HUD OIG’s efforts to prevent and

detect fraud and provide audit coverage for

the billions of dollars HUD is administering

to aid in the recovery.

Chapter 2 Chapter 2

HUD’s Single-Family

Housing Programs
Mutual Mortgage Insurance Fund singlefamily claims to determine whether HUD

ensured that paid claims were reviewed to

determine whether the mortgage loans met

program requirements.

Of the 175 claims reviewed, 44 were paid

for mortgages that did not meet program

requirements. Final HUD costs for claims that

did not meet program requirements are

estimated to be $356 million during the period

October 1, 2003, through June 3, 2005.

OIG recommended that HUD (1)

establish procedures to review paid claims

associated with early defaulted loans and

unsupported final costs and independently

verify that loans met program requirements,

(2) seek recovery or adequate support for final

HUD costs for the 44 unsupported claims

identified, and (3) assess costs and benefits

associated with reviewing claims on early

defaulted loans received since October 1, 2003,

and if feasible, independently determine that

loans comply with program requirements and

seek recovery or adequate support for final

HUD costs associated with those claims.

(Audit Report: 2006-SE-0001)

10 HUD’s Single-Family Housing Programs

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.

Audits

During this reporting period, the Office

of Inspector General (OIG) issued 12

external and 5 internal audit reports in the

single-family housing program area. These

reports disclosed more than $2.4 million in

questioned costs and more than $216

million in recommendations that funds be

put to better use.

FHA Mutual Mor FHA Mutual Mortgage

Insurance Fund Claim

Payments

The U.S. Department of Housing and

Urban Development (HUD) OIG reviewed

HUD’s controls over the payment of FHA

A Look Back for the Year

Chart 2.1: Per t 2.1: Percentage of OIG Single-Family Closed Audit Cases y Closed Audit Cases, Performed FY 06

Region 1

Boston

3%

Region 2

New York

11%

Region 3

Philadelphia

14%

Region 4

Atlanta

6%

Region 5

Chicago

17%

Region 6

Fort Worth

14%

Region 7-8

Kansas City

21%

Region 9-10

Los Angeles

14%
HUD’s Single-Family Housing Programs 11

Late Lender Submissions f

Late Lender Submissions f Late Lender Submissions for

Insurance Endor Insurance Endorsement

sement

On May 17, 2005, HUD issued

Mortgagee Letter 2005-23, removing the 6-

month payment history requirement for

loans submitted late for endorsement. HUD

OIG analyzed the impact of the policy

changes and reviewed the decision process

followed by HUD in approving the rule

change to determine whether changed late

submission for endorsement rules were

adequately supported and the decision

process was documented as required by the

Office of Management and Budget (OMB),

the Government Accountability Office

(GAO), and HUD/FHA internal policy and

practice.

Although HUD asserted that the change

did not materially increase FHA’s mortgage

insurance risk, it did not perform a risk

analysis to support this determination. A

review of the performance of loans from

seven prior OIG late endorsement audits

found a three and one-half times higher risk

of claims when loans had unacceptable

payment histories within the prior 6 months.

Further, since the issuance of the mortgagee

letter, the default rate for loans submitted

late has increased and is significantly higher

than the default rate for loans submitted in

a timely manner.

OIG recommended that HUD (1)

rescind Mortgagee Letter 2005-23 until

appropriate rule changes can be designed

that are supported by an adequate risk

assessment considering newly endorsable

loans and (2) establish sufficient

documentation practices to document

assertions and identify support data

referenced in published documents such as

policies and directives. Documentation

should be sufficient to permit a competent

and independent management review and

create an audit trail. (Audit Report: 2006-

SE-0002)

HUD’s Housin s Housing Counselin g Counseling

Assistance Pr Assistance Program

HUD OIG audited HUD’s Housing

Counseling Assistance Program,

Washington, DC, to determine whether

HUD (1) ensured the accuracy and reliability

of the data reported on fiscal year activity

reports, (2) had a system in place to measure

the impact that the grants have on program

performance measurements, and (3) had a

monitoring system that adequately

accounted for and safeguarded funds that

HUD provides grantees.

The data reported on the activity reports

were inaccurate and not current,

performance goals did not measure the

effects of grant funds on program objectives,

and some departmental program objectives

were not measured. In addition, HUD’s

oversight and monitoring of local counseling

agencies was not adequate to ensure that the

agencies were conducting activities in

accordance with HUD requirements and

grant agreements.

OIG recommended that HUD (1)

establish controls to ensure accurate and

reliable fiscal year activity reports, (2)

implement procedures for reporting that

provide for more timely information and the

reporting of actual results in later reports

when estimates are used, (3) implement a

system that measures all program objectives

and goals, and (4) establish and implement

written procedures to ensure adequate

oversight and monitoring of the program.

(Audit Report: 2006-NY-0001)

Credit Watch Terminated minated

Lenders

HUD OIG audited HUD’s Office of

Housing, Washington, DC, to determine

whether its controls adequately stop Credit

Watch terminated lenders from originating

new loans in the area in which they were

terminated.
HUD’s controls usually stop lenders

from originating new loans in areas in which

their approval has been terminated. In a

recent 3-year period, lenders originated 58

insured loans contrary to their sanctions.

During the same period, HUD insured more

than 3.3 million loans.

OIG recommended that HUD

periodically search for loans that have been

originated by terminated lenders and take

appropriate action against the lenders that

improperly originated the 58 loans

identified. (Audit Report: 2006-KC-0002)

Mortgagees, Loan

Correspondents espondents, and Dir and Direct

ect

Endorsement Lender sement Lenders

Audits of 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 12 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 National City

Mortgage Company of Miamisburg, OH, a

nonsupervised lender approved to originate,

underwrite, and submit insurance

endorsement requests under HUD’s singlefamily direct endorsement program. Of the

41 loans reviewed, National City approved

20 that did not fully meet HUD’s

requirements. The loans defaulted early

and/or went to claim. The underwriting

deficiencies were material as well as

technical and included errors and

documentation omissions clearly contrary to

prudent lending practices. Further, National

City incorrectly certified to the integrity of

the data supporting the underwriting

deficiencies and to the due diligence used

in underwriting the loans. HUD paid more

than $94,000 in claims for two loans and

incurred a loss of nearly $48,000 for another

two loans.

OIG recommended that HUD require

National City to indemnify HUD for any

future losses on nine loans with a total

mortgage value of more than $1 million;

reimburse HUD more than $94,000 for the

claims paid on two loans once the associated

properties are sold; reimburse HUD nearly

$48,000 for the loss incurred on two loans

since the properties were already sold; buy

down two active loans by $2,900; improve

its existing procedures and controls to

ensure its underwriters follow HUD’s

underwriting requirements; implement its

quality control plan for reviewing loans with

early payment defaults; and ensure that

quality control reviews under its quality

control plan are timely, accurate, and

properly documented. (Audit Report: 2006-

CH-1014)

○○○○○○○○○○○○○○○○○

HUD OIG audited Premier Mortgage

Funding, Inc., a nonsupervised loan

correspondent, because its default rate was

378 percent of the average of all lenders in

the San Antonio, TX, HUD jurisdiction.

Premier’s Austin, TX, branch originated 36

of 41 loans that defaulted within the first

year of origination. Premier and its sponsor,

JPMorgan Chase Bank NA, did not meet

HUD underwriting or quality control

requirements. HUD insured 11 loans

totaling more than $1 million that the

sponsor approved with inaccurate credit

information. Further, Premier and its

sponsors charged borrowers $163 in

ineligible closing costs and approved 31

loans with appraisals that did not meet HUD

requirements. These deficiencies increased

12 HUD’s Single-Family Housing Programs
the FHA insurance fund’s risk of loss. As of

April 28, 2006, HUD had lost more than

$394,000 on these loans.

OIG recommended that HUD (1)

require JPMorgan Chase to reimburse HUD

more than $394,000 for losses incurred on

six loans, indemnify HUD for six loans

totaling more than $647,000, and buy down

loans or repay HUD for other deficiencies;

(2) require Premier and JPMorgan Chase to

take action to correct quality control

deficiencies and ensure that appraisals meet

HUD requirements; and (3) take appropriate

administrative sanctions against Premier

and JPMorgan Chase for entering incorrect

data into the automated underwriting

system and certifying their integrity. (Audit

Report: 2006-FW-1011)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Devon, PA,

branch of Trident Mortgage Company, a

nonsupervised direct endorsement lender

approved to originate FHA single-family

mortgage loans, because its default rate was

above the state’s default rate. Of the 26 loans

reviewed, the Devon office did not fully

comply with FHA requirements for 15 of the

loans valued at just under $2 million.

Trident did not exercise due diligence in the

review of assets and liabilities, properly

verify income, ensure that all borrowers met

the minimum required 3 percent investment

in the property, properly document the

qualifying ratios, and verify rental history.

In addition, Trident overcharged for credit

reports. For five of the cases reviewed, fees

totaling $146 were charged to the borrowers.

Further, Trident did not perform the

required number of quality control reviews

of its FHA loans and did not ensure that all

FHA loans that went into early default were

flagged for review.

OIG recommended that HUD request

from Trident an indemnification of more

than $487,000 on 13 loans, which it issued

contrary to HUD’s loan origination

procedures, an indemnification of almost

$80,000 on two loans that went into default,

causing HUD to pay a claim, and require

Trident to develop internal procedures to

more closely monitor its underwriting

procedures, reimburse borrowers $146 in

overcharges, and revise and implement its

quality control plan to comply with HUD

requirements. (Audit Report: 2006-PH1012)

○○○○○○○○○○○○○○○○○

HUD OIG audited First Residential

Mortgage Corporation, a nonsupervised

direct endorsement lender located in

Englewood Cliffs, NJ. Seven of eleven loans

reviewed exhibited significant underwriting

deficiencies such as inadequate credit

analysis, inadequate verification of funds to

close, minimum cash investment not met,

and inadequate verification of income and/

or employment. The remaining four loans

contained technical violations. In addition,

one borrower was charged a $495 ineligible

commitment fee.

OIG recommended that HUD require

First Residential to indemnify it for potential

losses and/or claims on loans with

significant underwriting deficiencies,

reimburse one borrower for an ineligible

charge, and implement a quality control

process in accordance with HUD

requirements. (Audit Report: 2006-NY1009)

○○○○○○○○○○○○○○○○○

HUD OIG audited First Suffolk

Mortgage Corporation, North Babylon, NY,

a nonsupervised direct endorsement lender.

Three of eight loans reviewed exhibited

significant underwriting deficiencies, and

the remaining five loans contained technical

violations. As a result, the FHA insurance

fund paid claims associated with two loans

and continues to assume a risk with another

loan. In addition, First Suffolk did not

always comply with HUD’s and its own

quality control requirements to (1) ensure

that all HUD-insured loans that went into

default within the first six payments were

HUD’s Single-Family Housing Programs 13
reviewed and (2) document that corrective

action was taken on all material findings

identified in quality control reviews.

OIG recommended that HUD require

First Suffolk to (1) reimburse HUD for the

amount of claims and associated fees paid

on two loans with significant underwriting

deficiencies, (2) indemnify HUD against

future losses on the one currently insured

loan with significant underwriting

deficiencies, (3) establish procedures to

ensure that HUD’s underwriting

requirements are properly implemented

and documented, and (4) implement

procedures to ensure compliance with

HUD’s and its own quality control

requirements. (Audit Report: 2006-NY1007)

○○○○○○○○○○○○○○○○○

HUD OIG audited First Magnus

Financial Corporation’s loan origination and

business practices at the First Magnus

corporate office in Tucson, AZ. First

Magnus did not follow HUD requirements

when underwriting six FHA-insured loans.

As a result, the lender approved borrowers

for FHA-insured loans for which they may

not be able to make the monthly mortgage

payments.

OIG recommended that HUD require

First Magnus to indemnify it more than

$95,000 for estimated losses on three loans

processed and originated in disregard of

HUD rules and regulations and pay civil

money penalties for four loans that were

originated and processed using an incorrect

branch lender identification number. (Audit

Report: 2006-LA-1018)

○○○○○○○○○○○○○○○○○

HUD OIG audited Community Central

Bank, Mt. Clemens, MI, a supervised lender

approved to originate, underwrite, and

submit insurance endorsement requests

under HUD’s single-family direct

endorsement program, because of its high

default to claim rate. Community Central

generally complied with HUD’s

requirements for underwriting FHA loans.

However, it approved 3 of 29 FHA loans

reviewed that did not fully meet HUD’s

requirements. Further, Community Central

incorrectly certified to the due diligence

used in underwriting the three loans. Its

quality control plan did not comply with

HUD’s requirements, and quality control

reviews were not performed in a timely

manner. For the loans in question, the risk

to the FHA fund was increased.

OIG recommended that HUD require

Community Central to indemnify it for any

future losses on two loans with a total

mortgage value of more than $140,000,

reimburse it for any future net loss once the

associated property is sold, and ensure that

quality control reviews are timely and

properly documented. OIG also

recommended that HUD determine legal

sufficiency and if legally sufficient, pursue

remedies under the Program Fraud Civil

Remedies Act (PFCRA) against Community

Central and/or its principals for the three

incorrect certifications identified. (Audit

Report: 2006-CH-1017)

○○○○○○○○○○○○○○○○○

HUD OIG reviewed 13 FHA loans

underwritten by Nexgen Lending, Inc.’s

Lakewood, CO, branch office. Nexgen did

not follow HUD requirements in

underwriting two of the loans. As a result,

Nexgen placed HUD’s insurance fund at risk

for as much as $207,000 and overinsured one

mortgage for more than $1,000. Nexgen’s

quality control plan met HUD’s

requirements. OIG recommended that HUD

require Nexgen to indemnify it for the potential loss on the one loan with a

significant deficiency and reimburse the

appropriate parties for the overinsured

mortgage. (Audit Report: 2006-DE-1006)

○○○○○○○○○○○○○○○○○

HUD OIG audited KB Home Mortgage

Company in Los Angeles, CA, after a prior

OIG audit found indications that KB

underwriters inaccurately certified that they

14 HUD’s Single-Family Housing Programs
underwrote certain FHA loans. For 206 of

the 543 loans reviewed, KB’s underwriters

inaccurately certified that they personally

underwrote the loans. As a result, HUD has

no assurance that these loans were properly

underwritten to ensure that they were

eligible for FHA mortgage insurance.

OIG recommended that HUD require

KB to ensure that underwriter certifications

for HUD-insured loans are only executed by

direct endorsement underwriters after

personally reviewing the appraisal, credit

application, and all associated documents

and using due diligence in underwriting the

mortgage. (Audit Report: 2006-LA-1014)

○○○○○○○○○○○○○○○○○

HUD’s Single-Family Housing Programs 15
Investigations

During this reporting period, OIG

opened 77 investigation cases and closed 161

cases in the single-family housing program

area. Judicial action taken on these cases

during the period included $62,779,855 in

investigative recoveries, $23,645,106 in

funds put to better use, 111 indictments/

informations, 144 convictions/pleas/pretrial

diversions, 71 administrative actions, 9 civil

actions, 3 personnel actions, and 98 arrests.

Some investigations discussed in this

report were conducted jointly with federal,

Chart 2.2: Single-Family Recoveries

Flipping

70% ($44,136,680)

Loan

Origination

25%

($15,420,199)

Other

1% ($544,434)

False

Statements

2% ($1,539,149)

Contract Fraud

1% ($800,000)

Officer/Teacher

Next Door

1% ($339,393)

Total Recoveries $62,779,855

16 HUD’s Single-Family Housing Programs

state, and local law enforcement agencies.

The results of various significant

investigations are described below.

Loan Ori

Loan Ori Loan Origination Fraud gination Fraud

Donald W. Gupton, Inc., doing business

as Dynasty Homes of Henderson, Superior

Housing Center, Creative Real Estate, Manufacturing Housing Sales Center, M&G Properties II, Inc., and CRE Properties, LLC, (The

Companies) pled guilty in U.S. District

Court, New Bern, NC, to one count each of

conspiracy and money laundering. Donald

Scott Carroll and Richard Meador, both sales

managers for Gupton, were sentenced in

U.S. District Court, Raleigh, NC, for their

recent convictions on false statements; bank

fraud; and/or conspiracy to commit mail

fraud, wire fraud, or money laundering.

Carroll was sentenced to 30 months

incarceration and 3 years supervised release

and ordered to pay HUD $1,308,029 and 20

victims $168,802 restitution; Meador was

sentenced to 53 months incarceration and 3

years supervised release and ordered to pay

HUD $1,101,498 and 20 victims $168,802

A Look Back for the Year

Chart 2.3: Per t 2.3: Percentage of OIG Single-Family Closed Investigation Cases ation Cases, Performed FY 06

Region 1

Boston

2%

Region 2

New York

16%

Region 3

Philadelphia

15%

Region 4

Atlanta

8%

Region 5

Chicago

7%

Region 6

Fort Worth

23%

Region 7-8

Kansas City

8%

Region 9-10

Los Angeles

20%
restitution, jointly and severally with

Carroll. Between 1999 and 2002, The

Companies bought and sold more than 150

manufactured and mobile homes, some

including land, and assisted unqualified

borrowers in obtaining FHA-insured

mortgages valued at more than $11 million

by using fictitious trade-ins, providing cash

and fabricated gift letters, and falsely

inflating values and/or certifying land

ownership. A preliminary order of

forfeiture commands The Companies to

forfeit proceeds of up to $11 million, assets

associated with each organization, a Piper

airplane, and more than 300 acres of land.

As a result of foreclosures, HUD realized

losses estimated at $6.8 million.

○○○○○○○○○○○○○○○○○

David B. Finzi, a real estate investor, was

sentenced in U.S. District Court, Los

Angeles, CA, to 5 years probation and

ordered to pay HUD $2,389,133 restitution

for his earlier conviction on wire fraud and

aiding and abetting. Finzi and others located

and purchased multiunit residential

properties, flipped the properties at inflated

values to fictitious purchasers while Finzi’s

purchase transactions were pending,

prepared and submitted fraudulent loan

applications for bogus purchasers, and

obtained $12.5 million in FHA-insured

mortgage loans. As a result of foreclosures,

HUD realized losses of $3,161,942.

○○○○○○○○○○○○○○○○○

Cenobio Rojas and his wife, Ruth Rojas,

owners of Continental Termite and

Investments, were sentenced in U.S. District

Court, Los Angeles, CA, for their previous

guilty pleas to money laundering. Cenobio

Rojas was sentenced to 37 months

incarceration and ordered to pay HUD

$1,518,353 restitution; Ruth Rojas was

sentenced to 21 months incarceration and 36

months probation and ordered to pay the

above restitution jointly and severally with

her husband. Cenobio and Ruth Rojas

provided downpayment funds, used false

loan documents, and inflated the values of

properties sold to unqualified buyers

HUD’s Single-Family Housing Programs 17

obtaining FHA-insured mortgages. As a

result, 15 FHA-insured properties defaulted,

95 properties are at risk, and HUD realized

losses of $2,356,841.

○○○○○○○○○○○○○○○○○

Benedicta Gomez, an accountant and

owner of One Service, Inc., Aurora, CO, pled

guilty in U.S. District Court, Denver, CO,

to one count of wire fraud. William Mendez,

owner of William E. Mendez Team, Inc., at

REMAX 100; former Mendez Team realtor

Rogasiano Caldera; and unlicensed realtor

and former Mendez Team assistant Claudia

Mendez were sentenced for their earlier

guilty pleas to numerous charges. William

Mendez was sentenced to 49 months in

prison and 36 months probation and ordered

to pay HUD $1,227,082 restitution; Caldera

was sentenced to 15 months in prison and

36 months probation, ordered to pay HUD

$80,729 restitution, and debarred from

procurement and nonprocurement

transactions as either a principal or

participant with HUD and throughout the

Executive Branch of the Federal

Government for 10 months; Claudia Mendez

was sentenced to 8 months incarceration and

36 months probation and ordered to pay

HUD $109,167 restitution. Gomez, Caldera,

and William and Claudia Mendez assisted

unqualified and undocumented immigrants

in obtaining more than 300 FHA-insured

loans valued in excess of $61 million. As a

result of foreclosures, HUD realized losses

of $2.3 million.

○○○○○○○○○○○○○○○○○

Real estate investors Douglas Hastings

and Phil Miskimon, along with Julie Smith,

Shawn Fleming, and Jeffrey Meyer, each pled

guilty in U.S. District Court, Rockford, IL, to

numerous counts of conspiracy, false

statements to HUD, and false statements. Dale

Nelson, Chad Nicks, and Tasha Barnes, also

known as Tasha Thompson, were

sentenced for their earlier guilty pleas to

conspiracy and false statements to HUD.

Nelson was sentenced to 5 months

incarceration, 5 months home confinement,

and 24 months probation and ordered to pay
HUD $286,241 restitution; Nicks was

sentenced to 5 months incarceration, 5 months

home confinement, and 36 months probation

and ordered to pay HUD $257,372 restitution;

Barnes was sentenced to 4 months

incarceration, 4 months home confinement,

and 12 months probation and ordered to pay

HUD $183,715 restitution. Hastings,

Miskimon, Smith, Fleming, Meyer, Nelson,

Nicks, Barnes, and others provided or

acquired false credit letters, verifications of employment, or gift letters and/or acted as straw

buyers to assist unqualified applicants in obtaining more than 50 FHA-insured

mortgages. As a result, 35 FHA-insured

properties defaulted, and HUD losses exceed

$2 million.

○○○○○○○○○○○○○○○○○

Rhonda Torossian, a loan officer at RBC

Mortgage Company; Nancy Rodriguez, a loan

processor at RBC; Cesar Arenas, a realtor at

Whitehead Realty; and Raul Raygoza and

Israel Qunitero, both employees at Friends

Furniture, were indicted in U.S. District Court,

Rockford, IL, on numerous counts of false

statements to HUD, mail fraud, and

conspiracy. The above defendants allegedly

provided false documents, including

verifications of employment, credit letters,

cashier’s checks, Social Security cards and

numbers, and correspondence, to unqualified

buyers obtaining FHA-insured mortgages. As

a result, more than 50 FHA-insured loans were

identified, and HUD losses exceed $2 million.

○○○○○○○○○○○○○○○○○

Columbia National Mortgage, Inc.

(CNM), a subsidiary of American Home

Mortgage Investment Corporation,

Philadelphia, PA, entered into a settlement

agreement with the U. S. Government and

plaintiff/realtor Cynthia Santore-Smith, a

former CNM employee. As a condition of

the settlement agreement, CNM agreed to

pay the U. S. Government $800,000 and

indemnify two FHA-insured loans on

residential properties in Philadelphia, PA. In

2003, Santore-Smith filed a Qui Tam

complaint and provided information

relating to fraudulent FHA-insured loans

packaged and processed by employees of

CNM’s Bensalem, PA, branch office during

1997, 1998, and 1999.

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Edward Carrillo, owner of Sahara

Investments in Scottsdale, AZ, was

sentenced in Maricopa County Superior

Court, Phoenix, AZ, to 5 years in prison and

7 years probation and ordered to pay

18 HUD’s Single-Family Housing Programs

Copyright, 2006. The Rockford Register

Star - Rockford, IL. First two

paragraphs of article. Reprinted with

permission.
numerous victims $1,097,432 restitution for

accepting investor funds and failing to

acquire properties or return investor

monies. Carrillo was further charged in an

information filed in U.S. District Court,

Phoenix, AZ, with one count of mail fraud.

Carrillo allegedly purchased FHA-insured

properties through HUD’s “preforeclosure”

program at substantial discounts and using

fraudulent appraisals, then resold the

properties the same day at market value to

purchasers obtaining conventional

mortgages. As a result, 65 FHA-insured

properties defaulted, and HUD realized

losses in excess of $1.8 million.

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Andrew Bogdan, a former real estate

speculator, was sentenced in U.S. District

Court, Baltimore, MD, to 5 years probation

and ordered to pay Community Law

Center $277,650 restitution for his earlier

guilty plea to conspiracy. Bogdan and

others purchased and resold properties at

inflated values and assisted unqualified

buyers in obtaining FHA-insured mortgages

by submitting false employment, financial,

and gift letter documentation. As a result,

64 FHA-insured properties defaulted, and

HUD realized losses of $1.6 million.

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Barry C. Fauntleroy, President of EON

Corporation; Devon Bowie, President of

Neighborhood Mortgage Bankers; Sean

Mason, a closing attorney for EON; and

Stacey Morrero, an underwriter at

Neighborhood Mortgage Bankers, were

sentenced in U.S. District Court, Newark,

NJ, for their earlier guilty pleas. Fauntleroy

was sentenced to 12 months incarceration

and 4 years probation, fined $1,000, and

ordered to perform 40 hours of community

service; Bowie was sentenced to 9 months

incarceration, 3 years probation, and 100

hours of community service; ordered to pay

New Jersey State Division of Consumer

Affairs $300,000 restitution; and fined

$1,500; Mason was sentenced to 3 years

probation, fined $3,500, and ordered to

perform 100 hours of community service;

Morrero was sentenced to 36 months

probation and ordered to pay the State of

New Jersey $20,000. Fauntleroy, Bowie,

Mason, and Morrero assisted unqualified

borrowers in obtaining FHA-insured

mortgages by submitting false loan

documentation and appraisals. In addition,

the above defendants purchased properties

using borrower funds, failed to complete

promised renovations, and overcharged

borrowers through excessive origination

fees. As a result, 33 FHA-insured

properties defaulted, and HUD losses

exceed $1.2 million.

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Ricardo Medina, a former realtor at

REMAX 100, Lakewood, CO, and Perla

Alvarado, a former loan officer at Creative

Mortgage in Englewood, CO, were

sentenced in First Judicial District Court,

Golden, CO, for their earlier guilty pleas to

theft. Medina was sentenced to 48 months

confinement, 48 months probation, and 300

hours of community service and fined

$5,000; Alvarado was sentenced to 36

months probation and 96 hours of

community service and ordered to pay HUD

$52,223 restitution. Medina, Alvarado, and

others assisted unqualified and

undocumented immigrant homebuyers in

obtaining FHA-insured mortgages on

numerous properties. As a result, 67 FHAinsured properties defaulted, and HUD

losses approximate $1 million. In addition,

Medina, Alvarado, and previously indicted

Nancy Rios, a former loan officer at

Colorado Bank and Trust, Denver, CO, were

suspended from participation in

procurement and nonprocurement

transactions as either participants or

principals with HUD and throughout the

Executive Branch of the Federal

Government. The suspensions were based

on an indictment filed in Jefferson County

District Court, Denver, CO, charging

Medina, Alvarado, and Rios with 49

predicate acts in violation of the Colorado

Organized Crime Control Act.

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HUD’s Single-Family Housing Programs 19
David Calderon, owner of Atlas Home

Loans (AHL), a HUD direct endorsement

lender; his wife Baneza Calderon, AHL

office manager; and his brother Carlos

Calderon, a loan officer at AHL, each pled

guilty in U.S. District Court, Los Angeles,

CA, to false statements and/or misprision

of a felony. David, Baneza, and Carlos

Calderon created fraudulent documents for

unqualified or ghost buyers obtaining

FHA-insured mortgages. As a result,

approximately 91 FHA-insured properties

defaulted, and HUD realized losses of about

$910,000.

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Lawrence Lynch, a real estate investor

and partner in Tiffy Corporation, pled guilty

in U.S. District Court, Springfield, MA, to

mail fraud, money laundering, and

forfeiture. Mark McCarthy, a loan

originator and mortgage broker doing

business as RCML INC., pled guilty to wire

fraud, money laundering, and forfeiture.

Joseph Sullivan, owner of Sullivan

Appraisals; James Smith, former owner of

Springfield Mortgage; mortgage broker

Theodore C. Jarrett, Jr.; real estate investors

Pasquale Romeo and Anthony Matos; and

Michael Bergdoll, owner of Bergdoll Home

Improvement, each pled guilty to wire fraud

and money laundering. Kathryn Zepka, a

mortgage broker, pled guilty to wire fraud

and false statements. In addition, Albert V.

Innarelli, a former real estate closing

attorney; Jonathan Frederick, an appraiser

doing business as Westside Appraisal; and

real estate brokers Paul Starnes and Marc

Brown were sentenced for their earlier guilty

pleas. Innarelli was sentenced to 6 years

imprisonment and 5 years probation and

ordered to pay two financial institutions and

seven victims $1,293,858 restitution for his

earlier guilty plea to wire fraud; Frederick

was sentenced to 18 months confinement

and 4 years probation and ordered to pay

seven victims $35,000 restitution for his

previous guilty plea to wire fraud and

conspiracy to launder money. Starnes was

sentenced to 36 months incarceration and 5

years probation and ordered to pay two

banks $137,685 restitution for his earlier

guilty plea to wire fraud and conspiracy to

commit money laundering; Brown was

sentenced to 1 day incarceration, 12 months

confinement at a community corrections

center, 12 months house arrest with

electronic monitoring, 400 hours of

community service, and 5 years supervised

release and ordered to pay Bank of America

20 HUD’s Single-Family Housing Programs

Copyright, 2006. The Republican - Springfield, MA.

Reprinted with permission.
and National City Mortgage $137,685

restitution for his earlier plea to wire fraud

and money laundering. The above

defendants purchased and flipped more

than 70 HUD real estate owned (REO)

properties and obtained more than $5.9

million in FHA-insured mortgages for

unqualified buyers by processing fraudulent loans containing false information and

documentation. As a result, 31 FHA-insured

properties defaulted, and HUD realized

losses of $834,795.

○○○○○○○○○○○○○○○○○

Gilbert Lugo and Tracey Silvis Rangell,

former owners of Benefit Escrow in Downey,

CA, pled guilty in U.S. District Court, Los

Angeles, CA, to an information charging

them with conspiracy, false statements, and

aiding and abetting. Lugo, Rangell, and

others assisted unqualified buyers in

obtaining FHA-insured mortgages by

providing downpayments and submitting

false statements. As a result, 30 FHAinsured properties defaulted, and HUD

losses exceed $700,000.

○○○○○○○○○○○○○○○○○

Naomi LaBrie, formerly doing business

as Rehablers, Inc., pled guilty in U.S.

District Court, Kansas City, KS, to false

statements to HUD. LaBrie provided

closing funds for FHA-insured homebuyers,

instructed the homebuyers to falsify gift

letters, and certified on settlement

statements that she did not provide funds

for loan closings. As a result, 20 FHAinsured properties defaulted, and HUD

losses exceed $600,000.

○○○○○○○○○○○○○○○○○

Brian Lyles, a real estate investor, and

Shena Fraser, a loan officer at A&E,

Independent, and Germaine Mortgage

Companies, were each sentenced in U.S

District Court, Newark, NJ, to 3 years

probation and ordered to pay HUD $537,701

restitution, jointly and severally, for their

earlier guilty pleas to conspiracy to commit

mail fraud and false statements. Lyles and

Fraser purchased residential properties,

flipped the properties at inflated values, and

recruited or assisted unqualified buyers in

obtaining FHA-insured mortgages by

submitting false employment, income, and

financial documentation. As a result, 16

FHA-insured properties defaulted, and

HUD realized losses of $537,701.

○○○○○○○○○○○○○○○○○

Harold Meza, a real estate agent and

investor who operated JLF Properties,

California Discount Realty, North Wind

Realty, and Casa Blanca Realty in San

Bernardino County, CA, and Karla Preciado,

also known as Karla Venegas, an unlicensed

real estate agent and Meza’s assistant, were

each indicted in U.S District Court, Los

Angeles, CA, on one count of conspiracy

and six counts each of false statements and

aiding and abetting. Meza, Preciado, and

others allegedly obtained or produced false

identification documents, employment

verifications, gift letters, or other records for

unqualified buyers acquiring FHA-insured

mortgage loans. As a result, 40 FHAinsured properties defaulted, and HUD

losses exceed $500,000.

○○○○○○○○○○○○○○○○○

Jocelyn Sicat and Andy Pena, former

owners of Crossmark Mortgage, were

sentenced in U.S. District Court, Los

Angeles, CA, for their earlier guilty pleas to

wire fraud. Sicat and Pena were each

sentenced to 6 months home detention, 3

years supervised release, and 600 hours of

community service and ordered to pay HUD

$367,929 restitution, which they paid on or

before sentencing. Sicat and Pena conspired

and created false documents to assist

unqualified buyers in obtaining FHAinsured mortgages. As a result, 12 FHAinsured properties defaulted, and HUD

realized losses estimated at $474,264.

○○○○○○○○○○○○○○○○○

Kenneth DiPrenda, a former AMS

Mortgage loan officer; Mario Mendoza, a

former realtor for Weichart Realty; Linda

Serrano, a real estate closing attorney; and

HUD’s Single-Family Housing Programs 21
Myriam Vaca, an employee of formerly

indicted realtor Mario Mendoza, were each

sentenced in U.S. District Court, Newark,

NJ, for their earlier guilty pleas to

conspiracy to submit false statements to

HUD. DiPrenda was sentenced to 2 years

probation and ordered to pay HUD $28,858

restitution; Mendoza was sentenced to 6

months home confinement and 2 years

probation and ordered to pay HUD

$100,000; Serrano and Vaca were sentenced

to 1 and 2 years probation, respectively. In

addition, John and Caridad Prados were

arrested after criminal complaints were filed

charging them with defrauding HUD for the

purpose of executing a Title 11 bankruptcy

petition and using a false Social Security

number (SSN) to secure FHA-insured loans.

DiPrenda, Mendoza, Serrano, Vaca, and

John and Caridad Prados recruited and

assisted unqualified borrowers in obtaining

FHA-insured mortgages by submitting

fraudulent employment, identity, and other

loan documentation. As a result, 12 FHAinsured properties defaulted, and HUD

losses exceed $349,000.

○○○○○○○○○○○○○○○○○

Lionel Crosby, a taxicab driver, pled

guilty in U.S. District Court, Las Vegas, NV,

to one count of fraud against HUD. Lionel

Crosby’s brother, Stefan Crosby, was

sentenced to 21 months imprisonment and

3 years supervised release and ordered to

pay HUD $302,365 restitution for his earlier

guilty plea to conspiracy and false

statements to HUD. Lionel and Stefan

Crosby provided fraudulent employment,

income, identification, and other

documentation to unqualified straw buyers

obtaining FHA-insured loans. In addition,

both Lionel and Stefan Crosby personally

applied for FHA-insured loans using bogus

documents. As a result, 12 FHA-insured

properties defaulted, and HUD realized

losses of $302,365.

○○○○○○○○○○○○○○○○○

Rashid Muhammad, a recruiter for

RETI Relocation Services, pled guilty in U.S.

District Court, Atlanta, GA, to conspiracy

and wire fraud. Calvin D. Dalton, President

of RETI Relocation Services, Inc.; James F.

Stovall III, a closing attorney; certified real

estate appraisers John Bello, David R. Bobo,

and Paul Jaretsky Jr.; mortgage brokers

Martin Rosenthal and George W. McRee Jr.;

real estate broker Larry Frazier; and straw

recruiters/borrowers William Chavis, John

Hyacinty, Reginald Kemp, Rhonda Kent,

Constance Zielins, and Leonard Zielins,

were indicted on numerous counts of money

laundering, bank loan fraud, bank fraud,

wire fraud, mail fraud, and conspiracy.

Demetri Dante Coffee, an FHA-approved

appraiser, was charged in a superseding

indictment with bank fraud, wire fraud,

mail fraud, and conspiracy. The above

defendants allegedly created and submitted

false documentation to obtain 98 mortgage

loans valued at more than $20 million,

including two FHA-insured loans. As a

result of foreclosures, HUD losses

approximate $300,000.

○○○○○○○○○○○○○○○○○

Michael Grady, Joel Rosario, and

Robert Zappone, doing business as GRZ

LLC, a home connection and mortgage

super center, entered into a $750,000 civil

settlement with the Connecticut Attorney

General’s Office (CAGO) in Superior Court,

Waterbury CT. In December 2003, CAGO

filed a civil lawsuit alleging the above

defendants performed cosmetic repairs on

neglected properties before selling the

properties at inflated values to purchasers

who obtained 17 FHA-insured mortgages

valued at $1,358,824. As a result, three FHAinsured properties defaulted, and HUD

realized losses approximating $235,000.

○○○○○○○○○○○○○○○○○

Real estate investor Sholom Moskowitz

and Trena Hill, a former loan officer with

Community Home Mortgage Company,

were each sentenced in U.S. District Court,

Newark, NJ, for their earlier guilty pleas to

tax evasion, bank fraud, false statements to

a financial institution, and/or conspiracy to

22 HUD’s Single-Family Housing Programs
submit false statements to a financial

institution. Moskowitz was sentenced to 6

months home confinement and 5 years

probation and ordered to pay HUD $201,244

restitution; Hill was sentenced to 5 years

probation and ordered to pay HUD $91,556

restitution. Moskowitz and Hill prepared

false loan applications, appraisals,

employment verifications, and gift letters to

assist unqualified individuals in obtaining

nine FHA-insured mortgages. As a result,

four FHA-insured properties defaulted, and

HUD realized losses of $201,224.

○○○○○○○○○○○○○○○○○

Sean Beard, owner of First Equity

Corporation, and real estate investors

Morgan Haines and Theodore Antonucci

were each sentenced in U.S. District Court,

Rochester, NY, for their earlier guilty pleas

to conspiracy to commit mail fraud,

conspiracy to commit bank fraud, and/or

false documents or statements to obtain a

HUD loan. Beard was sentenced to 16

months incarceration and 3 years

supervised release and ordered to pay

HUD $38,441 and Countrywide Mortgage

$23,412 restitution; Haines was sentenced to

6 months home confinement and 5 years

probation and ordered to pay the above

restitution jointly and severally with Beard;

Antonucci was sentenced to 48 months

incarceration and 5 years probation and

ordered to pay HUD $156,341 and

numerous banks $775,217 restitution.

Beard, Haines, Antonucci, and other

conspirators purchased homes, flipped the

properties to each other at inflated values,

provided false documentation to secure

FHA or conventional financing on the

properties, and defaulted on mortgage loans

in excess of $1 million shortly afterward. As

a result, two FHA-insured properties

defaulted, and HUD realized losses of

$186,475.

○○○○○○○○○○○○○○○○○

Mordecai Smith, the former chief

financial officer of Virginia Beach Public

Schools, pled guilty in U.S. District Court,

Norfolk, VA, to bankruptcy fraud,

aggravated identity theft, and wire fraud.

Smith fraudulently verified the

creditworthiness of two borrowers

obtaining FHA-insured mortgages through

a bogus company known as 4H Investment

Mutual, LLC; duped an individual into

investing $27,000 for an appraisal and

downpayment on a $10 million

multifamily Section 8 apartment complex;

fraudulently used the SSN of another

person to obtain a conventional mortgage;

and filed eight bankruptcies, five under his

name and three under his spouse’s name, to

forestall foreclosure proceedings against his

personal residence. As a result, both FHAinsured mortgages defaulted, and HUD

realized losses of $126,900.

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Elie Louie-Pierre, a former loan officer

at Saxon Mortgage Bankers (SMB), was

sentenced in U.S. District Court, Central

Islip, NY, to 5 years probation and ordered

to pay HUD $92,015 restitution for his

previous guilty plea to fraud against HUD.

Carol Horton Branch and Francis Purcell,

real estate agents with 5-Star Realty and

Pelican Properties, were convicted in U.S.

District Court, Mineloa, NY, on one count

of conspiracy. Branch and Purcell were each

sentenced to 5 years probation, and Purcell

was fined $1,000. Louie-Pierre, Branch, and

Purcell produced, obtained, and used

fraudulent documents to originate at least

75 FHA-insured mortgages during LouiePierre’s employment with SMB. As a result

of foreclosures, HUD realized losses of

$92,015.

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Axel Bonilla, a former loan officer at

Main Street Mortgage and Ark Mortgage,

was sentenced in U.S. District Court,

Trenton, NJ, to 18 months incarceration and

3 years probation and ordered to pay

numerous victims $1,531,062 and HUD

$76,123 restitution for his earlier guilty plea

to mail fraud charges. Bonilla and

previously indicted Laura Barlow, a former

HUD’s Single-Family Housing Programs 23
underwriter at Main Street Mortgage

Service and Ark Mortgage, assisted

unqualified borrowers in obtaining FHAinsured mortgages by providing false

documents. Bonilla also embezzled and

converted more than $1.5 million in

investor funds, by creating false documents

and reporting fictitious investment

earnings, and used investor funds to

purchase residential properties. As a result,

HUD realized losses of $76,123 when six

FHA-insured mortgages defaulted.

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Farid Bayot and Shaian Birashk, real

estate brokers/owners of Global One Realty

Inc., Aurora, CO, each pled guilty in U.S.

District Court, Denver, CO, to wire fraud

and/or aiding and abetting. Bayot was

sentenced to 36 months probation and

ordered to refrain from employment in the

real estate or mortgage industry. In

addition, Mehdi “Tim” Ghaemi, owner of

Arborz Real Estate Company in Greenwood

Village, CO, and Hamidullah Sarwary, a

former Littleton Housing Authority (LHA)

Section 8 tenant, were arrested after theft,

forgery, and/or criminal impersonation

charges were filed in State District Court,

Englewood, CO. Bayot and Birashk assisted

Sarwary purchase property and obtain an

FHA-insured mortgage. Ghaemi allegedly

assisted Sarwary in hiding his property

ownership from LHA, and Sarwary

allegedly failed to report his ownership of

the property on LHA certifications. As a

result, HUD realized losses of $46,988 when

Sarwary defaulted on his FHA-insured

mortgage, and $3,760 in LHA housing

assistance Sarwary was not entitled to

receive.

○○○○○○○○○○○○○○○○○

Ifiok Equere, a loan broker and real

estate investor, was sentenced in U.S.

District Court, St. Louis, MO, to 37 months

incarceration and ordered to pay HUD and

Wells Fargo Mortgage $104,702 restitution

for his earlier guilty plea to false statements

and felon in possession of a firearm. Equere

used false documents to flip properties and

broker FHA-insured mortgage loans. As a

result, two FHA-insured properties

defaulted, and HUD realized losses of

$46,299.

○○○○○○○○○○○○○○○○○

Willie Bynum pled guilty in U.S. District

Court, Norfolk, VA, to one count of

conspiracy to make false statements to HUD.

Bynum purchased three properties, obtained

FHA-insured mortgages by falsifying loan

applications and using or attempting to use

straw buyers, rented then sold two

properties and allowed unqualified

purchasers to assume his FHA-insured

loans, and defaulted on the remaining FHAinsured mortgage. As a result, HUD

realized a loss of $25,000.

○○○○○○○○○○○○○○○○○

Twelve undocumented immigrants pled

guilty in Johnson County District Court,

Kansas City, KS, to various charges of

identify theft and false statements. The

above defendants were each sentenced to 5

months incarceration and 18 months

probation and ordered to refinance or sell

their FHA-insured properties to eliminate

about $900,000 in mortgages considered at

risk. The defendants fraudulently obtained

FHA-insured mortgage loans using false

SSNs through an unidentified loan officer in

Olathe, KS. As a result, 72 FHA-insured

mortgages valued at approximately $5

million were identified at risk.

○○○○○○○○○○○○○○○○○

Realtor Rohan A. Johnson, also known

as Ato Ra Ajah El, and real estate consultant

Donovan Gilpin, doing business as Pre

Amble Properties and professing

membership in an antigovernment Moorish

rights group, were indicted in a superseding

indictment filed in U.S. District Court, Central

Islip, NY, on conspiracy, theft of government

property, and mail fraud charges. Johnson and

Gilpin allegedly filed fraudulent real estate

deeds transferring ownership of 14 HUDowned or FHA-insured properties, a U.S.

Department of Veterans Affairs (VA)-

guaranteed property, and a bank-owned

24 HUD’s Single-Family Housing Programs
property to Pre Amble Properties. After

transferring the properties, Johnson and

Gilpin allegedly resided in two HUD

properties, sold the bank property to an

unsuspecting buyer, and attempted to sell the

VA property and two HUD properties to

undercover operatives for $550,000. In

addition, Johnson allegedly claimed to be a

HUD official on numerous deed recordings.

As a result, the bogus deeds prevented HUD

from selling its properties to legitimate buyers

and banks from deeding foreclosed properties

to HUD.

○○○○○○○○○○○○○○○○○

John Thomas, a former appraiser, was

sentenced in U.S. District Court, St. Louis,

MO, to 3 years probation and ordered to pay

his victim $40,000 restitution for his

previous guilty plea to conspiracy to commit

wire fraud. Thomas and others falsely

inflated the value of both FHA-insured and

conventionally financed properties,

concealed needed repair information, and

received payments for bogus appraisals. As

a result, six properties obtained fraudulent

FHA-insured mortgages valued at $650,000.

○○○○○○○○○○○○○○○○○

Dwayne Jones, a former loan officer at

the now defunct First Funding Mortgage

Bankers (FFMB), pled guilty in U.S. District

Court, Brooklyn, NY, to one count of

conspiracy to defraud the United States.

Jones submitted false statements to HUD

and Countrywide Home Loans when he

flipped his personal property to a relative,

who obtained an FHA-insured mortgage

through FFMB for $75,000 more than the

approved purchase price. Jones received

proceeds in excess of $51,000 and a short

payoff on his original FHA-insured

loan, also serviced by Countrywide.

Countrywide, unaware that the property on

which it approved a short payoff was flipped

to a straw buyer for $75,000 more than the

approved purchase price, submitted a claim

to HUD for more than $85,000.

○○○○○○○○○○○○○○○○○

Kelly Jones, a loan officer and real estate

agent at Amortgage Link and Nationwide

Real Estate Solutions LLC, and Wander

Colon, an FHA-insured mortgagor, were

indicted in U.S. District Court, Memphis,

TN, on numerous charges of conspiracy,

fraud, false statements, and general

provisions. Jones allegedly submitted false

financial documents to assist unqualified

borrowers in obtaining FHA-insured

mortgages. Colon allegedly submitted false

income and employment information to

acquire an FHA-insured mortgage. As a

result, two FHA-insured mortgages valued

at approximately $225,000 are at risk.

○○○○○○○○○○○○○○○○○

Brad Marks and Edwin Rivera, former

owners of the now defunct Quality Builders,

Inc., and Quality Home Remodeling, were

sentenced in U.S. District Court,

Philadelphia, PA, for Marks’ earlier guilty

plea and Rivera’s prior conviction on charges

of mail fraud, wire fraud, and aiding and

abetting. Marks was sentenced to 20 months

incarceration and 3 years probation and

ordered to pay $400,000 to the victims.

Rivera was sentenced to 41 months

incarceration and 3 years probation and

ordered to pay the above restitution jointly

and severally with Marks. Marks and Rivera

induced Latino homeowners into signing

home improvement contracts; assisted them

with obtaining low-cost bank or HUDinsured Title I financing; obtained

homeowner loan proceeds; and provided

incomplete, shoddy, or no property

improvements as promised. As a result,

homeowner loss is estimated at more than

$400,000.

Identity Fraud and F Identity Fraud and False

Social Security Number Social Security Numbers

Vincent Sirolli, owner of Encore

Mortgage Services, Inc. (EMS); Keith Lyon,

EMS Chief Operating Officer; Dana

Siciliano, EMS loan officer; June Kodiak,

EMS underwriter; Ciriaco Gatta, also known

HUD’s Single-Family Housing Programs 25
as Jack Gatta, an appraiser; Mary Diantonio

and Anthony Giampietro, settlement agents

at Rittenhouse Abstract and Title Company;

Mahn Huu Doan, also known as Bruce

Doan; Trung Tam Dang; and straw buyer/

seller Zu-Yun Kim, also known as Andy

Kim, were indicted in U.S. District Court,

Philadelphia, PA, on numerous counts of

conspiracy, wire fraud, false statements to

HUD, identity fraud, and aiding and

abetting. The above defendants allegedly

purchased properties using false or

borrowed identities, submitted and/or

processed false financial documents and

inflated appraisals, and concealed financial

transactions at loan settlements to secure

more than 180 fraudulent FHA-insured

mortgages valued in excess of $11 million.

As a result, HUD realized losses of

$11,781,000 when 180 properties defaulted.

○○○○○○○○○○○○○○○○○

Lesly Bardales, a self-employed tax

preparer, pled guilty to an information filed

in U.S. District Court, Los Angeles, CA,

charging him with mail fraud and unlawful

transfer of an identification document.

Bardales created false pay stubs and IRS

W-2 documents and conspired with a former

Social Security Administration (SSA)

employee to obtain and use genuine Social

Security cards and numbers for unqualified

borrowers obtaining FHA-insured

mortgages. As a result, more than 100 FHAinsured mortgages valued in excess of $1.3

million were obtained, and HUD realized

losses of $135,899 when eight loans

defaulted.

○○○○○○○○○○○○○○○○○

James Rucker, a mortgage broker with

Ravenswood Mortgage, pled guilty in U.S.

District Court, Chicago, IL, to one count of

wire fraud. Rucker submitted FHA-insured

loan packages containing false identification,

downpayment, employment, tax, and other

financial information for unqualified and/or

straw buyers obtaining FHA-insured

mortgages. As a result, one property

defaulted, and HUD realized a loss greater

than $50,000.

○○○○○○○○○○○○○○○○○

Kathleen Ramon, also known as

Kathleen Hagan and doing business as El

Mercado de Kansas City, was charged in

Johnson County District Court, Kansas City,

KS, with nine counts of unlawful use of

driver’s license and making a false writing.

Ramon, through El Mercado de Kansas City,

allegedly received payments from

undocumented immigrants obtaining

fraudulent Kansas-issued drivers’ licenses.

In addition, Ramon allegedly coached

undocumented immigrants on obtaining

mortgage and bank loans and insurance and

filing tax documents under assumed

identities. As a result, seven FHA-insured

mortgages valued at $480,631 were

identified, and 150 fraudulent drivers’

licenses obtained.

○○○○○○○○○○○○○○○○○

Sergio Manual Rodriguez, a former

FHA-insured mortgagor, was indicted in

U.S. District Court, Macon, GA, on one

count each of Social Security fraud and false

statements. Rodriguez allegedly used the

identity of another person to obtain and

default on an FHA-insured mortgage loan.

As a result, HUD realized a loss greater than

$40,000.

○○○○○○○○○○○○○○○○○

David J. Brown, owner of 12 Volt, an

electronics retailer, pled guilty in U.S.

District Court, Washington, DC, to an

information charging him with bank fraud.

Brown and other conspirators laundered

credit card fraud proceeds by purchasing

approximately 11 HUD REO properties

using false financial documents and bogus

identifications. After purchasing HUD REO

properties, Brown falsified documents and

leased some properties to Washington, D.C.

Housing Authority for use in its rental

assistance program.

○○○○○○○○○○○○○○○○○

26 HUD’s Single-Family Housing Programs
Edward Futch, also known as Edward

Daniels, was sentenced in U.S. District

Court, Norfolk, VA, to 3 years probation,

ordered to cease using the name and identity

of Edward Daniels, and fined $1,000 for his

earlier guilty plea to one count of making

false statements to HUD. Futch possessed

and used identities and SSNs in two names,

obtained credit under both, and applied for

and received an FHA-insured mortgage

loan by submitting fraudulent

documentation. The FHA-insured loan was

cured from default status, and HUD realized

no loss.

Bankruptcy Fraud y Fraud

Richard Leroy Davis, owner of

Foreclosure and Tenant Company Association,

pled guilty in U.S. District Court, Detroit, MI,

to one count of mail fraud. Davis and

previously convicted conspirators Chris

Thomas and Milton Goddard acquired partial

ownership in 600 distressed properties,

including 120 properties with FHA-insured

mortgages; filed fraudulent bankruptcies to

forestall foreclosure proceedings; and

skimmed property equity by diverting

monthly payments. As a result, 100 properties

valued at $7 million defaulted, and HUD

losses are yet to be determined.

○○○○○○○○○○○○○○○○○

Salvador Bernal Hernandez pled guilty

in U.S. District Court, Salt Lake City, UT, to

making false statements, false bankruptcy

declaration, false bankruptcy documents,

and misuse of an SSN. Hernandez acquired

the identity of others, used their identities

to obtain three properties with FHA-insured

mortgages, and filed fraudulent

bankruptcies to avert foreclosure

proceedings. As a result of foreclosures,

HUD realized losses of $225,000.

○○○○○○○○○○○○○○○○○

Barbara Kessinger, also known as Sheila

Murphy, was sentenced in U.S. District Court,

Chicago, IL, to 3 years probation and ordered

to pay HUD $97,079, VA $13,807, and Bank of

America $9,122 restitution for her earlier

bankruptcy fraud conviction. Kessinger

acquired one FHA-insured and two VAguaranteed properties using a bogus name

and SSN, failed to make mortgage payments,

and filed multiple sham bankruptcies to

hinder foreclosure proceedings.

○○○○○○○○○○○○○○○○○

Debra Ahmad-Bey, a Chicago Housing

Authority (CHA) Section 8 landlord, Chicago

police officer, and the former president of

Developing Economical & Better Living, Inc.,

a nonprofit organization permitted to acquire

discounted HUD REO properties, was

convicted in U.S. District Court, Chicago, IL,

on seven counts of bankruptcy fraud. AhmadBey failed to report her nonprofit business,

extensive proceeds from the resale of HUD

REO properties, CHA Section 8 rental

assistance payments, or income from her

employment with the Chicago Police

Department and various nursing companies

on two distinct bankruptcy petitions.

○○○○○○○○○○○○○○○○○

Other Sin Other Single-Famil

amily Fraud y Fraud

Steven Lucas and Robert Bronke, former

employees of now-defunct Dollars Express,

a HUD/FHA 203K general contractor, each

pled guilty in U.S. District Court, Chicago,

IL, to one count of wire fraud. Arnold

Gillard, a former maintenance supervisor,

was sentenced to 48 months incarceration

and ordered to pay First Tennessee Bank

$260,275 restitution for his earlier guilty plea

to wire fraud. Lucas, Bronke, Gillard, and

others defrauded HUD and First Tennessee

Bank by recruiting straw buyers and falsifying

completed work orders to facilitate the release

of contracting escrow funds on more than 70

FHA-insured 203K mortgaged properties. As

a result, HUD realized losses in excess of $4

million.

○○○○○○○○○○○○○○○○○

Isaac Lee Woods and Regina Bailey

Woods, owners and officers of Woodbai, Inc.,

a mortgage lender doing business as

HUD’s Single-Family Housing Programs 27
Unlimited Financial Resources, were both

convicted in U.S. District Court, New Bern,

NC, on 32 counts of conspiracy, wire fraud,

false statements, and money laundering.

Isaac and Regina Woods created phony

mortgages, electronically submitted the

bogus mortgages to the secondary mortgage

market, and caused Government National

Mortgage Association to guarantee $1.4

million in counterfeit investments. As a

result, Isaac and Regina Woods fraudulently

acquired more than $1 million, used most

of the money to purchase rental properties

in Durham, NC, and leased some of the

properties to Durham Housing Authority

for use in its Section 8 program. In addition,

Timothy Eugene Benjamin, a defense

witness who testified at the U.S. v Woods

trial, was indicted in U.S. District Court,

Raleigh, NC, on numerous counts of

conspiracy, endeavoring to obstruct justice

and aiding and abetting, attempted witness

tampering and aiding and abetting, and

false declarations in court. During Isaac and

Regina Woods’ trial, Benjamin allegedly

telephoned a government witness; made

numerous false, misleading, and/or

threatening statements; and attempted to

influence or prevent the witness from

testifying. In addition, while testifying on

the Woods’ behalf, Benjamin allegedly made

materially false declarations.

○○○○○○○○○○○○○○○○○

Steven Marquez, a loan officer at Primera

Mortgage Company, was charged in a

superseding indictment filed in Cook County

Circuit Court, Chicago, IL, with multiple

counts of theft. Marquez allegedly deceived

two property owners and acquired rights to

their properties, sold the properties to

borrowers obtaining FHA-insured mortgages,

and collected the sales proceeds. The property

owners, believing they were refinancing their

original loan, mistakenly signed “power of

attorney” documents assigning their

homeownership rights to Marquez. The new

FHA-insured mortgages valued at more than

$250,000 are in foreclosure, and HUD losses

are yet to be determined.

○○○○○○○○○○○○○○○○○

Dariusz Przybylek, an investor, and

Erwin Espe, a former HUD-approved

appraiser, were arrested after criminal

complaints were filed in U.S. District Court,

Chicago, IL, charging them with mail and

wire fraud. Przybylek allegedly attempted

to purchase a HUD-owned property for 150

percent of the HUD-appraised value by

submitting an inflated appraisal, phony

contractor affidavits, and fraudulent loan

documents to facilitate his receipt of

$113,000 for property rehabilitation through

a straw contractor at closing.

○○○○○○○○○○○○○○○○○

28 HUD’s Single-Family Housing Programs

Copyright, 2006. Tribune - Chicago, IL.

Reprinted with permission.
Kenneth Mixon was charged with two

counts of false pretenses and breaking and

entering with illegal entry in a criminal

complaint filed in Wayne County Court,

Detroit, MI. Mixon allegedly entered HUDowned properties, presented himself as the

owner and collected tenant rents in excess of

$4,700, and unlawfully resided in one

property. As a result, HUD losses are

estimated at approximately $45,700,

including $41,000 in property damage.

○○○○○○○○○○○○○○○○○

Israel Pena, a former youth pastor at a

church in Bronx, NY, was found guilty in

U.S. District Court, White Plains, NY, of

conspiracy, bank fraud, and mail fraud.

From 1998 to 2001, Pena purchased

properties in the New York metropolitan

area, flipped the properties to unqualified

first-time homebuyers at a substantial profit,

and assisted the ineligible borrowers in

obtaining both FHA-insured and

conventional mortgages by submitting false

loan documents and/or providing fictitious

downpayment deposits. As a result, HUD

realized a loss of $16,000 when one FHAinsured property defaulted.

○○○○○○○○○○○○○○○○○

Shatanya Fitchpatrick, also known as

Shatanya Douglas, owner of ABS Rentals

and Investments; Manjur Alam, a realtor at

ReMax Preferred Properties; and straw

buyers Kathleen Fitchpatrick, Deverell

Jones, and Demond Reed were each

sentenced in U.S. District Court, Wichita,

KS, for their earlier guilty pleas to numerous

counts of conspiracy to commit fraud

against HUD, false statements to HUD, and/

or wire fraud. Shatanya Fitchpatrick was

sentenced to 4 months incarceration and 36

months probation and ordered to pay the

U.S. Department of Agriculture $22,552

restitution; Alam was sentenced to 12

months probation and ordered to pay HUD

$2,000 restitution; Kathleen Fitchpatrick was

sentenced to 12 months probation and

ordered to pay the court $500; Jones was

sentenced to 3 months incarceration and 24

months probation and ordered to pay the

court $500; Reed was sentenced to 24 months

probation and ordered to pay the court $500.

In addition, the above defendants agreed to

a 36-month governmentwide debarment.

Shatanya Fitchpatrick and her previously

indicted husband, Bryon Fitchpatrick, used

illicit drug sales proceeds to purchase HUDowned properties as investments through

Alam via straw buyers Kathleen

Fitchpatrick, Jones, and Reed. After

purchasing the properties, Bryon

Fitchpatrick used the homes to store illegal

drugs before renting or selling the

properties.

○○○○○○○○○○○○○○○○○

Maritza Portillo, a real estate agent and

loan officer at Transatlantic Financial

Corporation, Covina, CA, was sentenced in

U.S. District Court, Los Angeles, CA, to 3

months in a community corrections center,

6 months house arrest with electronic

monitoring, and 27 months supervised

release for violating the terms and

conditions of her federal probation, a result

of her earlier guilty plea to conspiracy to

commit bribery. While on probation, Portillo

enticed and paid an individual to act as a

straw buyer and purchase residential

investment property, promising to remit a

portion of the sale proceeds when reselling

the property at a later date. Portillo sold the

property, failed to divide the sale proceeds

with the straw buyer, and diverted the funds

to other business associates. In addition,

Portillo recruited a relative to collect rents

from tenants residing in eight additional

properties she purchased through straw

buyers; three of the properties had FHAinsured mortgages.

○○○○○○○○○○○○○○○○○

James Elliott Coleman, the former

president of the Allen Village Charter School

(AVCS) Board, pled guilty in U.S. District

Court, Kansas City, MO, to 11 counts of

conspiracy, federal program fraud, and

interstate transportation of stolen funds.

Coleman embezzled then repaid AVCS more

HUD’s Single-Family Housing Programs 29
than $47,000 in funds he obtained through

a mortgage investment fraud scheme.

Coleman and previously indicted James

Lynn Woolard solicited investors for

mortgage investments, provided false

documents to obtain conventional mortgage

loans on the investment properties, and

leased the properties to various

organizations providing HUD-subsidized

housing assistance payments.

○○○○○○○○○○○○○○○○○

Barry Oaks, Sr., a San Joaquin Sheriff’s

Office deputy, entered into a settlement

agreement with the U.S. Attorney’s Office,

Sacramento, CA, agreeing to pay HUD

$70,293. Oaks purchased but failed to reside

in property he acquired through HUD’s

Officer/Teacher Next Door (OTND)

program.

○○○○○○○○○○○○○○○○○

John Henry Davis, a California licensed

real estate agent and lieutenant at Ironwood

State Prison in Blythe, CA, was convicted in

U.S. District Court, Los Angeles, CA, on one

count of attempting to corruptly influence

a witness and acquitted of false statement

charges. Davis, previously indicted on false

statements under HUD’s OTND program,

attempted to influence the testimony of a

witness/tenant in an effort to hide his true

residency at the OTND property. Davis

purchased a HUD-owned property through

HUD’s OTND program in Rialto, CA, failed

to reside at the property, leased the property

for approximately 34 months, collected rents

totaling $23,800, and falsely certified his

residency at the property on annual

certifications. As a result, HUD realized

losses approximating $60,300.

○○○○○○○○○○○○○○○○○

James Anthony Street, a former U.S.

Postal Inspection Service police officer, was

sentenced in U.S. District Court, Los

Angeles, CA, to 1 year probation and

ordered to pay a $2,100 fine for his earlier

guilty plea to false statements. Street, a

participant in HUD’s OTND program,

owned property in Bloomington, CA, when

he submitted written certifications claiming

the OTND property he purchased in Long

Beach, CA, was his sole residence. Street

paid HUD $48,500 when he sold the OTND

property.

  

30 HUD’s Single-Family Housing Programs
Chapter 3 Chapter 3

HUD’s Public and Indian s Public and Indian

Housing Programs
32 HUD’s Public and Indian Housing Programs

The U.S. Department of Housing and

Urban Development (HUD) provides grants

and subsidies to more than 2,637 public

housing authorities (PHA) nationwide.

More than 1,657 PHAs manage public

housing units, and almost 980 with

no public housing manage units

under Section 8 tenant-based programs.

PHAs administer both public housing

and Section 8 programs. HUD also

provides assistance 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.

Audits

During this reporting period, the Office

of Inspector General (OIG) issued 47 reports:

5 internal and 42 external audits in the

public and Indian housing (PIH) program

Section 8 Housin Section 8 Housing Choice g Choice

Voucher Program Acti

ram Acti ram Activities

Audits of the Section 8 Housing Choice

Voucher program were a priority during this

semiannual reporting period. In HUD’s

fiscal year (FY) 2006 appropriation, the

Congress directed OIG to increase its audit

and investigative efforts related to public

housing agencies’ administration of this

program. Public housing agencies were

selected for audit based on risk analysis and/

or hotline complaints. While OIG’s

objectives varied by auditee, the majority of

area. These reports disclosed more than

$47.1 million in questioned costs and about

$61 million in recommendations that funds

be put to better use. During this reporting

period, OIG reviewed Section 8 Housing

Choice Voucher program activities,

public housing activities, including the

low-rent housing and Moving to Work

(MTW) Demonstration programs and the

operating fund program.

A Look Back for the Year

Chart 3.1: Per t 3.1: Percentage of OIG Public and Indian Housing Closed Audit Cases g Closed Audit Cases,

Performed FY 06

Region 1

Boston

6%

Region 2

New York

10%

Region 3

Philadelphia

12%

Region 4

Atlanta

19%

Region 5

Chicago

17%

Region 6

Fort Worth

12%

Region 7-8

Kansas City

14%

Region 9-10

Los Angeles

10%
HUD’s Public and Indian Housing Programs 33

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.

HUD OIG audited the Housing

Authority of the County of Cook’s, Chicago,

IL, Section 8 Housing Choice Voucher

program based upon a risk analysis that

identified it as having a high-risk program.

Of the 83 housing units inspected, 64

did not meet HUD’s housing quality

standards, and 61 had 279 violations that

existed at the time of the Authority’s

previous inspection. In addition, the

Authority improperly permitted 18 of 31,587

individuals reviewed to be claimed as

dependents in more than one program unit,

resulting in more than $20,000 in

overpayments of program housing

assistance. The Authority also failed to

determine the reasonableness of program

rents before approving housing assistance

payment contracts for 11 of the 20 tenant

files reviewed and lacked documentation to

support when its rent reasonableness

database was last updated. As a result,

program funds were not used efficiently and

effectively, and fewer funds were available

to assist low- and moderate-income families

on the Authority’s waiting list.

OIG recommended that HUD require

the Authority to reimburse its program from

nonfederal funds for the improper use of

more than $123,000 in program funds,

ensure that program housing units

inspected during the audit are repaired to

meet HUD’s housing quality standards, and

implement procedures and controls to

address the findings reported. (Audit

Report: 2006-CH-1012)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Housing

Authority of the City of Passaic, Passaic, NJ.

From 2002 through 2005, the Authority did

not adequately manage its Section 8

program. It made ineligible transfers of

program funds from Section 8

administrative fee reserves to its low-rent

housing program and from the capital fund

to its Section 8 program. In addition, it did

not maintain adequate documentation for

rent and employee benefits costs charged to

the Section 8 program and for payments to

the City of Passaic for police services.

Further, an inspection of 65 units revealed

that 44 units failed for material

noncompliance with housing quality

standards.

OIG recommended that HUD instruct

the Authority to (1) reimburse the Section 8

administrative fee reserve for the $1 million

transferred to the low-rent housing program

and recapture or reduce Section 8

administrative fees by more than $590,000;

(2) reimburse the capital fund more than

$401,000 from the Section 8 program; (3)

provide additional supporting

documentation for rent expenses, employee

benefits costs, and payments for police

services and repay any unsupported costs

determined to be ineligible; and (4) develop

and implement procedures to ensure that

units meet housing quality standards.

(Audit Report: 2006-NY-1012)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Metropolitan

Development and Housing Agency’s,

Nashville, TN, inspection of Section 8 units.

Of 71 Section 8 units inspected, 52 did not

meet minimum housing quality standards,

and 30 of those were in material

noncompliance. As a result, tenants lived

in units that were not decent, safe, and

sanitary, and the Agency made housing

assistance payments for units that did not

meet standards.

OIG recommended that HUD require

the Agency to inspect the 52 units that did

not meet minimum housing quality

standards to verify that the owners took

appropriate actions. If appropriate actions
were not taken, the Agency should abate the

rents or terminate the housing assistance

payment contracts. HUD should also

require the Agency to implement internal

controls that ensure units meet HUD’s

housing quality standards and inspection

requirements to prevent more than $8.7

million from being spent on units that are

in material noncompliance with standards.

(Audit Report: 2006-AT-1009)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Columbus

Metropolitan Housing Authority’s,

Columbus, OH, Section 8 Housing Choice

Voucher program based upon a risk analysis

that identified it as having a high-risk

program.

Of the 67 housing units inspected, 47

did not meet HUD’s housing quality

standards, and 34 had 164 violations that

existed at the time of the Authority’s

previous inspection. In addition, of the 8,976

unit inspections conducted by the Authority

in calendar year 2005, 966 were not

conducted within the required 1 year of the

previous inspection, and 35 of the 76 files

reviewed did not contain the documentation

required by HUD and the Authority’s

program administrative plan. The Authority

also incorrectly calculated housing

assistance payments, resulting in more than

$12,000 in overpayments and more than

$11,000 in underpayments from January

2003 through December 2005.

OIG recommended that HUD require

the Authority to reimburse its program from

nonfederal funds for the improper use of

more than $83,000 in program funds,

provide documentation or reimburse its

program more than $332,000 from

nonfederal funds for the unsupported

housing assistance payments and

administrative fees, ensure that 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. (Audit Report:

2006-CH-1011)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Housing

Authority of the County of Cook’s, Chicago,

IL, Section 8 Housing Choice Voucher

program based upon a risk analysis that

identified it as having a high-risk program.

Of the 70 households’ files reviewed, the

Authority incorrectly calculated housing

assistance payments for 26 and lacked

supporting documentation regarding

admission and selection for five households,

resulting in nearly $28,000 in overpayments

of program housing assistance and utility

allowances and more than $47,000 in

unsupported housing assistance. The

Authority also failed to adequately use

HUD’s Enterprise Income Verification (EIV)

system to determine that reported zeroincome households had unreported income,

34 HUD’s Public and Indian Housing Programs

Copyright, 2006. The Columbus DispatchColumbus, OH. Reprinted with permission.
resulting in more than $62,000 in improper

housing assistance and utility allowance

payments. It also did not monitor and

correct escrow balances of its Family SelfSufficiency Program participants and

accurately account for payments related to

household portability. As a result, program

funds were not always used efficiently and

effectively, and fewer funds were available

to assist low- and moderate-income families

on the Authority’s waiting list.

OIG recommended that HUD require

the Authority to (1) reimburse its program

from nonfederal funds for the improper use

of program funds, (2) provide support or

reimburse its program from nonfederal

funds for the unsupported housing

assistance payments and related

administrative fees, and (3) implement

adequate procedures and controls to

address the findings cited to help ensure

that more than $3.4 million in program

funds are spent on housing assistance

payments that meet HUD’s requirements.

(Audit Report: 2006-CH-1021)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Lucas

Metropolitan Housing Authority’s, Toledo,

OH, Section 8 Housing Choice Voucher

program based upon a risk analysis that

identified it as having a high-risk program.

Of the 62 housing units inspected, 49

did not meet HUD’s housing quality

standards, and 45 had 212 violations that

existed at the time of the Authority’s

previous inspections. The 45 units had

between 1 and 12 preexisting violations per

unit. OIG estimates that over the next year,

the Authority will pay more than $1.3

million in housing assistance payments on

units with material housing quality

standards violations. In addition, of 67 files

reviewed, 37 did not contain the

documentation required by HUD and the

Authority’s program administrative plan.

The Authority also incorrectly calculated

housing assistance payments, resulting in

more than $22,000 in unsupported

payments, more than $21,000 in

overpayments, and nearly $1,300 in

underpayments from April 2004 through

March 2006.

OIG recommended that HUD require

the Authority to (1) reimburse its program

from nonfederal funds for the improper use

of program funds, (2) provide support or

reimburse its program from nonfederal

funds for the unsupported housing

assistance and utility allowance payments

and related administrative fees, and (3)

implement adequate procedures and

controls to address the findings cited to help

ensure that nearly $2 million in program

funds are spent on payments that meet

HUD’s requirements. (Audit Report: 2006-

CH-1019)

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HUD OIG audited the Ann Arbor

Housing Commission’s, Ann Arbor, MI,

Section 8 Housing Choice Voucher program,

based upon a risk analysis that identified it

as having a high-risk program.

Of the 62 housing units inspected, 45

did not meet HUD’s housing quality

standards, and 40 had 125 violations that

existed at the time of the Commission’s

previous inspections. In addition, the

Commission improperly calculated the

housing assistance payments for 16 of 25

tenant files reviewed and did not perform

reexaminations in a timely manner. This

resulted in more than $7,000 in housing

assistance payment errors. Also, the

Commission did not establish an adequate

cost allocation plan for charging indirect

costs to its program.

OIG recommended that HUD require

the Commission to reimburse its program

from nonfederal funds for the improper use

of almost $59,000 in program funds, ensure

that program housing units inspected

during the audit are repaired to meet HUD’s

housing quality standards, and implement

HUD’s Public and Indian Housing Programs 35
procedures and controls to address the

findings reported. (Audit Report: 2006-CH1013)

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HUD OIG audited the Orange City

Housing Authority’s, Orange, NJ, Housing

Choice Voucher program. Of 59 Section 8

units inspected, 55 did not meet minimum

housing quality standards, 37 of which were

in material noncompliance. As a result,

tenants lived in units that were not decent,

safe, and sanitary, and HUD made housing

assistance payments for units that did not

meet housing quality standards.

Additionally, the Authority did not always

allocate expenses accurately to the Housing

Choice Voucher program and did not always

correctly calculate its housing assistance

payments and obtain necessary documents

related to tenant recertifications.

OIG recommended that HUD instruct

the Authority to (1) to ensure that units meet

housing quality standards and that

corrective action has been taken on those

units that failed to meet standards, (2)

develop procedures and controls for

allocating and charging costs to the Housing

Choice Voucher program, (3) provide

documentation for all unsupported cost and

reimburse any cost determined to be

ineligible, and (4) establish procedures to

ensure that all voucher recertification

information for tenants and landlords is

adequately supported and documented.

(Audit Report: 2006-NY-1010)

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HUD OIG audited the Housing

Authority of the City of Austin’s, Austin, TX,

Section 8 Housing Choice Voucher program.

In 482 of the 662 vouchers reviewed, the

Authority applied the correct voucher size

and correctly computed housing assistance

payments. However, it overhoused 180

tenants and paid more than $588,000 in

excess housing assistance payments. In

addition, HUD overfunded the Authority’s

FY 2006 Section 8 Housing Choice Voucher

program budget by more than $189,000.

OIG recommended that HUD require

the Authority to (1) correct the voucher size

for overhoused tenants, (2) repay HUD for

the housing assistance overpayments, (3)

improve and correct its procedures for

assigning subsidy size to avoid future losses

of up to $768,000, and (4) take the necessary

action to reduce the Authority’s FY 2006

Section 8 budget by more than $189,000.

(Audit Report: 2006-FW-1015)

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HUD OIG audited the Municipality of

Bayamon Housing Authority’s, Bayamon,

PR, Section 8 Housing Choice Voucher

program. Of the 66 units inspected, 58 did

not meet minimum housing quality

standards, and 15 were in material

noncompliance. As a result, tenants lived

in units that were not decent, safe, and

sanitary, and HUD made housing assistance

payments for units that did not meet

standards.

OIG recommended that HUD require

the Authority to inspect all of the 58 units

that did not meet minimum housing quality

standards to verify that the landlords took

appropriate corrective actions to make the

units decent, safe, and sanitary. If

appropriate actions were not taken, the

Authority should abate the rents or

terminate the tenants’ vouchers. HUD also

should require the Authority to implement

an internal control plan and incorporate it

into the Authority’s Section 8 administrative

plan to ensure that units meet HUD’s

housing quality standards and inspections

meet HUD requirements. (Audit Report:

2006-AT-1015)

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HUD OIG audited the Orlando, FL,

Housing Authority’s Section 8 Housing

Choice Voucher program. Of 67 Section 8

units inspected, 20 did not meet standards,

and eight of those were in material

noncompliance. As a result, the Authority

paid more than $31,000 in ineligible

subsidies and more than $10,000 in excess

housing assistance payments for 5 of 22

36 HUD’s Public and Indian Housing Programs
tenants housed in units larger than justified

by the families’ composition.

OIG recommended that HUD require

the Authority to abate Section 8 subsidies

or terminate housing assistance payment

contracts on all units that do not meet

standards if the violations detected are not

corrected in a timely manner. HUD should

also require the Authority to improve its

controls over the inspection process to

ensure that inspectors properly identify and

report all housing quality standards

violations in the units they inspect to

prevent more than $1.1 million from being

spent on units with material housing quality

standards violations. HUD should further

require the Authority to repay more than

$31,000 from nonfederal funds for ineligible

housing assistance payments it made for the

eight units with material violations.

OIG also recommended that HUD

require the Authority to reimburse its

program from nonfederal funds more than

$10,000 for excess housing assistance

payments for five overhoused tenants plus

any additional amount paid until corrective

action is taken. HUD should also require

the Authority to establish controls to ensure

initial determination of the correct voucher

size and to adjust tenant vouchers in a

timely manner to reflect reported changes

in family composition. HUD should further

require the Authority to issue the correct size

voucher to overhoused tenants and ensure

that their subsidy amounts are properly

calculated. (Audit Report: 2006-AT-1010)

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HUD OIG audited the Housing

Authority of the City of Los Angeles’ tenant

eligibility determinations for its Section 8

Housing Choice Voucher program. The

Authority did not establish and document

its Section 8 tenants’ eligibility to receive

housing choice vouchers in 76 of 133 cases

reviewed. As a result, the Authority paid

more than $1 million in unsupported and

ineligible housing assistance payments.

OIG recommended that HUD require

the Authority to (1) support or reimburse

HUD more than $1 million in unsupported

Section 8 housing assistance payments, (2)

implement the necessary controls and/or

revisions to its administrative plan to ensure

that the eligibility determinations are made

properly in the future, and (3) conduct

training with Section 8 personnel on the new

controls and procedures. (Audit Report:

2006-LA-1012)

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HUD OIG audited the Rockford

Housing Authority’s, Rockford, IL, Section

8 Housing Choice Voucher program based

upon a risk analysis that identified the

Authority as having a high-risk program. Of

85 files reviewed, 73 did not contain

documentation required by HUD and the

Authority’s program administrative plan to

support more than $547,000 in housing

assistance and utility allowance payments.

The Authority incorrectly calculated

households’ payments, resulting in nearly

$50,000 in overpayments and more than

$2,500 in underpayments for the period

October 2003 through November 2005. OIG

estimates that over the next year, the

Authority will overpay more than $338,000

in housing assistance and utility allowance

payments.

OIG recommended that HUD (1)

require the Authority to provide

documentation or reimburse its program

from nonfederal funds for the unsupported

housing assistance and utility allowance

payments and associated administrative

fees, (2) reimburse its program from

nonfederal funds for the improper use of

program funds, (3) reimburse the

appropriate households for the

underpayment of housing assistance and

utility allowance payments, and (4)

implement adequate procedures and

controls to address the deficiencies

identified. (Audit Report: 2006-CH-1020)

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HUD’s Public and Indian Housing Programs 37
HUD OIG audited the Section 8

program administered by the Housing

Authority of the City of Denton, Denton,

TX. The Authority applied its decreased

payment standards without granting the

required grace period. Further, it did not

grant disability allowances for six eligible

tenants in determining adjusted income. As

a result, it underpaid an estimated $126,000

in subsidies for 447 tenants. Twenty-nine

tenants were overhoused because the

Authority assigned a voucher size that

exceeded its subsidy size standards with

either no explanation or questionable

justification. The Authority paid almost

$51,000 in ineligible or unsupported subsidy

payments for these tenants.

OIG recommended that HUD require

the Authority to (1) repay tenants for

subsidy underpayments caused by

decreasing payment standards too early and

not granting disability allowances, (2) repay

its Section 8 account for overpayments from

overhousing tenants, (3) strengthen its

quality control process, and (4) develop and

implement controls to ensure that the

procedural errors identified during the audit

are corrected and avoided in the future.

(Audit Report: 2006-FW-1013)

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38 HUD’s Public and Indian Housing Programs

Copyright, 2006. Denton Record-Chronicle - Denton, TX. Reprinted with permission.
HUD OIG reviewed the Section 8

Housing Choice Voucher program at the

Portland Housing Authority in Portland,

ME. The Authority did not use its Section 8

administrative fee reserves in a timely

manner or properly allocate salary and

employee benefits expenses to the program.

It transferred Section 8 administrative fee

reserves to its local programs account, but

as of March 2006, it had not used almost

$648,000 of these reserve funds for program

or other housing purposes. It also

undercharged its program by more than

$158,000 in salary and employee benefits

expenses because its cost allocation

procedures improperly charged the

program costs to its Public Housing Capital

Fund program when the Housing Choice

Voucher program had funding shortfalls.

OIG recommended that HUD require

the Authority to (1) repay to its Section 8

program the unused portion of almost

$648,000 in administrative fee reserve funds

transferred to its local programs account and

provide supporting documents for

verification of the more than $158,000 in

transferred reserve funds to the Public

Housing Capital Fund program, (2) identify

current and valid uses for the remaining

Section 8 administrative reserves (almost

$490,000), and (3) establish and implement

formal written procedures to properly

allocate costs to the benefiting programs. In

addition, OIG recommended that HUD

verify the repayment of more than $158,000

to the Authority’s Public Housing Capital

Fund program for ineligible administrative

expenses. (Audit Report: 2006-BO-1011)

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HUD OIG audited the Freeport

Housing Authority, Freeport, NY, to

determine whether it (1) implemented

admission policies that complied with HUD

requirements, (2) ensured that Section 8

program units met housing quality

standards, (3) maintained a financial

management system that adequately

safeguarded funds, and (4) operated its notfor-profit entity in accordance with HUD

regulations.

The Authority improperly issued

housing choice vouchers to 22 tenants and

erroneously disbursed more than $49,000 in

housing assistance payments. It lacked a

system to monitor the results of housing

quality standards inspections to ensure that

housing assistance payments were abated

when needed and to document that it

conducted quality control inspections as

required by HUD regulations. Weaknesses

in the Authority’s financial management

system allowed the disbursement of more

than $588,000 for questionable and ineligible

costs and caused the incorrect calculation of

Section 8 administrative fees. Further, the

Authority did not obtain a partial release of

declaration of trust from HUD to transfer

properties to its not-for-profit entity as

required by HUD regulations.

OIG recommended that HUD reallocate

the Authority’s unused housing choice

vouchers and require it to (1) seek a HUD

waiver to allow tenants who were

improperly issued vouchers to retain them,

(2) seek reimbursement of ineligible housing

assistance payments, (3) establish a system

to track housing quality inspection activities,

(4) develop and implement financial controls

to ensure proper allocation and

disbursement of funds, and (5) obtain

properly approved partial release of

declaration of trust documents for property

transferred for sale under the

homeownership program. (Audit Report:

2006-NY-1008)

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HUD OIG audited the Dallas County

Housing Agency’s, Dallas, TX, Section 8

program. The Agency operated its Section

8 program in compliance with HUD

requirements. It computed housing

assistance payments correctly and had

effective controls in place to ensure that it

met housing quality standards. However,

it overhoused 34 tenants by granting

HUD’s Public and Indian Housing Programs 39
unjustified subsidy size exceptions and

unnecessarily paid more than $63,000 in

housing assistance payments for 23 of the

tenants.

OIG recommended that HUD require

the Agency to (1) repay ineligible housing

assistance overpayments of more than

$63,000 and (2) improve its procedures to

ensure that it assigns the correct subsidy

size for all tenants. (Audit Report: 2006-

FW-1009)

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HUD OIG audited the Housing

Authority of the County of Butler to

determine whether the Authority was

properly administering its Section 8

Housing Choice Voucher program. The

Authority generally administered its Section

8 program properly, but some

improvements were needed. The Authority,

located in Butler, PA, did not allocate

administrative salary and employee benefit

costs to the Section 8 program on a

reasonable and fair basis. As a result, it

could not support more than $229,000 in

expenditures for administrative salaries and

associated employee benefits over a 3-year

period. In addition, the Authority did not

always calculate housing assistance

payments correctly or maintain adequate

documentation in its client files to

demonstrate compliance with HUD

requirements. It also did not have written

procedures for conducting quality control

reviews of the client files, which would have

alerted it to the deficiencies. As a result, it

made housing assistance overpayments of

more than $500 and underpayments of more

than $1,000 in the 21 client files reviewed

and did not have adequate assurance that

the housing assistance payments it made to

landlords were reasonable.

OIG recommended that the Authority

(1) provide documentation to support the

more than $229,000 in questioned employee

salary and benefit costs or reimburse the

Section 8 program from the programs that

benefited from the erroneous costs

allocations; (2) develop and implement a

reasonable method for allocating costs to the

Section 8 program, thereby putting more

than $76,000 to better use over a 1-year

period; (3) repay its Section 8 program more

than $500 and reimburse clients more than

$1,000 from its earned Section 8

administrative fees for housing assistance

overpayments and underpayments; and (4)

develop and implement procedures for

calculating rents correctly, maintaining

client files adequately, performing quality

control reviews of its client files, and

performing adequate rent reasonableness

determinations. (Audit Report: 2006-PH1010)

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HUD OIG audited the Benton Harbor

Housing Commission’s, Benton Harbor, MI,

Public Housing Capital Fund program. The

Commission lacked documentation to

support more than $206,000 in program

expenditures and improperly used $500 in

program funds to pay expenses related to

its Housing Choice Voucher program.

Further, the Commission’s procurement

activities were not conducted according to

its and HUD’s requirements.

OIG recommended that HUD require

the Commission to (1) provide

documentation to support the unsupported

expenditures or reimburse its program from

nonfederal funds for the applicable portion;

(2) provide documentation that it

reimbursed its program from its Section 8

housing administrative fees for the improper

payment of expenses related to its Section 8

Housing Choice Voucher program; and (3)

implement adequate procedures, controls,

and board oversight to correct the

weaknesses cited. (Audit Report: 2006-CH1010)

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HUD OIG audited the Miami, FL,

Miami Dade Housing Agency’s Section 8

Housing Choice Voucher program. The

Agency overhoused 17 tenants and

unnecessarily paid almost $62,000 in excess

40 HUD’s Public and Indian Housing Programs
subsidies on behalf of 13 of the tenants. It

also had 228 tenants who could be

overhoused with the potential to incur

excess subsidy payments. By improving its

procedures, the Agency could avoid future

losses of almost $82,000, which would allow

it to provide vouchers to additional tenants.

OIG recommended that HUD require

the Agency to (1) submit a corrective action

plan to correct the 17 overhoused tenant

vouchers, (2) reimburse its program almost

$62,000 from nonfederal funds, (3) submit a

time schedule to review the additional 228

tenants for overhousing and a corrective

action plan to correct any overhoused tenant

vouchers and reimburse its program from

nonfederal funds, and (4) develop and

implement procedures to ensure that

tenants receive the proper voucher size to

avoid future losses of almost $82,000. (Audit

Report: 2006-AT-1012)

Public Housin Public Housing Authority g Authority

Management of

ement of ement of Assets

HUD OIG audited HUD’s efforts to

collect a more than $2.7 million debt from

the Omaha Housing Authority of Omaha,

NE, in response to a citizen’s complaint that

the Authority had not taken steps to repay

or resolve the liability. The audit objectives

were to determine why the liability existed,

to whom it was owed, and what efforts HUD

made to collect it.

HUD did not ensure that the Authority

repaid its public housing programs more

than $2.7 million for ineligible program

activities, nor did it establish a repayment

agreement. As a result, the Authority’s

programs did not have these funds available

for their intended purposes.

OIG recommended that HUD establish

a repayment agreement with the Authority

to resolve the liability. (Audit Report: 2006-

KC-0003)

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HUD OIG audited the Omaha Housing

Authority in Omaha, NE, to determine

whether the Authority followed HUD

procurement requirements. The Authority

did not follow required procurement

procedures. It used more than $5,000 in

HUD funds to purchase ineligible goods and

services, and it could have saved at least

$970,000 when it purchased $1.9 million in

other goods and services.

OIG recommended that HUD require

the Authority to repay its low-rent program

for the ineligible purchases and improve

controls over its procurement process.

(Audit Report: 2006-KC-1010)

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HUD OIG audited the Saginaw

Housing Commission’s, Saginaw, MI,

Public Housing Operating Fund program

based on a request from HUD. The

Commission improperly acquired the

Saginaw County Fairgrounds property,

which included a harness raceway, using

nearly $536,000 in program funds. Because

of the Commission’s improper use of these

funds, its program also lost more than

$25,000 in interest income that would have

been realized if the funds had been invested.

The Commission failed to file a required

declaration of trust to evidence its covenant

to convey or encumber the property and to

protect HUD’s rights and interests. Further,

the Commission entered into eight rooftop

lease agreements without required HUD

approval and did not restrict more than

$12,000 in revenue to pay for program

expenses.

OIG recommended that HUD require

the Commission to (1) reimburse its

program for the inappropriate use of funds

and lost interest income identified, (2) file a

declaration of trust on the property if it has

not been sold, (3) submit its current rooftop

lease agreements to HUD for approval, and

(4) implement adequate procedures and

controls to address the findings cited. OIG

also recommended that HUD pursue

HUD’s Public and Indian Housing Programs 41
administrative sanctions against the

Commission’s former executive director and

its board members involved in the improper

purchase of property. (Audit Report: 2006-

CH-1018)

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Based on a complaint from a member

of the Housing Authority of the City of Las

Vegas’, Las Vegas, NV, board of

commissioners, HUD OIG reviewed the

Authority’s contracts with Abt Associates to

determine whether the Authority followed

federal procurement and contracting

requirements when it hired Abt. OIG

expanded its review to determine whether

the Authority retained interest from

improperly invested grant funds.

The Authority awarded three contracts

totaling more than $473,000 to Abt in 2004

and 2005 in violation of federal requirements

and its own policies and procedures for

procurement, contracting, and contract

administration. It also improperly retained

investment earnings totaling almost $85,000

from improperly drawn down replacement

housing factor grant funds for FYs 2000 and

2001.

OIG recommended that HUD require

the Authority to provide adequate support

of cost reasonableness or reimburse the lowrent housing program more than $473,000

from nonfederal funds, reimburse the

Federal Government for the almost $85,000

in interest earned on the grant funds, take

appropriate administrative sanctions

against responsible Authority officials, and

provide contract and procurement training

to both the board and Authority officials.

(Audit Report: 2006-LA-1017)

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HUD OIG reviewed the Housing

Authority of the City of Macon’s

administration of its housing development

activities as part of its audit of HUD’s

oversight of public housing agency

development activities with related

nonprofit entities. The audit objectives were

to determine whether the Authority, located

in Macon, GA, used low-income housing

and HOPE VI program funds for

unauthorized purposes to benefit other

entities without specific HUD approval and

whether the Authority complied with

applicable laws and regulations and

properly safeguarded low-income resources

when it conducted business with affiliated

nonprofit entities and consultants.

The Authority violated its annual

contributions contract with HUD by using

funds from its low-income housing general

fund account to pay expenses of its

programs’ affiliated entities. As of December

31, 2004, 11 programs or entities, including

nonprofit firms and other programs, owed

the general fund account more than

$395,000. As a result, the Authority made

ineligible disbursements with low-income

housing funds totaling more than $395,000.

Further, the Authority violated its contract

with HUD by using low-income public

housing assets as collateral to guarantee

loans for two affiliated nonprofit entities

totaling $2.2 million, thereby placing

contract assets at risk. The original $2.2

million in loan balances guaranteed has been

reduced to $125,000, which is the amount

currently at risk. Additionally, the Authority

violated federal contracting requirements by

entering into an open-ended contract with a

consultant without a ceiling price. The

Authority spent almost $228,000 on the

contract, which has been in effect since

November 2001.

OIG recommended that HUD require

the Authority to (1) collect the more than

$395,000 or current balance owed to the

general fund account and repay the lowincome public housing reserve the amounts

collected, (2) pursue terminating the loan

guarantees so the contract collateral used to

guarantee the unpaid loan balances of

$125,000 will not be at risk, (3) justify the

necessity and reasonableness of the

payments made for the consultant’s contract

42 HUD’s Public and Indian Housing Programs
and reimburse any amount that cannot be

supported from nonfederal funds, and (4)

terminate or amend the consultant’s contract

in accordance with applicable federal

requirements. (Audit Report: 2006-AT1008)

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HUD OIG audited the Housing

Authority of the City of North Charleston’s,

North Charleston, SC, implementation of a

HUD Section 5(h) homeownership program

to determine whether the Authority

administered its capital funding for the

Oakleaf project in accordance with HUD

program requirements for financial

management and reasonableness and

necessity of expenditures and whether the

project was adequately progressing toward

accomplishing its homeownership objective.

The Authority inappropriately pledged

public housing program funds to secure a

$400,000 commercial bank loan for real

estate improvements at Oakleaf. In

addition, the Authority’s noncompliance

with program requirements and untimely

planning caused delays in its Oakleaf

homeownership program. The delays

hampered the Authority’s ability to provide

timely homeownership opportunities to

low-income individuals and families.

OIG recommended that the HUD

ensure that the Authority obtains prior

approval from HUD before entering into any

future contract or agreement that obligates

HUD funds to secure debt and require the

Authority to provide a reasonable plan for

completing the project and selling the units

and properly assess and document

homebuyers’ progress and related time

extension. (Audit Report: 2006-AT-1013)

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HUD OIG audited the Hampton

Redevelopment and Housing Authority,

Hampton, VA, to determine whether the

Authority carried out its operations in

accordance with applicable HUD

requirements.

The Authority did not properly allocate

almost $60,000 in salary and benefit costs to

its nonfederal housing developments. It also

did not always follow federal procurement

requirements when awarding contracts. In

addition, it made some incorrect housing

assistance payments and did not settle

almost $62,000 in interfund balances due its

low-rent public housing fund from other

HUD programs in a timely manner.

OIG recommended that HUD require

the Authority to provide adequate

documentation to support almost $60,000 in

questioned salary and benefit costs or

reimburse its public housing program from

nonfederal sources, reduce the amount of

housing assistance payments by the more

than $5,000 overpayment on the Authority’s

next Section 8 year-end settlement

statement, reimburse applicable tenants

almost $800 for housing assistance

underpayments, and repay its low-rent

public housing fund almost $62,000 from its

other HUD programs. OIG also

recommended that the Authority provide

adequate documentation to justify its

awarding of four contracts or repay almost

$85,000 or the amount currently expended

under the contracts from nonfederal funds

and create and implement adequate internal

controls to ensure that it fully complies with

HUD and other federal requirements.

(Audit Report: 2006-PH-1011)

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HUD OIG reviewed the development

activities of the Columbus Housing

Authority, Columbus, NE, to determine

whether it spent or encumbered HUD assets

for development activities without HUD

approval.

The Authority inappropriately spent

more than $204,000 in public housing funds

to develop a non-HUD multifamily

housing development. It also improperly

HUD’s Public and Indian Housing Programs 43
encumbered its public housing assets when

it signed loan documents containing setoff

provisions that allowed the bank to take

Authority bank account funds in the event

of default on the loans. The Authority

defaulted on the loans, and the bank seized

more than $88,000 in public housing funds.

OIG recommended that HUD require

the Authority to repay its public housing

program from nonfederal sources, continue

to pursue recovery of the funds seized by

the bank, and ensure that no additional

HUD funds are used for nonfederal

purposes without HUD approval. (Audit

Report: 2006-KC-1013)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Pickaway

Metropolitan Housing Authority’s,

Circleville, OH, activities with its related

nonprofit organization because the

Authority was identified as having high-risk

indicators of nonprofit development activity.

The Authority improperly loaned nearly

$256,000 in 5(h) Homeownership Plan

(program) sales proceeds to its nonprofit,

Building Affordable Housing Corporation.

The two loans occurred without HUD

approval and did not follow federal

requirements regarding the use of the

program proceeds. The Authority’s

program also lost more than $60,000 in

interest income that would have been

realized if the proceeds had been invested.

Further, the Authority paid more than

$22,000 in expenses that would not have

been incurred if it had conducted the

Corporation’s development activities. The

Corporation used nearly $2,400 in program

proceeds to pay legal expenses related to its

development activities that were not

adequately supported by detailed invoices.

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

payments identified, and (3) implement

adequate procedures and controls to correct

the cited weaknesses. (Audit Report: 2006-

CH-1016)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Orange City

Housing Authority, Orange, NJ, regarding

its payments to and on behalf of the City of

Orange and the write-off of an account

receivable from the City. The objective was

to determine whether payments to the City

for street lighting and a write-off of an

account receivable from the City were

proper.

The Authority paid for street lighting

expenses, which should have been furnished

by the City at no cost to the Authority. It

also wrote off an account receivable

pertaining to the cost of the lights without

obtaining board approval. As a result, the

Authority paid for the City’s street lighting

costs and was deprived of funds from a more

than $156,000 receivable, which could be

used to pay for necessary operating

expenses if collected.

OIG recommended that HUD instruct

the Authority to record an account receivable

for the more than $156,000 due from the City

and notify the City to pay for street lighting

costs. (Audit Report: 2006-NY-1011)

○○○○○○○○○○○○○○○○○

HUD OIG reviewed the development

activities of the Columbus Housing

Authority, Columbus, NE. The Authority

inappropriately spent more than $62,000 in

public housing funds to operate Crown

Villa, a non-HUD multifamily development.

It also inappropriately signed Crown Villa

loan documents that contained setoff

provisions allowing the bank to take

Authority deposits in the event of default.

The Authority defaulted, and the bank

seized more than $88,000 in public housing

funds to satisfy the defaulted loans. The

Authority still owes nearly $112,000 on a

remaining loan. It is now at significant risk

44 HUD’s Public and Indian Housing Programs
of being unable to continue administering

HUD housing programs.

OIG recommended that HUD require

the Authority to (1) repay its public housing

program from nonfederal sources, (2) ensure

that no additional HUD funds are used for

nonfederal activities without prior HUD

approval, (3) terminate the bank agreement

that is encumbering public housing funds,

and (4) implement controls to protect federal

funds. OIG also recommended that HUD

impose administrative sanctions against the

Authority, its former executive director, and

members of its board of commissioners for

placing the Authority in its current position.

(Audit Report: 2006-KC-1014)

○○○○○○○○○○○○○○○○○

HUD OIG audited the public housing

program of the Youngstown Metropolitan

Housing Authority in Youngstown, OH,

based on a citizen’s complaint to the hotline.

The complainant alleged that the Authority’s

executive director (1) ordered Authority

personnel to purchase her a new sport utility

vehicle for her personal use, (2) failed to

follow HUD’s and the Authority’s

procurement policies, (3) used the

Authority’s employees for personal services

during duty hours, (4) used the Authority’s

equipment for her own and others’ personal

use, and (5) tampered with the Authority’s

records. OIG’s objectives were to determine

whether the complainant’s allegations were

substantiated and whether the Authority

used HUD funds in accordance with

applicable requirements.

The Authority did not follow HUD’s

requirements for full and open competition

and its procurement procedures manual

regarding the procurement of legal and

housing maintenance training services

totaling almost $100,000 from July 2004

through January 2006. In addition, it did

not follow federal requirements regarding

its use of almost $4,000 in public housing

operating funds from May 2004 through

September 2005. It used more than $2,000

to pay entertainment expenses for its

employees and residents, more than $1,000

to pay travel expenses, and more than $150

to pay bereavement expenses. The

complainant’s other allegations were not

substantiated by the review.

OIG recommended that HUD require

the Authority to (1) support that the use of

operating funds for legal services was

reasonable or reimburse its operating fund

from nonfederal funds for the applicable

amount, (2) implement procedures and

controls to ensure that it follows HUD’s

requirements and/or the Authority’s

procurement procedures manual when

procuring services and using operating

funds, (3) submit its legal services contracts

to HUD for review and approval before

disbursing additional HUD funds for legal

services, and (4) review its use of operating

funds to ensure that funds were used for

allowable expenses. If operating funds were

used to pay inappropriate expenses, the

Authority should reimburse its operating

fund from nonfederal funds as appropriate.

(Audit Report: 2006-CH-1009)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Housing

Authority of Lawrence County, KY, to

determine whether it managed its

procurement and financial management

systems in accordance with HUD

requirements. The Authority spent almost

$72,000 for questionable purchases and

travel expenses. HUD and the Authority

have entered into an improvement plan and

memorandum of agreement to address

inefficiencies in the Authority’s operations,

but additional actions are needed.

OIG recommended that HUD (1)

require the Authority to provide support for

almost $72,000 in questionable costs or repay

any ineligible or unsupported amounts from

nonfederal funds; (2) revise the

improvement plan and memorandum of

agreement with the Authority to include

actions to ensure that the Authority

HUD’s Public and Indian Housing Programs 45
adequately segregates its accounts payable

processes, provides adequate supervisory

oversight of credit card purchases and travel

advances, and complies with its

procurement policies and federal

procurement regulations; and (3) reevaluate

the corrective actions at a later date to

determine whether the actions were

appropriate. (Audit Report: 2006-AT-1017)

Low -Rent Maintenance w -Rent Maintenance

Program

HUD OIG audited the Housing

Authority of the City of McKeesport’s,

McKeesport, PA, management of its lowrent maintenance program. The Authority

received operating subsidies for ineligible

units and did not prevent conflict-of-interest

situations with its vendors. Additionally, it

did not provide adequate management

oversight and control and did not

implement adequate policies and

procedures to ensure that its maintenance

employees completed vacant work orders as

required.

OIG recommended that the Authority

(1) repay the program more than $90,000

from nonfederal funds for the ineligible

expenditures resulting from the prohibited

conflict-of-interest situations with its

vendors, (2) implement controls and

procedures to prevent and resolve conflictof-interest situations with its vendors, (3)

provide adequate management oversight

and control to ensure that maintenance

employees document and complete vacant

unit work orders in a timely manner, (4)

bring its maintenance staffing levels in line

with HUD guidelines or properly justify

why the additional maintenance personnel

are needed, (5) implement policies and

procedures to justify hiring maintenance

contractors to provide services that should

be performed by the Authority’s

maintenance personnel, (6) repay HUD

ineligible amounts from nonfederal funds

after HUD recalculates the Authority’s

operating subsidy to exclude ineligible units

from April 1, 2003, to December 31, 2004, and

(7) discontinue requesting subsidies for

housing units that are not eligible. By

implementing these recommendations, the

Authority can put nearly $1.9 million to

better use over a 1-year period. (Audit

Report: 2006-PH-1014)

Moving to Work (MTW) ork (MTW)

Demostration Pr Demostration Program

HUD OIG audited the process HUD

used to admit the Housing Authority of

Baltimore City, Baltimore, MD, into its

MTW Demonstration program to determine

whether HUD followed applicable statutory

requirements when it admitted the

Authority into the program.

In violation of the statute, HUD

executed an MTW agreement with the

Authority without requiring it to provide for

citizen participation through a public

hearing or other means and by not requiring

it to develop a plan that considered

comments from the public hearing or any

other public comments on the proposed

program. In addition, HUD did not follow

its normal award-making process because

it allowed the Authority to submit its

expression of interest 31 months past the

HUD-established deadline and did not

require it to demonstrate its ability to

properly administer HUD funds.

OIG recommended that HUD obtain an

opinion from its Office of General Counsel

to determine whether it has sufficient legal

grounds to nullify the Authority’s MTW

agreement and if so, nullify the agreement.

If the agreement is nullified, OIG

recommended that HUD reinstate

recommendations from its prior audits of the

Authority’s Section 8 certificate and voucher

programs, Audit Reports 2005-PH-1004 and

2001-PH-1003. HUD should recapture $25.1

million from the Authority’s Section 8

reserve account that the Authority carried

46 HUD’s Public and Indian Housing Programs
over to the MTW program. HUD should

also establish policies and procedures

requiring it to obtain a legal opinion from

its Office of General Counsel when it does

not follow the normal award-making

process in approving housing agencies’

participation in program initiatives. (Audit

Report: 2006-PH-0002)

Public Housin Public Housing Operatin g Operating

Fund Pr Fund Program

HUD OIG audited HUD’s phase-down

for demolition add-on funding calculations

for the Public Housing Operating Fund

program, based on results of a prior audit

that indicated HUD did not always obtain

adequate supporting documentation from

PHAs before approving requests for phasedown funding. The objective was to

determine whether HUD obtained and

adequately reviewed the supporting

documentation for the $74.3 million in

approved phase-down funding for FYs 2004

and 2005.

HUD did not always obtain

and adequately review supporting

documentation before approving $42 million

in phase-down funding. Each field office

implemented its own procedures for the

review of phase-down funding requests in

the absence of formal guidance from HUD.

Without this guidance, the field offices

interpreted and applied phase-down for

demolition regulations inconsistently. As a

result, HUD funded more than $15.1 million

in unsupported and $20.6 million in

ineligible phase-down funding requests for

FYs 2004 and 2005.

OIG recommended that HUD develop

formal guidance and review procedures for

approving requests for the phase-down for

demolition funding, obtain and review

support for the $15.1 million in unsupported

phase-down funding requests for FYs 2004

and 2005, determine the correct amount of

phase-down funding received, recover the

$20.6 million in ineligible phase-down

funding paid to public housing agencies in

FYs 2004 and 2005, and obtain and review

complete support for phase-down funding

requests for FY 2006. (Audit Report: 2006-

BO-0001)

HUD’s Public and Indian Housing Programs 47

Copyright, 2006. Baltimore Sun -

Baltimore, MD. Reprinted with permission.
Conversion of

sion of sion of Low-Rent

Units to Housin Units to Housing Choice g Choice

Voucher Program

HUD OIG reviewed HUD’s oversight of

PHAs’ compliance with the mandatory

conversion of low-income housing units to

the Section 8 Housing Choice Voucher

program to determine whether HUD had

adequate oversight to ensure that Section

202 of the Omnibus Consolidated

Rescissions and Appropriations Act of 1996

was followed by PHAs regarding the

mandatory conversion of low-income

housing units.

Of the 28 public housing developments

reviewed, all developments had either

completed or were in the process of meeting

the mandatory conversion requirements

except for the Detroit Housing

Commission’s Frederick Douglass

development. HUD approved the partial

demolition of the development in July 2001

based in part on its high vacancy rate. As of

March 22, 2006, partial demolition had

occurred; however, the development was

still not meeting the mandatory conversion

requirements, and it had a vacancy rate of

43 percent.

OIG recommended that HUD

implement additional procedures and

controls to ensure that all public housing

authorities comply with Section 202 and

HUD’s regulations regarding the mandatory

conversion of low-income housing units and

initiate appropriate action to ensure that the

Frederick Douglass development complies

with Section 202’s requirements and HUD’s

regulations regarding mandatory

conversion. (Audit Report: 2006-CH-0002)

○○○○○○○○○○○○○○○○○

48 HUD’s Public and Indian Housing Programs
HUD’s Public and Indian Housing Programs 49

Investigations

During this reporting period, OIG

opened 388 investigation cases and closed

361 cases in the Public and Indian housing

program area. Judicial action taken on these

cases during the period included $7,855,917

in investigative recoveries, $14,559,970 in

funds put to better use, 516 indictments/

informations, 298 convictions/pleas/pretrial

diversions, 735 administrative actions, 10

civil actions, 7 personnel actions, and 1,798

arrests.

Chart 3.2: Public and Indian Housing

Recoveries

Section 8, Tenant Fraud

58% ($4,483,422)

Total Recoveries $7,855,917

Other

3% ($191,801)

Section 8,

Landlord Fraud

7% ($528,731)

Embezzlement

2% ($137,118)

False

Statements

11% ($802,983)

Public

Corruption

13%

($1,073,820)

Tenant Fraud

3%

($221,223)

Mail Fraud

3%

($199,000)

Some investigations discussed in this

report were conducted by OIG or jointly

with federal, state, and local law

enforcement agencies. The results of

various significant investigations are

described below.

Public Housin Public Housing Authority g Authority

Theft/Embe heft/Embezzlement

zzlement zzlement

Raymond Asselin, Sr., the former

executive director of Springfield Housing

Authority (SHA); his wife Janet Asselin; his

sons James Asselin, Raymond Asselin, Jr.,

Christopher P. Asselin (formerly 9th

Hampden District Representative for the

State of Massachusetts), and Joseph Asselin;

Arthur G. Sotirion, the former deputy

executive director of SHA; and former SHA

contractors John Spano, doing business as

Valley Floor Covering, Inc., and John P.

Corcoran, doing business as Corcoran

Plumbing, each pled guilty in U.S. District

Court, Springfield, MA, to numerous

charges including racketeering, filing false

A Look Back for the Year

Chart 3.3: Per t 3.3: Percentage of OIG Public and Indian Housing Closed Investigation Cases ation Cases,

Performed FY 06

Region 1

Boston

7%

Region 2

New York

9%

Region 3

Philadelphia

17%

Region 4

Atlanta

10%

Region 5

Chicago

12%

Region 6

Fort Worth

14%

Region 7-8

Kansas City

15%

Region 9-10

Los Angeles

16%
federal income tax returns, conspiracy to

commit theft against the government,

conspiracy to commit receipt of gratuity,

conspiracy to commit theft, conspiracy to

commit mail fraud/theft of honest services,

conspiracy to commit federal bribery,

conspiracy to commit wire fraud, and/or

obstruction of justice. The above defendants

and other conspirators assisted Raymond

Asselin, Sr., the former executive director at

SHA, in embezzling more than $3.5 million

from SHA for the personal benefit of

himself, family members, and others. The

SHA funds were embezzled in the form of

money and items, including home

improvements, household goods,

construction work, automotive repairs, and

contributions to Christopher Asselin’s

political campaign. As part of a settlement,

12 defendants agreed to collectively

liquidate six properties, including a $1.2

million house on Cape Cod, a time-share

condo in Aruba, a 23-foot Chaparral boat, a

BMW automobile, and $243,650 in cash

previously seized.

○○○○○○○○○○○○○○○○○

Eric Ackerman, President of Ackerman

Mechanical Services, Inc., a plumbing

50 HUD’s Public and Indian Housing Programs

Copyright, 2006. The Republican - Springfield, MA. Reprinted with permission.

contractor for Buffalo Municipal Housing

Authority (BMHA), was sentenced in U.S

District Court, Buffalo, NY, to 6 months

home confinement and 18 months probation

and fined $10,000 for his earlier guilty plea

to false statements to HUD. Mary K.

Pedlow, also known as Mary Casey

Ackerman, an employee of Ackerman

Mechanical Services, Inc., pled guilty to one

count of submitting false documents to

HUD. Both Ackerman and Pedlow falsely

certified their qualifications as a Minority

Business Enterprise (MBE) and their

utilization and distribution of contract work

to an actual MBE company on BMHA

projects. As a result, Ackerman illegally

obtained approximately $1.75 million in

BMHA contracts.

○○○○○○○○○○○○○○○○○

LaToya Cotton, a former Michigan State

Housing Development Authority (MSHDA)

contractor, was sentenced in U.S. District

Court, Detroit, MI, to 41 months incarceration

and 3 years probation and ordered to pay

MSHDA $1,052,701 restitution for her earlier

guilty plea to theft and embezzlement. Cotton,

doing business as Washtenaw Payee Services,

created false tenant files and inspections to
HUD’s Public and Indian Housing Programs 51

divert and personally use MSHDA funds for

10 years.

○○○○○○○○○○○○○○○○○

William Moorehead, doing business as

William Moorehead and Associates (WMA),

pled guilty in U.S. District Court, Chicago,

IL, to one count of wire fraud. Moorehead,

a property manager for many housing

authorities and privately owned Section 8

developments, created fraudulent records

and money transfers to hide embezzled and

misused HUD funds. In addition,

Moorehead directed former WMA

employees Patricia Taylor and Brian

Townsend to create false bank records and

draw checks on bank accounts containing

insufficient funds; both Taylor and

Townsend previously pled guilty to one

count of wire fraud. As a result of their

actions, HUD realized losses of $995,000.

○○○○○○○○○○○○○○○○○

Ronald McCoy, a Philadelphia Housing

Authority (PHA) contractor doing business as

ABC Construction, was sentenced in

Philadelphia Court of Common Pleas,

Philadelphia, PA, to 1 to 5 years in prison for

his earlier guilty plea to theft by deception,

bid rigging, and conspiracy. McCoy

fraudulently billed PHA subsidiary

Philadelphia Housing Development

Corporation for rehabilitation work he failed

to complete at a low-income shelter. As a

result, HUD realized losses of $156,000.

○○○○○○○○○○○○○○○○○

Eric Hurt, a former accounting manager

at Hoboken Housing Authority (HHA), pled

guilty in U.S. District Court, Newark, NJ,

to theft concerning programs receiving

federal funds and federal income tax

violations. Hurt, while employed as the

accounting manager at HHA, embezzled

$111,083 in HHA funds by issuing 34 checks

from the HHA general operating fund to

himself without authorization, deposited 31

HHA checks into his personal bank

accounts, cashed the remaining three HHA

checks, used the misappropriated HHA

funds for personal expenditures, and failed

to report the stolen funds as income on his

federal income tax returns.

○○○○○○○○○○○○○○○○○

Livia Alicea-Rios, the former executive

manager of San Juan’s Department of

Housing and Community Development

(SJDHCD) Section 8 Division; Jeffrey FontRuiz, a former SJDHCD landlord; and

Shemika Ortiz-Aquino, a former SJDHCD

Section 8 tenant, were indicted in U.S.

District Court, San Juan, PR, on conspiracy

to corruptly solicit monies concerning

programs receiving federal funds, program

fraud, and theft of government funds. In

addition to the defendants above, Lorna

Yeampierre-Adorno, Gladys Rosario-Santel,

Teresa Fernandez-Maldonado, and 29

SJDHCD Section 8 voucher tenants were

charged with one count of conspiracy to

corruptly solicit monies concerning

programs receiving federal funds. From

March 2004 through March 2005, AliceaRios, Font-Ruiz, and Ortiz-Aquino allegedly

orchestrated a fraud scheme using

Yeampierre-Adorno, Rosario-Santel, and

Fernandez-Maldonado as “runners” to

receive payments from SJDHCD Section 8

applicants. The SJDHCD Section 8

applicants allegedly provided $800 to $1,500

to obtain SJDHCD Section 8 vouchers or

move up on the SJDHCD Section 8 waiting

list.

○○○○○○○○○○○○○○○○○

Marysol Morales, the former Avon

Housing Authority (AHA) Section 8

coordinator, was sentenced in U.S. District

Court, Boston, MA, to 70 months

incarceration and 2 years supervised release

and ordered to pay AHA and three victims

$194,100 restitution for her earlier conviction

on false statements and corrupt receipt of

payments by an agent of a federally funded

local government entity. From January to

December 2004, Morales accepted at least

$31,000 for selling more than 100 AHA

Section 8 vouchers valued in excess of $1.3

million. As a result, HUD realized losses of

$387,000.

○○○○○○○○○○○○○○○○○
Thomas Herrera, the former executive

director of Pueblo de Cochita Housing

Authority (PDCHA), was sentenced in U.S.

District Court, Albuquerque, NM, to 3 years

probation and ordered to pay PDCHA

$78,448 restitution for his earlier guilty plea

to embezzlement from an Indian tribal

organization. From February to November

2003, Herrera forged PDCHA board

members’ signatures on unauthorized

PDCHA checks he issued to himself,

endorsed and cashed the PDCHA checks,

and used the embezzled PDCHA funds for

personal expenses. As a result, HUD

realized a loss of $78,448.

○○○○○○○○○○○○○○○○○

Serena Parker, a former Greensboro

Housing Authority (GHA) intake specialist,

and Vivian Bailey, a fabricated GHA landlord,

were sentenced in U.S. District Court,

Greensboro, NC, for their earlier guilty pleas

to mail fraud and aiding and abetting. Parker

was sentenced to 1 month incarceration, 5

months home detention, and 3 years

supervised release and ordered to pay GHA

$74,322 restitution; Bailey was sentenced to 4

months home detention and 4 years probation

and ordered to pay GHA $19,861 restitution.

Parker accessed GHA’s computer system,

illegally added Bailey and previously indicted

Teresa Thomas as GHA landlords, and caused

the mailing of 48 fraudulent housing

assistance payment checks valued at more

than $70,000 to Bailey and Thomas. As a result,

HUD realized a loss of $74,322.

○○○○○○○○○○○○○○○○○

Corey Newton and Gregory Webb,

former employees of Housing Authority of

New Haven (HANH) and doing business

as Unlimited Horizons, each pled guilty in

U.S. District Court, New Haven, CT, to

conspiring to make false statements and

misapplying money belonging to a local

government entity receiving federal

funds. Newton and Webb created a

fictitious company, awarded themselves

approximately $54,000 in HANH

maintenance and rehabilitation contracts,

and used HANH employees to complete the

contract work.

○○○○○○○○○○○○○○○○○

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

providing social services to HANH public

housing residents, pled guilty in U.S. District

Court, New Haven, CT, to an information

charging her with theft from a program

receiving federal funds. From 2001 through

2003, while serving as the Police

52 HUD’s Public and Indian Housing Programs

Copyright, 2006. New Haven Register- New

Haven, CT. Reprinted with permission.
Commissioner for the City of New Haven

and holding an elected position on the New

Haven Board of Aldermen, Rawls-Ivy

prepared, endorsed, and negotiated ASC

checks totaling more than $49,000 for her

personal use.

○○○○○○○○○○○○○○○○○

Carsereena Red Dog, a former

accounting specialist with Opportunities,

Inc., a nonprofit organization administering

a HUD Section 8 housing program, and her

husband Leslie Red Dog were sentenced in

U.S. District Court, Great Falls, MT, for their

earlier guilty pleas to false statements.

Carsereena and Leslie Red Dog were each

sentenced to 6 months home detention and

5 years probation and ordered to pay the

Montana Department of Commerce $32,455

restitution jointly and severally. Carsereena

and Leslie Red Dog failed to report Leslie’s

income on housing certifications and

obtained $32,455 in housing assistance

payments they were not entitled to receive.

○○○○○○○○○○○○○○○○○

Walter John, a former Virgin Island

Housing Authority (VIHA) procurement

specialist, and George Flemming, a former

VIHA contractor and owner of Mr. G’s

Maintenance, were convicted in U.S. District

Court, St. Croix, VI, of conspiracy, wire

fraud, and federal program fraud. From

June 1998 to September 1999, John received

more than $30,000 from Flemming for

preferential treatment in securing a $1.5

million VIHA public housing rehabilitation

contract and expedited payments. As a

result, HUD’s loss is estimated at $30,000.

○○○○○○○○○○○○○○○○○

Toni Hart, the former Lawrence County

Housing Authority (LCHA) executive

director, was indicted in U.S. District Court,

Lawrenceville, IL, on two counts of

embezzlement and one count each of wire

fraud and false statements to a federal agent.

Hart allegedly used a LCHA credit card to

purchase clothing and jewelry, acquire cash

through ATM withdrawals, and pay for

personal trips. HUD’s loss is estimated at

more than $24,000.

○○○○○○○○○○○○○○○○○

Chris Emeka Ayoka, a former

Minneapolis Public Housing Authority

(MPHA) Section 8 inspector, was indicted in

Hennepin County Court, Minneapolis, MN,

on one count of theft by swindle. Ayoka

allegedly worked as a baggage handler at the

Minneapolis-St. Paul International Airport

while claiming he conducted and received

payment for MPHA Section 8 residential

inspections. HUD’s loss is estimated at

$15,000.

○○○○○○○○○○○○○○○○○

Waconda Nolan, a former Internal

Revenue Service (IRS) employee, was

sentenced in U.S. District Court, Atlanta,

GA, to 5 years probation and 40 hours of

community service and ordered to pay

Atlanta Housing Authority (AHA) $13,629

restitution for her previous guilty plea to

false statements. Nolan provided false

verifications of employment on behalf of

others to AHA.

○○○○○○○○○○○○○○○○○

Frederick Demps, the former Housing

Authority of the City of Austin (HACA)

housing manager, was indicted in U.S.

District Court, Austin, TX, on one count of

theft from a federally funded program.

Demps allegedly embezzled tenant rents

and altered HACA accounting documents

to hide missing HACA funds. As a result,

HUD realized a loss of $7,750.

○○○○○○○○○○○○○○○○○

Guy Dill Copes, the former executive

director of Housing Authority of the Town

of Beaufort (HATB), was arrested after a

complaint was filed in Carteret County

District Court, Beaufort, NC, charging him

with embezzlement and larceny by an

employee. Copes allegedly purchased tools

and equipment with HATB funds for his

personal use. HUD’s loss is estimated

to exceed $5,000.

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HUD’s Public and Indian Housing Programs 53
Daniel M. McNamee, a former

Springfield Housing Authority (SHA)

maintenance supervisor, was arrested after

his indictment in U.S. District Court,

Springfield, MA, on obstruction of due

administration of justice and filing a false

federal income tax return. McNamee

allegedly caused SHA to purchase and pay

$1,720 for a boiler, hot water tank, and

baseboard heating components installed in

the Rhode Island residence of Francis

Keough, the previously indicted former

director of Friends of the Homeless, a HUDfunded nonprofit.

○○○○○○○○○○○○○○○○○

Benita James and Sean Gray, former

Housing Authority of the City of New

Haven (HANH) employees, were indicted

in Superior Court, New Haven, CT, on

charges of conspiracy to commit identity

theft, larceny, conspiracy to commit larceny,

and trafficking in personal identifying

information. James, while employed at

HANH, allegedly accessed HANH

computer databases, obtained identifying

information on another HANH employee/

Section 8 landlord, and sold the

identification information to Gray. Gray,

using the stolen identification information

he purchased from James, allegedly opened

residential and cellular telephone accounts

in the name of the victim. In addition to her

indictment above, James was sentenced in

U.S. District Court, Bridgeport, CT, to 6

months home confinement and 3 years

probation and fined $3,000 for her earlier

guilty plea to federal program bribery.

While employed at HANH, James accepted

cash and stolen items in exchange for

moving HANH Section 8 applicants to the

top of the Section 8 waiting list.

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Phyllis Marie Moor, director of Land

Acquisitions for Lakeland Housing

Authority (LHA), was charged in an

information filed in Polk County Tenth

Judicial Circuit Court, Bartow, FL, with one

count each of forgery and uttering forged

instruments. Moor allegedly falsified her

LHA employment application by using a

Social Security number (SSN) assigned to

another person to conceal her criminal

history and obtain employment with LHA.

Moor obtained LHA employment and an

annual salary of $74,880.

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David Gomez Serena, the former

executive director of Yolo County Housing

Authority (YCHA), was indicted in County

of Yolo Superior Court, Woodland, CA, on

numerous counts of making false and

fraudulent insurance claims, preparing false

statements concerning insurance claims,

and grand theft exceeding $400. Serena

allegedly claimed his girlfriend and her

dependent children as his dependents to

collect medical insurance benefits provided

by YCHA.

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Bertha G. Muniz, the former Bayard

Housing Authority (BHA) executive

director, was indicted in Grant County

Court, Silver City, NM, on one count of

embezzlement. Muniz allegedly authorized

BHA maintenance personnel to purchase

materials, build a covered porch and

elevated walkway, and install security lights

at her personal residence. HUD’s loss is

estimated at $748.

Rental Assistance Fraud Rental Assistance Fraud

As a result of “Operation Eight,”

Eliminating Ineligible Grantees Housing

Task Force (Phase II), 14 Chicago Housing

Authority (CHA) or Cook County Housing

Authority (CCHA) Housing Choice Voucher

Program participants, and a CHA

contractor were indicted in U.S. District

Court, Chicago, IL, on various counts of false

statements, mail fraud, wire fraud, and

embezzlement. The above defendants

allegedly failed to report ownership of more

than $1 million in real estate, omitted income

on CHA/CCHA annual certifications,

diverted fictitious landlord checks, or

54 HUD’s Public and Indian Housing Programs
collected housing assistance payments on

property they did not own. In addition to

criminal charges, federal civil complaints for

false claims, payment by mistake, and

unjust enrichment were filed against six of

the above subjects. HUD’s loss is estimated

to exceed $600,000.

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As part of “Operation Deep Pockets,” 19

Cuyahoga Metropolitan Housing Authority

(CMHA) Section 8 tenants and four CMHA

Section 8 landlords were indicted in Cuyahoga

County Court, Cleveland, OH, on numerous

violations of theft and fraud against the

HUD’s Public and Indian Housing Programs 55

Copyright, 2006. Chicago Sun Times - Chicago,

IL. Reprinted with permission.

CMHA. CMHA Section 8 tenants and

landlords indicted allegedly failed to report

proper annual income, tenants with

ownership in Section 8 properties, and/or

landlords residing in Section 8 units with

tenants. HUD’s loss is estimated at $422,000.

○○○○○○○○○○○○○○○○○

Miami Dade Housing Agency (MDHA)

Section 8 tenants Andrea Greene, Revenue

Bien Aime, and Sheree Dozier were indicted

in U.S. District Court, Miami, FL, on

numerous counts of theft of government

funds, false statements to HUD, or

conspiracy to defraud HUD for allegedly

failing to report income, true household

composition, ownership of MDHA

subsidized units, and/or receipt of housing

assistance from other housing authorities on

annual MDHA certifications. Delores

Murat, Rosa Colon and her husband Luis

Zayas, and Liliana Barranco each pled guilty

to theft of government funds, conspiracy,

and/or false statements for failing to report

employment, income, or ownership of or

unauthorized residency in MDHA

subsidized units on MDHA certifications.

Former MDHA tenants sentenced for their

earlier guilty pleas to theft of government

funds, false statements, and/or conspiracy

include Quiana Adams, her spouse Anthony

Boatwright, and Sharon Dixon. Adams was

sentenced to 3 months incarceration and 7

months home confinement; Boatwright was

sentenced to 6 months home confinement

and ordered to pay HUD $59,327 restitution,

jointly with Adams; and Dixon was

Copyright, 2006. Plain Dealer, Cleveland, OH. Reprinted with permission.
sentenced to 36 months supervised release

with 6 months electronic monitoring and

home confinement and ordered to pay HUD

$58,822 restitution. The above MDHA

tenants obtained more than $310,843 in

MDHA housing assistance they were not

entitled to receive.

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In an “Operation Clean Sweep Phase II”

press conference, HUD Secretary Alfonso

Jackson announced that 49 individuals were

indicted in Marion County Superior Court,

Indianapolis, IN, on charges of welfare fraud

and theft. Indianapolis Housing Authority

(IHA) Section 8 leased and subleased tenants,

landlords, and a housing manager were

indicted for allegedly collecting housing

56 HUD’s Public and Indian Housing Programs

Copyright, 2006. Indystar.com - Indianapolis, IN. Reprinted with permission.

assistance payments on behalf of vacant units,

failing to report income or disclose assets,

subleasing units to unauthorized tenants,

allowing illegal occupants with violent

criminal histories to reside in leased units, and/

or having landlords occupying subsidized

units with tenants. HUD’s losses are estimated

to exceed $500,000.

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SLS Management, Inc. (SLS), an Indianapolis Housing Authority (IHA) Section 8

landlord, pled guilty in Marion County

Superior Court, Indianapolis, IN, to one count

of welfare fraud. Between April and October

2005, SLS Management leased apartments to

new residents who were receiving Section 8

assistance. In doing so, SLS Management, Inc.
falsely certified that the owner had not been

barred from participating in any federallyfunded housing program. As part of the plea

agreement, SLS Management, Inc. agreed to

relinquish any claim to IHA Section 8

payments, pay IHA $327,640.00 and the

Indianapolis Police Department $3,480.00.

○○○○○○○○○○○○○○○○○

Sixteen public housing, Section 8

voucher, or HUD-funded project-based

multifamily residents of either Freeport

Housing Authority, Rockville Center

Housing Authority, Hempstead Department

of Urban Renewal, Nassau County

Housing and Intergovernmental Affairs, or

Woodsedge Apartments, Hempstead, NY,

were arrested after complaints were filed in

Nassau County Court, Mineola, NY,

charging them with grand larceny and/or

offering a false instrument for filing. The

above defendants allegedly failed to

accurately report their incomes on housing

assistance certifications and HUD’s loss is

estimated at more than $225,000.

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Alonzo Freeman, Joey Hornback, Sheila

O’Neal, Denneshia McCraw, Brenda McCoy,

and Bridgette Peoples, Inglewood Housing

Authority (IHA) Section 8 recipients, were

charged in Superior Court, Inglewood, CA,

with numerous counts of filing a false/

forged instruments, obtaining money by

false pretenses, grand theft, and/or fraud.

The above defendants allegedly failed to

disclose income or assets, prior criminal

histories, and/or unauthorized tenants on

annual IHA certifications. In addition, Geno

Wilson, a former IHA Section 8 tenant was

sentenced to 3 years incarceration and

ordered to pay IHA $49,434 restitution for

failing to disclose his prior criminal history

or conviction and registered sex offender

status on IHA certifications. The above

defendants obtained more than $154,000 in

IHA housing assistance they were not

entitled to receive.

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Twelve Nazareth Housing Authority

(NHA) Section 8 recipients were charged in

North Hampton County Court of Common

Pleas, Nazareth, PA, with theft by

deception or not sworn falsifications. The

12 defendants allegedly failed to report

accurate sources or amounts of household

income and allegedly obtained more than

$150,000 in NHA housing assistance benefits

they were not entitled to receive.

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As part of a Waukegan Housing

Authority (WHA) Section 8 fraud initiative,

13 WHA Section 8 tenants were arrested and

indicted in Lake County Circuit Court,

Waukegan, IL, on numerous counts of theft,

state benefits fraud, and forgery. The indicted

WHA Section 8 tenants allegedly falsified

annual WHA certifications by underreporting

income. HUD’s loss is estimated at more than

$140,000.

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Donna James, Lyris Wolfe, Sheila

Whittenberg, and Christine Carpenter,

former Housing Authority of the County of

San Mateo (HACSM) Housing Choice

Voucher program participants, each pled

guilty to informations filed in U.S. District

Court, San Francisco, CA, charging them

with one count of defrauding HUD.

Celestine Gallegos, also a former HACSM

Housing Choice Voucher program

participant, was sentenced to 24 months

probation and ordered to pay HUD $13,285

restitution for her previous guilty plea

to defrauding HUD. James, Wolfe,

Whittenberg, Carpenter, and Gallegos each

applied for and received HACSM housing

assistance payments while living in San

Francisco Housing Authority public

housing units. As a result, the above

defendants obtained $132,124 in HACSM

housing assistance they were not entitled to

receive.

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Cynthia Braxton, an IRS employee;

Christine Hill, a U.S. Postal Service

(USPS) employee, and seven additional

HUD’s Public and Indian Housing Programs 57
Montgomery County Housing Authority

(MCHA) Housing Choice Voucher program

recipients were indicted in U.S. District

Court, Philadelphia, PA, on numerous

counts of false statements in order to obtain

federally subsidized housing benefits.

Braxton, Hill, and the five additional MCHA

tenants allegedly failed to report income,

unauthorized residents, or assets on MCHA

certifications. HUD’s loss is estimated to

exceed $134,000.

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Linda White and Corrina Arenas,

former City of Ventura Housing Authority

(CVHA) Section 8 tenants; Linda McClain,

a former CVHA public housing resident;

and Gloria De La Cruz, a former CVHA

landlord, were each charged in Ventura

County Superior Court, Ventura, CA, with

one count of grand theft. The above

defendants allegedly failed to report

vacated CVHA subsidized units and/or

employment, business, or rental income

on CVHA certifications and obtained

approximately $93,390 in CVHA housing

assistance they were not entitled to receive.

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Previously indicted Kalsoum Berro, a

Michigan State Housing Development

Authority (MSHDA) Section 8 tenant, and

Hassan Berro, an MSHDA Section 8 landlord,

entered into a diversion program agreement

in Wayne County Circuit Court, Detroit, MI.

Terms of their agreement required a $35,000

payment to MSHDA. From 1990 , Kalsoum

and Hassan Berro resided in the same

subsidized housing unit but failed to claim

their joint residency on MSHDA tenant and

housing assistance payment contract

certifications. As a result, HUD realized a loss

of $90,000.

○○○○○○○○○○○○○○○○○

Compton Housing Authority (CHA)

Section 8 tenants Christine Shena Baker and

Joseph Christianlee Haywood were indicted

or pled guilty in U.S. District Court, Los

Angeles, CA. Baker was indicted for making

false statements to a government agency and

fraud and false statements involving HUD

for allegedly failing to disclose her criminal

history and status as a registered sex

offender on annual CHA certifications.

Haywood, previously convicted of rape,

auto theft, and assault with a deadly

58 HUD’s Public and Indian Housing Programs

Copyright, 2006. Times Herald, Philadelphia, PA. Reprinted with permission.
weapon, pled guilty to an information

charging him with one count of theft of

government funds for failing to disclose his

prior criminal history on annual CHA

certifications. Baker and Haywood obtained

more than $88,000 in CHA housing

assistance payments they were not entitled

to receive. CHA terminated both Baker and

Haywood from its rental assistance

program.

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Jerome Massey, a Detroit Housing

Commission (DHC) Section 8 landlord and

previously convicted felon, was charged in

Wayne County Circuit Court, Highland Park,

MI, with numerous counts of receiving

monies under false pretenses, tax evasion,

identity theft, delivery/manufacture of

marijuana, and under the Habitual Offender

Act. Massey allegedly used his son’s SSN and

collected $84,000 as a DHC landlord while

occupying a DHC subsidized unit with a DHC

Section 8 tenant. Massey was arrested after

marijuana plants, harvested marijuana, and

materials for a continued marijuana operation

were found in the DHC unit.

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Clifford Chambers, a Montgomery

County Housing Opportunities

Commission (MCHOC) Section 8 recipient,

was sentenced in U.S. District Court,

Greenbelt, MD, to 18 months incarceration

and 3 years supervised release and ordered

to pay MCHOC $80,912 restitution for his

earlier guilty plea to trafficking in

counterfeit goods and theft of government

property. From 2000 to June 2004, Chambers

owned and operated a business selling

counterfeit marked goods out of his

MCHOC subsidized unit and failed to report

the business income on annual MCHOC

certifications. As a result, Chambers

obtained $80,912 in MCHOC housing

assistance he was not entitled to receive.

○○○○○○○○○○○○○○○○○

David Murray-McCarthy, a former

Metropolitan Boston Housing Partnership

(MBHP) Section 8 tenant, pled guilty in U.S.

District Court, Boston, MA, to an

information charging him with false

statements and defrauding the Social

Security Administration (SSA). MurrayMcCarthy assumed a false identity to obtain

an SSN, federal student loans, and

employment, while using his true identity

to obtain MBHP housing assistance and

Social Security Disability Insurance benefits.

As a result, HUD realized a loss of $72,606.

○○○○○○○○○○○○○○○○○

Barbara Singleton, a Rochester Housing

Authority (RHA) Section 8 tenant, and Larry

Pradia, a RHA landlord, were each charged

in a superseding indictment filed in U.S.

District Court, Rochester, NY, with

conspiracy to commit HUD fraud, false

statements, theft of government funds, and

bankruptcy fraud. Singleton and Pradia

allegedly conspired to collect more than

$70,000 in RHA Section 8 housing assistance

payments when Singleton certified that

Pradia was her landlord and resided

elsewhere on annual RHA certification and

leasing documents. In addition, Pradia filed

bankruptcy in November 2005 and allegedly

failed to claim RHA Section 8 income or his

residency with Singleton on bankruptcy

documents.

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Deonna Degraffenreid, a former City of

Las Vegas Housing Authority (LVHA)

Section 8 tenant, pled guilty in Clark County

Justice Court, Las Vegas, NV, to one count

of conspiracy to commit unlawful acts

concerning food stamps. Degraffenreid

failed to accurately report her household

income and composition on LVHA and

Nevada welfare certifications and obtained

$65,823 in LVHA housing assistance she was

not entitled to receive.

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Tyeshia Borela, a former San Francisco

Housing Authority (SFHA) Section 8 tenant,

pled guilty in U.S. District Court, San

Francisco, CA, to one count of making false

HUD’s Public and Indian Housing Programs 59
statements. Borela was sentenced to 1

month incarceration and 3 years probation

and ordered to pay HUD $63,042 restitution.

From 2002 to 2005, Borela sublet her $2,000

monthly SFHA subsidized unit to others,

underreported her income, and falsely

claimed a daughter on SFHA certifications.

○○○○○○○○○○○○○○○○○

Eugenia Cooks, a former Norwalk

Housing Authority (NHA) Section 8

recipient, was charged in an information

filed in U.S. District Court, Los Angeles, CA,

of making false statements. From 1994 to

2003, Cooks allegedly failed to report income

on annual NHA certifications and obtained

more than $60,000 in NHA housing

assistance she was not entitled to receive.

○○○○○○○○○○○○○○○○○

Jennifer Stevanovich, a former Andover

Section 8 tenant, pled guilty in Essex County

Superior Court, Salem, MA, to larceny over

$250 and criminal perjury. Stevanovich was

sentenced to 1 year house arrest and 15 years

probation and ordered to pay $59,765 to

Community Teamwork, Inc., a Section 8

contract administrator, and $57,790 to

the Commonwealth of Massachusetts.

Stevanovich, previously convicted of selling

stolen “Victoria’s Secret” merchandise from

her subsidized housing unit, deposited

approximately $280,000 into eight bank

accounts while receiving $59,765 in housing

benefits and $57,790 in welfare benefits she

was not entitled to receive.

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Carrie Bailey, a former Isle of Wight

Department of Social Services (IOW) Section

8 tenant, and her daughter Melinda Bailey

were indicted in Isle of Wight Circuit Court,

Smithfield, VA, on numerous counts of

conspiracy, making false statements, and

obtaining money by false pretenses from

HUD, SSA, and the Virginia Department of

Social Services. Carrie and Melinda Bailey

allegedly conducted a 15-year scheme to

receive housing assistance, Social Security

benefits, food stamps, Medicaid, and other

social service benefits by falsifying

household composition and income. Total

loss to the government is estimated at

$250,000, including $53,000 in HUD-funded

housing assistance payments.

○○○○○○○○○○○○○○○○○

Esther Arias, her mother Esther Percel,

and Gladys Cabrera, former Revere Housing

Authority (RHA), Boston Housing

Authority (BHA), and/or Metropolitan

Boston Housing Partnership (MBHP)

Section 8 tenants, and Edwin Gonzalez were

indicted in U.S. District Court, Boston, MA,

on numerous counts of conspiracy, mail

fraud, theft and receipt of stolen mail, bank

fraud, identity theft, conspiracy to file false

claims for refunds, false and fraudulent

statements, and/or theft of government

property involving HUD benefits. Arias,

Percel, and Cabrera allegedly conspired to

engage in an ongoing criminal enterprise,

including stealing U.S. mail, using stolen

identification data to open credit card and

bank accounts, altering stolen checks to

obtain bank funds, depositing stolen credit

card checks into bank accounts, and using

various identities to fraudulently obtain

RHA, BHA, or MBHP Section 8 housing

units within the greater Boston area. In

addition, from February 1999 to April 2004,

Arias, Percel, and Gonzalez allegedly caused

the filing of more than 45 fraudulent federal

income tax returns to unlawfully collect

federal and state tax refunds. As a result,

HUD’s loss is estimated at $51,916.

○○○○○○○○○○○○○○○○○

Nasir Javaid, a former San Francisco

Housing Authority (SFHA) Section 8

landlord, and Nancy Kharsa, a former SFHA

Section 8 tenant, were each sentenced in U.S.

District Court, San Francisco, CA, for their

earlier guilty pleas to making false

statements to HUD. Javaid was sentenced

to 2 years probation and ordered to pay

HUD $51,717 restitution; Kharsa was

sentenced to 2 years probation and ordered

to pay HUD $1,822 restitution, jointly and

severally with Javaid. From 1998 to 2002,

60 HUD’s Public and Indian Housing Programs
Javaid and Kharsa defrauded HUD’s Section

8 program by using SFHA and/or HUD

multifamily housing assistance payments

received by Javaid, Kharsa, and Javaid’s

mother to purchase two properties located

in El Cerrito and San Francisco. As a result

of their actions, HUD realized losses of

$51,717.

○○○○○○○○○○○○○○○○○

In U.S. District Court, Boston, MA, a

$435,798 civil judgment was issued against

Delia Baez, a former Boston Housing

Authority (BHA) public housing tenant, for

obtaining housing assistance, welfare

benefits, food stamps, and Medicaid

through false claims and fraud. Baez failed

to report her ownership of a restaurant

known as “Mi Tierra” and a multifamily

property on BHA certifications. As a result,

HUD’s loss is estimated at $51,038.

○○○○○○○○○○○○○○○○○

Shaunda Boulware, Nikki Robinson,

Rose Long, and Silvia and Carlos Delgado,

San Diego Housing Commission (SDHC)

Section 8 recipients, were charged in San

Diego County Superior Court, San Diego,

CA, with making false statements and

grand theft. Boulware, Robinson, Long, and

Silvia and Carlos Delgado allegedly failed

to report income and/or employment and/

or claimed nonresident dependents on

SDHC applications and obtained $50,911 in

SDHC housing assistance they were not

entitled to receive.

○○○○○○○○○○○○○○○○○

Shaneen Edwards and Manila McCloud,

City of Miami Department of Community

Development (MDCD) Section 8 tenants,

each pled guilty in U.S. District Court,

Miami, FL, to theft of government funds

and/or making false statements. McCloud

was sentenced to 60 months supervised

release and 100 hours community service

and ordered to pay HUD $22,695 restitution.

Edwards and McCloud failed to report

income on MDCD certifications and

obtained $48,140 in MDCD housing

assistance they were not entitled to receive.

○○○○○○○○○○○○○○○○○

Cassaundra Samuels, a Housing

Authority of Kansas City (HAKC) Section 8

tenant and IRS employee, and Connie

Wooten, a HAKC Section 8 recipient, current

employee of USPS, and former employee of

IRS, were charged in Jackson County

District Court, Kansas City, MO, with

stealing by deceit. Samuels and Wooten

allegedly failed to report employment

income on HAKC certifications and

obtained $47,630 in HAKC housing

assistance they were not entitled to receive.

○○○○○○○○○○○○○○○○○

HUD’s Public and Indian Housing Programs 61

Copyright, 2006. The Daily Item, Boston, MA. Reprinted with permission.
Angel Smith, also known as Angel King;

Gloria Dixon; and Catrinia Parker, former

Tampa Housing Authority (THA) Section 8

tenants, were each charged in informations

filed in Hillsborough County Thirteenth

Judicial Court, Tampa, FL, with fraud for

allegedly failing to report all household

occupants, employment, income, or other

government benefits they received on THA

certifications. In addition, Jeanette Camille,

a former THA Section 8 tenant, entered into

a pretrial diversion agreement (PTDA) with

the U.S. Attorney’s Office in Tampa, FL,

admitting to theft of government funds. The

PTDA placed Camille on 12 months

supervisory probation and ordered her to

perform 60 hours of community service and

pay THA $5,048 restitution for failing to

report income on THA certifications.

Barbara Mack, also a former THA Section 8

tenant, was sentenced in U.S. District Court,

Tampa, FL, to 5 months incarceration, 5

months home detention, and 36 months

probation and ordered to pay HUD $23,455

and SSA $38,333 restitution for her earlier

guilty plea to theft of government funds. Mack

acquired and used two SSNs to obtain THA

housing assistance, SSA disability benefits,

and a Federal Housing Administration (FHA)-

insured mortgage and to file bankruptcy, then

failed to report employment income she

earned to THA or THA housing assistance and

SSA disability benefits to the bankruptcy

court. As a result, Smith, Dixon, Parker,

Camille, and Mack obtained approximately

$47,465 in THA housing assistance they were

not entitled to receive.

○○○○○○○○○○○○○○○○○

Johnnie Mae Brooks, a Greensboro

Housing Authority (GHA) Housing Choice

Voucher program participant, pled guilty in

U.S. District Court, Greensboro, NC, to

making false statements to HUD. Brooks

failed to report income from two daycare

businesses she owned and operated on GHA

Housing Choice Voucher program

certifications. In addition, Blondine Yvonne

Wynn, a former GHA Housing Choice

Voucher program participant, was indicted

on two counts of making false statements to

HUD. From February 2002 to May 2005,

Wynn allegedly failed to report employment

or income, and claimed a nonresident

daughter on annual GHA certifications. As

a result, HUD’s loss is estimated at $47,000.

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Patricia Laverne Bryant, a former

Housing Authority of Pittsburg (HAP)

Section 8 tenant, was charged in a complaint

filed in Contra Costa County Superior Court,

Walnut Creek, CA, with grand theft, welfare

fraud, and perjury. Bryant allegedly failed

to report income or the residency of her

boyfriend on annual HAP certifications and

obtained $46,000 in HAP housing assistance

she was not entitled to receive.

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Ernest Stevenson, a Duluth Housing

Redevelopment Authority (DRHA) Section

8 landlord, and Paula Petruk, also known as

Paula Stevenson, a DRHA Section 8 tenant,

were each sentenced in U.S. District Court,

Duluth, MN, to 3 years probation and 150

hours of community service and ordered to

pay HUD $45,441 restitution, jointly and

severally, for their earlier guilty pleas to

conspiracy. Stevenson and Petruk failed to

disclose joint bank accounts, ownership of

additional real estate, or their dual

occupancy in a DRHA Section 8 unit on

DRHA certifications. As a result, HUD

realized losses of $45,441.

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Jalenska Cheatham, a Murfreesboro

Housing Authority (MHA) Section 8 tenant,

was indicted in the U.S. District Court,

Nashville, TN, for making charges of false

statements to HUD and theft of government

funds for allegedly failing to report

employment income or ownership of

her MHA subsidized unit on MHA

certifications. In addition, Marshall Graves,

a former MHA Section 8 tenant, pled guilty

to msking false statements to HUD for

failing to report income on MHA

certifications. As a result, Cheatham and

62 HUD’s Public and Indian Housing Programs
Graves obtained $43,326 in MHA housing

assistance they were not entitled to receive.

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Amy McPherson and Delilah Property,

Inc., also known as Delilah Property

Services, Inc., entered into a $254,774 civil

settlement with the New Hampshire United

States Attorney’s Office, Concord, NH, as a

result of McPherson’s previous guilty plea

to msking false statements. The consent

decree and order of payment was entered

on behalf of HUD, the U.S. Department of

Health and Human Services (HHS), the U.S.

Department of Agriculture (USDA), SSA,

and DOJ. McPherson paid $100,000, and a

lien securing a Delilah Properties, Inc.,

property located in Waltham, MA, for the

remainder of the settlement order was

recorded. McPherson, a former Exeter

Housing Authority (EHA) Section 8

recipient, received EHA Section 8 housing

assistance on a residence she occupied and

owned under the corporate name of Delilah

Properties, Inc. As a result, HUD realized a

loss of $38,765.

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Mary Martin, a former Saint Petersburg

Housing Authority (SPHA) Section 8 tenant,

was sentenced in U.S. District Court, Tampa,

FL, to 5 years probation with 6 months home

detention and ordered to pay HUD $36,997

restitution for her earlier guilty plea to theft

of government funds. Lamesha Ware,

Martin’s daughter and former Pinellas

County Housing Authority (PCHA) Section

8 tenant, was indicted on one count of

msking false statements and possession of

false papers. Martin failed to report her

husband’s income and claimed her daughter

Lamesha Ware as a resident of her SPHA

unit while Ware received Section 8 housing

assistance from PCHA. As a result, Martin

obtained approximately $36,997 in SPHA

housing assistance benefits she was not

entitled to receive and aided Ware in

defrauding PCHA of $16,900.

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Regina Williams, a former Alexandria

Redevelopment and Housing Authority

(ARHA) Housing Choice Voucher program

recipient, pled guilty in U.S. District Court,

Alexandria, VA, to an information charging

her with making false statements. From

1996 through 2004, Williams, a Department

of Defense (DoD) employee, falsified her

income on annual ARHA certifications and

misused the DoD seal on letterhead

letter that she submitted. As a result,

Williams obtained $36,237 in ARHA housing

assistance she was not entitled to receive,

and ARHA terminated Williams from its

rental assistance program.

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Dena Battles, a former Clark County

Housing Authority (CCHA) Section 8

recipient, and her mother Sandra Kay

Battles, a CCHA landlord, were each

sentenced in U.S. District Court, Las Vegas,

NV, for their earlier guilty pleas to

defrauding HUD and/or aiding and

abetting. Dena Battles was sentenced to 6

months home confinement, 3 years

probation, and 200 hours of community

service; Sandra Kay Battles was sentenced

to 6 months home confinement with

electronic monitoring, 3 years probation, and

100 hours of community service. In

addition, Dena and Sandra Battles entered

into a settlement agreement pledging to

repay CCHA $36,201. From May 2002

through October 2005, Dena Battles failed

to report her mother’s ownership of her

CCHA subsidized residence and claimed

her out-of-state son as a resident on CCHA

certifications. As a result of their actions,

HUD realized a loss of $36,201.

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Robert Askew III, a former Oakland

Housing Authority (OHA) Section 8 tenant,

pled guilty in U.S. District Court, Oakland,

CA, to one count of mail fraud. From 1998

to 2003, Askew III failed to report his

employment income or ownership of two

houses on OHA annual certifications. Under

a plea agreement with the U. S. Attorney’s

HUD’s Public and Indian Housing Programs 63
Office, Askew III agreed to pay HUD, SSA,

and HHS $140,380 restitution for housing

and other social benefits he obtained but was

not entitled to receive. HUD’s loss is

estimated at $35,584.

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Darlynn Cooper, a former Santa Monica

Housing Authority (SMHA) Section 8

recipient, was charged in Superior Court,

Santa Monica, CA, with grand theft and

filing a false/forged instrument. From July

2005 to March 2006, Cooper allegedly failed

to disclose income she earned on SMHA

certifications and obtained $34,493 in SMHA

housing assistance she was not entitled to

receive. SMHA terminated Cooper from its

rental assistance program.

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Diane McGuiness, a former Salem

Housing Authority (SHA) Section 8 tenant,

was found guilty in Salem District Court,

Salem MA, on one count of larceny over

$250 and one count of uttering a false

statement under oath. McGuiness was

sentenced to 5 years probation, ordered to

refrain from accepting federal and/or state

funded housing subsidies during her

probation, and directed to pay a $1,000 fine.

McGuiness failed to report the joint tenancy

or income of her boyfriend on SHA

certifications and obtained $27,544 in SHA

housing assistance she was not entitled to

receive.

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Prince Fianko, a Carroll County

Housing Authority (CCHA) landlord, and

his wife Rosemary Sekyere, a CCHA

Housing Choice Voucher program recipient,

were each charged in Carroll County Circuit

Court, Carroll County, MD, with theft,

msking false statements to a housing

authority, and common law conspiracy.

From May 2004 to January 2006, Fianko,

allegedly using an alias, hid his ownership

and residence in a CCHA unit leased to his

wife. As a result, Fianko and Sekyere

obtained about $26,000 in CCHA housing

assistance they were not entitled to receive.

CCHA removed Fianko and Sekyere from

its rental assistance program.

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Sonciera Dejarnette Bomar-Royal, a

former Housing Authority of the City of

Napa (HACN) Housing Choice Voucher

program participant, was charged in Napa

County Superior Court, Napa, CA, with

perjury by false affirmation for aid, aid by

misrepresentation over $400, and grand theft

of personal property. Bomar-Royal allegedly

claimed her nonresident son on HACN

certifications and obtained $25,020 in HACN

housing assistance she was not entitled to

receive.

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Elaine Bradfordt, also known as Robeana

Ware, a Cuyahoga Metropolitan Housing

Authority (CMHA) Section 8 landlord, and her

son Samuel Dickerson, the former managing

agent of Housing Choice Voucher program

Properties, were indicted in U.S. District Court,

Cleveland, OH, on numerous counts of theft

of government funds, making false statements

to SSA, and msking false statements to HUD.

Bradfordt and Dickerson allegedly used a

fictitious name and SSN to obtain SSA and

HUD Section 8 benefits. In addition, Tonja

Williams, also known as Latonya McKinley,

also a former CMHA Section 8 landlord, pled

guilty to misuse of an SSN, msaking false

statements to HUD, mail fraud, and bank

fraud. Williams used aliases and a false SSN

to acquire credit cards, bank accounts, and

an FHA-insured mortgage on property she

leased to CMHA for a Section 8-eligible

family member but used the CMHA

subsidized property as her personal

residence. As a result, HUD and SSA

realized losses of $25,000 and $100,000,

respectively.

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Carlos Riosvalle, a former Portland

Housing Authority (PHA) Section 8 tenant,

was charged in Multnomah County Superior

Court, Portland, OR, with numerous counts

64 HUD’s Public and Indian Housing Programs
of theft and attempted aggravated theft.

From 1992 to 2005, Riosvalle allegedly failed

to report his prior sex offense conviction on

annual PHA certifications and obtained

$25,000 in PHA housing assistance he was

not entitled to receive.

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Dorothy Hansen, a former Vermont

State Housing Authority (VSHA) Section 8

tenant, pled guilty in U.S. District Court,

Burlington, VT, to an information charging

her with making false statements and theft

of government funds. Hansen failed to

report employment income on VSHA

certifications and obtained $24,552 in VSHA

housing assistance benefits she was not

entitled to receive. VSHA terminated

Hansen from its rental assistance program.

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Raquel Bonifacio, a former Broward

County Housing Authority (BCHA) Section

8 tenant, was indicted in U.S. District Court,

Miami, FL, on theft of government funds

and making false statements to HUD. From

January 2003 through December 2005,

Bonifacio, a support services technician for

the Federal Bureau of Investigation (FBI),

allegedly failed to report her FBI

employment or income on BCHA

certifications and obtained $24,320 in BCHA

housing assistance she was not entitled to

receive.

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Brothers Brian and Robert Booker,

purported Cook County Housing Authority

(CCHA) Section 8 tenant and landlord, were

indicted in Cook County Circuit Court,

Chicago, IL, on various counts of theft and

benefits fraud. Brian Booker allegedly

fabricated a fictional landlord to accept

CCHA housing assistance payments for a

property he owned and occupied. Robert

Booker allegedly used his name as a straw

CCHA Section 8 tenant, never resided in the

CCHA subsidized unit, and signed annual

CCHA certifications allowing Brian Booker

to obtain $24,000 in CCHA housing

assistance payments he was not entitled to

receive.

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Latisia Upshaw, a former Knoxville

Community Development Corporation

(KCDC) public housing tenant, was indicted

in Knox County State Court, Knoxville, TN,

for unlawfully and intentionally obtaining

public housing, utility, and other services

valued at $10,000 or more. Upshaw

allegedly failed to report household income

on KCDC annual certifications. As a result,

Upshaw allegedly obtained $22,671 in

KCDC housing assistance she was not

entitled to receive.

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Shelly Duffina, a former New

Hampshire Housing Finance Authority

(NHHFA) Section 8 tenant, and Bruce

McLaughlin, an unauthorized tenant

residing with Duffina, were indicted in

Hillsborough County Court, Nashua, NH.

Duffina was charged with theft by

deception, and McLaughlin was charged

with criminal liability for the conduct of

another; theft by deception. Duffina

HUD’s Public and Indian Housing Programs 65

Copyright, 2006. The Staff, Miami, FL. Reprinted with permission.
allegedly failed to report McLaughlin’s

residency and income on NHHFA

certifications and obtained an estimated

$21,000 in NHHFA housing assistance she

was not entitled to receive.

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Sharon Smith, a former Elizabeth

Housing Authority (EHA) Section 8 tenant

and Superior Court Judicial Clerk in Union,

NJ, was sentenced in U. S. District Court,

Newark, NJ, to 2 years probation and

ordered to pay HUD $20,714 restitution for

her earlier guilty plea to theft of government

funds. From January 2002 to September

2005, Smith caused fraudulent employment

verification forms to be submitted to EHA

and obtained $20,714 in EHA housing

assistance she was not entitled to receive.

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Toria Woods, a former Inglewood

Housing Authority (IHA) Section 8 tenant,

was convicted in Los Angeles County

Superior Court, Beverly Hills, CA, on two

counts of filing a false/forged instrument

and one count of grand theft. Woods was

sentenced to 2 years in prison and ordered

to pay IHA $20,612 restitution. Woods, a

participant in an interstate identity theft

ring, failed to report income she received

from the criminal activity on annual IHA

housing certifications. IHA terminated

Woods from its Section 8 program.

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James Bell, owner of The Thomas Clinic

in Clayton, MO, pled guilty to an

information filed in U.S. District Court, St.

Louis, MO, charging him with making

false statements. From 1999 to 2004,

Bell failed to disclose income or his

business ownership to numerous

agencies, including St. Louis Missouri

Housing Authority (SLMHA) and SSA. As

a result, Bell obtained about $753,810 in SSA

disability, Medicaid, food stamps, and

SLMHA housing assistance benefits he was

not entitled to receive. HUD’s loss is

estimated at $20,590.

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Kenneth R. Christenot, a Billings

Housing Authority (BHA) Section 8

landlord, and Ramona Lee Emmett, a BHA

Section 8 tenant, were both found guilty in

U.S. District Court, Billings, MT, of making

false statements and theft of federal funds.

Emmett claimed absent children as

occupsants, and failed to declare property

ownership or the residency of Christenot on

BHA certifications; Christenot failed to claim

his residency with Emmett on BHA

documents. As a result, HUD realized losses

of $19,382.

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Linda Virginia McClain, a former

Housing Authority of the City of San

Buenaventura (HACSB) public housing

recipient, was found guilty in Ventura

County Superior Court, Ventura, CA, of

grand theft. McClain failed to report rental

income she received on HACSB

certifications and obtained $19,170 in

HACSB housing benefits she was not

entitled to receive.

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Gabriela Garcia, a Homestead Housing

Authority (HHA) Housing Choice Voucher

program participant, pled guilty in U.S.

District Court, Miami, FL, to theft of

government funds and making false

statements. Garcia was sentenced to 60

months supervised release and 50 hours

community service and ordered to pay HUD

$18,622 restitution. Garcia concealed the

existence, residency, and income of her

spouse on HHA certifications and obtained

$18,622 in HHA housing assistance she was

not entitled to receive.

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Adam Doyle, an Omaha Housing

Authority (OHA) Section 8 landlord, pled no

contest in Douglas County District Court,

Omaha, NE, to earlier charges of theft by

deceit. Doyle resided with an OHA tenant

at his OHA Section 8 leased property. As a

result, HUD realized a loss estimated at

$18,000.

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66 HUD’s Public and Indian Housing Programs
Angelina Lyles, a former DuPage

Housing Authority (DPHA) Section 8 tenant,

was sentenced in U.S. District Court, Chicago,

IL, to 3 months incarceration, 3 months home

confinement, and 3 years supervised release

and ordered to pay HUD $17,901 restitution

for her previous conviction for providing false

income and family composition statements to

DPHA. In addition, Lyles and her landlord/

brother-in-law Lance Phillips were named in

a four-count civil complaint under the False

Claims Act for allegedly failing to disclose

their relationship on DPHA payment

contracts.

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Kimberly Madrigal, a former Central

Oregon Regional Housing Authority

(CORHA) Section 8 tenant, was convicted

in Deschutes County Superior Court, Bend,

OR, on one count of theft by deception.

Madrigal was sentenced to 36 months

probation, and ordered to pay CORHA

$17,071 restitution. Madrigal failed to report

Social Security benefits she received on

behalf of her dependent children on annual

CORHA certifications.

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Rita Mae Hodge, also known as Patricia

Jackson, pled guilty in U.S. District Court,

Columbus, OH, to making false statements

and SSA fraud. Hodge used a fictitious

name and SSN to simultaneously obtain

Columbus Metro Housing Authority

(CMHA) Section 8 tenant housing assistance

payments, CMHA Section 8 landlord

payments on four CMHA subsidized units,

and SSA benefits. As a result, HUD and SSA

realized losses of $17,000 and $96,000,

respectively.

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Catherine Rouse Herrin, an Aiken

Housing Authority (AHA) Section 8 tenant,

and Elmira Whatley, an AHA Section 8 and

Augusta Housing Authority (AGHA) public

housing tenant, were indicted in U.S. District

Court, Augusta, GA, for making false

statements to HUD. Herrin allegedly failed

to report household income on annual AHA

certifications, and Whatley allegedly failed

to report to AHA that she received public

housing assistance from AGHA. As a result,

Herrin and Whatley allegedly obtained

$16,813 in AHA housing assistance they

were not entitled to receive.

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Janet Buckner, a St. Louis County

Housing Authority (SLCHA) Section 8

recipient and USDA employee, was indicted

in U.S. District Court, St. Louis, MO, on

eight counts of making false statements to

HUD, USDA, and SSA. Buckner allegedly

failed to report income and obtained more

than $16,000 in SLCHA housing assistance

and $109,000 in USDA and SSA benefits she

was not entitled to receive.

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Monique Murrell, a former Johnson

County Human Services and Aging Section

8 recipient, was charged in Johnson County

District Court, Leawood, KS, with one count

of theft and three counts of making false

writings. From September 2003 to May 2006,

Murrell allegedly failed to disclose her

employment and/or income on federal

housing certifications. As a result, HUD

realized a loss of $16,170.

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Theresa Gray, a former Portland

Housing Authority (PHA) Section 8 tenant,

was sentenced in Cumberland County

Superior Court, Portland, ME, to 14 days

incarceration and ordered to participate in

a diversion and rehabilitative program and

pay PHA $5,000 restitution for her earlier

guilty plea to theft by unlawful taking or

transfer. From July 2001 through December

2004, Gray failed to report employment

income on PHA certifications and obtained

$16,000 in PHA housing assistance she was

not entitled to receive. PHA terminated

Gray from its rental assistance program.

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HUD’s Public and Indian Housing Programs 67
Joanne Mallett, a former Massachusetts

Department of Housing and Community

Development (MADHCD) Section 8

landlord, pled guilty in Winchendon District

Court, Winchendon, MA, to larceny over

$250 by false pretense. Mallett was

sentenced to 36 months probation and

ordered to pay RCAP, Inc., a MADHCD

Section 8 contract administrator, $14,532

restitution. From May 2001 through October

2003, Mallett leased a MADHCD Section 8

unit to her sister and falsely certified that

she was not related to her. As a result,

Mallett obtained $14,532 in MADHCD

housing assistance contract payments she

was not entitled to receive.

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Kamilah Rainey, a former Lakeland

Housing Authority (LHA) Section 8 tenant,

pled guilty in Tenth Judicial Circuit Court,

Bartow, FL, to public assistance fraud for

failing to disclose earned income on LHA

annual certifications. Rainey was sentenced

to 5 years probation and ordered to pay LHA

$11,460 restitution.

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Sherry White, a Fairfield Housing

Authority (FHA) Housing Choice Voucher

program participant, and Arthur White, an

FHA landlord, were each indicted in U.S.

District Court, Fairfield, AL, on theft of

HUD funds. From May 2003 to May 2004,

Sherry and Arthur White allegedly provided

false documentation and failed to report

their father/daughter relationship to FHA.

As a result, Sherry White allegedly obtained

$9,876 in FHA housing assistance she was not

entitled to receive.

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Antonia Medina, a South Gate Housing

Authority (SGHA) Section 8 recipient, was

charged in Los Angeles County Superior

Court, Downey, CA, with obtaining money

by false pretenses. Medina allegedly failed

to disclose the unauthorized tenancy of her

daughter or notify SGHA of her relocation

and residency in Chula Vista, CA. As a

result, Medina allegedly obtained more than

$9,000 in SGHA housing assistance

payments she was not entitled to receive.

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Gerard Hernandez, a Goodhue County

Housing Authority (GCHA) landlord, and

Robin Denise Gard, also known as Denise

Hernandez, a GCHA Section 8 tenant, were

charged in a criminal complaint filed in

Goodhue County Court, Goodhue County,

MN, with three counts of felony theft by

swindle. Hernandez and Gard allegedly

created fictitious documents, claiming that

Hernandez owned property and leased the

property to GCHA Section 8 tenant Gard.

Hernandez allegedly rented the property

from a market rent landlord and then jointly

occupied the unit as husband and wife with

Gard. HUD’s loss is estimated at $8,000.

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Yadiris Dela Rosa, a former Maine State

Housing Authority (MSHA) Section 8

tenant, pled guilty in Skowhegan District

Court, Skowhegan, ME, to theft by

deception. Dela Rosa was sentenced to serve

364 days in prison (9 months and 1 day

suspended) and 2 years probation and

ordered to pay PropSys, an MSHA Section 8

contractor administrator, $7,520 restitution.

From July 2004 to October 2005, Dela Rosa

lived in Massachusetts and New York while

receiving MSHA housing assistance in

Skowhegan, ME. As a result, Dela Rosa

obtained $7,520 in housing assistance she

was not entitled to receive.

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Abel Vilcapoma, a former Worcester

Housing Authority (WHA) Section 8

landlord, pled guilty in Worcester District

Court, Worcester, MA, to making false

claims to a government agency and

conspiracy. Vilcapoma was sentenced to 6

months probation and ordered to pay the

court $376; Vilcapoma previously agreed to

repay WHA $6,320. Vilcapoma, the owner

of rental property leased to a WHA Section

8 tenant, sold the property and conspired

68 HUD’s Public and Indian Housing Programs
with the new owner to continue collecting

housing assistance contract payments from

WHA. As a result, Vilcapoma obtained

$7,070 in WHA housing assistance contract

payments he was not entitled to receive.

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Diane Schauman, a former City of Mesa

(CM) Housing Choice Voucher program

participant, was indicted in Maricopa

County Superior Court, Phoenix, AZ, for

theft. Schauman allegedly failed to report

wages from full-time employment on CM

certifications and obtained more than $7,000

in CM housing assistance she was not

entitled to receive. CM terminated

Schauman from its rental assistance

program.

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Norlene Smith, a former Eustis Housing

Authority (EHA) public housing tenant, was

arrested after an information was filed in Lake

County Fifth Judicial Circuit Court, Lake

County, FL, charging her with one count of

public assistance fraud. From August 2004 to

June 2005, Smith allegedly failed to disclose

true household income on EHA annual

certifications and obtained $5,172 in housing

assistance she was not entitled to receive.

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Dean P. Proffitt, Orbin Dale May, Ernest

A. White, Howard E. Schneider, Osamn

Abdulluhl, Elias Mohamed, Ahmed

Muhidin Sharif, Hiram Chebar Olover,

Abdulfatah Osman Farah, Adil Majlovic,

Merud Kajtazovic, Abdirizak Abdi

Mohamed, Abdiwahab Mohamud

Mohamed, Yusuf Kalmole, and Samir

Hasanovic were arrested after their

indictments in U.S. District Court, Kansas

City, MO, on conspiracy to commit fraud

in obtaining commercial drivers’ licenses

through the state of Missouri. The above

defendants allegedly participated in a food

stamp and Section 8 housing assistance

fraud scheme by obtaining cash for their

food stamp cards and failing to disclose

employment, income, or business

ownership on housing assistance

applications.

Fugiti

Fugitive Felon Initiatie Felon Initiati e Felon Initiatives

Section 903 of Public Law 104-193 is

entitled “Elimination of Housing Assistance

with Respect to Fugitive Felons and

Probation and Parole Violators.” Signed into

law in 1996, it allows for an immediate

tenancy termination of public housing

tenants who flee to avoid prosecution or

confinement after conviction of a felony or

when felons violate parole or probation

conditions imposed under federal or state

laws. This law also authorizes law

enforcement agencies to exchange

information and perform data matches.

HUD assists approximately 4.8 million

households through public housing and

rental assistance including Section 8 and

Housing Choice Voucher programs.

Reducing overpaid rent subsidies is one of

HUD’s management improvement goals as

stated in the President’s Management

Agenda, as well as an OIG goal as stated in

our strategic plan. The identification and

termination of fugitive felons fleeing felony

prosecution or probation and parole

violators, may impact HUD’s housing

assistance subsidies.

The Office of Investigation (OI)

continues to increase Fugitive Felon

Initiatives (FFI) by matching HUD housing

assistance information with crime data from

the National Crime Information Center , U.S.

Marshals Service (USMS), and/or

participating states. Since the inception of

OI’s FFI, hundreds of cases have been

opened and closed, resulting in more than

5,600 arrests. In addition, OI provides tenant

records matching USMS wanted persons

lists and participates in “Operation

FALCON,” a USMS operation designed to

apprehend fugitive felons living in public

and assisted housing.

HUD’s Public and Indian Housing Programs 69
Operation FALCON (Federal and Local

Cops Organized Nationally), a nationwide

fugitive felon apprehension operation

coordinated by USMS, combines federal,

state, city, and county law enforcement

resources in a joint effort to locate and

apprehend criminals wanted for violent

crimes. Conducted in most major cities

throughout the United States and its

territories, Operation FALCON places a

strong emphasis on violent crimes involving

gangs, weapons, homicides, and sexual

assaults, along with crimes against children

and the elderly. HUD OIG strongly

supports Operation FALCON in an effort to

make HUD-assisted housing a safe place for

families to live.

HUD OIG participated in “Operation

FALCON II,” a USMS action initiated to

identify, locate, and apprehend violent

fugitives, particularly those charged with

sex crimes. As a result, 3,647 individuals

were arrested on outstanding felony

warrants in East St. Louis, IL, and St. Louis,

MO; Kansas City metropolitan area;

Colorado; Utah; Montana; Los Angeles,

San Francisco, Richmond, Salinas, San

Jose, Sacramento, and Marysville, CA;

Phoenix, AZ; Las Vegas, NV; Houston,

Dallas, Fort Worth, and San Antonio, TX;

Oklahoma City, OK; Chicago, IL; and

Minneapolis, MN metropolitan areas.

HUD OIG arrested 719 individuals; 172 of

those arrested resided in HUD-assisted

housing.

○○○○○○○○○○○○○○○○○

The Dallas Fort Worth Fugitive

Apprehension Strike Team, representing law

enforcement personnel from USMS; the U.S.

Department of Veterans Affairs (VA) OIG;

SSA OIG; the Texas Department of

Public Safety Rangers and Criminal

Intelligence Divisions; the Dallas, Fort

Worth, Commerce, and Greenville Police

Departments; the Dallas County, Tarrant

County, Hunt County, and Johnson County

Sheriff ’s Departments; and HUD OIG

arrested 66 individuals on outstanding

warrants at Turner Courts and Rhoads

Terrace, Dallas Housing Authority public

housing units in Dallas, TX, and numerous

HUD-assisted units located in southeast Fort

Worth, TX, on various charges

including murder, attempted murder,

possession of controlled substances, sexual

assault, aggravated sexual assault, child

endangerment, and/or robbery. Thirty-nine

of the subjects arrested received HUD

housing assistance, and 41 individuals were

referred for termination from HUD’s rental

assistance program.

○○○○○○○○○○○○○○○○○

As part of a national FFI involving law

enforcement personnel from USMS; the

Bureau of Alcohol, Tobacco, Firearms, and

70 HUD’s Public and Indian Housing Programs

Copyright, 2006. The Associated Press, Washington, DC. Reprinted with permission.
Explosives (ATFE); Immigration and

Customs Enforcement (ICE); the FBI;

the Hartford Police Department Vice,

Narcotics, and Intelligence Divisions; the

Waterbury Police Department; the State of

Connecticut Adult Probation and Parole

Departments; the Connecticut State Police;

and HUD OIG, 47 individuals were arrested

in Hartford, CT, and 33 individuals were

arrested in Waterbury, CT, on various

charges including possession of narcotics

with intent to distribute, illegal possession

of narcotics in a school zone, sexual assault,

forgery, robbery, burglary, assault, assault

of a police officer, escape of custody, grand

larceny, and/or probation violations.

○○○○○○○○○○○○○○○○○

HUD OIG’s Newark field office

participated in a USMS FFI in Hoboken

Housing Authority (HHA) housing

developments located on Jackson Street,

Harrison Street, and Marshall Drive in

Hoboken, NJ. The USMS operation focused

on the cooperative efforts of law

enforcement and HHA to dismantle a

suspected drug distribution ring and arrest/

evict fugitive felons from HHA housing

projects. During the initiative, 34

individuals were arrested on outstanding

warrants for sex crimes; assaults; and

narcotics, parole, child support, and/or

traffic violations. In addition, a heroin and

cocaine distribution ring was dismantled.

○○○○○○○○○○○○○○○○○

U.S. Attorney Kenneth L. Wainstein

announced the indictments and/or arrests of

24 individuals on numerous charges

including unlawful distribution of a

controlled substance, conspiracy, possession

of firearms without a license, and/or

unlawful possession of ammunition after a

5-month District of Columbia (DC) Public

Housing Safety Initiative (PHSI) operation

at Woodland Terrace Apartments, a DC

Housing Authority (DCHA) housing

development in Washington, DC. During

this operation, the DC PHSI task force,

consisting of law enforcement personnel

from the DC Metropolitan Police, DCHA

Police, and HUD OIG, seized illegal drugs,

including PCP, cocaine, marijuana, and

ecstasy, along with two vehicles and

firearms. As a result, DCHA initiated three

eviction proceedings against resident

violators arrested.

○○○○○○○○○○○○○○○○○

In Worcester, MA, 21 individuals,

including five Worcester Housing Authority

(WHA) Section 8 and/or public housing

tenants, were arrested at a WHA public

housing development on outstanding

warrants. The arrests resulted from a

Worcester Police Department “ruse,” which

lured the subjects, believing they were to

receive cash from the State of Massachusetts,

Massachusetts Department of Transitional

Adjustment, to the WHA public housing

site.

○○○○○○○○○○○○○○○○○

HUD’s Public and Indian Housing Programs 71

Copyright, 2006. Telegram & Gazette, Worcester, MA. Reprinted with permission.
The Philadelphia PHSI task force,

consisting of law enforcement personnel

from ATFE, the Drug Enforcement Agency

(DEA), USMS, the Philadelphia District

Attorney’s Office, the Philadelphia Police

Department, Philadelphia Housing

Authority (PHA) Police, the Eastern District

of Pennsylvania U.S. Attorney’s Office, and

HUD OIG arrested six individuals on

outstanding warrants for possession of crack

cocaine, producing and distributing

marijuana, and/or driving under the

influence (DUI) violations in or near Paschall

housing development, a PHA subsidized

housing complex in Philadelphia, PA. In

addition, two subjects living next to PHA

Section 8 program participants were

arrested for constructing and operating a

marijuana “grow house,” complete with an

elaborate tube ventilation system, lighting,

and drying production facilities, and

supplying the controlled substance to

individuals around Paschall housing units.

As a result of this operation, one PHA

resident was arrested.

○○○○○○○○○○○○○○○○○

Sheila L. Williams, Sebrina D. Long,

Sarah L. Brooks, and Andrea Holmes,

Greensboro Housing Authority (GHA) and/

or Housing Authority of Winston-Salem

(HAWS) Section 8 or public housing tenants,

were arrested at their GHA/HAWS

subsidized units in Greensboro and

Winston-Salem, NC, for probation

violations relating to their earlier convictions

on embezzlement, assault with a deadly

weapon, and narcotics violations. GHA and

HAWS terminated Williams, Long, and

Brooks from their rental assistance

programs.

○○○○○○○○○○○○○○○○○

Julio Pizzaro, a previously convicted sex

offender and resident of a New York City

Housing Authority (NYCHA) Section 8 unit,

was arrested on an outstanding warrant for

parole violations by the New York/New

Jersey Regional Fugitive Task Force (NY/NJ

RFTF) in New York, NY.

○○○○○○○○○○○○○○○○○

Danilo Rico, a former East Hartford

Housing Authority (EHHA) Section 8

tenant, pled guilty in U.S. District Court,

Hartford, CT, to one count of possession of

a firearm by a convicted felon. Rico was in

possession of a 9 millimeter handgun seized

during execution of a federal search warrant

at his EHHA Section 8 unit. EHHA

terminated Rico from its rental assistance

program.

Other Fraud/Crimes Other Fraud/Crimes

Kevin Timochenko, a Reading City

Housing Authority (RCHA) landlord and

owner of Metropolitan Management

Corporation, was charged in an information

filed in U.S. District Court, Reading, PA,

with one count of theft from an interstate

pipeline. Timochenko, representing that he

paid tenant utilities in his RCHA housing

assistance payment contract, allegedly

directed his maintenance staff to install bypass devices on utility meters and

pilfered natural gas valued at approximately

$1 million from UGI Utilities, Inc.

○○○○○○○○○○○○○○○○○

Michael Ciarcia, owner of Ciarcia

Construction, LLC, was sentenced in U.S.

District Court, Hartford, CT, to two

concurrent 13-month prison sentences and

two concurrent 2-year probation terms for

his earlier conviction on money laundering

and conspiracy to commit money

laundering charges. Ciarcia, a rehabilitation

contractor with the Housing Authority of the

City of New Britain (HANB), certified a

ghost employee, previously indicted Luis

Santiago, on HANB certifications to

facilitate laundering Santiago’s illicit drug

sales proceeds through Ciarcia

Construction, LLC’s payroll.

○○○○○○○○○○○○○○○○○

Billy Nsubuga, a former Malden

Massachusetts Housing Authority (MMHA)

Section 8 tenant, was sentenced in U.S.

District Court, Boston, MA, to 13 months

incarceration and 36 months supervised

72 HUD’s Public and Indian Housing Programs
release and ordered to pay two financial

institutions $107,401 restitution and is also

subject to deportation for her previous guilty

plea to numerous counts of bank fraud, mail

fraud, identity theft, and identity document

fraud. Nsubuga opened bank accounts in

Massachusetts, New York, and Connecticut

with cash deposits in the names of others,

using altered passports from Uganda, The

Republic of Congo, and South Africa, along

with bogus identification documents from

California. Nsubuga received more than

$100,000, which was not reported to MMHA,

HUD’s Public and Indian Housing Programs 73

“Money Launderer Sentenced” by Courant Staff Reports, published 7/6/06:

“Copyright, 2006, Hartford Courant. Reprinted with permission”

before her detection by New York and

Connecticut banks.

○○○○○○○○○○○○○○○○○

Samuel Lewis, a former Worcester

Housing Authority (WHA) public housing

tenant, was convicted in U.S. District Court,

Worcester, MA, on 15 counts of making false

statements to procure firearms. Lewis

provided a false address on documents he

used to purchase firearms while residing in

a WHA public housing unit.

  

Chapter 4 Chapter 4

HUD’s Multifamil s Multifamil s Multifamily

Housing Programs
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

During this period, the Office of

Inspector General (OIG) issued eight

external reports in the multifamily housing

program area. These reports disclosed

almost $4.9 million in questioned costs and

almost $5.3 million in recommendations that

funds be put to better use.

76 HUD’s Multifamily Housing Programs

Owner and Mana Owner and Management

ement

Agent Operations ent Operations

Over the past 6 months, OIG has

audited owner and management agent

operations with an emphasis on combating

equity skimming. While our objectives

varied by auditee, the majority of the

reviews were to determine whether the

owner and/or management agent used the

project funds in compliance with the

regulatory agreement and HUD

requirements. The results of OIG’s more

significant audits are described below.

At the request of HUD, OIG audited the

Rhode Island Housing and Mortgage

Finance Corporation, a state housing agency

located in Providence, RI. The Corporation

incorrectly processed Section 8 housing

assistance payment contract renewals for

eight developments. It included debt service

at incorrect levels and failed to reduce

Section 8 contract rents, resulting in more

A Look Back for the Year

Chart 4.1: Per t 4.1: Percentage of OIG Multifamil OIG Multifamily Housing Closed Audit Cases g Closed Audit Cases, Performed FY 06

Region 1

Boston

22%

Region 2

New York

0%

Region 3

Philadelphia

0%

Region 4

Atlanta

0%

Region 5

Chicago

6%

Region 6

Fort Worth

6%

Region 7-8

Kansas City

28%

Region 9-10

Los Angeles

38%
than $1.8 million in Section 8 subsidy

overpayments to the development owners.

The Corporation did not recover the

overpayments. It also violated federal

regulations when it allowed two

developments to use more than $900,000 in

restricted residual receipts to pay financing

fees to the Corporation, the Corporation’s

affiliated Affordability Housing Trust, and

one development owner.

OIG recommended that HUD require

the Corporation to (1) actively pursue and

recover just under $1.2 million in Section 8

subsidy overpayments from six

development owners, (2) confirm that it

returned more than $657,000 in

overpayments collected from two

development owners to the appropriate

accounts, (3) develop and implement

procedures to ensure that HUD

requirements governing the renewal of

expiring Section 8 housing assistance

payment contracts are followed, and (4)

clarify its procedures to ensure that residual

receipts are restricted to authorized uses.

Further, OIG recommended that HUD

confirm that the Corporation returned more

than $945,000 to the appropriate restricted

accounts. (Audit Report: 2006-BO-1009)

○○○○○○○○○○○○○○○○○

In response to a referral from HUD, OIG

audited two projects owned and managed

by Juniper Communities. One of the

projects, Wellspring at Aurora, made

unauthorized cash distributions totaling

more than $165,000, prematurely withdrew

more than $912,000, and had loans

outstanding from other Federal Housing

Administration (FHA)-insured projects

totaling more than $127,000 as of December

31, 2005. In addition, Juniper accrued

unallowable asset management fees totaling

almost $130,000 and improperly allocated

corporate expenses to Wellspring at Aurora.

OIG recommended that HUD require

Juniper to repay Wellspring at Aurora for

the unauthorized cash distributions, develop

HUD’s Multifamily Housing Programs 77

and implement management controls to

ensure that unauthorized cash distributions

do not recur, repay Wellspring at Aurora for

the unauthorized loans to other projects,

develop and implement management

controls to ensure that unauthorized loans

do not recur, eliminate all asset management

fee accrual accounts, develop and

implement management controls to ensure

that expenses accrued and/or charged to

projects are legitimate project-related

expenses, and properly allocate its corporate

expenses. (Audit Report: 2006-DE-1004)

○○○○○○○○○○○○○○○○○

HUD OIG audited Sundial Care Center

located in Modesto, CA. OIG found that

the owner used almost $660,000 in project

funds for nonproject (ineligible) and

undocumented costs and could not account

for more than $407,000 in project revenue

receipts. The owner ’s noncompliance

caused a default on the insured mortgage

and HUD’s $3.6 million loss on the

subsequent sale of the mortgage note.

OIG recommended that HUD require

the owner to repay HUD’s FHA insurance

fund almost $1.1 million, pursue double

damages remedies against the owner, and

take administrative actions against the

owner and its principals/officers. (Audit

Report: 2006-LA-1011)

○○○○○○○○○○○○○○○○○

HUD OIG reviewed Wellston

Townhouses, a 63-unit project located in St.

Louis County, MO. Wellston Townhouses’

managing owner did not use project funds

in compliance with the regulatory

agreement and violated several other terms

of the agreement. These violations, totaling

almost $305,000, adversely affected the

project’s financial stability.

OIG recommended that HUD take

appropriate actions to correct deficiencies

and ensure that these violations will not

recur. (Audit Report: 2006-KC-1011)

○○○○○○○○○○○○○○○○○
HUD OIG reviewed HDC Retirement

Village, a 48-unit project located in St. Louis,

MO. HDC Retirement Village’s managing

owner did not use project funds in

compliance with the regulatory agreement

and also violated several other terms of the

agreement. These violations, totaling almost

$210,000, adversely affected the project’s

financial stability.

OIG recommended that HUD take

appropriate actions to correct deficiencies

and ensure that these violations will not

recur. (Audit Report: 2006-KC-1012)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Utah Non Profit

Housing Corporation, Salt Lake City, UT, a

management agent for nine properties

assisted by HUD. Utah Non Profit did not

ensure that seven properties generated

sufficient funds to meet their financial

obligations. It deferred payments to itself

to pay the projects’ other expenses. It also

improperly charged salary costs to

properties based on an arbitrary,

unsupported rate and billed properties for

more than $49,000 in supervisor salaries that

its management fee should have covered. In

addition, it paid more than $21,000 for

unnecessary expenses and may be paying

more than $31,000 annually more than

necessary for services.

OIG recommended that HUD require

the project owners to ensure that Utah Non

Profit submits rent increases in a timely

manner to reduce operating deficits and pay

the accrued management fees, implements

an acceptable allocation plan, reimburses

the properties for ineligible salaries and

unnecessary costs, and develops and

implements adequate management controls

to ensure compliance with HUD

requirements. (Audit Report: 2006-DE1005)

○○○○○○○○○○○○○○○○○

HUD OIG conducted a review of Deer

Creek Apartments (project), a Section

221(d)(4)-insured multifamily housing

project in Houston, TX. The project’s owner

generally complied with the regulatory

agreement and HUD regulations; however,

the previous management agent paid itself

more than $24,000 for unsupported

expenses.

OIG recommended that HUD require

the project’s owner or its prior management

agent to either provide documentation to

show that the charges were for actual work

performed and that the fees charged were

reasonable and necessary or repay the

expenses to the project. HUD should also

determine whether the prior management

agent charged other HUD-insured projects

for these unsupported fees and if so, require

that the same documentation be provided

or the fees be repaid for those projects as

well. (Audit Report: 2006-FW-1010)

Section 202 Suppor Section 202 Supporti

tive

Housing f

g for the Elderlor the Elderl or the Elderly

HUD OIG audited the Bridgeport,

CT, project Hall Commons, Inc.’s,

administration of its Section 202 Supportive

Housing for the Elderly capital advance

construction funds to determine whether

Hall Commons administered the Section 202

funds advanced for construction in

accordance with federal requirements.

Hall Commons failed to maintain

adequate and essential financial records to

accurately account for project financial

transactions and safeguard project assets. It

also made unauthorized disbursements and

allowed required insurance policies to lapse

due to nonpayment of premiums. As a

result, more than $2 million in capital

advances and payments to vendors and

contractors was not properly recorded, more

than $199,000 in project funds was disbursed

in violation of the governing project

agreements, the project was not always

78 HUD’s Multifamily Housing Programs
covered by builder’s risk or crime insurance,

and real estate taxes were delinquent.

OIG recommended that HUD (1)

pursue applicable sanctions available under

the regulatory agreement to protect its $4

million investment, including issuing a

notice of default and if the violations are not

corrected within 30 days of declaring a

default, taking possession of the project,

foreclosing on the mortgage, or requiring a

transfer of physical assets to a HUDapproved nonprofit corporation, and (2)

require Hall Commons, Inc., to support and/

or repay the more than $199,000 in project

funds that were disbursed in violation of the

governing project agreements. If Hall

Commons is allowed to remain the owner,

HUD should require it to establish a

financial accounting system and maintain

current and accurate books and accounts

and a functioning board of directors to

provide adequate oversight of project

operations. (Audit Report: 2006-BO-1008)

○○○○○○○○○○○○○○○○○

HUD’s Multifamily Housing Programs 79
Investigations

During this reporting period, OIG

opened 54 investigation cases and closed 60

cases in the multifamily housing program

area. Judicial action taken on these cases

during the period included $6,472,308 in

investigative recoveries, $3,211,285 in funds

put to better use, 59 indictments/

informations, 43 convictions/pleas/pretrial

diversions, 120 administrative actions, 1

personnel action, and 97 arrests.

Chart 4.2: Multifamil t 4.2: Multifamily Housing Recoveries

False Statements

59% ($4,216,719)

Embezzlement

10% ($737,456)

Total Recoveries $6,472,308

Section 8

Landlord Fraud

6% ($460,300)

Public

Corruption

0% ($2,000)

Equity Skimming

23% ($1,661,278)

Section 8

Tenant Fraud

2% ($175,034)

Some investigations discussed in this report were conducted by OIG or jointly with

federal, state, and local law

enforcement agencies. The results of

various significant investigations are

described below.

Theft/Embe heft/Embezzlement

zzlement zzlement

 Jill M. Trayner, the former executive

director of United Methodist Retirement

Center of Tampa, Inc. (UMRCT), also known

as Methodist Place, a HUD-funded

multifamily elderly housing complex, was

sentenced in U.S. District Court, Tampa, FL,

to 1 year and 1 day in prison, mandatory

attendance in a mental health program during

her incarceration, and 36 months supervised

released; fined $5,000; and ordered to pay

UMRCT $366,228 restitution for her previous

guilty plea to theft of federal program funds.

Trayner used her position to divert UMRCT

program funds and used the funds for

personal expenses including gambling, loan

payments, credit card debt, and club

memberships.

80 HUD’s Multifamily Housing Programs

A Look Back for the Year

Chart 4.3: Per t 4.3: Percentage of OIG Multifamil OIG Multifamily Housing Closed Investigation Cases ation Cases, Performed FY 06

Region 1

Boston

10%

Region 2

New York

6%

Region 3

Philadelphia

15%

Region 4

Atlanta

10%

Region 5

Chicago

9%

Region 6

Fort Worth

12%

Region 7-8

Kansas City

23%

Region 9-10

Los Angeles

16%
HUD’s Multifamily Housing Programs 81

Copyright, 2006. The Tampa Tribune,

Tampa, FL. Reprinted with permission.

○○○○○○○○○○○○○○○○○

Larry Lippman, a managing agent for

Republic Management at Eastwood Terrace

Apartments (ETA), a HUD-funded

multifamily apartment complex in

Nacogdoches, TX, was indicted in U.S.

District Court, Beaumont, TX, on three

counts of embezzlement. From August 2000

to June 2003, Lippman allegedly paid

himself an unauthorized annual salary of

$60,000 and hid the salary payments by

manipulating ETA accounts under his

control. As a result, HUD’s loss is estimated

at $300,000.

○○○○○○○○○○○○○○○○○

On Guard Security Services, Inc.

(OGSS), a security contractor for HUD

Multifamily Mortgagee-In-Possession

properties located in Kentucky and

Tennessee, pled guilty to an information

filed in U.S. District Court, Spartanburg, SC,

charging it with making false, fictitious, or

fraudulent claims and general provision

crimes. For approximately 2 years, OGSS

submitted inflated and false invoices for

security services. As a result, HUD paid

approximately $260,431 for services not

provided.

○○○○○○○○○○○○○○○○○

Wanda Mercado, a former Peabody

Properties manager at Schoolhouse 77, a

HUD-subsidized multifamily complex, pled

guilty in U.S. District Court, Boston, MA,

to five counts of bribery. Mercado solicited

and received more than $34,000 in bribes

from 10 Section 8 applicants for HUDassisted housing units at Schoolhouse 77. As

a result, HUD realized losses exceeding

$151,478 when housing assistance payments

were paid on behalf of 10 unqualified

tenants.

○○○○○○○○○○○○○○○○○

Charles Sitter, a property manager at

East Main Street Apartments, a HUDfunded multifamily elderly housing

complex, was arrested and charged in

Seneca County District Court, Waterloo, NY,

with grand larceny. Sitter allegedly extorted

$60,000 from an elderly tenant by

threatening eviction if the payment was not

made.

○○○○○○○○○○○○○○○○○

Jorge Hernandez Cruz, a former

manager at Casa De Las Hermanitas

(CDLH), a HUD-subsidized multifamily

complex, was arrested after a complaint was

filed in Los Angeles County Superior Court,

Los Angeles, CA, charging him with

commercial bribery and theft. Cruz

allegedly solicited and received payments

from nine elderly families for placement into

CDLH housing units, illegally bypassing

other applicants on the CDLH waiting list.

In addition, Cruz allegedly demanded

additional monies from applicants reaching

the top of the waiting list before assigning

CDLH housing units.

○○○○○○○○○○○○○○○○○

Jerri Kirby, the former property manager

at College Hill Apartments, a HUD-subsidized
multifamily housing complex, pled guilty in

Clermont County Municipal Court,

Columbus, OH, to one count of theft for

personally using tenant rents she collected.

Kirby was sentenced to 3 months incarceration

and 2 years probation and ordered to pay

College Hill Apartments $4,100 restitution.

Rental Assistance Fraud Rental Assistance Fraud

Olandria Williams, a former Shoreview

Apartments Section 8 tenant, was sentenced

in U.S. District Court, San Francisco, CA,

to 1 year probation and ordered to pay HUD

$45,072 restitution for her earlier guilty plea

to making false statements to HUD.

Williams falsified reported income, failed to

reside in her subsidized unit, and obtained

$45,072 in housing assistance she was not

entitled to receive.

○○○○○○○○○○○○○○○○○

Rosalyn Tillery, a former La Salle

Apartments Section 8 tenant, was sentenced

in U.S. District Court, San Francisco, CA,

to 2 years probation and 25 hours of

community service and ordered to pay HUD

$35,759 restitution for her previous guilty

plea to making false statements to HUD.

Tillery failed to report income or property

she jointly owned with her spouse on

Section 8 certifications.

○○○○○○○○○○○○○○○○○

Donald Pierce, a former Maine State

Housing Authority (MSHA) Section 8 tenant

at William Woods Apartments in Rockland,

ME, pled guilty in U.S. District Court,

Portland, ME, to making false statements.

Pierce failed to disclose income and assets,

including $165,000 in certificates of deposit,

more than $80,000 in an investment account,

and/or $145,000 in cash seized by the State

of Maine, on MSHA housing assistance

certifications. As a result, Pierce obtained

$26,987 in MSHA housing assistance he was

not entitled to receive. Pierce remains in

state custody for his earlier conviction on

narcotics violations.

○○○○○○○○○○○○○○○○○

Tamyra T. Nelson, a Maryland state

correctional officer, was indicted in

Wicomico County District Court, Salisbury,

MD, on theft and making false statements.

Deniece Davis, a Wicomico County

Detention Center correctional officer, pled

guilty to making false statements. Nelson

and Davis, former Section 8 tenants at

Pemberton Manor Apartments, a HUDsubsidized multifamily complex, allegedly

failed to report income on annual housing

certifications and allegedly obtained

approximately $20,000 in housing assistance

they were not entitled to receive.

○○○○○○○○○○○○○○○○○

Pia Benjamin, a HUD multifamily

Section 8 tenant and New York Police

Department (NYPD) school safety officer,

was charged in a criminal complaint filed

in Brooklyn Criminal Court, Brooklyn, NY,

with grand larceny, falsifying business

records, and offering a false instrument for

filing. Benjamin allegedly failed to report

her NYPD employment or income on

housing certifications and obtained

approximately $19,282 in housing assistance

she was not entitled to receive.

○○○○○○○○○○○○○○○○○

Elsa Ondina Herrera-Martinez, a former

Section 8 tenant at High Point Village, a

HUD-subsidized multifamily complex, was

indicted in U.S. District Court, Boston, MA,

on theft of government funds, aggravated

identity theft, and illegally obtaining a Social

Security number (SSN). Herrera-Martinez

allegedly used the identity of another person

to obtain more than $15,000 in Section 8

housing assistance payments.

○○○○○○○○○○○○○○○○○

Paulita Brigham, an Internal Revenue

Service (IRS) employee and Section 8 tenant

of Friendship Village, a HUD-funded

multifamily housing complex, entered into

a plea agreement in Jackson County Circuit

Court, Kansas City, MO, and was sentenced

to 12 months probation and 40 hours of

community service for stealing government

82 HUD’s Multifamily Housing Programs
funds. Brigham failed to disclose her IRS

employment and/or income on annual HUD

certifications and obtained $4,766 in housing

assistance she was not entitled to receive.

○○○○○○○○○○○○○○○○○

Mikael Best, a previously convicted sex

offender and Section 8 tenant at Harlen

Houses in New York City, NY, was arrested

on an outstanding warrant for parole

violations. The New York/New Jersey

Regional Fugitive Task Force arrested Best.

○○○○○○○○○○○○○○○○○

Candace Allen, Brenda Serrato, and

Lawrence Valdez, Weber County Section 8

tenants, were arrested in Salt Lake City, UT,

on outstanding warrants for various charges

including lewdness, theft, and drugs.

Other Fraud/Crimes Other Fraud/Crimes

Antonio Giordano, owner of Suburban

Mortgage and four HUD-insured nursing

homes located in Rhode Island

and known as Coventry Health

Center (CHC), Mount St. Francis

Health Center (MSFC), Edmunds

Place (EP), and Hillside Health

Center (HHC), and John

Montecalvo, administrator of the

above nursing homes, were

sentenced in U.S. District Court,

Providence, RI, for their earlier

guilty pleas to equity skimming.

Giordano was sentenced to 30

months incarceration and 24

months supervised release,

ordered to pay the U.S.

Treasury Department $780,539

restitution jointly and severally

with Montecalvo, and fined

$100,000. Montecalvo was

sentenced to 24 months

incarceration and 24 months

supervised release. Giordano,

Montecalvo, and others illegally

diverted income or funds from

the nursing homes to themselves

or My Place, Inc., Antonio Giordano,

Inc., Construction Software, Inc.,

Consultants, Inc., Simon and Windsor, Inc.,

Gregory Building Company, Management

Realty Services, and/or Sterling Health Care

Management Company, identity-of-interest

companies authorizing payments for

unwarranted services while the properties

were in a non-surplus-cash position,

a violation of their HUD regulatory

agreement. Giordano and Montecalvo were

further indicted in Rhode Island Superior

Court on 45 counts of conspiracy to

embezzle, money laundering, conspiracy to

commit money laundering, Medicaid fraud,

and conspiracy to commit Medicaid fraud

in connection with HHC operations.

Montecalvo was charged with additional

counts of patient neglect for his role at HHC.

As a result of their actions, HUD realized a

loss of $14 million when Giordano defaulted

on both the CHC and EP HUD-insured

mortgages. HUD continues litigation over

the now defunct HHC $13 million insurance

HUD’s Multifamily Housing Programs 83

Copyright, 2006. The Journal Medical, Providence,

RI. Reprinted with permission.
payment, and MSF, with a $9.7 million

HUD-insured mortgage, continues

operations while listed for sale. In addition,

the Suburban Mortgage portfolio contains

approximately 57 HUD-insured loans

estimated at $314.3 million, all of which are

considered at risk. HUD’s Office of

General Counsel announced the suspension

of Giordano, Montecalvo, and 17 affiliates.

○○○○○○○○○○○○○○○○○

Kevin Rice and Jimmy Keel, contractors

for Burchwood Harbor Apartments (BHA),

a HUD-insured multifamily project, signed

pretrial diversion agreements of 6 months

deferred adjudication in U.S. District Court,

Hot Springs, AR. Rice and Keel admitted

to bankruptcy fraud and conspiracy when

they perjured themselves during a BHA

Bankruptcy Rule 2004 examination. Rice

and Keel admitted that Rodney Myers,

owner of BHA, and others induced their

perjury in their Bankruptcy Rule 2004

examinations by convincing them to falsely

state that they received BHA funds for work

they performed. Myers previously pled

guilty to bankruptcy fraud, money

  

84 HUD’s Multifamily Housing Programs

laundering, and perjury for diverting more

than $110,000 in BHA project rents and other

funds while BHA’S HUD-insured mortgage

was in default and during BHA’S Chapter

11 bankruptcy. As a result, HUD realized

losses in exceeding $1.6 million.

○○○○○○○○○○○○○○○○○

Longley-Jones Management Corporation (LJMC), a manager of commercial

and residential properties, was sentenced in

U.S. District Court, Syracuse, NY, to a $4

million fine for its earlier guilty plea to

conspiracy to violate the Clean Air Act and

mail fraud. The sentencing orders LJMC to

use $3 million for proper asbestos abatement

and implementation of an environmental

compliance plan and remit the remaining $1

million to the U.S. Government. Between

1990 and November 2005, at HUD-insured

and other properties, LJMC, through

its supervisory employees, knowingly

stripped, bagged, removed, and disposed of

regulated asbestos material in a manner that

did not comply with the Clean Air Act work

practice standards.
Chapter 5 Chapter 5

HUD’s Community Plannin s Community Planning

and Development Pr elopment Pr elopment Programs
86 HUD’s Community Planning and Development Programs

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.

Audits

During this reporting period, OIG

issued 1 internal and 10 external audit

reports in the CPD program area. These

reports disclosed more than $11 million in

questioned costs and nearly $4 million in

recommendations that funds be put to

better use.

OIG audits the Community

Development Block Grant (CDBG) program,

Supportive Housing Program Grant,

HOME, and Special Purpose Grants

program. While OIG’s objectives varied by

auditee, the majority of the reviews were to

determine whether the grant funds were

administered for eligible activities and that

they met overall agreements. The

following section illustrates the audits

conducted in the CPD area.

Community De Community Development

elopment elopment

Block Grant Pr k Grant Program

 HUD OIG audited the Municipality of

Toa Baja’s, Toa Baja, PR, Section 108 Loan

Guarantee Assistance program. The

Municipality did not manage two program

activities in an economical, efficient, and

effective manner. It paid more than $4.8

million for two activities in which the

intended benefits and compliance with

CDBG national objectives were not met and

paid more than $70,000 for unreasonable/

unnecessary expenditures. In addition, the

Municipality did not maintain adequate

records to demonstrate that it complied with

environmental review procedures

associated with the construction of the Toa

A Look Back for the Year

Chart 5.1: Per t 5.1: Percentage of OIG Community Planning and Development Closed Audit elopment Closed Audit

Cases, Performed FY 06

Region 1

Boston

11%

Region 2

New York

16%

Region 3

Philadelphia

5%

Region 4

Atlanta

16%

Region 5

Chicago

21%

Region 6

Fort Worth

5%

Region 7-8

Kansas City

0%

Region 9-10

Los Angeles

26%
HUD’s Community Planning and Development Programs 87

Baja public library. As a result, HUD has no

assurance that requirements were met or

whether potential findings or concerns were

properly addressed.

OIG recommended that HUD require

the Municipality to (1) develop and

implement a corrective action plan to

eliminate safety hazards and ensure that the

public library meets a national objective or

repay $3.8 million used for its construction,

(2) provide all supporting documentation

showing that it obtained HUD approval to

change the purpose and scope of the

Candelaria multipurpose center or repay $1

million used for its construction, (3) repay

more than $70,000 in unreasonable/

unnecessary cost for repairs at the public

library, (4) develop and implement an

internal control plan to ensure that the Loan

Guarantee Assistance program has

procedures that ensure funded activities

provide the intended benefits to the

community and meet at least one of the

CDBG national objectives and

environmental review procedures that

ensure funded activities are properly

Picture of the front of the public library. The

library is beneath a deteriorated water tower

and has no parking facility.

assessed and supported. (Audit Report:

2006-AT-1019)

○○○○○○○○○○○○○○○○○

HUD OIG audited the Municipality of

Humacao’s, Humacao, PR, CDBG program.

The Municipality’s financial management

system did not properly identify the

application of more than $1.2 million in

program income, did not properly allocate

almost $316,000 in administrative salaries,

allowed the use of almost $67,000 for

ineligible expenditures, and could not

account for nearly $80,000 in CDBG receipts.

In addition, the Municipality awarded 12

contracts without following HUD

procurement requirements, did not support

the reasonableness of $1.9 million in CDBG

contracts, and paid almost $103,000 for

excessive or unnecessary expenditures.

Further, the Municipality did not maintain

adequate records to demonstrate that

activities met at least one of the three CDBG

national objectives. Therefore, the intended

benefits and compliance with the CDBG

national objectives and related expenditures

totaling nearly $212,000 are unsupported.

OIG recommended that HUD require

the Municipality to repay almost $103,000

in excessive costs and nearly $67,000 in

ineligible operating expenditures; provide

all supporting documentation showing the

appropriateness and eligibility of $3.8

million in CDBG disbursements; develop

and implement an internal control plan to

ensure that the CDBG program has (1) a

financial management system that complies

with HUD requirements, (2) procurement

procedures that ensure goods and services

are obtained at the most advantageous terms

and in a manner providing full and open

competition, and (3) procedures that ensure

funded activities meet at least one of the

CDBG national objectives; and ensure that

CDBG expenditures are properly accounted

for, reconciled with HUD’s disbursement

system, and in compliance with HUD

requirements. (Audit Report: 2006-AT1016)

○○○○○○○○○○○○○○○○○
HUD OIG is conducting ongoing audits

of the Lower Manhattan Development

Corporation’s administration of the CDBG

Disaster Recovery Assistance funds, which

were 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. The Corporation disbursed $129.7

million of these funds during the audit

period of October 1, 2005, through March

31, 2006.

The Corporation generally disbursed

Disaster Recovery Assistance funds in

accordance with the HUD-approved action

plans. The Corporation also expended the

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, weaknesses in the Corporation’s

control procedures permitted nearly

$187,000 to be misclassified in HUD’s Line

of Credit Control system, resulting in

charges to the wrong programs. In addition,

a consultant was reimbursed at incorrect

rates, resulting in a $3,000 overpayment.

OIG recommended that HUD require

the Corporation to (1) reclassify costs

totaling nearly $187,000 to the appropriate

HUD Line of Credit Control System budget

line item, (2) reimburse more than $3,000 to

the World Trade Center Memorial and

Cultural program, and (3) strengthen

controls to ensure that consultants are

reimbursed in accordance with the terms of

agreements. (Audit Report: 2006-NY-1013)

○○○○○○○○○○○○○○○○○

HUD OIG audited the HOME and

CDBG programs of the Snohomish County

Office of Housing and Community

Development in Everett, WA. Snohomish

County generally administered its CDBG

and HOME Investment Partnerships

Program grants in accordance with HUD

requirements. However, the County

charged more than $67,000 in ineligible

administrative expenses to its CDBG. The

County also extended the payoff date for two

CDBG float-funded activities without

properly identifying the loan extensions as

a new activity as required.

OIG recommended that HUD require

the County to (1) reimburse its CDBG and/

or repay HUD from nonfederal funds for

more than $67,000 in expenses related to

ineligible administrative activities, (2)

establish and implement adequate

procedures for charging administrative costs

that meet federal requirements, and (3)

establish and implement adequate

procedures for its float loan program. (Audit

Report: 2006-SE-1003)

○○○○○○○○○○○○○○○○○

HUD OIG audited the City of Modesto’s,

Modesto, CA, Park, Recreation, and

Neighborhood Services Division. The City

did not adequately administer its grant. OIG

recommended that HUD require the City to

(1) reduce the loan balances for loan

recipients who were charged nearly $65,000

for unreasonable and unnecessary

rehabilitation costs; (2) review all additional

loans related to rehabilitation work carried

out after June 2005 to determine the

reasonableness of costs charged for the work

and reduce the recipient loan balances for

any identified overcharges; (3) implement a

procurement system that meets federal

requirements, (4) develop an adequate

quality control system to ensure proper

monitoring of contractor charges,

rehabilitation work, and work progress; and

(5) provide evidence that it now complies

with its own underwriting requirements

regarding verification of income and

assistance eligibility for loan applicants.

(Audit Report: 2006-LA-1019)

○○○○○○○○○○○○○○○○○

HUD OIG audited the 2004 CDBG

Disaster Recovery Assistance funds

provided to the State of Florida. The State

awarded and disbursed the 2004 CDBG

Disaster Recovery Assistance funds in

accordance with HUD requirements.

However, program files lacked evidence that

88 HUD’s Community Planning and Development Programs
the State verified whether recipients used

the funds for activities reimbursed by the

Federal Emergency Management Agency

(FEMA), Small Business Administration

(SBA), or other sources. As a result, the

opportunity existed for a recipient to receive

funding for the same activity from several

sources.

OIG recommended that HUD require

the State to develop and implement

procedures to ensure that CDBG disaster

recovery funds will not be used for activities

reimbursed by FEMA, SBA, or any other

program or source and maintain supporting

documentation in its files. (Audit Report:

2006-AT-1014)

Special Pur Special Purpose Grants pose Grants

HUD OIG audited HUD’s oversight of

Economic Development Initiative – Special

Purpose Grants appropriated for fiscal years

2002 through 2005 to determine the

adequacy of HUD’s application and award

processing and monitoring of the Grants.

HUD did not require grantees to place

liens on assisted properties’ titles to protect

HUD’s interests. It also did not ensure that

grantees placed covenants on assisted

properties’ titles assuring nondiscrimination

and that Grant funds were appropriately

used according to its agreements with

grantees. Of 105 Grants reviewed, HUD did

not ensure that 71 grantees submitted

required forms and documentation for

appropriate monitoring and nine grantees

properly completed and submitted required

application and award forms and

documentation. HUD could not support

that four grantees submitted required

semiannual progress reports and three

grantees submitted certifications regarding

lobbying and that it approved two grantees’

environmental release of funds before

disbursing Grant funds.

OIG recommended that HUD improve

its existing procedures and controls to

ensure that (1) grantees receiving Grant

funds above a HUD-established minimum

threshold record liens showing HUD’s

interest in assisted properties, (2) grantees

place covenants on properties’ titles assuring

nondiscrimination, (3) grantees properly

complete required application forms and

documentation for Grant awards, (4) Grant

funds are appropriately used, and (5) Grant

funds are properly disbursed. OIG also

recommended that HUD strengthen

existing procedures and controls over the

Grant agreement template review to ensure

that citations to requirements are accurate.

(Audit Report: 2006-CH-0003)

Supporti

tive Housin e Housing

Program Grant

ram Grant ram Grant

HUD OIG audited the Institute for

Urban Research and Development, located

in El Monte, CA, in response to a citizen’s

complaint. The objective of the audit was to

determine whether the complainant’s

allegations had merit and whether the

Institute administered its Supportive

Housing Program grants in accordance with

pertinent requirements.

The Institute claimed to have spent

almost $109,000 in grant funds for allocated

supportive housing and corporate office

expenses that were not documented. In

addition, it could not provide support for

more than $181,000 in required matching

funds for three of the grants.

OIG recommended that HUD require

the grantees to (1) provide adequate

supporting documentation for almost

$109,000 in unsupported expenses or repay

it from nonfederal funds and (2) provide

adequate supporting documentation that

more than $181,000 in required matching

funds was provided or repay the $1.1 million

balance of grant funds expended. (Audit

Report: 2006-LA-1015)

HUD’s Community Planning and Development Programs 89
HOME

HUD OIG audited the Commonwealth

of Virginia’s HOME Investment

Partnerships program to determine whether

the Commonwealth’s Department of

Housing and Community Development

properly administered its HOME program.

The Commonwealth did not always

comply with federal regulations and/or its

own requirements in its disbursements and

administration of HOME funds for various

purposes. As a result, HOME funds totaling

almost $184,000 were used for ineligible

expenses or activities, and more than

$527,000 in expenses were unsupported.

The Commonwealth also accumulated more

than $3.2 million in administrative funds

that should have been used to improve its

administration of its HOME program and

to fund additional eligible HOME projects.

OIG recommended that HUD require

the Commonwealth to (1) recover almost

$184,000 it spent on ineligible expenses and

provide support for more than $527,000 in

expenses or repay that amount to the HOME

program, (2) use the accumulated $3.2

million in administrative funds to improve

its monitoring program and recommit any

excess funds to eligible HOME projects, and

(3) create and implement procedures to

ensure that HOME funds are disbursed and

used in compliance with applicable

regulations. (Audit Report: 2006-PH-1013)

○○○○○○○○○○○○○○○○○

90 HUD’s Community Planning and Development Programs
HUD’s Community Planning and Development Programs 91

Investigations

During this reporting period, OIG

opened 42 investigative cases and closed 31

cases in the CPD program area. Judicial

action taken on these cases during the

period included $4,617,997 in investigative

recoveries, $7,025,433 in funds put to better

use, 23 indictments/informations, 25

convictions/pleas/pretrial diversions, 17

administrative actions, 1 civil action, 2

personnel actions, and 17 arrests.

Chart 5.2: Community Planning and

Development Recoveries

Embezzlement

6% ($384,615)

Davis Bacon

6% ($340,000)

Total Recoveries $4,617,997

Contract Fraud

9% ($530,925) False Statements

79% ($4,720,516)

Some investigations discussed in this report were conducted by the OIG or jointly

with federal, state, and local law

enforcement agencies. The results of our

more significant investigations are

described below.

Theft/Embe heft/Embezzlement

zzlement zzlement

Gary Jojuana Meeks, executive director

for HUD-funded Gary Urban Enterprise

Association (GUEA), and Charmaine

Pratchett, fiscal director for GUEA, were

each charged in U.S. District Court, Gary,

IN, with embezzlement, conspiracy, and

mail fraud. Meeks and Pratchett allegedly

embezzled more than $750,000 in GUEA

funds by misusing the GUEA credit card,

receiving excessive wages, and diverting

GUEA funds to a personal bank account and

used GUEA funds for real estate,

automobiles, clothing, home furniture,

restaurants, vacations, and personal

expenses.

○○○○○○○○○○○○○○○○○

A Look Back for the Year

Chart 5.3: Per t 5.3: Percentage of OIG Community Planning and Development Closed

Investigation Cases ation Cases, Performed FY 06

Region 1

Boston

3%

Region 2

New York

22%

Region 3

Philadelphia

11%

Region 4

Atlanta

8%

Region 5

Chicago

14%

Region 6

Fort Worth

28%

Region 7-8

Kansas City

11%

Region 9-10

Los Angeles

3%
Carol Aranjo, the former executive

director of D. Edward Wells Federal Credit

Union (DEWFCU), along with her spouse

and son, Alphonso and Douglas Smith, were

indicted in U.S. District Court, Springfield,

MA, on conspiracy, embezzlement, bank

fraud, federal program fraud, and various

tax code violations. Aranjo and Alphonso

and Douglas Smith allegedly embezzled

more than $1.18 million from DEWFCU,

including more than $65,000 from Walnut

Street Apartments, a HUD-insured

multifamily project; allegedly submitted

fraudulent bids to secure $522,340 from the

City of Springfield HUD HOME program;

allegedly embezzled more than $10,000 from

the City of Springfield HUD HOME

program through D.A.T. Construction, a

company owned by Alphonso and Douglas

Smith; and allegedly embezzled HUDinsured mortgage funds by failing to pay

mortgage loans on properties securing new

Federal Housing Administration (FHA)-

insured mortgages. The indictment also

contains a forfeiture count for all property

92 HUD’s Community Planning and Development Programs

and cash obtained through fraudulent acts

alleged in the indictment. In addition to the

above defendants, Mary Spruell, former

treasurer of DEWFCU and owner/manager

of Walnut Street Apartments, pled guilty to

an information charging her with

embezzlement of monies and funds, aiding

and abetting, and subscribing to false federal

income tax returns. Spruell embezzled more

than $109,000 from DEWFCU, including

more than $65,000 from Walnut Street

Apartments. Terms of her plea agreement

include the forced sale of Walnut Street

Apartments to repay HUD for unauthorized

distributions, excessive management fees,

and court ordered restitution. As a result

of their actions, HUD’s losses are estimated

at $360,000.

○○○○○○○○○○○○○○○○○

Leroy Brown, a former Salvation Army

financial manager, pled guilty in U.S.

District Court, Newark, NJ, to conspiracy

for theft from an organization receiving

federal benefits and federal income tax

Copyright, 2006. The Republican, Springfield, MA. Reprinted with permission.
evasion. Susan Bigelow, a City of Newark

Department of Finance employee, was

sentenced to 10 months incarceration and 2

years probation and ordered to pay the

Salvation Army $385,760 for her previous

guilty plea to conspiracy to steal federal

program funds. Brown, while working at a

Newark branch of the Salvation Army,

embezzled $385,760 from a Salvation Army

bank account, funded in part with HUD

Housing Opportunities for Persons with

AIDS (HOPWA) program funds, by creating

fraudulent client files, check request forms,

and court documents to support the

issuance of bogus landlord payments to

Bigelow. Bigelow received payments from

Brown for cashing more than $300,000 in

federal program checks, including checks

from FEMA and HUD’s HOPWA program.

○○○○○○○○○○○○○○○○○

Herbert Bagley, an insurance broker for

Howard and Stuart Associates, Inc., pled

guilty in U.S. District Court, Norristown,

PA, to numerous counts of mail fraud,

bribery, conspiracy, bank fraud, filing a false

federal income tax return, and honest service

mail fraud. From 2002 through 2005, Bagley

paid bribes to Theodore LeBlanc, the

previously convicted former mayor of

Norristown, PA, to obtain Norristown

Borough’s insurance contracts and other

payments financed with HUD CDBG

program funds. As a result, HUD realized

losses of $200,000.

○○○○○○○○○○○○○○○○○

Malik Blackmon, former minority AIDS

initiative coordinator for Positive Voices, a

nonprofit corporation and subgrantee of

federal funds administered by Arkansas

Department of Health (ADH), entered into

a pretrial diversion agreement in U. S.

District Court, Little Rock, AR. Blackmon

admitted to theft of federal grant money and

in return for 12 months deferred

adjudication, agreed to perform 60 hours of

community service and forfeit a diamond

ring seized by the government. Blackmon

and his wife, formerly indicted Lola

HUD’s Community Planning and Development Programs 93

Thrower, ADH HIV Services program

administrator, established a nonprofit

corporation called B’MON, Inc. Blackmon

and Thrower directed others to write checks

from numerous HUD-funded subgrantee

accounts to B’MON, created phony invoices

and receipts, and used pilfered federal funds

for personal expenses, to include the

purchase of a $5,000 diamond ring.

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Mark Marcucilli, Assistant Director of

Housing Management for New York State

Division of Housing and Community

Renewal; Fred Marcucilli, father of Mark

Marcucilli; and Carmine Carpinone each

pled guilty in U.S. District Court, New York,

NY, to numerous counts of conspiracy to

commit mail fraud and theft of government

funds. Mark Marcucilli, Fred Marcucilli,

and Carpione conspired to obtain Lower

Manhattan Development Corporation funds

by falsely claiming residences in the lower

Manhattan World Trade Center area. HUD

provided $2.7 billion for the Corporation, an

organization created to coordinate the

rebuilding and revitalization of lower

Manhattan after the September 11, 2001,

terrorist attacks.

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Terry Lynn Miller, the former executive

director of Suffolk Shelter for the Homeless

(SSH), a HUD-funded organization, was

sentenced in U.S. District Court, Norfolk,

VA, to 6 months home detention and 3 years

probation and ordered to pay SSH $20,117

restitution for her previous guilty plea to

federal program fraud. Miller used SSH

funds and credit to personally obtain a

laptop computer, computer software, digital

camera, medical lift chair, YMCA family

membership, and gasoline and to pay

$17,238 in wages to her daughter, although

her daughter was not an SSH employee. As

a result, HUD realized a loss of $23,889;

Miller paid the court $20,117 restitution as

ordered.
Other Fraud/Crimes Other Fraud/Crimes

Following a “Qui Tam” complaint, a $2

million settlement agreement was reached

between the United States Attorney’s Office,

Indianapolis, IN, and Phoenix Fabricators

and Erectors, Inc. Phoenix received HUD

CPD and U.S. Department of Agriculture

(USDA) program funds to weld steel water

storage tanks throughout the United States

In 1996, Phoenix began generating false

testing records to show that installed tanks

met contractual standards, causing the

submission of false claims to HUD and

USDA for payments. According to the

consent judgment, the U.S. Department of

Justice (DOJ) and the “Qui Tam Realtor” will

receive $1.75 million, with the remaining

$250,000 designated for mandatory

extended warranties on all tanks

constructed during the relevant period.

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Anthony and Teresa Auyer each pled

guilty in U.S. District Court, Chattanooga,

TN, to conspiracy, bank fraud, and mail

fraud charges. Anthony and Teresa Auyer

received a HUD CDBG loan through

Tennessee Department of Economic and

Community Development to purchase

lumber mill equipment. The Auyers

submitted phony invoices, showing lumber

mill equipment purchases, but never

purchased lumber mill equipment and

failed to repay the CDBG loan. As a result,

HUD realized a loss of $458,821.

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HUD OIG received and probed

allegations of unfair grant distributions by

Empire State Development Corporation

(ESDC), New York, NY, a HUD-funded

nonprofit created to administer and distribute

Small Firm Attraction and Retention Grants

(SFARG) and Business Recovery Grants

(BRG) for redevelopment of lower

Manhattan after the September 11, 2001,

terrorist attacks. As a result, Dart Courier

Service, the recipient of SFARG and BRG

funds totaling $692,500 and $300,000,

respectively, returned $422,425 in SFARG

funds to ESDC.

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Chang Sheng Yu, a Chinese national and

president of American McKinley Venture

Management, Inc., pled guilty during his

trial in U.S. District Court, New York, NY,

to theft of government funds, mail fraud, and

submission of false Social Security numbers

(SSN) for his role in a scheme to defraud

HUD and Empire State Development

Corporation (ESDC) of $118,876 in federal

grant money. Yu falsely obtained a BRG and

attempted to obtain an SFARG through

ESDC. ESDC, a HUD-funded nonprofit

established to provide assistance to

businesses in lower Manhattan after the

September 11, 2001, terrorist attacks,

established BRG and SFARG programs after

receiving a $700 million appropriation from

HUD.

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Roderick Caston, a former member of the

City of Shreveport Zoning and Appeals Board,

was sentenced in U.S. District Court,

Shreveport, LA, to 12 months confinement

and 3 years supervised release and ordered to

pay City of Shreveport Department of

Community Development (SDCD) $107,000

restitution for his earlier guilty plea to theft of

government funds. Caston applied for and

received HUD CDBG funds through the

SDCD Small Business Loan Program to

construct a carwash business in downtown

Shreveport, then diverted loan proceeds at

closing through two vendors. The vendors

funneled back to Caston most of the borrowed

money, which he used for personal expenses.

As a result, HUD realized a loss of $107,144.

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John J. Walsh, doing business as J. Walsh

and Sons Building and Remodeling, was

sentenced in U.S. District Court,

Springfield, MA, to 6 months confinement

at a community corrections center, 6 months

house arrest with electronic monitoring, 3

94 HUD’s Community Planning and Development Programs
years probation, and 200 hours of

community service for his previous

conviction on false statements to a federal

agent and perjury charges. Walsh provided

false statements to a federal grand jury and

federal agents when questioned about his

role in the laundering through his business

of HUD CDBG funds earmarked for the

Façade program, a program providing

funding for renovations at specific

restaurants in Springfield, MA.

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Harry Diaz pled no contest in Seventh

Judicial Circuit Court, Deland, FL, to

charges of grand theft. Diaz was placed on

36 months probation and ordered to pay

$1,400 restitution to Health Planning

Council of Northeast Florida (HPCNEF), a

nonprofit organization and subrecipient

contracted to administer HUD HOPWA

funding. Diaz used the identity of another

incarcerated but active participant in the

HOPWA program, forged his signature on

a HPCNEF rental assistance contract

agreement and checks issued by HPCNEF,

and deposited HPCNEF checks totaling

$1,400 into his personal account.

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Lori Thompson, also known as Lori

Hyman; Lori Gribbin; Christine Hyman;

Suzanne O’Leary; and/or April Atkinson, a

former Shelter Plus Care Section 8 tenant

through Shalom House, a HUD CPDfunded housing assistance program, pled

guilty in Cumberland County Court,

Portland, ME, to theft by deception and

aggravated forgery. Thompson was

sentenced to 10 years incarceration (5 years

suspended) and 3 years supervised

probation for defrauding HUD and State of

Maine Health and Human Services by

creating false identities, failing to report

tenants and income, creating identifies for

fictitious children, and receiving additional

benefits for children not in her custody. In

addition to the above charges, Thompson

pled guilty to previous charges of theft by

deception and was sentenced to an

additional 3 years incarceration (to be served

concurrently with her above imprisonment)

for fraudulently receiving $105,121 in state

and/or federal funds and benefits. As a

result of her actions, HUD realized a loss of

$23,069.

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James Thomas Jr., owner of Thomas

Wrecking, was sentenced in U.S. District

Court, St. Louis, MO, to 60 days home

confinement and 3 years probation for his

earlier guilty plea to tax evasion. Thomas

admitted using his company as a “front” for

Spiritas Wrecking to satisfy St. Louis

Community Development (SLCD)

regulations regarding minority business

participation in the $8 million renovation of

the old St. Louis City Hospital. Thomas

funneled Spiritas Wrecking payroll checks

through Thomas Wrecking to create the

façade that a minority contractor

participated in the SLCD project as certified.

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Michael Caridi, president and owner of

SRC Industries, pled guilty in Rockland

County Court, New City, NY, to falsifying

business records and offering false

instruments for filing. Joseph Rotonde, vice

president of SRC, and Orry Osinga, a

subcontractor for SRC, each pled guilty to

charges of offering false instruments for

filing. SRC, a general contractor for Jawanio,

a HUD-funded nonprofit created to build

housing for developmentally disabled

adults, falsified payrolls submitted to HUD

and failed to pay employees Davis-Bacon

wages as agreed.

HUD’s Community Planning and Development Programs 95

  

Chapter 6 Chapter 6

Hurricane Relief ricane Relief ricane Relief Oversight
98 Hurricane Relief Oversight

HUD Authorized CPD Funds to Gulf HUD Authorized CPD Funds to Gulf Coast Re Coast Region

Alabama

$95.6 Million

Florida

$182 Million

Mississippi

$5.481 Billion

Louisiana

$10.41 Billion

Texas

$503 Million
Hurricane Relief Oversight 99

“We learned from our 9-11 efforts that to be effective, your teams on

the ground and at headquarters must be proactive rather than reactive.

Although a basic concept, it is one that is key to the ability to make a

real impact. This proactive posture extends to collaboration.

Rebuilding and redevelopment must happen cooperatively with state

agencies that know their communities and citizens’ needs.”

Remarks made by Inspector General Kenneth M. Donohue testifying before the

United States House of Representatives on May 10, 2006, in Washington, DC.

Introduction and oduction and

Background

During the Office of Inspector General’s

(OIG) last semiannual reporting period,

Congress approved $11.5 billion to the U.S.

Department of Housing and Urban

Development (HUD) to assist five Gulf

Coast states with restoration and recovery

from the 2005 hurricane season, and an

additional $390 million for housing

vouchers. During the current reporting

period ending September 30, 2006, Congress

approved an additional $5.2 billion to the

HUD Community Development Block Grant

(CDBG) program for the five Gulf Coast

states for necessary expenses related to

disaster relief, long-term recovery, and

restoration of infrastructure in the most
impacted and distressed areas related to the

consequences of Hurricanes Katrina, Rita,

and Wilma. As requested by President

Bush, HUD allocated the State of Louisiana

the statutory maximum $4.2 billion, making

$973 million available to address the disaster

recovery needs of Alabama, Florida,

Mississippi, and Texas.

HUD conducted panel meetings with

the other Gulf Coast states to discuss

allocation requests and unmet needs.

Secretary Jackson announced emergency

CDBG funding allocations for the remaining

four Gulf States as follows: Texas - $428

million, Mississippi - $423 million, Alabama

- $21 million, and Florida - $100 million. In

addition, HUD opened 20 new homes in the

old Fischer development in the New Orleans

area and has worked to redevelop other

public housing developments to

accommodate returning residents. HUD

also contributed $500,000 to the New

Orleans’ Neighborhoods Rebuilding Plan or

“charrette” process, which is a communitydriven effort to help guide the revitalization

of the city’s neighborhoods that addresses

each community’s priorities and plans.

The following list provides updates on

Federal Emergency Management Agency

(FEMA) disaster relief, mission

assignments, and CDBG funding to the five

Gulf Coast states:

HUD Public and Indian Housing,

Katrina Disaster Housing Assistance

Program (KDHAP)

 $79 million funded to HUD

by FEMA to relocate almost

102,000 families in Presidential

Declared Disaster Area (PDDA).

 Evacuees relocated by

public housing agencies in

44 states.

 14,000 families relocated by

the Housing Authority of

New Orleans (HANO).

 119 housing choice vouchers

and 1,721 disaster vouchers

issued by HANO.

 KDHAP transitioned by

HUD to Disaster Voucher

Program (DVP).

HUD Single-Family Real Estate

Owned (REO) Properties

 $29 million advanced to HUDcontracted management and

marketing firms.

 6,500 houses taken off the

market for rehabilitation and

use by evacuees in 11 states.

 2,600 houses readied for

evacuee housing.

 REO properties offered for

sale to evacuees at a

discount.

HUD Public and Indian Housing

Disaster Voucher Program

 $390,299,500 funded directly to

HUD.

 Portable Section 8 vouchers.

 Program to expire

September 30, 2007.

Sypnosis of Approved Plans for Gulf

Coast States’ CDBG Disaster Recovery

Assistance

 Louisiana

 $10.410 billion in total

Disaster Recovery

Assistance funding.

 Primary administering

agencies: Louisiana

Recovery Authority (LRA)

and State of Louisiana,

Office of Community

Development (OCD).

 The Road Home Housing

Program - $8.062 billion.;

100 Hurricane Relief Oversight
$6.347 billion earmarked for

the Homeowner Assistance

Program.

 Additional HUD approved

action plans:

 Restoration of homeless

housing shelter capacity

- $26 million.

 Workforce and

Affordable Rental

Housing Program -

$1.536 billion.

 Other developer

incentives - $21 million.

 Local Government Code

Enforcement Program -

$11 million.

 Economic development

programs - $332.5

million.

 Administration - $189.9

million.

 Additional action plans are

under development by the

state.

 Mississippi

 $5,481,036,059 in Disaster

Recovery Assistance

funding.

 Primary administering

agency: Mississippi

Development Authority

(MDA)

 Additional HUD approved

action plans:

 Homeowner Assistance

Grant Program - $3.26

billion.

 Public Housing Program

- $105 million.

 Ratepayer and Wind

Pool Mitigation

Programs - $410 million.

 Gulf Coast Regional

Infrastructure Program -

$500 million.

 Economic Development

and Community

Revitalization Program -

$300 million, under

discussion with HUD.

 Additional action plans are

under development by the

state.

 Texas

 $503,194,849 in Disaster

Recovery Assistance

funding.

 Primary administering

agencies: Texas Department

of Housing and Community

Affairs (TDHCA) and Office

of Rural Community Affairs

(ORCA).

 Housing, infrastructure,

public service, and public

facility - $74.5 million.

 Additional action plans are

under development by the

state.

 Florida

 $182,970,518 in Disaster

Recovery Assistance

funding.

 Primary administering

agency: Florida Department

of Community Affairs,

Division of Housing and

Community Development.

 Housing, infrastructure, and

durable construction - $82.9

million.

Hurricane Relief Oversight 101
 Additional action plans are

under development by the

state.

 Alabama

 $95,613,574 in Disaster

Recovery Assistance

funding.

 Primary administering

agency: Alabama

Department of Economic

and Community Affairs

(ADECA).

 Housing, infrastructure, and

economic development -

$74.4 million.

 Additional action plans are

under development by the

state.

Audits

During this period, OIG issued two

external reports and one internal report on

the Gulf Coast disaster area. These reports

disclosed more than $97,000 in questioned

costs and made recommendations to ensure

that HUD maintains complete and

compliant contract files.

The HUD OIG Office of Audit

responded quickly to establish an office for

Hurricane Katrina oversight to prepare for

the long process of recovery. The Office of

Audit and HUD are not generally first

responders; however, the Office of Audit

established an office, developed an audit

plan, and begun some reviews in the disaster

areas. Currently, the Hurricane Recovery

Audit Operations Division in New Orleans

is staffed by five permanent employees and

five additional auditors are detailed from

other HUD OIG regional offices. In addition,

the Office of Audit is in the process of hiring

six more auditors to be located in Louisiana

and Mississippi.

The Office of Audit’s initial assignment

was to evaluate HUD’s use of REO properties

to house disaster evacuees. It also has

performed an audit of the more than $17

million in contracts issued for disasterrelated procurement activities. The

Hurricane Recovery Audit Operations

Division is now starting reviews of

Mississippi’s and Louisiana’s homeowners

programs. These programs are funded from

HUD’s emergency supplemental

appropriations of approximately $17 billion.

These reviews are timely and will assist in

establishing a presence and acting as a realtime deterrent to waste and abuse in HUD’s

activities. The results of OIG’s completed

Gulf Coast disaster area audits are described

below.

102 Hurricane Relief Oversight
Final Audit Pr inal Audit Products

Southwest Alliance of Asset Managers,

LLC, Addison, Texas, Did Not Effectively

Enforce the Lease Terms over Payment of

Property Utilities

HUD OIG audited Southwest Alliance

of Asset Managers, LLC, a management and

marketing contractor (M&M) for HUD REO

properties held off market for disaster

victims. The audit was initiated in

conjunction with the President’s Council on

Integrity and Efficiency (PCIE), as part of

its examination of relief efforts provided by

the Federal Government in the aftermath of

Hurricanes Katrina and Rita. OIG’s

objective was to determine whether

Southwest Alliance complied with HUD’s

regulations, procedures, and instructions in

the management of HUD’s REO properties

held off market for disaster victims.

Southwest Alliance generally complied

with the terms of its M&M contract, with

one exception. It did not effectively ensure

that the disaster victims transferred the

billing of property utility services into their

names within 7 days of occupancy, as

required by the lease agreements. As a

result, after occupancy by tenants, HUD

paid more than $79,000 in utility costs for

636 leased properties during the period

September 2, 2005, through April 25, 2006.

OIG recommended that HUD instruct

Southwest Alliance to take appropriate

action against the tenants who do not

comply with the lease requirements over

utility payments and require Southwest

Alliance to initiate collection actions against

tenants to recover the more than $79,000

HUD paid for utility costs. (Audit Report:

2006-AO-1001)

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Cityside Management Corporation,

Hammond, Louisiana, Did Not Enforce the

Lease Terms over Payment of Property

Utilities

HUD OIG audited Cityside

Management Corporation, an M&M

contractor for HUD REO properties held off

market for disaster victims. The audit was

initiated in conjunction with PCIE, as part

of its examination of relief efforts provided

by the Federal Government in the aftermath

of Hurricanes Katrina and Rita. OIG’s

objective was to determine whether Cityside

complied with HUD’s regulations,

procedures, and instructions in the

management of HUD’s REO properties held

off market for disaster victims.

Cityside complied with HUD’s

regulations, procedures, and instructions in

the management of HUD’s REO properties

held off market to house disaster victims,

with one exception. It did not ensure that

all disaster victims transferred the billing of

property utility services into their names

and paid charges for utility services in full,

as required by the lease agreements.

Instead, Cityside used almost $18,000 in

HUD funds to pay the monthly billings on

133 leased properties during the period

October 13, 2005, through March 31, 2006.

OIG recommended that HUD take

appropriate action against the tenants who

do not comply with the instruction and

requirements regarding utility payments

and require Cityside to initiate collection

actions against tenants to recover almost

$18,000 that HUD paid for utility costs and

any additional costs HUD incurred after

March 31, 2006. (Audit Report: 2006-AO1002)

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Hurricane Relief Oversight 103
The Departments Did Not Maintain

Complete Contract Files; Washington, DC

HUD OIG audited HUD’s emergency

response contract award process as part of

the OIG annual audit plan, along with

efforts to monitor Hurricanes Katrina and

Rita disaster relief efforts. The objective was

to evaluate the economy, efficiency, and

effectiveness in the award of the contract

funds for hurricane relief and recovery

efforts.

HUD did not maintain complete files for

contract actions that were awarded in

response to disaster-related relief efforts. In

11 of the 13 contract files reviewed,

information was either missing or not

prepared in accordance with applicable

regulations, policies, and procedures. As a

result, HUD cannot be assured that contract

files related to emergency contract actions

were complete and in compliance with

applicable regulations, policies, and

procedures.

OIG recommended that HUD develop

and implement internal controls to ensure

that the contract files are complete and in

accordance with applicable regulations,

policies, and procedures for contracts

awarded in response to disaster-related

events. (Audit Report: 2006-AT-0001)

Ongoing Audits g Audits

CDBG Disaster Funding

Auditors are reviewing the system of

controls over the homeowners program that

is funding through the issuance of block

grant funds for the States of Mississippi and

Louisiana.

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104 Hurricane Relief Oversight

KDHAP Vouchers

HUD OIG has obtained access to FEMA

data relating KDHAP funds and is

conducting a review of the issuance of the

funds.

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Coordination with State Auditors

HUD OIG initially held meetings with

the state auditors for the five states within

the Gulf Coast region to discuss plans on

how to coordinate the various audit efforts.

Currently HUD OIG auditors are working

with Louisiana and Mississippi auditors on

coordination efforts.

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their contractors, conferring with HUD

program officials and industry groups, and

hosting and participating in law

enforcement meetings and conferences in

the Gulf Coast Region.

During this reporting period, OIG

opened 66 investigative cases in the Disaster

Relief program areas. Judicial action taken

on these cases during the period included

$4380 in investigative recoveries, 13

indictments/informations, 5 convictions/

pleas/pretrial diversions, 3 administrative

actions, and 13 arrests.

Some investigations discussed in this

report were conducted jointly with Federal,

state, and local law enforcement agencies.

The results of various significant

investigations are described below.

Hurricane-Related Benefit

ricane-Related Benefit ricane-Related Benefit

Fraud

Carolyn Richard and her husband

George Davis III, Lancaster City Housing

Authority (LCHA) Section 8 applicants,

were sentenced in U.S. District Court,

Harrisburg, PA, for their earlier guilty pleas

to providing LCHA false information.

Richard was sentenced to 6 months home

confinement and 2 years supervised

probation and fined $250; Davis III was

sentenced to 2 years supervised probation

and fined $450. Richard and Davis III,

Hurricane Katrina evacuees from New

Orleans, LA, who relocated to Columbia, PA,

submitted an application for emergency

housing through LCHA but failed to report

their criminal histories, including Richard’s

release from a New Orleans jail as a result

of hurricane flood waters.

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Sheila Davis pled guilty in U.S. District

Court, Harrisburg, PA, to making false

statements to HUD. Davis submitted a false

application for emergency housing

assistance to the Housing Authority of the

Investigations

The HUD OIG Office of Investigation

established the Disaster Relief Oversight

Division (DROD) to assist with oversight

responsibilities in the detection and

prevention of waste, fraud, and abuse of

HUD CDBG disaster recovery assistance

funding available to five affected Gulf Coast

States. OIG also created the Hurricane

Recovery Task Force, located in New

Orleans, LA, combining forces with the U.S.

Department of Justice (DOJ), Federal Bureau

of Investigation (FBI), Department of

Homeland Security (DHS) OIG, Social

Security Administration (SSA) OIG, U.S.

Postal Inspection Service (USPIS), and other

federal agencies to jointly address

allegations of fraud and public corruption

through active participation in the

Hurricane Katrina Fraud Task Forces

(HKFTF) located in Baton Rouge, LA;

Jackson, MS; and Houston, TX.

DROD is primarily responsible for

liaison; research, analysis, and

recommendations; monitoring, reporting,

and dissemination; and strategic planning

and implementation of HUD OIG OI

directives and initiatives associated with

disaster assistance and recovery. DROD

developed and participates in a far-reaching

fraud prevention program in the affected

states of the Gulf Coast region. DROD

sponsored disaster recovery funding

workshops for prosecutors and law

enforcement, as well as state agencies’

personnel in the States of Louisiana and

Mississippi. These disaster recovery

funding training workshops were designed

to educate their state agencies, as well as

federal, state, and local law enforcement, in

identifying fraud in the HUD Community

Planning and Development (CPD) grant

programs. During this reporting period, OI

senior investigative management, DROD,

and the Hurricane Recovery Task Force in

New Orleans devoted significant efforts to

prevention and deterrence activities. This

included liaison with state agencies and

Hurricane Relief Oversight 105
County of Dauphin when she claimed to be

a Hurricane Katrina evacuee forced to

relocate to Harrisburg, PA, but actually

resided in Harrisburg, PA, and was facing

eviction from her Harrisburg, PA apartment

at the time.

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Tequila Marleen Davis, a Housing

Authority of the County of Los Angeles

(HACoLA) Section 8 recipient, and Ruby

Mae Jones, a Housing Authority of the City

of Los Angeles (HACLA) Section 8 recipient,

were each charged in Los Angeles County

Superior Court, Los Angeles, CA, with

grand theft and cheating and defrauding

FEMA. Davis and Jones, while receiving

housing assistance from HACoLA and

HACLA, allegedly claimed to be victims of

Hurricane Katrina and filed fraudulent

claims with FEMA, and each received $2,000

U.S. Treasury checks based on their claims.

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Tina Marie Gilmore, a Saint Clair

Housing Authority, Belleville, IL, Section 8

applicant, was indicted in U.S. District

Court, East St. Louis, IL, on making false

statements to HUD, FEMA, and SSA.

Gilmore allegedly filed false HUD, FEMA,

and SSA applications stating she lost her

home and two children during Hurricane

Katrina flooding in New Orleans, LA, but

Gilmore never had children and resided

with her spouse in Belleville, IL during the

hurricane.

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Della Lee, also known as Darby Orange,

a Gainesville Housing Authority Section 8

tenant, was indicted in U.S. District Court,

Plano, TX, on false statements and agreed

to a pretrial diversion. Lee allegedly

misrepresented herself as a Hurricane

Katrina victim and displaced Mississippi

resident but lived in Gainesville, TX, when

Hurricane Katrina struck and was

incorrectly listed by FEMA as a person

eligible for KDHAP. As a result, Lee

received $4,380 in KDHAP benefits she was

not entitled to receive and agreed to pay

restitution as a condition of her pretrial

diversion.

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Rashieda Hollins, a Houston Housing

Authority Section 8 recipient, was indicted

in U.S. District Court, Houston, TX, on three

counts of making false claims. Hollins

allegedly filed three false FEMA applications

claiming she was a Hurricane Katrina

evacuee from New Orleans, LA, and

received $4,550 in FEMA assistance to which

she was not entitled to receive. Hollins was

terminated from HUD’s Rental Assistance

Program for abandoning her subsidized

unit.

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Quanetha Joseph, an Indianapolis

Housing Authority (IHA) Section 8 tenant,

and her mother Penny Joseph were charged

in Marion County Superior Court,

Indianapolis, IN, with multiple counts of

welfare fraud and theft. Quanetha Joseph

allegedly claimed she lived in a New

Orleans, LA, public housing unit during

Hurricane Katrina when she applied for IHA

housing assistance. After receiving an IHA

public housing unit, Quanetha Joseph

allegedly relocated to Houston, TX, failed to

notify IHA of her relocation, and allowed her

mother Penny Joseph to reside in her IHA

public housing unit. Penny Joseph allegedly

claimed she also was a victim of Hurricane

Katrina but actually had lived in the

Indianapolis area since January 2005.

Quanetha Joseph filed for and obtained

FEMA funding, Red Cross Assistance, and

approximately $5,800 in IHA housing

assistance she was not entitled to receive;

Penny Joseph filed multiple false damage

claims, but all claims were denied. Quanetha

and Penny Joseph were terminated from

HUD’s Rental Assistance Program.

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Bridgette N. Toney, a Section 8 tenant at

Scotland Square Apartments, a HUD-funded

multifamily housing complex, was indicted in

106 Hurricane Relief Oversight
U.S. District Court, Baton Rouge, LA, on one

count of making false claims and two counts

of making false statements. Toney allegedly

filed a claim with FEMA requesting $2,000

in FEMA funds as a result of Hurricane

Katrina damages to her personal property

and evacuation from her HUD-subsidized

housing unit, but Scotland Square

Apartments suffered no structural damage,

and residents were not forced to evacuate

during either Hurricanes Katrina or Rita.

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Amanda Rettig, a Section 8 tenant of

Lyman Manor Apartments, a HUDsubsidized multifamily housing complex, was

indicted in U.S. District Court, Gulfport, MS,

on numerous counts of making a false claim,

false statements, theft of public money, and

mail fraud. Rettig allegedly filed a FEMA

application claiming damages to her primary

residence and personal property in Saucier,

MS, received $22,253 in FEMA assistance, but

resided in a HUD-subsidized housing unit in

Gulfport, MS, during Hurricane Katrina.

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Roosevelt Ingram, a LaFouche Parish

Housing Authority Section 8 tenant, pled

guilty in St. Charles Parish District Court, Des

Allemands, LA, to battery and criminal

damage to property. Ingram was sentenced

to 6 months confinement (suspended) and 2

years active probation. Ingram, a fugitive

felon with an outstanding warrant was

arrested and removed from a barricaded

temporary housing trailer during HUD OIG

Operation Falcon II, and terminated from

HUD’s Rental Assistance Program.

Hurricane-Related ricane-Related

Inspections Inspections

HUD OIG is using forensic auditors

located in the Gulf Coast region to review

and evaluate the following:

 M&M firms, which received

advance payments from HUD to

rehabilitate and repair REO properties

for use by disaster victims.

Hooks Van Holm

This M&M contractor’s contract with

HUD was increased more than $15

million to provide repairs to singlefamily properties set aside for

Hurricane Katrina victims. A review

was performed to determine whether

the contractor properly accounted for

and made the necessary repairs as

specified. Interviews, reviews of

documentation, and property

inspections showed that the repair

work was adequate and the contractor

maintained proper documentation for

the repairs.

 Public housing authorities – Ensure

adequate procedures and controls are

in place to safeguard CDBG disaster

recovery funding used to repair and

replace public housing units in New

Orleans and elsewhere and to verify

that costs and expenses are proper and

documented.

HANO

This is an ongoing review of the

Authority’s contract to include

all contracts awarded post-Hurricane

Katrina. Also reviewing the

Authority’s homeownership program.

 Multifamily properties – Review HUD

recertification and housing assistance

payments procedures for selected

multifamily properties located in the

Gulf Coast states.

Sunlight Manor Apartments

This is an ongoing review of the

property’s contracting to repair

damage sustained by Hurricane Rita

and the property’s housing assistance

Hurricane Relief Oversight 107
payment procedures to ensure that

payments were accounted for properly.

 MDA – Determine whether MDA and/

or its contractor(s) used “suspicious

activity reports” or similar reports

designed to detect fraud during

the homeowner assistance grant

application process.

This is an ongoing review of the

homeowner application process from

reports supplied by MDA’s contractor.

These reports identify homeowners

that potentially made multiple

applications on the same property.

These reports also identify

homeowners that potentially

submitted multiple applications on

more than one property.

 HKFTF – Louisiana State University

(LSU)

This is an ongoing review of complaints

received by the HKFTF to determine

whether they warrant investigation or

review by HUD OIG, including an

analysis of HUD Section 8 tenants

using the National Emergency

Management Information System

(NEMIS) to determine which tenants

received funding through FEMA.

Hurricane-Related OIG

Hotline Hotline

During this reporting period, the

Hotline received and processed 45

complaints related to Hurricanes Katrina,

Rita, and Wilma.

Hurricane-Related ricane-Related

Outreach

Louisiana Outr Louisiana Outreach

HUD Inspector General Kenneth M.

Donohue chaired an hour-long panel

discussion on administrative and civil fraud

enforcement remedies in New Orleans, LA.

United States Attorney General Alberto

Gonzales and the Department of Justice

hosted this event to commemorate the

one-year anniversary of Hurricane Katrina.

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Louisiana Attorney General Charles Foti

hosted a press conference for the “Louisiana

Road Home Zero Tolerance Program” in

Baton Rouge, LA. Speakers at the press

conference included Roy A. Bernardi,

Deputy Secretary of HUD, Kenneth M.

Donohue, HUD Inspector General, David

Dugas, Donald Washington and James

Letten, U.S. Attorneys representing three

108 Hurricane Relief Oversight

Speakers at the “Louisiana ‘Road Home’ Zero

Tolerance Program” from left to right: Robbie Tighe,

Compliance Officer, Road Home Program, ICF

International; Mike Byrne, Chief Program Officer,

Road Home Program ICF International; Roy

Bernardi, HUD Deputy Secretary; Charles Foti,

Attorney General, State of Louisiana; David Dugas,

United States Attorney, Middle District of Louisiana;

Donald Washington, United States Attorney,

Western District of Louisiana; Jim Letten, United

States Attorney, Eastern District of Louisiana;

Kenneth M. Donohue, HUD Inspector General; and

Sharon B. Robinson, Inspector General, State of

Louisiana.
Louisiana judicial districts, and Mike Byrne,

CEO of ICF International, the “The Road

Home” program contractor. The press

conference described a “Zero Tolerance”

policy relating to the detection, prevention,

and Federal or state prosecution of all

fraudulent activity as Louisiana begins the

distribution of nearly $6 billion to

homeowners affected by Hurricanes Katrina

and Rita.

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Deputy Assistant Inspector General for

Inspections and Evaluations (DAIGI) John

McCarty, Acting Special Agent in Charge

(SAC) Thomas Luke, and Special Agent

(SA) Robert Anderson, provided a tour of

the devastation caused by Hurricane

Katrina in New Orleans, LA, and

Mississippi to Gale Burton, Maggie Owens,

and Bruce Friedland, three staff members

of the U.S. House of Representatives

Appropriations Committee, Sub-Committee

on Surveys and Investigations. The

Louisiana tour included Orleans Parish, St.

Bernard Parish, and St. Tammany Parish,

and focused on public housing and

multifamily locations. A tour of New

Orleans included three public housing

projects set for demolition as a result of

Hurricane Katrina, two HOPE VI

developments destroyed by Hurricane

Katrina, and one completely reoccupied and

two partially reoccupied housing

developments. The Mississippi tour

included Gulfport and Biloxi areas, and

concentrated on neighborhoods that held a

high percentage of Federal Housing

Administration (FHA)-insured singlefamily residences, multifamily properties,

and public housing units destroyed by

Hurricane Katrina.

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SAC Larry Amaker presented training

on Disaster Recovery Funding to

prosecutors and law enforcement personnel

at the State House in Baton Rouge, LA. The

Disaster Recovery Funding workshop was

designed to educate law enforcement

personnel on the nuances of HUD’s annual

CDBG and Disaster Supplemental CDBG

funding. Hosted by Louisiana Attorney

General Charles Foti and the Louisiana

Recovery Authority (LRA), guest speakers

included Mr. Leroy Frazer, Bureau Chief of

the Special Prosecutions Bureau, Manhattan

District Attorney’s Office; SAC Ruth

Ritzema, HUD OIG New York field office;

SA Jenell Clark, Small Business

Administration (SBA) OIG; David Dugas,

U.S. Attorney, Middle District of Louisiana;

Richard McClintock, Director, KPMG LLP,

and Mike Byrne, CEO, ICF International.

HUD OIG Management Analyst Desiree

Johnson facilitated the training workshop

attended by approximately 50 Federal, state,

and local law enforcement personnel.

Hurricane Relief Oversight 109

SAC Larry Amaker presenting information at the

HUD Disaster Recovery Funding workshop in Baton

Rouge, LA in September 2006.

SAC Ruth Ritzema briefing on “Lesson Learned New

York Disaster Recovery” at the HUD Disaster

Recovery Funding workshop held in Baton Rouge,

LA.

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Acting SAC Thomas Luke, Senior

Forensic Auditor (SFA) Windell Durant, and

Assistant Regional Inspector General

for Audit (ARIGA) Rose Capalungan

participated in an initial meeting of the

Louisiana Road Home Fraud Prevention and

Investigations Task Force hosted by the State

of Louisiana Attorney General in Baton

Rouge, LA. Other task force members

include the Louisiana Attorney General’s

Office, ICF International and KPMG, two

contractors hired by the State of Louisiana

to administer the Road Home Program,

Louisiana State Office of Legislative Audit,

and three United States Attorneys’ Offices

in Louisiana. HUD OIG presented the

current and future efforts in the State of

Mississippi, and discussed numerous issues

surfacing in administering the Mississippi

Development Authority (MDA) plan of

action. A lengthy review of future fraud

prevention measures in Louisiana

undertaken by HUD OIG and the United

States Attorneys’ Offices followed.

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Acting SAC Thomas Luke, SFA Windell

Durant, and HUD OIG Hotline Director

Robert Ashworth attended a Louisiana State

Attorney General’s Hurricane Katrina Fraud

Task Force (HKFTF) working group meeting

in Baton Rouge, LA. The HKFTF working

group met to discuss methods necessary to

insure valid fraud complaints or

mismanagement of CDBG funds are entered

into a Department of Justice database.

Hotline Director Ashworth provided

suggestions and guidance to two contractors

administering Hurricane Katrina CDBG

funds, ICF International and KPMG, when

establishing the Louisiana “Road Home”

hotline. In addition, discussions were held

relating to “Road Home” hotline public

service announcements. Officials from

Department of Justice, Louisiana State

Attorney General’s Office, Louisiana Office

of Economic Development, ICF

International, KPMG LLP, and Governor

Blanco’s office attended.

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Acting SAC Thomas Luke provided a

briefing on the current condition of the

Housing Authority of New Orleans

(HANO), HANO refurbishment/ rebuilding

contracts, the present stage of housing

developments off-line, the status of out-ofstate evacuees, and an overview of assistance

available through the Hurricane Katrina

Fraud Task Force (HKFTF) located in Baton

Rouge, LA, to members of the Project Safe

Neighborhood (PSN) Executive Council in

New Orleans, LA. The PSN Executive

Counsel consists of personnel from the U.S.

Attorney Office for the Eastern District of

Louisiana; Assistant U.S. Attorneys

prosecuting violent, gun, drug, and fraud

crimes; Federal agents from FBI, Drug

Enforcement Agency (DEA), U.S. Marshals

Service (USMS) and Alcohol, Tobacco,

Firearms, and Explosives (ATFE); staff from

New Orleans District Attorney Office; and

law enforcement personnel from New

Orleans and Jefferson, Orleans and St.

Bernard Parishes. HUD OIG agreed to

coordinate efforts between PSN members

and HANO.

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Acting SAC Thomas Luke provided a

briefing on the Louisiana Recovery

Authority (LRA), the Mississippi

Development Authority (MDA), and the

relationship between these state agencies

and HUD OIG Office of Investigations to

staff members from the House

Appropriations Committee, Surveys and

Investigations office in New Orleans, LA.

In addition, Acting SAC Luke provided an

overview of the relationship between HUD

OIG and the Hurricane Katrina Fraud Task

Force, how LRA and MDA interact on issues

of suspected fraud, and current efforts for

proactive fraud prevention. Deputy

Assistant Inspector General for Audit

(DAIGA) Robert Gwin and members of the

New Orleans Audit staff provided an

overview of audit functions involving both

LRA and MDA. At the completion of the

briefings, SA Robert Anderson provided the

House staff members with a tour of New

110 Hurricane Relief Oversight
Orleans’ low-income and public housing

neighborhoods.

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SA Robert Anderson provided a fraud

awareness briefing at the Louisiana Housing

Council conference held in Baton Rouge,

LA. SA Anderson provided information on

HUD OIG roles and responsibilities to

approximately 75 Louisiana Public Housing

Authorities executives in attendance.

Mississippi Outr Mississippi Outreach

DAIGI John McCarty, Acting SAC

Thomas Luke, ARIGA Rose Capalungan,

and SFA Windell Durant conducted a

briefing and overview of the Mississippi

Development Authority (MDA) action plan

to Dunn Lampton, U.S. Attorney, Southern

District of Mississippi, members of the FBI,

auditors from Mississippi State Auditor

Office, and District Attorneys representing

four affected counties in Southern

Mississippi at a meeting held in Jackson,

MS. The briefing provided a synopsis of

funding, an explanation on how MDA will

withdraw funds, and covered topics

including Federal and state prosecutions,

construction working groups, Memoranda

of Understanding (MOU) between Federal

and state agencies, and additional training

for prosecutors and local law enforcement.

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SAC Larry Amaker and Acting SAC

Thomas Luke sponsored a Disaster

Recovery Funding Workshop on the campus

of the University of Southern Mississippi

located in Hattiesburg, MS. Mississippi

State Auditor Phil Bryant made a guest

appearance to kick off the start of the HUD

OIG workshop, and other guest speakers

included SAC Ruth Ritzema, SAC Peter

Emerzian, and SA Jenell Clark, Small

Business Administration (SBA) OIG. Those

in attendance included David Dugas, U.S.

Attorney, Middle District of Louisiana;

Dunn Lampton, U.S. Attorney, Southern

District of Mississippi; John Dowdy,

Assistant U.S. Attorney, Southern District of

Mississippi; numerous District Attorneys

and their representatives, as well as audit

personnel from the Mississippi Office of the

State Auditor. Representing HUD OIG was

ARIGA Rose Capalungan, SSA Sandra

Hackworth, and SAs Robert Anderson,

William Bathke, and Michael Gibson.

Approximately 50 law enforcement agents

and personnel attended the workshop. The

Disaster Recovery Funding Workshop was

designed to train law enforcement personnel

on the nuances found in the HUD Annual

CDBG funding and Disaster Supplemental

CDBG funding.

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Acting SAC Thomas Luke and

Supervisory Forensic Auditor (SFA) Windell

Durant provided multiple fraud awareness

briefings to employees of the Reznick Group

and Allied American Adjusting in Gulfport,

Gautier, and Bay St. Louis, MS. The

Mississippi Development Authority

contracted with the Reznick Group to

administer their homeowner assistance

grant program, and Allied American

Adjusting to conduct appraisals of singlefamily homes damaged or destroyed during

Hurricane Katrina.

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Hurricane Relief Oversight 111

State Auditor Phil Bryant addressing law enforcement

personnel attending the HUD OIG sponsored Disaster

Recovery Funding Workshop in Hattiesburg, MS in

July 2006.
Acting SAC Thomas Luke provided

remarks at a press conference held at the

Mississippi Gulf Coast Convention Center

in Biloxi, MS. Hosted by Phil Bryant, State

Auditor for Mississippi, the press

conference was called to announce the

formation of the Katrina Fraud Prevention

and Detection Unit. Speeches given by

Mississippi Governor Haley Barbour and

Dunn Lampton, U. S. Attorney, Southern

District of Mississippi, highlighted the

conference. Others in attendance included

Congressman Gene Taylor’s representative,

U.S. Marshal Nehemiah Flowers, Federal

Bureau of Investigation (FBI) SAC John

Rucci, HUD OIG Assistant Regional

Inspector General for Audit (ARIGA) Rose

Capalungan, and District Attorneys and

Sheriffs from four Mississippi counties

affected by the hurricanes.

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Acting SAC Thomas Luke, SFA Windell

Durant, and HUD OIG Hotline Director

Robert Ashworth attended a Mississippi

fraud working group meeting held at the

U.S. Attorney’s Office in Gulfport, MS.

Deputy Attorney General Alice Fischer

provided an overview of Department of

Justice efforts to assist local District

Attorneys and law enforcement personnel,

and Southern District of Mississippi U.S.

112 Hurricane Relief Oversight

Acting SAC Thomas Luke (right) conversing with

United States Attorney, Dunn Lampton (left) and

State Auditor Phil Bryant (center) in Hattiesburg,

MS at the HUD OIG sponsored Disaster Recovery

Funding Workshop.

Attorney Dunn Lampton and Assistant U.S.

Attorney John Dowdy, Chief of the Criminal

Division, provided an update on current

investigations. Mississippi Attorney

General Jim Hood and local District

Attorneys provided an overview of issues

they faced, and described current contractor

fraud investigations and consumer

protection violations. Representatives from

FBI, Department of Homeland Security

Office of Inspector General, Mississippi State

Auditors Office, Mississippi Bureau of

Investigations, and numerous southern

Mississippi District Attorney offices and law

enforcement personnel attended.

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Acting SAC Thomas Luke and SA’s

Michael Gibson and Toni Zavala

participated in a “Contractor Fraud Working

Group” (CFWG) hosted by Southern District

of Mississippi U.S. Attorney Dunn Lampton

and Assistant U.S. Attorney John Dowdy,

Chief of the Criminal Division in Gulfport,

MS. U.S. Attorney Lampton, in conjunction

with the State of Mississippi Attorney

General’s Office, formed the CFWG and

includes representatives from the FBI,

District Attorneys’ Offices, Sheriff’s Offices,

and Police Departments from seven localities

along the gulf coast affected by Hurricane

Katrina, MS State Auditors Office, and MS

State Police. The CFWG met to develop a

standard operating procedure for recording,

investigating, and prosecuting homeowner

complaints involving contractors. U.S.

Attorney Lampton provided an overview of

the procedures for prosecuting complaints,

a briefing on the Hurricane Katrina Fraud

Task Force (HKFTF) process of recording

complaints, and described assistance

available to local law enforcement from

HKFTF task force members.

○○○○○○○○○○○○○○○○○

Acting SAC Luke accompanied

Congressional staff members from the

House Appropriations Committee to the

MDA Service Center in Gulfport, MS. At

the MDA Center, representatives from the
Reznick Group provided a briefing on the

Mississippi Housing Assistance Program, a

walkthrough of the intake procedure, and

an observation of an actual applicant

progressing through the CDBG grant

application process. After the MDA Service

Center visit, staff members were provided

with a tour of single-family neighborhoods

in both Gulfport and Biloxi before a fraud

referral briefing by Mississippi State

Auditors in Hattiesburg.

Other Outr Other Outreach

HUD OIG Deputy Inspector General

(DIG) Michael Stephens,DAIGI John

McCarty, SAC Larry Amaker, Senior Special

Agent (SSA) Hackworth, and HUD OIG

Auditors Christine Begola and Patrick

Bannon attended the President’s Council on

Integrity and Efficiency/Executive Council

on Integrity and Efficiency (PCIE/ECIE)

Homeland Security roundtable meeting for

OIG Hurricane Katrina Oversight in

Washington, D.C. Topics of discussion

included legislative updates, government

reform initiatives, Gulf Coast small business

contracting issues, GAO updates on Gulf

Coast initiatives, and updates on the

operations of the Hurricane Katrina Fraud

Task Force.

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DAIGI John McCarty, ARIGA Rose

Capalungan, and Region 6 ASAC Michael

Wilson met with representatives of HUD

and Texas Department of Housing and

Community Affairs (TDHCA) in Austin,

Texas. DAIGI McCarty presented the role

and responsibilities of HUD OIG in the

hurricane recovery process, and offered

HUD OIG assistance in program

development. Officials in attendance

included Katie Worsham, Director of HUD

Office of Community Planning and

Development (CPD), Fort Worth, Texas,

Jennifer Molinari, TDHCA, Oralia Cardenas,

Texas’ Office of Rural Community Affairs

(TXORC), and representatives and staff of

Hurricane Relief Oversight 113

TDHCA, TXORC, and four Councils of

Governments overseeing Hurricane Rita

recovery efforts in their communities.

○○○○○○○○○○○○○○○○○

SAC Larry Amaker and Assistant

Director for Technical Planning & Oversight

Christine Begola met with Florida

Department of Community Affairs (FDCA)

officials in Tallahassee, FL. SAC Amaker

provided the role and responsibilities of

HUD OIG in overseeing HUD CDBG

funding to the State of Florida. Anne Kittrell,

Inspector General for the State of Florida,

FDCA Chief of Staff Janice Browning, FDCA

Ted Court, and HUD OIG Region 4 SAC

William Creel and ASAC Timothy Mowery

also attended.

○○○○○○○○○○○○○○○○○

SSA Sandra Hackworth and SA Michael

Gibson provided a presentation at the

Alabama Department of Economic and

Community Affairs (ADECA) training

workshop held at the Mitchell Center on

the University of Alabama campus in

Mobile, AL. ADECA is the state agency

administering funding provided to Alabama

for its recovery from the effects of Hurricane

Katrina. SSA Hackworth and SA Gibson’s

presentation, an integral part of ADECA’S

workshop, focused on HUD’S Community

Development Block Grant (CDBG) disaster

recovery funding program and contract

fraud awareness. SSA Hackworth and SA

Gibson also hosted a question and answer

session following their presentation.

Approximately 50 ADECA grantees and

sub-grantees attended.

○○○○○○○○○○○○○○○○○
Pictures of HUD OIG’ HUD OIG’ HUD OIG’s Hurricane Relief ricane Relief ricane Relief and

Recovery Efforts

HOPE VI project, Abundance Square, 9th Ward,

New Orleans, LA.

Frenchman’s Wharf, HUD multifamily location,

New Orleans East.

Lake Pontchartrain as seen from Carr Drive in

Slidell, LA.

DAIGI John McCarty and SA Robert Anderson

briefing congressional staffer Bruce Friedland at

Frenchman’s Wharf located in New Orleans East.

Acting SAC Thomas Luke leading congressional

staffers on a tour of Abundance Square located in the

9th Ward, New Orleans, LA.

114 Hurricane Relief Oversight
Flood-damaged home in Lakeview neighborhood,

New Orleans, LA.

  

DAIGI John McCarty and Acting SAC Thomas

Luke conferring with congressional staffers at the

Industrial Canal breach, Lower 9th Ward, New

Orleans, LA.

Hurricane-damaged structure along the Mississippi

Gulf Coast.

Hurricane-damaged structure along the Mississippi

Gulf Coast.

Hurricane Relief Oversight 115

Chapter 7 Chapter 7

Other Si Other Si Other Significant HUD Audits gnificant HUD Audits gnificant HUD Audits

and Investigations/OIG Hotline ations/OIG Hotline ations/OIG Hotline
118 Other Significant HUD Audits and Investigations/OIG Hotline

Audit

During this reporting period, the Office

of Inspector General (OIG) issued one

external and three internal reports

involving areas of U.S. Department of

Housing and Urban Development (HUD)

operations that do not fall under major HUD

programs reported in previous chapters.

These reports disclosed more than $930,000

in questioned costs and over $470,000 in

funds put to better use.

OIG’s more significant audits are

discussed below.

HUD Inf HUD Inf HUD Information

Technology Contin gy Contingency

Plannin Planning and Pr g and Preparedness

Compliance with Federal Compliance with Federal Compliance with Federal

Requirements

HUD OIG audited HUD’s information

technology contingency planning and

preparedness compliance with federal

requirements and its ability to recover in the

event of interruption or disaster in a timely

manner.

The following areas of concern were

identified: (1) the information contingency

planning process does not fully use the

planning process as recommended by the

National Institute of Standards and

Technology, (2) there is no assurance that the

alternate data recovery facilities have the

capability to restore HUD’s mission-critical

and major applications within the required

timeframes, and (3) HUD’s information

technology contingency and disaster

recovery plans are not documented and

maintained to reflect current conditions.

OIG recommended that HUD (1)

request that program officials complete the

business impact analysis and risk

assessments and ensure that they are

incorporated into HUD’s contingency and

disaster recovery plans and that the

documents reflect current conditions and

incorporate corrective actions identified, (2)

ensure that the Lockheed Martin Network

Operating Center develops a memorandum

of understanding with its alternate recovery

sites to ensure that the facilities have the

capability to restore HUD applications

within the required timeframes, and (3)

evaluate the Electronic Data Systems and

SunGard “no priority of service” provisions

to determine whether conflicting priorities

impact the recovery time objectives. (Audit

Report: 2006-DP-0005)

HUD Inf HUD Inf HUD Information

Technology Compliance gy Compliance

with OMB M-06-16 with OMB M-06-16

“Protection of

otection of otection of Sensiti Sensiti Sensitive

Agency Inf

y Information” mation”

HUD OIG completed a limited scope

assessment of HUD’s compliance with

Office of Management and Budget (OMB)

Memorandum M-06-16, “Protection of

Sensitive Agency Information.” The

memorandum stresses that federal agencies

take all necessary and reasonable measures

to eliminate significant vulnerabilities to the

sensitive information entrusted to them.

Agencies are required to (1) implement

National Institute of Standards and

Technology-recommended security controls

and take specific actions by August 7, 2006,

and (2) answer questions related to

personally identifiable information and the

extent to which specific controls and actions

required by the memorandum were

designed and implemented. Additionally,

the Inspectors General community is

required to assess compliance with the

memorandum. OIG has determined that the

contents of this memorandum would not be

appropriate for public disclosure. Therefore,

it has limited its distribution to selected

HUD officials. (Audit Report: 2006-DP0802)
Other Significant HUD Audits and Investigations/OIG Hotline 119

Federal Inf

Federal Inf Federal Information

Security Mana Security Management Act

ement Act ement Act

of 2002 of 2002

The Federal Information Security

Management Act of 2002 (FISMA) directs

HUD OIG to perform an annual

independent evaluation of HUD’s

information security program and practices.

OIG has determined that the contents of this

memorandum would not be appropriate for

public disclosure and has, therefore,

limited its distribution to selected

officials. (Audit Report: 2006-DP-0803)

Healthy Homes Initiati

y Homes Initiati y Homes Initiative

Grant

HUD OIG audited the Child Abuse

Prevention Council of Sacramento, located

in North Highlands, CA, in response to a

referral from HUD. The objectives were to

determine whether the Council

administered its Supportive Housing

Program grant in accordance with HUD

requirements and its grant agreement.

The Council did not adequately

administer its Healthy Homes Initiative

grant. As a result, nearly $937,000 of the

more than $1 million in payment

(reimbursement) requests submitted to

HUD was for ineligible and unsupported

costs.

OIG recommended that HUD require

the Council to repay it from nonfederal

sources for ineligible and unsupported

expenses (for which reimbursement was

previously received from HUD); not pay the

Council for outstanding reimbursement

requests, consisting of ineligible and

unsupported expenses, unless it can provide

adequate supporting documentation;

deobligate all remaining grant funds

including ineligible costs, any unsupported

costs that cannot be documented, and the

almost $473,000 unused portion of the $1.5

million grant; and not award the Council

additional funding until it has implemented

adequate financial management and

procurement systems and can provide

evidence that it has developed the

organizational capacity to carry out a HUD

grant. (Audit Report: 2006-LA-1013)

○○○○○○○○○○○○○○○○○
OIG Hotline OIG Hotline

The HUD OIG Hotline is operational 5

days a week, Monday through Friday, from

10:00 a.m. to 4:30 p.m. The Hotline is staffed

by seven full-time OIG employees, who take

allegations of waste, fraud, abuse, or serious

mismanagement in HUD or HUD-funded

programs from HUD employees,

contractors, and the public and coordinate

reviews with internal audit and investigative

units or with HUD program offices.

During this reporting period, the

Hotline received and processed 10,588

complaints – 76 percent received by

telephone, 17 percent by mail, and 7 percent

by e-mail. Every allegation received by the

Hotline is logged into a database and

tracked.

Of the complaints received, 1,196 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.

The Hotline closed 832 cases this reporting period. The closed Hotline cases included 130 substantiated allegations. The

substantiated allegations resulted in six administrative sanctions against HUD employees for personnel violations or investors for

improprieties involved in the purchase of a

home. The Department also took 124 corrective actions that resulted in $69,798 in

recoveries of losses and $2,158,300 in HUD

funding that could be put to better use. The

recoveries included repayments of overpaid

rental subsidies. Some of the funds that

could be put to better use were the result of

cases in which tenants were terminated from

public housing or multifamily housing programs for improperly reporting their incomes or family composition to qualify for

rental assistance.

Investigation

During this reporting period, OIG

opened 14 investigation cases and closed 10

cases involving areas of HUD operations

that do not fall under specific programs

identified in other chapters of this report.

Judicial actions taken on these cases during

the period included 2 indictments/

informations, 1 convictions/pleas/pretrial

diversions, 3 personnel actions, and 1 arrest.

120 Other Significant HUD Audits and Investigations/OIG Hotline
Chart 7.4: Substantiated Cases by Type of Complaint Recei Complaint Received by Hotline

Rental Fraud and

Improprieties

85%

Mismanagement

7%

Owner/Occupant

Violations

5%

Chart 7.3: Hotline Dollar Impact fr : Hotline Dollar Impact from Program Offices ram Offices

2,000,000

1,800,000

1,600,000

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0

Single-Family Housing Multifamily Housing Public and Indian Housing

Recoveries $69,798 Funds Put to Better Use $2,158,300

$14,168

$264,689

$55,630

  

Chart 7.2: Hotline Cases Opened by Program Area

OIG Audit

and Investigation

12%

Other HUD

Offices

3%

Public and

Indian

Housing

66%

Single-Family

Housing

6%

Multifamily

Housing

13%

$84,000

$1,809,611

Other Significant HUD Audits and Investigations/OIG Hotline 121

Other

3%

Chapter 8 Chapter 8

Outreach Efforts
124 Outreach Efforts

To foster cooperative, informative, and

mutually beneficial relationships with

agencies and organizations whose intent is

to assist the accomplishment of the U.S.

Department of Housing and Urban

Development’s (HUD) mission, the Office of

Inspector General (OIG) participates in a

number of special outreach efforts. These

efforts, as described below, are in addition

to OIG’s regular coordination with federal,

state, and local law enforcement agencies;

other OIGs; and various congressional

committees and subcommittees. During

these outreach efforts, OIG presents the

results of its audit and investigative work,

discusses its goals and objectives, and

provides information about its role and

function.

Inspector General (IG) Kenneth

Donohue; Regional Inspector General for

Audit (RIGA) Edgar Moore; Special Agent

in Charge (SAC) Ruth Ritzema; and

Assistant Inspector General/Director of

Investigations (AIG/DOI) Steve Pasichow,

Port Authority of New York/New Jersey,

were guest speakers at the Association of

Government Accountants’ (AGA) 55th

Annual Professional Development

Conference in San Diego, CA. The

presentation was entitled “The Tragedy and

Aftermath of September 11, 2001; Oversight

of Disaster Assistance Funding and Lessons

Learned.” IG Donohue was the moderator,

while RIGA Moore and SAC Ritzema made

presentations on HUD OIG’s audits and

investigative efforts regarding Community

Development Block Grant (CDBG) Disaster

Recovery Assistance funds provided to the

State of New York in response to the

September 11, 2001, terrorist attacks. AIG/

DOI Pasichow provided a presentation on

the Port Authority’s efforts in using integrity

monitors to help in overseeing Port

Authority funding provided after the

September 11 tragedy.

○○○○○○○○○○○○○○○○○

IG Kenneth Donohue, Assistant Special

Agent in Charge (ASAC) Suzanne

Steigerwald, and RIGA Ron Hosking met

with the U.S. Attorney for the District of

Colorado and members of his staff in their

Denver, CO, office. They also met with staff

of the Colorado Bureau of Investigations in

its Denver office. The topic of discussion at

both meetings was fraud in HUD’s singlefamily programs.

○○○○○○○○○○○○○○○○○

IG Kenneth Donohue, SAC Barry

McLaughlin, and RIGA Heath Wolfe

participated in the Minnesota NAHRO

conference, which was held in Breezy Point,

MN. IG Donohue was the keynote speaker,

and he presented an overview of OIG, OIG’s

mission and role, and the general functions

of the Offices of Investigation and Audit.

There were more than 300 members in

attendance. SAC McLaughlin and RIGA

Wolfe participated in a round table

discussion in which they explained common

audit findings, the “red flags” of fraud, and

fraud case studies and discussed good

public housing authority operating

practices.

○○○○○○○○○○○○○○○○○

Deputy Inspector General (DIG)

Michael Stephens, SAC William Creel, and

ASAC Ruth Valdes participated in a HUDsponsored Single-Family Mortgage Fraud

Symposium in Savannah, GA. The

symposium, entitled “Stop Mortgage Fraud:

A Call To Action,” was attended by more

than 650 members of the real estate

community representing Fannie Mae,

Freddie Mac, the North Carolina Real Estate

Commission, the Florida Office of Financial

Regulation, the Georgia Department of

Banking and Finance, and mortgage and real

estate professionals. DIG Stephens served

as the moderator for a panel of seven

presenters addressing “Enforcement After

the Crime.” Panel members included ASAC

Valdes, HUD OIG Miami field office; SAC

Brian Lamkin, Federal Bureau of
Outreach Efforts 125

Investigation (FBI), Columbia, SC, division;

two assistant U.S. attorneys (AUSA);

and Verlon Shannon, Director of HUD’s

Quality Assurance Division, Atlanta

Homeownership Center. DIG Stephens

discussed HUD OIG’s commitment to

investigating and prosecuting those who

prey on the mortgage industry to illegally

enrich themselves, and ASAC Valdes spoke

on the importance of combining law

enforcement resources and industry

professionals to hold offenders accountable.

○○○○○○○○○○○○○○○○○

SAC Barry McLaughlin, along with

representatives from the U.S. Attorney’s Office

(USAO), U.S. Trustee’s Office, and FBI,

provided a panel discussion and presentation

to more than 50 individuals attending a

meeting of the Illinois Association of Mortgage

Brokers and Bankers in Chicago, IL. Panel

members presented their agencys’ mission,

and collectively the panel discussed law

enforcement methods used for investigating

real estate fraud.

○○○○○○○○○○○○○○○○○

SAC Barry McLaughlin, along with an

FBI supervisory special agent (SA) and legal

counsel, conducted a panel presentation at

the Mortgage Bankers Association (MBA)

first annual National Fraud Issues

conference held in Chicago, IL. The panel

discussed numerous topics, including the

Deputy Inspector General Michael Stephens

presenting at a HUD-sponsored Single-Family

Mortgage Fraud Symposium in Savannah, GA.

Federal Housing Administration (FHA)

mortgage environment, working with law

enforcement, and forfeiture laws, and

illustrated recent successful investigations.

Approximately 60 MBA members attended.

○○○○○○○○○○○○○○○○○

New England Regional SAC Peter

Emerzian, ASAC Diane DeChellis, and

ARIGA Michael Motulski presented HUD

OIG’s mission, priorities, and successful

investigations/audits involving HUD’s

public and Indian housing program at the

annual Connecticut National Association of

Housing and Redevelopment Officials

(NAHRO) conference held at the Mohegan

Sun in Uncasville, CT. More than 300

officials representing approximately 25

Connecticut public housing authorities

attended.

Region 1 ASAC Diane Dechellis, CT NAHRO

Executive Director Carol Barlow, & Region 1

ARIGA Michael Motulski at the Connecticut

NAHRO conference held at the Mohegan Sun in

Uncasville, CT.

○○○○○○○○○○○○○○○○○

Patrick Meehan, U. S. Attorney for the

Eastern District of Pennsylvania, held a

press conference at Lucien Blackwell

Homes, a Philadelphia Housing Authority

(PHA) public housing development located

in southwest Philadelphia, PA, to announce

the kick-off of the Philadelphia Public

Housing Safety Initiative (PHSI). Lucien

Blackwell Homes, a newly built family

development with more than 120 homes, is

considered the “wave of the future” for
126 Outreach Efforts

Philadelphia’s housing developments, and

PHA plans to construct an additional 400

homes on 17 square blocks encompassing

Lucien Blackwell Homes. The Philadelphia

PHSI is one of 10 nationwide PHSIs

developed to protect the residents of newly

constructed housing developments from

fugitive felons, violent crimes, and gang

activity. AUSA Richard Barrett requested

HUD OIG assistance in providing strategic

information during the development of the

Philadelphia PHSI law enforcement

proposal, a proposal developed by the

USAO, and continued assistance as a

participating law enforcement partner. SAC

for HUD OIG Mid-Atlantic Region, Joseph

Clarke, and SA Lou Mancini were invited

to participate in the press conference by

Philadelphia’s USAO. Other Philadelphia

PHSI law enforcement partners

participating in the press conference

included representatives from the U.S.

Marshals Service (USMS); Bureau of

Alcohol, Tobacco, Firearms, and Explosives

(ATFE); Drug Enforcement Administration

(DEA); Philadelphia Police Department;

PHA Police Department; and other federal,

state, and local officials including Guy

Ciarrochi, HUD Region 3 Director. HUD

OIG continues to actively support

Philadelphia’s PHSI investigative efforts.

○○○○○○○○○○○○○○○○○

RIGA Heath Wolfe and SAC Barry

McLaughlin met with three state auditor’s

offices to explain the role of HUD OIG,

develop lines of communication, and

possibly conduct joint audits in the future.

On April 3, they met with officials of the

Michigan Auditor General’s office in

Lansing, MI; on April 5, they met with

officials of the Minnesota State Auditor’s

office in St. Paul, MN; and on April 17, they

met with officials of the Wisconsin

Legislative Auditor’s office in Madison, WI.

They provided a brief background of OIG

and presented information on OIG’s mission

and the function of the Offices of

Investigation and Audit. They outlined

ways in which the states can refer cases/

audits to OIG and ways in which OIG can

make referrals to the states.

○○○○○○○○○○○○○○○○○

RIGA Heath Wolfe and SAC Barry

McLaughlin gave a presentation at the

Mortgage Association of Minnesota’s 36th

Annual Convention and Trade Show in

Minneapolis, MN. SAC McLaughlin

presented an overview of the latest trends

in mortgage and real estate fraud. RIGA

Wolfe’s presentation covered common OIG

findings during mortgagee audits and

certifications that violate the Program Fraud

Civil Remedies Act (PFCRA).

○○○○○○○○○○○○○○○○○

RIGA Frank Baca, ARIGA Theresa

Carroll, and SA Lynelle Kunst presented a

training session to about 30 attendees of the

Texas NAHRO conference in Corpus

Christi, TX. The presentation covered OIG’s

organization and mission and the recent

focus on rental assistance overpayments.

○○○○○○○○○○○○○○○○○

RIGA Edgar Moore gave a presentation

to President’s Council on Integrity and

Efficiency/Executive Council on Integrity

and Efficiency (PCIE/ECIE) members who

attended the 2006 PCIE/ECIE training

conference and retreat in Portsmouth, VA.

The presentation, entitled “The IG

Community’s Changing Role in the Wake of

911 and Katrina,” provided an overview of

Region 2 New York/New Jersey’s work in

auditing the CDBG Disaster Recovery

Assistance funds. RIGA Moore participated

in a panel of PCIE awardees from three

agencies, who discussed their

accomplishments.

○○○○○○○○○○○○○○○○○

RIGA Heath Wolfe and SA Julien

Kubesh made a presentation at the

Supportive Housing Program Start-Up

Conference in Minnetonka, MN. The

presentation provided an overview of HUD

OIG, which consisted of a brief background

of OIG’s missions and goals. RIGA Wolfe
Outreach Efforts 127

presented the Office of Audit’s function, and

SA Kubesh presented the Office of

Investigation’s function. Information was

also provided on OIG’s role in fraud

investigations and the importance of

documentation of program expenditures

and achievements. There were

approximately 85 in attendance.

○○○○○○○○○○○○○○○○○

RIGA Francis Baca and ARIGA Will

Nixon gave a presentation at the fall meeting

of the Oklahoma Chapter of NAHRO in

Norman, OK. The presentation, prepared

by Senior Auditor Danita Wade and entitled

“How to Survive a HUD Audit,” focused on

how OIG selects and performs audits, public

housing findings, and resolution of audits.

RIGA Baca and ARIGA Nixon fielded a

range of questions from the group of about

30 housing executives from across

Oklahoma who attended.

○○○○○○○○○○○○○○○○○

ASAC Tony Meeks and SA David

Carranza coordinated and hosted a meeting

between the Ventura County District

Attorney’s Office Chief Deputy, Bureau of

Investigations personnel, and Executive

Directors representing Newbury Park,

Oxnard, Ventura, Port Hueneme, and Santa

Paula Housing Authorities in Ventura, CA.

The purpose of the meeting was to discuss

HUD rental assistance program fraud

schemes and trends. ASAC Meeks and SA

Carranza provided an overview of HUD

OIG’s Fugitive Felon and Sex Offender

initiatives, identified avenues for housing

authorities to recognize program fraud, and

shared ideas to develop a more efficient and

coordinated effort between HUD OIG and

the District Attorney’s office when

investigating and prosecuting housing

authority fraud referrals. The Ventura

County District Attorney’s Chief Deputy

expressed a commitment to combating

housing fraud and providing an expeditious

process to prosecute individuals

fraudulently receiving public funds.

○○○○○○○○○○○○○○○○○

ASACs Ray Espinosa and Brad Geary

provided a presentation to the Electronic

Crimes Commission sponsored by the U. S.

Secret Service in Chicago, IL. ASACs Espinosa

and Geary discussed the latest trends in real

estate and mortgage fraud, along with

procedures used in investigating these crimes.

More than 150 individuals representing law

enforcement and security personnel from

banks and private businesses attended.

○○○○○○○○○○○○○○○○○

ASAC Diane DeChellis and SA

Fernando Ramos attended a Criminal Justice

Advisory Board meeting at Bridgewater

State College in Bridgewater, MA. ASAC

DeChellis presented and discussed HUD

OIG’s role, mission, and priorities, along

with the importance of HUD OIG’s

partnership with local, state and other

federal law enforcement agencies in

combating crime. Those in attendance

included Timothy Cruz, District Attorney

for Plymouth County; Linda Balzotti,

Brockton City Council; and numerous

representatives from state and local law

enforcement agencies.

○○○○○○○○○○○○○○○○○

ASAC Ray Espinosa, along with

representatives from the Northern District

of Illinois USAO and Chicago Police

Department, participated in a panel

presentation at Project Safe Neighborhoods

National Conference held in Denver, CO.

The presentation, known as “Public

Housing, Gang Suppression and Deterrent

Strategies,” described investigative

strategies to help reduce the proliferation of

gang-related activities in public housing

complexes, HUD OIG resources to support

deterrence, and enforcement initiatives.

ASAC Espinosa also discussed HUD OIG’s

role in assisting Project Safe Neighborhood

operations, initiatives, and task forces by

initiating parallel white-collar investigations

involving tenants, landlords, single-family

fraud, and money laundering.

○○○○○○○○○○○○○○○○○
ASAC Ruth Valdes met with members

of the Domestic Security Task Force (DSTF)

in Palm Beach, FL. ASAC Valdes presented

HUD OIG’s authority, mission, and benefits

of cooperation between HUD OIG and DSTF

members and provided information relating

to Section 8 fraud and HUD OIG initiatives,

including the Fugitive Felon initiative.

ASAC Valdes also discussed a possible

coordination with HUD’s public housing

personnel for training employees of South

Florida public housing authorities to aid

DSTF response teams in Dade, Broward, and

Palm Beach Counties. Approximately 40

DSTF representatives from various federal,

state, and local law enforcement entities

attended the meeting.

○○○○○○○○○○○○○○○○○

ASAC Nadine Gurley and SA Michelle

Ahmad presented HUD OIG’s mission and

role in preserving the integrity of HUDfunded programs at the Southeast

Affordable Housing Management

Association (SAHMA) 2006 spring

workshop held in Birmingham, AL. Topics

discussed included HUD OIG’s efforts to

identify and eliminate fraudulent schemes

in HUD rental assistance, hurricane relief,

and FHA programs, along with HUD OIG’s

Fugitive Felon and Missing Children

initiatives. Approximately 75 SAHMA

members attended.

○○○○○○○○○○○○○○○○○

The HUD OIG Los Angeles field office

conducted a presentation at the Southern

California Housing Authority Managers

Association (HAMA) quarterly meeting in

Oceanside, CA. ASACs Herschell Harvell

and Tony Meeks provided an overview of

scheduled presentations and introduced

OIG SAs Neil McMullen, Herminia Neblina,

and John Rodriguez, along with ARIGA

Tanya Shulze. Seminar topics included

OIG’s Fugitive Felon, Sexual Offender, and

rental assistance fraud initiatives, in

addition to HUD’s Enterprise Income

Verification. Additionally, SA McMullen

discussed the benefits of a well-worded

Section 8 housing application and its

evidentiary value during a criminal and/or

administrative proceeding, and ARIGA

Shulze provided an overview of OIG’s

organizational structure and function and

the mission of OIG’s Office of Audit.

○○○○○○○○○○○○○○○○○

ASAC Suzanne Steigerwald provided a

presentation to more than 50 individuals

attending a NAHRO conference in Keystone,

CO. ASAC Steigerwald provided an overview

of HUD OIG’s mission and authority and

described fraud detection and enforcement

methods used to successfully prosecute

investigations.

○○○○○○○○○○○○○○○○○

ASAC Nadine Gurley presented HUD

OIG’s mission and role in preserving the

integrity of HUD-funded programs at the

Georgia Association of Housing and

Redevelopment Authorities (GAHRA) 2006

spring workshop held in Macon, GA. Topics

discussed included HUD OIG’s efforts to

identify and eliminate fraudulent schemes

in HUD rental assistance, hurricane relief,

and FHA programs and HUD OIG’s Fugitive

Felon and Missing Children initiatives.

Approximately 75 GAHRA members

attended.

○○○○○○○○○○○○○○○○○

ASAC Suzanne Steigerwald provided a

presentation to approximately 20 individuals

attending a Colorado Housing and Finance

Authority conference in Denver, CO. ASAC

Steigerwald provided an overview of HUD

OIG’s mission and authority and described

fraud detection and enforcement methods

used to successfully prosecute

investigations.

○○○○○○○○○○○○○○○○○

ASAC Maureen Nelting, along with SAs

from the U.S. Department of Education

(DOE) OIG and Internal Revenue Service

(IRS), Criminal Investigations Division

(CID), participated in a Federal Law

Enforcement Officers Association-sponsored

128 Outreach Efforts
event in support of National Missing

Children’s Day in Boston, MA. ASAC

Nelting and others fingerprinted and

photographed 60 children who attend the

Government Center Child Care at the JFK

and O’Neill Federal Buildings in Boston.

Since 1983, the United States has observed

May 25 as National Missing Children’s Day,

as a reminder to the nation to renew efforts

to reunite missing children with their

families and to make child protection a

national priority. The National Center for

Missing and Exploited Children

spearheaded this event.

○○○○○○○○○○○○○○○○○

ASAC Brad Geary provided a

presentation at a meeting of the Illinois

Coalition of Appraisal Professionals in

Springfield, IL. ASAC Geary discussed

types of fraud in the real estate and

mortgage industry, presented “red flag”

indicators, described detection methods,

explained documenting and reporting

allegations, and supplied examples of fraud

investigations to approximately 65

appraisers in attendance.

○○○○○○○○○○○○○○○○○

ASAC George Dobrovic and SA Dave

Frederick conducted a real estate and

mortgage fraud seminar for U.S. Secret

Service agents in Cleveland, OH. ASAC

Dobrovic and SA Frederick discussed how

to identify fraudulent mortgage files and

“red flag” indicators and illustrated how

fake identities and U.S. Treasury checks are

used to further mortgage fraud schemes.

○○○○○○○○○○○○○○○○○

At the request of the Long Beach

Housing Authority (LBHA), ASAC

Herschell Harvell participated as a panelist

for a resident community meeting at LBHA’s

Northpointe housing complex in Long

Beach, CA. ASAC Harvell described HUD

OIG’s mission and role in preventing fraud,

waste, and abuse in HUD’s Section 8

programs and discussed tenant fraud issues

involving unauthorized tenancy and

unreported income. As a result,

representatives from LBHA, the Long Beach

Police Department, the Long Beach City

Prosecutors Office, and Northpointe

property management personnel developed

and agreed to participate in a joint

investigative effort to assist in identifying

tenants violating HUD’s Section 8 programs.

○○○○○○○○○○○○○○○○○

ASACs Brad Geary and Ray Espinosa

conducted a comprehensive training session

for 75 Wisconsin Association of Housing

Authorities employees in Wausau, WI.

ASACs Geary and Espinosa provided a

presentation entitled “Combating Fraud in

Assisted Housing” and described HUD’s

Rental Housing Integrity Improvement

Program (RHIIP) initiative, HUD OIG’s

Fugitive Felon initiative, tenant and landlord

fraud schemes, “red flag” fraud indicators,

and current prosecutorial initiatives within

Region 5.

○○○○○○○○○○○○○○○○○

ASAC Herschell Harvell and SAs David

Carter and Ira Long presented HUD Section

8 fraud investigative efforts at a meeting

held in San Bernardino, CA, and attended

by the San Bernardino County Sheriff and

approximately 30 police chiefs from cities

located throughout San Bernardino County.

SA Carter offered a brief overview of HUD

OIG’s organizational structure, jurisdiction,

and mission and described HUD OIG’s role

as “lead investigative agency” in an ongoing

joint Section 8 fraud investigative initiative

with the San Bernardino County Sheriff’s

Department.

○○○○○○○○○○○○○○○○○

ASAC Herschell Harvell and ARIGA

Tanya Schulze presented an overview of

HUD OIG’s roles to personnel from LBHA

in Long Beach, CA. ARIGA Schulze offered

a summary of the HUD OIG Office of

Audit’s organizational structure and

discussed the audit process. ASAC Harvell

described the organizational structure and

Section 8/Sex Offender initiatives of OIG’s

Outreach Efforts 129
Office of Investigation. Approximately 35

housing authority employees, including the

Executive Director and LBHA managers,

attended.

○○○○○○○○○○○○○○○○○

ASAC Brad Geary provided a

presentation for the Metro Fraud Committee

of Chicago Title Companies in Chicago, IL.

ASAC Geary discussed current fraud trends

in the real estate and mortgage industry and

provided examples of investigations, “red

flags,” detection, and methods for

documenting and reporting allegations of

fraud to law enforcement. Approximately

25 title industry personnel attended.

○○○○○○○○○○○○○○○○○

ASAC Suzanne Steigerwald provided an

overview of HUD OIG’s mission and authority

to more than 400 individuals attending a

NAHRO conference in Denver, CO. ASAC

Steigerwald also explained fraud detection

and enforcement methods used to

successfully prosecute criminal investigations.

○○○○○○○○○○○○○○○○○

ASACs Ray Espinosa and Brad Geary

participated in a panel discussion entitled

“The Homeownership Preservation

Initiative,” sponsored by Neighborhood

Housing Services of Chicago and the Federal

Deposit Insurance Corporation in Chicago,

IL. The panel discussed current real estate

fraud, including rescue fraud, flipping,

condo conversions, and straw buyers.

Approximately 15 individuals representing

community groups, banks, and law

enforcement agencies attended.

○○○○○○○○○○○○○○○○○

ASAC Robert Gale and SSA Daniel Ellis

spoke at the Mortgage Bankers Association

training seminar entitled “Detecting and

Avoiding Mortgage Fraud,” held in

Washington, DC. SSA Ellis, a keynote

speaker, provided information on HUD

OIG’s mission and described mortgage

fraud investigations and prosecutions to

approximately 30 representatives from

lending institutions across the country. In

addition, SSA Ellis presented an overview

of a Baltimore housing fraud initiative

investigation resulting in 16 borrowers,

speculators, real estate agents, loan officers,

appraisers, and/or settlement agents being

convicted of a property-flipping scheme and

costing FHA millions in claims.

○○○○○○○○○○○○○○○○○

ASAC Brad Geary provided a

presentation to a meeting of the Illinois

Coalition of Appraisal Professionals in

Naperville, IL. ASAC Geary discussed

current fraud trends in the real estate and

mortgage industry, and provided examples

of investigations, “red flags,” detection, and

methods for documenting and reporting

allegations of fraud to law enforcement.

Approximately 350 appraisers attended.

○○○○○○○○○○○○○○○○○

ASAC Herschell Harvell and SA Vicky

Lawson were invited to LBHA, Long Beach,

CA, to speak with property owners and

managers of the Andy Street Association, an

association containing several housing units

occupied by Section 8 tenants. ASAC

Harvell presented HUD Section 8 policies

and the role of HUD OIG and described the

collaborative law enforcement efforts

between HUD OIG, the Long Beach Police

Department, LBHA, and the City of Long

Beach Prosecutor’s Office. Representatives

from LBHA, the Long Beach Police

Department, and approximately 21 property

owners and/or managers attended.

○○○○○○○○○○○○○○○○○

ASACs Kevin Chan and Frank

Castrogiovanni and SFA Mark Klein met

with New York State Division of Housing

and Community Renewal (HCR) Assistant

Commissioner Alan Smith, Director Clifford

Scott, and Senior Program Representative

Vincent Fagon in New York City, NY, to

establish a working relationship with HCR

and its staff for assistance in the

development of HUD’s Housing Choice

Voucher program investigations. HCR

130 Outreach Efforts
oversees numerous HUD-subsidized

housing complexes within the New York

City area. During the meeting, ASACs Chan

and Castrogiovanni and SFA Klein

discussed HUD OIG’s mission and objective

toward combating fraud, waste, and abuse

and removing housing assistance recipients

from HUD’s subsidized housing programs.

○○○○○○○○○○○○○○○○○

ASAC Brad Geary provided a

presentation through a video telephone

conference in Indianapolis, IN, to more than

150 individuals representing bankruptcy

court personnel and AUSAs from nine

judicial districts in Indiana, Illinois,

Missouri, Arkansas, and Nebraska. ASAC

Geary presented an overview of HUD OIG’s

mission and described real estate fraud and

the roles of bankruptcy court personnel

during bankruptcy fraud prosecutions.

○○○○○○○○○○○○○○○○○

ASAC George Dobrovic and SAs James

Waldron and Matt Nutt provided a

presentation outlining aspects and

techniques used in Housing Choice Voucher

program fraud investigations to Michigan

State Housing Development Authority

(MSHDA) employees in Detroit, MI.

Approximately 45 managers; housing

specialists; department technicians;

administrative personnel; and MSHDA

finance, homeownership, and family selfsufficiency staff members attended the

presentation.

○○○○○○○○○○○○○○○○○

ASAC Mike Wilson and ARIGA Theresa

Carroll gave a presentation to more than 35

public housing authority officials attending

the Office of Public Housing’s New

Executive Director’s Training in the Fort

Worth, TX, regional office. The presentation

explained 1) roles and responsibilities of the

Offices of Investigation and Audit, 2) areas

of fraud which could occur in public

housing and the prosecution process, 3) how

and why a public housing entity might be

reviewed by OIG, and 4) areas that might

be audited and audit findings over the past

12 months.

○○○○○○○○○○○○○○○○○

The Offices of Audit and Investigation

participated in the 2006 Youth Summit. The

event was held at the Savannah Center

located on the campus of Indiana University

Northwest, in Gary, IN. ARIGA Kelly

Anderson and SFA Katherine Bercaw

represented Region 5 at the event. They met

with high school students and shared

information about HUD OIG and the career

opportunities available.

○○○○○○○○○○○○○○○○○

ARIGA Tom Towers and Auditor

Alexandra Burgess participated in Walsh

College’s career fair in Troy, MI. They spoke

with students about OIG’s mission and the

benefits of pursuing a student volunteer

position with HUD OIG. They accepted 25

resumes, eight from students who expressed

an interest in the student volunteer program

at OIG’s Detroit Office of Audit.

○○○○○○○○○○○○○○○○○

ARIGA Ron Farrell and ASAC George

Dobrovic spoke to more than 60 members

of the Ohio Conference of Community

Development, Inc., Columbus, OH. They

delivered a presentation on HUD’s mission

statement and strategic goals and discussed

how OIG interacts with HUD to accomplish

its mission and goals. They discussed ways

in which OIG promotes the integrity,

efficiency, and effectiveness of HUD

programs and operations to assist the

Department in accomplishing its mission.

The discussion focused on how OIG

detects and prevents waste, fraud, and abuse

in CPD programs through its audits and

investigations and seeks redress through

criminal prosecution, civil recoveries, and

administrative sanctions for those

responsible for fraud.

○○○○○○○○○○○○○○○○○

Outreach Efforts 131
SA Timothy Lishner provided an

overview of Section 8 Housing Choice

Voucher program fraud schemes at a

“landlord fair” sponsored by the Aurora

Housing Authority in Aurora, CO. The fair

provided new and existing landlords an

opportunity to network and obtain

information on managing properties under

the Section 8 Housing Choice Voucher

program. SA Lishner encouraged

participants to notify HUD OIG when

encountering any suspected fraud.

Approximately 50 current and prospective

landlords attended the fair.

○○○○○○○○○○○○○○○○○

SA Neil McMullen provided an

overview of HUD OIG’s mission and

authority to approximately 50 members of

Inglewood Rental Property Owners

Association in Inglewood, CA. In addition,

SA McMullen offered information on

Inglewood Section 8 fraud investigations

and prosecutions and explained HUD OIG’s

successful partnership with the Inglewood

Police Department in curtailing gang and

drug activity.

○○○○○○○○○○○○○○○○○

SA Heather Yannello, Auditor Patrick

Anthony, and AUSA Robert Trusiak

provided a presentation entitled “Fraud,

Flipping, and You, Learn to Detect and

Protect” at the Buffalo Mayor ’s AntiFlipping Task Force seminar held in Buffalo,

NY. The Mayor’s Anti-Flipping Task Force

is committed to curbing real estate flipping

and fraudulent activity. In Buffalo, this

activity typically involves the reselling of

vacant homes taken over by HUD or the City

of Buffalo and slated for demolition with

little or no rehabilitation and without an

attorney or title company involved. More

than 200 participants from the Western New

York Bar Association, Buffalo Niagara Board

of Realtors, and Appraisal Institute attended

the seminar.

○○○○○○○○○○○○○○○○○

SA James Carrieres provided an

overview of HUD OIG and described

successful single-family fraud investigations

to 41 appraisers attending the Arizona

Chapter of the National Association of

Independent Fee Appraisers meeting held

in Phoenix, AZ. SA Carrieres hosted a

question and answer forum after his

presentation.

○○○○○○○○○○○○○○○○○

SA Scott Savedow presented a course

entitled “HUD OIG Hurricane Response and

Fraud Awareness” at the SAHMA training

conference held in Jacksonville, FL. SA

Savedow discussed the impact and

consequences of recent hurricanes on HUD

operations and provided examples of

common fraudulent activity in subsidized

housing programs. Approximately 300

SAHMA representatives attended the

conference.

○○○○○○○○○○○○○○○○○

SA Nancy Valencic presented HUD

OIG’s mission in preserving the integrity of

HUD-funded programs at the Tennessee

Association of Housing and Redevelopment

Agencies (TAHRA) 2006 workshop held in

Franklin, TN. SA Valencic discussed

criminal cases involving tenant, landlord,

and housing authority employee fraud and

provided information relating to HUD OIG’s

Fugitive Felon/Missing Children initiatives

and hurricane relief efforts. Approximately

50 TAHRA members attended.

○○○○○○○○○○○○○○○○○

SA Joshua Stockman provided an

overview of HUD OIG’s rental assistance

program fraud investigations and successful

prosecutions in California and Arizona at the

Pacific Southwest Regional Council of

NAHRO Annual Spring Conference held in

Los Angeles, CA. In addition, SA Stockman

discussed prosecutorial merit and the

investigative process from referrals to

sentencing, and participants were provided

information on how to prevent program

132 Outreach Efforts
abuse and assist with fraud investigations.

Housing and redevelopment officials from

California, Arizona, and Nevada attended

this conference.

○○○○○○○○○○○○○○○○○

SA Julien Kubesh conducted a

presentation at the North Central NAHRO

convention held in Minneapolis, MN. SA

Kubesh outlined HUD OIG’s role in fraud

investigations originating from Enterprise

Income Verification data, the importance of

documentation when residents apply for or

recertify their housing eligibility, and the

critical need for open communication

between housing authorities and HUD OIG.

○○○○○○○○○○○○○○○○○

SA Jewel Kelley conducted a

presentation at Indiana’s annual NAHRO

conference held in Indianapolis, IN. The

theme of the conference was “Extreme

Makeover,” and presentations focused on

Enterprise Income Verification and Public

and Indian Housing Information Center

training, grant writing, and preventive

measures to reduce tenant, landlord,

contractor, and housing authority personnel

fraud. SA Kelley provided an overview of

HUD OIG’s mission, recent prosecutions,

and the responsibilities of housing

authorities to assist HUD in securing the

integrity of the Housing Choice Voucher and

project-based housing assistance programs.

Approximately 30 representatives from

various Indiana housing authorities

attended.

○○○○○○○○○○○○○○○○○

At the request of the Richmond

Housing Authority (RHA) housing manager

in Richmond, CA, SA Teresa Carson

conducted fraud training for approximately

15 RHA public housing, Section 8, and

maintenance supervisors. The training

consisted of a brief overview of HUD OIG,

HUD OIG’s perspective on priority

investigations and prosecution of housing

fraud, “red-flag” fraud indicators, possible

solutions to combating fraud, and the

relationship between HUD OIG and RHA

as it relates to fraud.

○○○○○○○○○○○○○○○○○

SA Nelson Sanchez provided an

overview of HUD OIG’s mission and authority

to more than 50 individuals attending a

NAHRO conference in Spearfish, SD. In

addition, SA Sanchez explained fraud

detection and enforcement methods used to

successfully prosecute criminal investigations.

○○○○○○○○○○○○○○○○○

SA Cari Williams provided an overview

of HUD OIG, housing assistance fraud

investigations, and joint initiatives to

approximately 30 police officers at the

Indianapolis Police Academy in

Indianapolis, IN. The officers in attendance

represented the Indianapolis Police

Department, Marion County Probation

Office, and other local agencies.

○○○○○○○○○○○○○○○○○

SA Scott Savedow conducted a training

course entitled “Subsidized Housing

Violations for Law Enforcement” for

Homestead Police Department personnel in

Miami, FL. The training provided methods

for identifying, investigating, and

prosecuting subsidized housing fraud,

along with the requirements necessary for

subsidy terminations under HUD’s “OneStrike and You’re Out” regulations.

Approximately 20 officers, detectives, and

senior law enforcement managers attended

the course.

○○○○○○○○○○○○○○○○○

SA Joshua Stockman presented an

overview of HUD OIG’s mission and role in

rental assistance and grant fraud

investigations at the Arizona Chapter of

NAHRO annual training conference in

Scottsdale, AZ. SA Stockman also described

the investigative process from referral to

sentencing and provided examples of

successful prosecutions in both Arizona and

California. Housing and redevelopment

Outreach Efforts 133
officials representing 20 Arizona cities

attended.

○○○○○○○○○○○○○○○○○

SA James Carrieres provided an

overview of HUD OIG and described

successful single-family fraud

investigations at a Las Vegas Chapter of the

Appraisal Institute meeting in Las Vegas,

NV. Approximately 45 individuals from

Arizona and Nevada attended.

○○○○○○○○○○○○○○○○○

SA Eric Huhtala presented a general

overview of HUD OIG’s mission and role in

investigating and prosecuting fraud to

Vallejo Housing Authority (VHA) housing

specialists, inspectors, and management in

Vallejo, CA. SA Huhtala described how

fraud cases are identified and prosecuted

and provided proactive prevention ideas for

VHA personnel to implement in their dayto-day operations and contacts with

program participants.

○○○○○○○○○○○○○○○○○

SA Kathleen Hatcher presented HUD

OIG’s mission; FHA fraud and predatory

lending schemes; and criminal, civil, and

administrative remedies at a Mortgage

Banker’s Association conference entitled

“Next Steps in Combating Mortgage Fraud”

in Long Beach, CA. In addition, SA Hatcher

discussed specific fraud investigations and

encouraged mortgage industry personnel to

contact HUD OIG when encountering fraud

schemes. Approximately 50 individuals

attended the conference.

○○○○○○○○○○○○○○○○○

SA Lynelle Kunst, assisted by SA Danita

Wade and ARIGA Will Nixon, gave a

presentation at a meeting of North Texas

Association of Housing Authorities in Fort

Worth, TX. The group consisted of about

40 administrators and managers of public

housing authorities in North Texas. The

presentation covered background on HUD

OIG, how it selects audits, common

findings, fraud and internal controls, and

audit resolution.

○○○○○○○○○○○○○○○○○

SA Christopher Conn presented HUD

OIG’s mission and role in rental assistance

fraud investigations at the annual MidAmerica Crime Free Conference entitled

“Combating Welfare Fraud,” held in Blue

Springs, MO. In addition, SA Conn

described fraud identification and

prosecution issues and common fraud

prevention methods and provided case

studies of successful fraud prosecutions.

Approximately 88 individuals representing

a spectrum of professions attended.

○○○○○○○○○○○○○○○○○

SA Charles Grace presented HUD OIG’s

role in maintaining the integrity of various

HUD-funded rental assistance programs at

a meeting of the Southeast Precinct

Interagency Coordination held at the Seattle

Police Department, Seattle, WA. Topics

discussed included crime in Seattle Housing

Authority’s public housing developments,

and concepts to address this issue were

shared. A spokesperson from the Seattle’s

Mayor’s office, law enforcement personnel,

and representatives from various

community agencies attended.

○○○○○○○○○○○○○○○○○

RIGA Ron Hosking, ARIGA Kim

Randall, and Computer Audit Specialist

(CAS) Glenn Brock met with auditors at the

Legislative Division of Post Audit for the

State of Kansas in Topeka, KS. ARIGA

Randall gave a presentation that explained

OIG’s mission and authority, organizational

structure, audit planning process, types of

audits conducted, and the reporting process.

CAS Brock presented the role of the

Information Systems Audits Division in the

OIG audit framework and the function of

the CAS position in the audit environment.

He discussed OIG’s use of general software

applications and the Department’s systems

inventory. RIGA Hosking, ARIGA Randall,

and CAS Brock, along with Legislative

134 Outreach Efforts
Division of Post Audit staff, then discussed

joint audits each agency had conducted in

the past and how the agencies might work

together in the future.

○○○○○○○○○○○○○○○○○

CAS Glenn Brock participated in the

Missouri Society of Certified Public

Accountants’ Kansas City Chapter Career

Night in Kansas City, KS. CAS Brock

imparted OIG’s mission and career

opportunities to the 50 students and

accounting professionals in attendance. He

provided information related to current

auditor and investigator positions within

OIG and a synopsis of OIG’s function as an

audit organization.

○○○○○○○○○○○○○○○○○

CAS Glenn Brock participated in the

Missouri Society of Certified Public

Accountants’ LEAP (Lead and Enhance the

Accounting Profession) Fall Mixer in Lee’s

Summit, MO. CAS Brock discussed OIG’s

mission and career opportunities with the

35 students and an accounting instructor in

attendance. He provided information

related to current auditor and investigator

positions available within OIG and a

synopsis of OIG’s function as an audit

organization. He also discussed computer

systems audits performed by the

Information Systems Audits Division and

the CAS role in the OIG audit environment.

○○○○○○○○○○○○○○○○○

ASAC Maureen Nelting, RIGA John

Dvorak, and ARIGA Kevin Smullen

presented HUD OIG’s mission and priorities

and described successful investigations/

audits and “red flag” indicators for

detecting tenant, landlord, and housing

authority employee fraud to

representatives of the New England

Elderly Housing Association at Monsignor

Neagle Apartments in Malden, MA.

Approximately 30 individuals from private

management companies and public housing

authorities attended.

○○○○○○○○○○○○○○○○○

RIGA Heath Wolfe and SAC Barry

McLaughlin gave presentations to the

Michigan State Chapter of NAHRO Fall

Conference on September 28, 2006, in

Lansing, MI. RIGA Wolfe and SAC

McLaughlin presented background

information on HUD OIG, OIG’s mission,

public housing authorities, common audit

findings, and the “red flags” of fraud.

Approximately 45 NAHRO members were

in attendance.

○○○○○○○○○○○○○○○○○

RIGA Heath Wolfe and SAC Barry

McLaughlin met with the State of Indiana’s

State Board of Accounts in Indianapolis, IN.

The State Board of Accounts has oversight

of the State of Indiana’s departments/

agencies, public housing authorities, local

municipalities, and nonprofit agencies. SAC

McLaughlin and RIGA Wolfe met with the

organization to explain the role of HUD OIG,

develop lines of communication, and discuss

the possibly of conducting joint audits in the

future. They provided the office a brief

background on HUD OIG and presented

information on OIG’s mission and the

functions of the Offices of Investigation and

Audit. They outlined ways in which the

state can refer cases/audits to OIG and ways

in which OIG can make referrals to the state.

○○○○○○○○○○○○○○○○○

ARIGA Kelly Anderson gave a

presentation at the Peer-to-Peer Homeless

Conference held in Collinsville, IL. The

audience was comprised of administrators

of supportive housing grants. Kelly gave

the attendees an overview of HUD OIG and

OIG’s activities as they relate to CPD

programs. There were approximately 50

people in attendance.

○○○○○○○○○○○○○○○○○

RIGA Heath Wolfe and SAC Barry

McLaughlin met with officials of the State

of Illinois’ Office of the Auditor General in

Springfield, MA, to explain the role of HUD

OIG, develop lines of communication, and

Outreach Efforts 135
  

discuss the possibly of conducting joint

audits in the future. SAC McLaughlin and

RIGA Wolfe provided the office a brief

background on HUD OIG and presented

information on OIG’s mission and the

functions of the Offices of Investigation and

Audit. They outlined ways in which the

state can refer cases/audits to OIG and ways

in which OIG can make referrals to the state.

○○○○○○○○○○○○○○○○○

The Region 5 Office of Audit

participated in the 2006 Business and Liberal

Arts Job Fair. The event was held in the

Student Union building on the Northeastern

Illinois University campus in Chicago, IL,

and was sponsored by the Northeastern

Illinois University Placement Office.

Auditors Anthony Smith and Eric

Linderman represented Region 5 at this

event. They met with students to promote

HUD OIG and recruit for current available

positions as student volunteers and future

entry-level auditor positions.

136 Outreach Efforts
Chapter 9 Chapter 9

Legislation, gislation, gislation, Regulations gulations gulations,

and Other Dir and Other Dir and Other Directives
138 Legislation, Regulations, and Other Directives

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 136

issuances. This chapter highlights some

of OIG’s prior comments on notices,

comments for this reporting period, and

other policy directives.

Proposed Rules oposed Rules oposed Rules

HUD proposed an interim r oposed an interim rule

for project-based v oject-based voucher rents

for units r or units receiving low-income w-income

housing tax cr g tax credits to allo edits to allow for

a higher rent than allo ent than allowed in

the Low Income Housing Tax

Credit (LIHTC) pr edit (LIHTC) program

OIG reported on this issue in the prior

semiannual report. OIG did not concur with

a proposed interim rule since it did not

allow for a comment period before

implementation and because HUD did not

provide support for the proposed action. In

response to OIG’s comments, HUD agreed

to issue the rule as a proposed rule, thereby

permitting public comment prior to

implementation. Essentially, the rule would

allow PHAs the option to pay projectbased voucher rents that exceed the

maximum allowable tax credit rent for

units receiving assistance under the

LIHTC program. As part of the comment

process, HUD should consider that each

Section 8 dollar in excess of the LIHTC rent

limit reduces the amount of Section 8 funds

available to assist other low-income

families in meeting their housing needs.

HUD proposed the cr oposed the creation

of an Independent Public of an Independent Public

Accountant Re Accountant Register

HUD proposed a rule to create a registry

of Independent Public Accountants

performing audits of HUD programs. OIG

did not concur with HUD’s proposal and

HUD is considering OIG’s comments.

Notices Notices Notices

Waivers for the State of or the State of

Louisiana Community Louisiana Community

Development Bloc elopment Block Grant k Grant

(CDBG) Disaster Reco (CDBG) Disaster Recovery Grant y Grant

OIG commented on HUD’s proposed

notice because the notice failed to include a

provision in the public law. Specifically, the

law limits on the amount of CDBG funds

that can be used as a matching share for

emergency situations. OIG requested that

HUD include a provision in this waiver for

the State of Louisiana CDBG Disaster

Recovery grant that states no more than

$250,000 may be used for the nonfederal

costshare of any project funded through the

U.S. Army Corps of Engineers.

Mortgagee Letter ee Letters

Nonprofit Do ofit Downpayment Gift yment Gift

Providers

HUD drafted a mortgagee letter

regarding nonprofit “downpayment

assistance providers.” OIG reported a

nonoccurrence on the letter in last

reporting period. The Department was

reviewing OIG’s nonconcurring comments

at the end of the previous semiannual

reporting period. HUD continues to work

on a notice for using nonprofits to provide
Legislation, Regulations, and Other Directives 139

downpayment assistance. A recent

Internal Revenue Service (IRS) ruling is also

impacting HUD’s development of the notice.

OIG and HUD continue to communicate

about the use of nonprofit downpayment

assistance and the number of Federal

Housing Administration (FHA) foreclosures

related to this assistance. OIG continues to

have many concerns related to nonprofit

downpayment assistance.

Late Request f Late Request for Endor or Endorsement

Procedures/Certification

Eliminated, Eliminated, Eliminated, Proposed

Mortgagee Letter ee Letter

In the prior period, HUD drafted a

mortgagee letter to remove the certification

requirement from FHA’s late endorsement

procedures. HUD believes the certification

requirement does not materially contribute

to reducing insurance risk. OIG

nonconcurred because the certification is a

critical document in supporting and

enforcing departmental remedies for

noncompliance, and, therefore, OIG

disagrees with its proposed elimination.

OIG has done significant testing of “late

endorsement” compliance by major direct

endorsement lenders as part of its audit

focus on FHA single-family lending

practices beginning in 2004. OIG found that

lenders certified full compliance and

eligibility for FHA insurance when some

loans were not eligible because the

borrowers were in arrears on their mortgage

payments. OIG also issued a report this

reporting period that questioned HUD’s

analysis on allowing late endorsements.

OIG continues to have concerns regarding

HUD’s taking little action against lenders for

late endorsement, and recommended that

the mortgage letter be rescinded.

  

Chapter 10 Chapter 10

Audit Resolution Audit Resolution
142 Audit Resolution

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 pending issues for

which resolution action has been delayed.

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 A,

“Audit Reports Issued before Start of Period

with No Management Decision as of

September 30, 2006,” and table B,

“Significant Audit Reports Described in

Previous Semiannual Reports in Which

Final Action Had Not Been Completed as of

September 30, 2006.”

Delayed Actions ed Actions ed Actions

Nonprofit Par ofit Participation in Single

Family Programs, Nationwide

Audit

Issued November 5, 2001 - HUD’s existing

regulations relating to the sale of HUD real

estate-owned (REO) properties gave priority

to nonprofit organizations over owneroccupant homebuyers for properties

involving a 10 percent nonprofit discount.

If a nonprofit organization and an owneroccupant homebuyer submitted bids to

purchase an REO property, HUD did not

take into consideration the nonprofit

organization’s 10 percent discount when

determining the highest bidder.

Accordingly, if an owner-occupant

purchaser submitted a bid to purchase an

REO property and the bid exceeded a

nonprofit organization’s bid by less than 10

percent, HUD awarded the nonprofit

organization the property, not the owneroccupant applicant. In OIG’s opinion, the

awards violated the intent of the discount

sales program, which was to provide lowcost housing opportunities to homebuyers.

OIG recommended that HUD’s

requirements be changed so that, if an owner

occupant homebuyer submitted a bid which

was higher than the net bid of a nonprofit

organization after taking into consideration

the nonprofit organization’s allowed

discount, the owner-occupant homebuyer

would be awarded the property. This would

meet the intent of providing low-cost

housing opportunities to low- and moderateincome homebuyers without having to go

through a middleman; i.e., the nonprofit

organization, which simply increased the

price of the property to the ultimate

homebuyer.

On January 22, 2002, HUD concurred

with OIG’s recommendation. HUD and OIG

agreed to a December 31, 2002, target date

for implementation of the changes necessary

to address OIG’s recommendation,

including revising existing regulations.

Before revising the regulations, however,

HUD decided that, due to changes in its

management and marketing service

contracts, many additional changes to the

current regulations affecting HUD’s sale of

its REO property inventory were necessary.

HUD stated that the previously agreed to

changes addressing OIG’s recommendation

were to be included in these revised

regulations. Accordingly, HUD requested

that the target date for implementation of

the regulations and clearing OIG’s

recommendation be extended until June of

2003. HUD did not meet this target date and,

in June 2004, informed OIG that the changes

to the regulations were still in process. HUD

requested another extension of the target

date for implementation of corrective actions

to June 30, 2005. Reluctantly, OIG agreed to

this extension. In August 2005, HUD again

informed OIG that the regulations were still
Audit Resolution 143

under development and requested another

extension to September 30, 2006. OIG

agreed to the request.

As of September 30, 2006, HUD has not

finalized and implemented the regulations

or addressed the problems OIG brought to

HUD’s attention in November 2001. HUD

has indicated that it will request another

extension to October 31, 2007, as the

proposed regulations remain at the

preclearance draft stage. OIG will not

concur with any further extension requests

as it has now been almost 5 years since

report issuance and HUD has still not

implemented the promised actions. (Report

No 2002-SF-0001)

Significant Mana gnificant 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 F Federal Financial inancial inancial

Management

Improvement Act of ement Act of ement Act of

1996

FFMIA requires that HUD implement

a remediation plan that will bring financial

systems into compliance with federal

financial management system requirements

within 3 years or obtain Office of

Management and Budget (OMB)

concurrence if more time is needed.

FFMIA requires OIG to report in its

semiannual reports to the Congress

instances and reasons when an agency has

not met the intermediate target dates

established in its mediation plan required

by FFMIA. In April 1998, HUD determined

that 38 of its systems were not in substantial

compliance with FFMIA. At the end of 2005,

the Department reported that 2 of its 44

financial management systems were not in

substantial compliance with FFMIA. These

two systems are Loan Accounting System

(LAS) and Facilities Integrated Resources

Management System (FIRMS). HUD

reported FIRMS as noncompliant in its 2005

self-assessment. HUD replaced LAS with a

commercial off-the-shelf software package

at the end of July 2006. As of September 30,

2006, the Department reports that the above

two systems are in substantial compliance

with FFMIA pending independent

verification.

  

Appendix 1 Appendix 1

Audit Repor Audit Repor Audit Reports Issued ts Issued
146 Audit Reports Issued

Internal Repor nal Reports

13 Audit Repor 13 Audit Reports

Chief Information Officer (3 Reports)

2006-DP-0005 Review of HUD’s Information Technology Contingency Planning and

Preparedness, 08/31/2006.

2006-DP-0802 Assessment of HUD’s Compliance with OMB Memorandum M-06-16,

“Protection of Sensitive Agency Information”, 09/21/2006.

2006-DP-0803 OIG Response to Questions from the OMB under Federal Information

System Management Act of 2002, 09/29/2006.

Chief Procurement Officer (1 Report)

2006-AT-0001 The Procurement Office Did Not Maintain Complete Contract Files,

08/29/2006.

Community Planning and Development (1 Report)

2006-CH-0003 The Congressional Grants Division’s Oversight of Economic

Development Initiative-Special Purpose Grants Needs to be Improved,

Washington, DC, 07/21/2006.

Housing (4 Reports)

2006-KC-0002 HUD’s Systems Usually Prevent Credit Watch-Terminated Lenders

from Originating HUD-Insured Loans, but Brief Searches Could Find

Additional Loans That Weren’t Prevented, 06/14/2006. Questioned:

$164,523.

2006-NY-0001 HUD’s Controls Over the Reporting, Oversight, and Monitoring of the

Housing Counseling Assistance Program Were Not Adequate, 06/08/2006.

2006-SE-0001 Significant Weaknesses in HUD’s Oversight of Single-Family Mortgage

Insurance Claims are Costly, 07/11/2006. Questioned: $1,301,230;

Unsupported: $1,301,230; Better Use: $214,000,000.

2006-SE-0002 The Office of Single-Family Housing Expanded Late Endorsement

Eligibility Without Studying Associated Risks, 08/16/2006.

Public and Indian Housing (4 Reports)

2006-BO-0001 HUD Incorrectly Approved $42 Million in Operating Subsidies for

Phase-Down for Demolition Add-On Funding, 07/11/2006. Questioned:

$35,755,661; Unsupported: $15,153,923; Better Use: $6,361,640.

2006-CH-0002 PIH is Taking Action to Oversee the Section 202 Mandatory Conversion

Program, Washington, DC, 07/13/2006.

2006-KC-0003 HUD Did Not Ensure That the Omaha Housing Authority Repaid its

Public Housing Programs $2.7 Million, Omaha, NE, 06/19/2006. Better

Use: $2,751,317.

2006-PH-0002 HUD Improperly Admitted the Housing Authority of Baltimore City into

the MTW Demonstration Program, Baltimore, MD, 05/31/2006.

Audit-Related Memoranda Audit-Related Memoranda

Housing (1 Report)

2006-FW-0801 Review of Partial Claim Option to Foreclosure under HUD’s Loss

Mitigation Program, 04/10/2006.
Audit Reports Issued 147

Public and Indian Housing (1 Report)

2006-KC-0801 HUD’s Oversight of PHA Processes for Prohibiting Criminal Activity,

04/13/2006.

External Repor nal Reports

74 Audit Repor 74 Audit Reports

Community Planning and Development (10 Reports)

2006-AT-1014 The State of Florida Lacked Adequate Procedures to Prevent Possible

Duplicate Disaster Recovery Benefits to Recipients, Tallahassee, FL,

07/26/2006.

2006-AT-1016 The Municipality of Humacao Did Not Administer its CDBG in

Accordance with HUD Requirements, Humacao, PR, 07/28/2006.

Questioned: $3,970,071; Unsupported: $3,800,945; Better Use: $318,853.

2006-AT-1019 The Municipality of Toa Baja Did Not Administer its Section 108 Loan

Guarantee Assistance Program in Accordance with HUD Requirements,

Toa Baja, PR, 09/06/2006. Questioned: $4,950,106; Unsupported:

$4,879,737.

2006-FW-1014 The City of Fort Worth Has Made Significant Improvements in

Procedures for Drawing Down CDBG Funds, Fort Worth, TX, 08/16/2006.

2006-LA-1015 Institute for Urban Research and Development Did Not Properly

Administer its Supportive Housing Program Grants, El Monte, CA,

07/19/2006. Questioned: $1,268,433; Unsupported: $1,268,433.

2006-LA-1016 Los Angeles Family Housing Corporation Generally Administered its

Supportive Housing Program Grants in Accordance with HUD

Requirements, North Hollywood, CA, 07/20/2006.

2006-LA-1019 The City of Modesto Did Not Always Administer its CDBG in

Compliance with Government Regulations, Modesto, CA, 09/07/2006.

Questioned: $68,379.

2006-NY-1013 Lower Manhattan Development Corporation, CDBG Disaster Recovery

Assistance Funds, New York, NY, 09/27/2006. Questioned: $3,053; Better

Use: $186,749.

2006-PH-1013 The Commonwealth of Virginia Did Not Ensure HOME Funds Were

Disbursed and Used in Accordance with Federal Regulations, Richmond,

VA, 09/18/2006. Questioned: $710,766; Unsupported: $527,060; Better Use:

$3,273,545.

2006-SE-1003 Snohomish County’s Office of Housing and Community Development

Charged Ineligible Administrative Expenses to its CDBG, Everett, WA,

05/31/2006. Questioned: $67,339; Better Use: $67,339.

Housing (22 Reports)

2006-AO-1001 Southwest Alliance of Asset Managers, LLC, Did Not Effectively

Enforce the Lease Terms Over Payment of Property Utilities, Addison,

TX, 06/23/2006. Questioned: $79,306.

2006-AO-1002 Cityside Management Corporation Did Not Enforce the Lease Terms

Over Payment of Property Utilities, Hammond, LA, 08/31/2006.

Questioned: $17,744.
2006-AT-1018 Taylor, Bean and Whitaker, Inc., Met Temporary Interest Rate

Buydown Requirements, Ocala, FL, 08/28/2006.

2006-BO-1007 Capital Mortgage Associates LLC Did Not Always Comply with HUD

Requirements Regarding its Single-Family Loan Originations and

Quality Control Plan, North Haven, CT, 06/02/2006. Questioned:

$3,875.

2006-BO-1008 Hall Commons Inc. Did Not Administer its $4.1 Million Section 202

Capital Advance Construction Grant in Accordance With Federal

Requirements, Bridgeport, CT, 06/30/2006. Questioned: $206,891;

Unsupported: $154,073; Better Use: $4,079,100.

2006-BO-1009 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, 07/06/2006. Questioned: $2,800,258.

2006-CH-1014 National City Mortgage Company, Nonsupervised Lender, Did Not

Comply with HUD’s Requirements Regarding Underwriting of Loans

and Quality Control Reviews, Miamisburg, OH, 07/31/2006.

Questioned: $145,101; Unsupported: $94,372; Better Use: $677,713.

2006-CH-1015 Birmingham Bancorp Mortgage Corporation, Nonsupervised Lender,

Substantially Complied with HUD’s Requirements Regarding

Underwriting of Loans but Not its Quality Control Reviews, West

Bloomfield, MI, 09/25/2006. Questioned: $47,103; Unsupported:

$47,103.

2006-CH-1017 Community Central Bank, Supervised Lender, Generally Complied

with HUD’s Requirements Regarding Underwriting of Loans but Not

its Quality Control Reviews, Mount Clemens, MI, 09/26/2006.

Questioned: $22,752; Unsupported: $22,752; Better Use: $41,280.

2006-DE-1004 Juniper Communities Did Not Comply with Its Regulatory Agreement

or HUD Regulations in Managing its FHA-Insured Projects,

Bloomfield, NJ, 07/18/2006. Questioned: $293,387; Better Use:

$1,042,515.

2006-DE-1005 Utah Non Profit Housing Corporation Did Not Ensure Properties

Generated Sufficient Income and Did Not Comply With Cost

Allocation and HUD Requirements, Salt Lake City, UT, 07/28/2006.

Questioned: $70,755; Better Use: $30,900.

2006-DE-1006 Nexgen Lending, Inc.’s Lakewood Branch Did Not Follow HUD

Requirements in Underwriting Two Insured Loans, Lakewood, CO,

08/31/2006. Questioned: $1,171; Better Use: $60,051.

2006-FW-1010 Deer Creek Apartments’ Previous Management Agent Paid Itself

Unsupported Fees, Houston, TX, 05/11/2006. Questioned: $24,312;

Unsupported: $24,312.

2006-FW-1011 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, 06/16/2006.

Questioned: $394,273; Better Use: $187,648.

2006-KC-1011 The Owner of Wellston Townhouses in St. Louis County Violated its

Regulatory Agreement, Wellston, MO, 06/29/2006. Questioned:

$200,288; Unsupported: $88,794; Better Use: $104,372.

148 Audit Reports Issued
2006-KC-1012 The Owner of HDC Retirement Village In St. Louis Violated its

Regulatory Agreement, St. Louis, MO, 06/29/2006. Questioned:

$193,421; Unsupported: $166,812; Better Use: $28,395.

2006-LA-1011 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, 05/18/2006. Questioned: $1,067,200;

Unsupported: $701,405.

2006-LA-1014 KB Home Mortgage Failed to Ensure Underwriting Certifications for

FHA Loans Were Accurate, Los Angeles, CA, 07/17/2006.

2006-LA-1018 First Magnus Financial Corporation Did Not Comply with HUD

Guidelines When Underwriting Six FHA-Insured Loans, Tucson, AZ,

07/26/2006. Better Use: $95,151.

2006-NY-1007 First Suffolk Mortgage Corporation Did Not Always Comply with

HUD Underwriting Requirements, North Babylon, NY, 06/19/2006.

Questioned: $153,044; Unsupported: $152,814; Better Use: $76,958.

2006-NY-1009 First Residential Mortgage Services Corporation Did Not Always

Comply With HUD/FHA Loan Origination Requirements, Englewood

Cliffs, NJ, 08/14/2006. Questioned: $64,714; Unsupported: $64,219;

Better Use: $424,384.

2006-PH-1012 Trident Mortgage Company Issued and Submitted for Endorsement

Loans with an Increased Risk of Defaults and Claims, Devon, PA,

07/19/2006. Questioned: $79,671; Unsupported: $79,525; Better Use:

$487,075.

Lead Hazard Control (1 Report)

2006-LA-1013 The Child Abuse Prevention Council of Sacramento Did Not

Adequately Administer Its Healthy Homes Initiative Grant, North

Highlands, CA, 07/17/2006. Questioned: $936,879; Unsupported:

$586,039; Better Use: $472,523.

Public and Indian Housing (41 Reports)

2006-AT-1008 The Housing Authority of the City of Macon’s Controls for Expending

Low-Income Housing and HOPE VI Program Funds and Safeguarding

Low-Income Housing Assets Were Inadequate, Macon, GA, 04/25/2006.

Questioned: $395,211; Better Use: $125,000.

2006-AT-1009 The Metropolitan Development and Housing Agency Did Not Ensure

Section 8-Assisted Units Were Decent, Safe and Sanitary, Nashville,

TN, 05/18/2006. Better Use: $8,791,956.

2006-AT-1010 The Orlando Housing Authority Did Not Ensure That All Section 8

Units Met Housing Quality Standards and Paid Excessive Subsidies for

Some Units, Orlando, FL, 05/31/2006. Questioned: $41,867; Better Use:

$1,146,708.

2006-AT-1011 The Housing Authority of the City of Raleigh Generally Administered

its Housing Choice Voucher Program in Accordance with

Requirements, Raleigh, NC, 06/19/2006. Questioned: $7,012.

2006-AT-1012 The Miami Dade Housing Agency Paid Housing Choice Voucher

Program Funds for Some Overhoused Tenants, Miami, FL, 06/28/2006.

Questioned: $61,862; Better Use: $81,828.

Audit Reports Issued 149
2006-AT-1013 The Housing Authority of the City of North Charleston

Inappropriately Pledged Assets to Secure a Loan and Caused Delays in

its Oakleaf Homeownership Program, North Charleston, SC,

07/12/2006. Better Use: $400,000.

2006-AT-1015 The Municipality of Bayamon Housing Authority Did Not Ensure

Section 8-Assisted Units Were Decent, Safe, and Sanitary, Bayamon,

PR, 07/27/2006. Better Use: $1,434,456.

2006-AT-1017 The Housing Authority of Lawrence County Spent More Than $71,000

for Questionable Purchases, Lawrence County, KY, 08/17/2006.

Questioned: $71,741; Unsupported: $71,741.

2006-AT-1020 The Jacksonville Housing Authority’s Section 8 Units Met HUD

Housing Quality Standards, Jacksonville, FL, 09/15/2006.

2006-BO-1010 Boston Housing Authority Used Voucher Program Funds to Pay State

Housing Assistance Program Expenses and Needs to Improve Its Rent

Reasonableness Process, Boston, MA, 07/26/2006.

2006-BO-1011 The Portland Housing Authority Did Not Use Reserve Funds or

Properly Allocate Employee Costs, Resulting in Questioned Costs of

More Than $850,000, Portland, ME, 08/28/2006. Questioned: $805,848;

Better Use: $44,336.

2006-CH-1009 The Youngstown Metropolitan Housing Authority Did Not Use Public

Housing Operating Funds Effectively and Efficiently, Youngstown,

OH, 04/18/2006. Questioned: $99,673; Unsupported: $99,673.

2006-CH-1010 The Benton Harbor Housing Commission Lacked Supporting

Documentation and Did Not Follow Procurement Requirements

Regarding its Public Housing Capital Fund Program, Benton Harbor,

MI, 05/18/2006. Questioned: $206,724; Unsupported: $206,224.

2006-CH-1011 The Columbus Metropolitan Housing Authority Did Not Effectively

Operate its Section 8 Housing Program, Columbus, OH, 07/06/2006.

Questioned: $415,385; Unsupported: $332,070; Better Use: $7,546,384.

2006-CH-1012 The Housing Authority of the County of Cook Needs to Improve its

Section 8 Housing Program Administration, Chicago, IL, 07/11/2006.

Questioned: $123,118; Better Use: $10,095,840.

2006-CH-1013 The Ann Arbor Housing Commission’s Administration of its Section 8

Housing Choice Voucher Program Needs to Be Improved, Ann Arbor,

MI, 07/21/2006. Questioned: $58,540; Better Use: $1,997,134.

2006-CH-1016 Pickaway Metropolitan Housing Authority Improperly Used

Homeownership Sales Proceeds to Fund its Nonprofit Development

Activities, Circleville, OH, 09/26/2006. Questioned: $238,507;

Unsupported: $2,350.

2006-CH-1018 Saginaw Housing Commission Improperly Used Public Housing

Funds to Purchase Property, Saginaw, MI, 09/28/2006. Questioned:

$573,324.

2006-CH-1019 Lucas Metropolitan Housing Authority Did Not Effectively Operate its

Section 8 Housing Choice Voucher Program, Toledo, OH, 09/29/2006.

Questioned: $211,037; Unsupported: $108,913; Better Use: $1,956,438.

2006-CH-1020 Rockford Housing Authority Needs to Improve its Controls over

Program Housing Assistance and Utility Allowance Payments,

Rockford, IL, 09/29/2006. Questioned: $663,702; Unsupported: $582,926;

Better Use: $341,027.

150 Audit Reports Issued
Audit Reports Issued 151

2006-CH-1021 Housing Authority of the County of Cook Had Weak Controls over its

Section 8 Housing Choice Voucher Program, Chicago, IL, 09/30/2006.

Questioned: $178,149; Unsupported: $88,055; Better Use: $3,416,210.

2006-FW-1008 Brazos Valley Council of Governments Issued Vouchers Larger Than

its Policy Allowed, Bryan, TX, 05/08/2006. Questioned: $552; Better

Use: $7,008.

2006-FW-1009 Dallas County Housing Agency Overhoused Tenants, Dallas, TX,

05/09/2006. Questioned: $63,311; Better Use: $298,013.

2006-FW-1012 Oklahoma Housing Finance Agency Made Minor Mistakes in

Computing Housing Assistance Payments and Housing Tenants,

Oklahoma City, OK, 06/29/2006. Questioned: $815; Better Use: $1,214.

2006-FW-1013 The Housing Authority of the City of Denton Made Subsidy

Calculation Errors and Overhoused Tenants, Denton, TX, 07/26/2006.

Questioned: $50,917; Unsupported: $26,104; Better Use: $949,234.

2006-FW-1015 The Housing Authority of the City of Austin Overhoused Tenants and

Paid Excessive HAPs in the Section 8 Housing Choice Voucher

Program, Austin, TX, 09/01/2006. Questioned: $588,130; Better Use:

$957,276.

2006-KC-1009 The Omaha Housing Authority Did Not Encumber Resources Without

HUD Approval, Omaha, NE, 04/24/2006.

2006-KC-1010 The Omaha Housing Authority Did Not Follow Required Procurement

Procedures, Omaha, NE, 05/30/2006. Questioned: $5,419; Better Use:

$970,000.

2006-KC-1013 The Columbus Housing Authority Improperly Expended and

Encumbered Its Public Housing Funds, Columbus, NE, 08/30/2006.

Questioned: $292,225.

2006-KC-1014 The Columbus Housing Authority Improperly Spent and Encumbered

Public Housing Funds for Its Non-HUD Development Activities,

Columbus, NE, 09/27/2006. Questioned: $62,135; Better Use: $111,894.

2006-LA-1012 The Housing Authority of the City of Los Angeles Did Not Adequately

Determine and Support Section 8 Tenant Eligibility, Los Angeles, CA,

06/20/2006. Questioned: $1,021,222; Unsupported: $1,021,222.

2006-LA-1017 The Housing Authority of the City of Las Vegas Did Not Comply with

Contracting and Grant Use Requirements, Las Vegas, NV, 07/21/2006.

Questioned: $558,068; Unsupported: $394,845.

2006-NY-1008 The Freeport Housing Authority Has Financial and Management

Control Weaknesses, Freeport, NY, 06/30/2006. Questioned: $407,782;

Unsupported: $356,354; Better Use: $241,880.

2006-NY-1010 Orange City Housing Authority Has Weakness in its Housing Choice

Voucher Program, Orange, NJ, 09/20/2006. Questioned: $26,231;

Unsupported: $23,592; Better Use: $1,710,661.

2006-NY-1011 Orange City Housing Authority Incorrectly Paid the City’s Street

Lighting Costs and Improperly Wrote-off a Receivable, Orange, NJ,

09/20/2006. Questioned: $156,409; Better Use: $20,164.

2006-NY-1012 The Housing Authority of the City of Passaic Has Allegations of

Mismanagement That Need to be Addressed, Passaic, NJ, 09/22/2006.

Questioned: $3,395,901; Unsupported: $1,404,813; Better Use:

$6,547,788.
2006-PH-1010 The Housing Authority of the County of Butler Needed to Improve

Administration of its Section 8 Housing Choice Voucher Program,

Butler, PA, 04/20/2006. Questioned: $229,961; Unsupported: $229,460;

Better Use: $77,587.

2006-PH-1011 The Hampton Redevelopment and Housing Authority Did Not Always

Follow HUD Requirements, Hampton, VA, 07/12/2006. Questioned:

$211,664; Unsupported: $144,707; Better Use: $169,962.

2006-PH-1014 The Housing Authority of the City of McKeesport Needed to Improve

its Low-Rent Housing Maintenance Program, McKeesport, PA,

09/25/2006. Questioned: $90,119; Better Use: $1,886,372.

2006-SE-1004 The Housing Authority of the City of Bremerton Inaccurately Reported

its 2005 Section 8 Management Assessment Program Results,

Bremerton, WA, 06/21/2006.

2006-SE-1005 King County Housing Authority Section 8 Program Meets HUD

Requirements, Tukwila, WA, 09/18/2006.

Audit-Related Memoranda Audit-Related Memoranda

Housing (1 Report)

2006-NY-1801 Section 8 Housing Choice Voucher Program, Rochester Housing

Authority, Rochester, NY, 05/19/2006.

  

152 Audit Reports Issued
Appendix 2 Appendix 2

Tables
154 Tables

Table A

Audit Repor Audit Reports Issued Prior to Star ts Issued Prior to Start of Period with No Management

Decision at September 30, 2006

* Significant Audit Reports Described in Previous Semiannual Reports

Report Number Reason for Lack of Issue Date/Target

& Title Management Decision for Management

 Decision

Nothing to Repor g to Report
Tables 155

Table B

Significant Audit Repor gnificant Audit Reports Described in Pr ts Described in Previous Semiannual Repor vious Semiannual Reports in Which Final

Action Had Not Been Completed as of September 30, 2006

Report Report Title Issue Decision Final

Number Date Date Action

1997-NY-1002 Montgomery County 03/14/1997 07/23/1997 12/31/2006

Community Development

Program, Fonda, NY

1997-CH-1010 Major Mortgage Corporation, 09/17/1997 01/06/1998 10/15/2006

Section 203(K) Rehabilitation

Home Mortgage Insurance

Program, Livonia, MI

2000-KC-0002 Housing Subsidy Payments 09/29/2000 02/21/2001 12/31/2006

2001-FO-0002 FHA Audit of FY 2000 03/01/2001 07/24/2001 12/21/2006

Financial Statements

2001-FO-0003 Audit of HUD FY 2000 03/01/2001 07/18/2001 12/31/2006

Financial Statements

2001-CH-1007 Detroit Housing Commission, 05/16/2001 09/13/2001 06/30/2011

Hope VI Program, Detroit, MI

2001-FW-1005 Supportive Housing Program, 08/27/2001 12/21/2001 08/03/2007

Harmony House, Inc.,

Harrison, AR

2002-SF-0001 Nonprofit Participation, HUD 11/05/2001 08/30/2002 10/15/2006

Single-Family Program

2002-FO-0002 FHA, FY 2001 and 2000 02/22/2002 05/30/2002 12/31/2006

Financial Statements

2002-FO-0003 HUD Financial Statements 02/27/2002 08/16/2002 11/15/2006

FY 2001 and 2000

2002-BO-1003 Newport, Resident Council, 04/30/2002 09/16/2002 01/15/2008

Inc., Newport, RI

2002-KC-0002 Nationwide Survey of HUD’s 07/31/2002 11/22/2002 03/31/2008

Office of Housing Section 232

Nursing Home Program

2002-FW-1003 New Mexico Public Interest 09/30/2002 03/31/2003 Note 1

Education Fund, Outreach and

Training Assistance Grant and

Public Entity Grant,

Albuquerque, NM

2002-PH-1005 Philadelphia Regional Alliance 09/30/2002 03/31/2003 03/29/2007

of HUD Tenants, Outreach and

Training Assistance Grant and

Intermediary Technical Assistance

Grant, Philadelphia, PA
Report Report Title Issue Decision Final

Number Date Date Action

2002-PH-1007 Legal Aid Bureau, Inc., 09/30/2002 03/31/2003 Note 1

Outreach and Training

Assistance Grant Number

FFOT98012MD, Baltimore, MD

2002-SF-1006 Legal Aid Society of Honolulu, 09/30/2002 03/31/2003 03/29/2007

HI, Outreach and Training

Assistance Grant

2003-SE-1002 Tenants Union, Outreach and 12/02/2002 03/31/2003 03/29/2007

Training Assistance Grant and

Intermediary Training Assistance

Grant, Seattle, WA

2003-AT-1001 Northwestern Regional Housing 01/09/2003 06/02/2003 04/01/2007

Authority, Public Housing

Programs, Boone, NC

2003-FO-0002 FHA, FY 2002 and 2001 01/21/2003 05/22/2003 12/31/2006

Financial Statements

2003-FW-1001 Low-Rent Program, Housing 02/21/2003 06/20/2003 12/31/2006

Authority of the City of

Morgan City, LA

2003-CH-1014 Coshocton Metropolitan 03/28/2003 07/28/2003 04/30/2047

Housing Authority, Public

Housing Program,

Coshocton, OH

2003-DE-0001 HUD Office of Multifamily 03/31/2003 03/31/2003 Note 1

Housing Assistance

Restructuring’s Oversight of

the Sec 514 Program Activities

2003-CH-1017 Housing Continuum, Inc., 06/13/2003 10/10/2003 Note 1

Homebuyers Assistance

Program, Geneva, IL

2003-NY-1005 Empire State Development 09/30/2003 01/28/2004 03/31/2007

Corporation, CDBG Disaster

Assistance Funds, New York, NY

2004-BO-1002 Family Living Adult Care 11/04/2003 03/04/2004 04/01/2007

Center, Biddeford and Saco, ME

2004-KC-1001 East Meyer Community 11/24/2003 03/29/2004 06/30/2007

Association, Kansas City, MO

2004-CH-1001 Kankakee County Housing 11/26/2003 03/24/2004 10/31/2006

Authority, Section 8 Housing

Program, Kankakee, IL

156 Tables
Report Report Title Issue Decision Final

Number Date Date Action

2004-DP-0001 FY 2003 Review of Information 12/01/2003 05/28/2004 12/31/2006

Systems Controls in Support

of the Financial Statements Audit

2004-BO-1004 Danbury Housing Authority 12/05/2003 04/05/2004 12/01/2008

Capital Fund Program,

Boston, MA

2004-FO-0003 HUD Financial Statements 12/19/2003 07/20/2004 10/15/2007

FY 2003 and 2002

2004-AT-0001 Public Housing Agency 01/13/2004 05/20/2004 04/01/2007

Development Activities

2004-AT-1001 Housing Authority of the 01/15/2004 05/14/2004 12/31/2006

City of Cuthbert, GA,

2004-AO-0001 Award and Administration of 02/06/2004 06/30/2004 08/01/2007

Lead-Based Paint Hazard

Reduction Grants

2004-DP-0002 Application Control Review of 02/25/2004 07/14/2004 01/30/2008

the Tenant Rental Assistance

Certification System

2004-FW-1003 City of New Orleans Section 03/15/2004 09/07/2004 Note 2

108 Loan Program, Jazzland

Theme Park, New Orleans, LA

2004-LA-1003 Homewide Lending 05/19/2004 09/01/2004 10/15/2006

Corporation, Nonsupervised

Mortgagee, Los Angeles, CA

2004-PH-1008 Safe Haven Outreach Ministry, 06/03/2004 08/31/2004 Note 2

Inc., Washington, DC

2004-FW-1007 City of New Orleans Desire 06/22/2004 09/20/2004 Note 2

Community Housing

Corporation, New Orleans, LA

2004-AT-0002 Effectiveness of the 07/12/2004 12/13/2004 12/31/2006

Departmental Enforcement

Center

2004-AT-1012 Housing Authority of the City 08/02/2004 11/29/2004 12/31/2020

of Durham, NC

2004-CH-1803 Somerset Point Nursing Home, 08/09/2004 08/09/2004 12/31/2007

Multifamily Equity Skimming,

Shaker Heights, OH

2004-CH-1008 Cornerstone Mortgage Group, 09/10/2004 01/05/2005 12/31/2006

Limited Nonsupervised Loan

Correspondent, Inverness, IL

Tables 157
Report Report Title Issue Decision Final

Number Date Date Action

2004-PH-1012 Mortgage America Bankers, LLC, 09/10/2004 01/06/2005 03/31/2007

Nonsupervised Loan

Correspondent, Kensington, MD

2004-FW-1009 Mays Property Management, Inc., 09/17/2004 02/23/2005 02/23/2007

Multifamily Management Agent,

Little Rock, AR

2004-LA-1008 United States Veterans Initiative, 09/27/2004 03/31/2005 04/15/2013

Inc., Inglewood, CA

2004-DE-1004 New Freedom Mortgage 09/29/2004 01/28/2005 Note 2

Corporation, Single-Family

Direct Endorsement Mortgagee,

Salt Lake City, UT

2005-DP-0001 FY 2004 Review of Information 10/19/2004 02/16/2005 01/15/2007

Systems Controls in Support of

the Financial Statements Audit

2005-SE-1001 Tulalip Tribes Housing 10/21/2004 02/02/2005 10/31/2006

Authority Cannot Account for

Grant Funds, Marysville, WA

2005-CH-1001 Prestige Mortgage Group, Inc., 10/27/2004 10/29/2004 10/29/2006

Non-Supervised Loan

Correspondent, Springfield, OH

2005-FW-1801 Highland Meadows Apartments, 11/02/2004 02/24/2005 02/28/2007

Dallas, TX

2005-LA-1801 The Carmichael Rehabilitation 11/04/2004 01/27/2005 Note 2

Center, Carmichael, CA

2005-FW-1001 City of New Orleans, Section 108 11/05/2004 03/02/2005 Note 2

Program, Louisiana ArtWorks,

New Orleans, LA

2005-FO-0002 FHA’s Financial Statements for 11/15/2004 11/15/2004 12/31/2006

FY 2004 and 2003

2005-AT-1004 Housing Authority of the City 11/19/2004 03/15/2005 03/15/2015

of Durham, NC

2005-CH-1003 Royal Oak Township Housing 11/29/2004 03/29/2005 10/31/2006

Commission, Public Housing

Program, Ferndale, MI

2005-PH-1004 Corrective Action Verification 12/21/2004 04/20/2005 04/30/2007

Review of the Housing Authority

of Baltimore, MD, Section 8

Certificate and Voucher Programs,

Audit Report No. 2001-PH-1003

158 Tables
Tables 159

Report Report Title Issue Decision Final

Number Date Date Action

2005-CH-1004 Lakewood Care Center, 12/22/2004 10/07/2005 12/31/2006

Multifamily Equity Skimming,

Milwaukee, WI

2005-CH-1801 RVA Properties Inc., Multifamily 12/22/2004 12/26/2004 06/29/2007

Equity Skimming, Farmington, MI

2005-CH-1005 Wood Hills Assisted Living 01/12/2005 10/07/2005 12/31/2006

Facility, Multifamily Equity

Skimming, Kalamazoo, MI

2005-AT-1005 Pan American Financial 01/27/2005 05/17/2005 05/31/2007

Corporation, Nonsupervised

Direct Endorsement Lender,

Guaynabo, PR

2005-FW-1004 American Property Financial, 01/28/2005 05/27/2005 05/31/2007

Nonsupervised Loan

Correspondent, San Antonio, TX

2005-SE-1003 Oregon Housing and 02/09/2005 05/27/2005 05/01/2008

Community Services, Salem, OR

2005-FW-1005 New Orleans African-American 02/25/2005 05/12/2005 Note 2

Museum Mismanaged its CDBG

and Did Not Comply with its

Grant Agreements, New Orleans, LA

2005-PH-1007 Lehigh County Housing 03/09/2005 05/02/2005 01/30/2017

Authority Could Not Support

All Costs and Used HUD Funds

to Support its Nonfederal Entities,

Emmaus, PA

2005-LA-1002 Housing Authority of Maricopa 03/14/2005 07/11/2005 08/31/2007

County, Mixed Finance

Development Activities,

Phoenix, AZ

2005-AT-1007 Interstate Financial Mortgage 03/15/2005 08/04/2005 01/31/2007

Group Corporation, Nonsupervised

Direct Endorsement Lender,

Miami, FL

2005-PH-1008 The Housing Authority of the 03/24/2005 07/13/2005 12/31/2006

City of Pittsburgh Did Not

Effectively Implement its MTW

Demonstration Program,

Pittsburgh, PA

2005-PH-0001 Criteria Governing Local 03/29/2005 07/27/2005 01/02/2007

Government Participation in

HUD’s Single-Family Property

Disposition Discount Sales

Program
Report Report Title Issue Decision Final

Number Date Date Action

2005-FW-1008 City of New Orleans Did Not 04/08/2005 05/26/2005 Note 2

Contribute Approximately $3.6

Million in HOME Funds,

New Orleans, LA

2005-PH-1009 Richmond Redevelopment and 04/08/2005 07/28/2005 10/31/2006

Housing Authority Did Not

Always Properly Use HUD Funds,

Richmond, VA

2005-BO-1003 Milford Housing Authority, 04/25/2005 10/07/2005 11/19/2006

Selected Programs, Milford, CT

2005-DE-1004 Aspen Home Loans, American 05/06/2005 08/31/2005 08/31/2007

Fork, UT

2005-DE-0001 HUD’s Control Over FHA Claims 05/12/2005 09/09/2005 01/31/2007

Payments

2005-LA-1003 First Source Financial USA, 05/12/2005 09/08/2005 05/31/2007

Henderson, WV

2005-FW-1010 Broad Street Mortgage Company, 05/26/2005 07/13/2006 07/16/2007

Subsidiary of Fieldstone Mortgage

Company, San Antonio, TX

2005-NY-1005 The Housing Authority of the 05/26/2005 09/23/2005 12/31/2006

City of Newark, Bond Financing

Activities and Section 8 Housing

Choice Voucher Administrative Fee

Reserves, Newark, NJ

2005-PH-1012 The Lycoming County Housing 06/06/2005 07/12/2005 11/30/2006

Authority Risked HUD Assets

for the Benefit of Its Affiliated

Nonfederal Entity,

Williamsport, PA

2005-LA-1006 Maricopa Home Consortium 07/28/2005 11/22/2005 08/31/2007

Home Program, Mesa, AZ

2005-BO-1004 Housing Choice Voucher and 07/29/2005 11/25/2005 11/25/2006

Low-Income Public Housing

Program Deficiencies at the

Bridgeport Housing Authority

Resulted in $3.8 Million in

Questioned Costs, Bridgeport, CT

2005-PH-1013 Review of the Commonwealth 07/29/2005 11/22/2005 11/21/2006

of Pennsylvania’s HOME

Investment Partnership Program,

Harrisburg, PA

160 Tables
Report Report Title Issue Decision Final

Number Date Date Action

2005-PH-1014 Review of the McKeesport 07/29/2005 11/21/2005 11/01/2006

Housing Authority’s Section 8

and Public Housing Programs,

McKeesport, PA

2005-CH-1012 Savanna Trace Apartments, 08/04/2005 12/28/2005 12/28/2006

Multifamily Equity Skimming,

Kalamazoo, MI

2005-CH-1013 Ivan Woods Senior Apartments, 08/05/2005 12/28/2005 12/28/2006

Multifamily Equity Skimming,

Lansing, MI

2005-LA-1007 KB Home Mortgage Company, 08/12/2005 12/09/2005 12/31/2006

Las Vegas, NV

2005-BO-1006 The Hartford Housing Authority 09/06/2005 01/03/2005 01/03/2007

Improperly Used $3.7 Million

in Public Housing Operating

Subsidies for its State and Other

Federal Programs, Hartford, CT

2005-LA-0001 Single-Family Preforeclosure 09/13/2005 01/10/2006 01/31/2007

Sale Program

2005-AT-1013 Corporacion Para el Fomento 09/15/2005 01/11/2006 11/30/2006

Economico de la Ciudad Capital

Did Not Administer its Independent

Capital Fund in Accordance with

HUD Requirements, San Juan, PR

2005-AT-1014 National City Mortgage 09/15/2005 11/14/2005 10/31/2006

Company Did Not Comply

with FHA Requirements,

Miamisburg, OH

2005-NY-1007 Security Atlantic Mortgage 09/16/2005 01/13/2006 01/31/2007

Company, Inc. Did Not Always

Comply with HUD/FHA Loan

Origination Requirements,

Edison, NJ

2005-SE-1007 City Bank, Puyallup, WA 09/16/2005 12/20/2005 12/20/2006

2005-SE-1008 Idaho Housing and Finance 09/16/2005 03/31/2006 11/01/2006

Association, Boise, ID

2005-CH-1017 Flint Housing Commission, 09/23/2005 01/20/2006 01/20/2016

Section 8 Housing Program,

Flint, MI

2005-LA-1010 First Magnus Financial 09/23/2005 01/19/2006 01/19/2007

Corporation, Las Vegas, NV

Tables 161
Report Report Title Issue Decision Final

Number Date Date Action

162 Tables

2005-BO-1007 Fairfield Financial Mortgage 09/26/2005 01/20/2006 01/19/2007

Group, Inc., Did Not Always

Comply with FHA Requirements,

Danbury, CT

2005-LA-1011 KB Home Mortgage Company 09/26/2005 01/23/2006 01/15/2007

Did Not Follow HUD

Requirements When Originating

Insured Loans, Phoenix, AZ

2005-FW-1018 The Housing Authority of the 09/27/2005 01/24/2006 01/24/2007

City of Houston Violated HUD

Regulations Concerning Section 8

Housing Choice Voucher Tenants

and Units, Houston, TX

2005-NY-1008 Lower Manhattan Development 09/27/2005 08/22/2006 12/31/2006

Corporation, CDBG Program

Disaster Assistance Fund,

New York, NY

2005-NY-1009 Golden First Mortgage 09/28/2005 01/20/2006 01/20/2007

Corporation, Nonsupervised

Direct Endorsement Lender,

Great Neck, NY

2005-AT-1015 The Municipality of San Juan 09/29/2005 01/12/2006 12/29/2006

Housing Authority Did Not

Properly Administer Its Section 8

Housing Choice Voucher Program,

San Juan, PR

2005-CH-1020 Housing Authority of the City 09/29/2005 01/25/1006 12/31/2052

of Gary, Section 8 Housing

Program, Gary, IN

2005-BO-0002 HUD Did Not Conduct a 09/30/2005 12/20/2005 04/01/2007

Front-End Risk Assessment

and, Therefore, Fully Implement

Controls for the Public Housing

Mortgages and Security Interest

Program

2005-KC-1009 Washington Mutual Bank Did 09/30/2005 01/11/2006 01/11/2007

Not Follow HUD Regulations

When Underwriting Six Loans,

Seattle, WA

2006-PH-1001 The Alexandria Redevelopment 10/04/2005 12/01/2005 10/04/2006

and Housing Authority Improperly

Used Section 8 Funds to Support

its Other Programs, Alexandria, VA
Report Report Title Issue Decision Final

Number Date Date Action

Tables 163

2006-BO-1001 The Division of Grants 10/27/2005 02/02/2006 02/02/2007

Management, City of Hartford,

Paid $1,039,296 for Ineligible

CDBG Activities and Failed to

Return Income to the Program,

Hartford, CT

2006-PH-1002 The Suffolk Redevelopment 10/17/2005 02/08/2006 01/02/2007

and Housing Authority Did Not

Always Follow HUD Requirements

in its Section 8 and Low-Rent

Programs, Suffolk, VA

2006-DP-0002 Security Configuration of FHA 10/31/2005 03/30/2006 02/28/2007

Unix Operating System

2006-LA-1001 Ryland Mortgage Company Did 10/31/2005 07/13/2006 07/16/2007

Not Follow HUD Requirements

in the Origination of Insured

Loans, Tempe, AZ

2006-FO-0002 FHA Financial Statements for 11/07/2005 02/15/2006 10/16/2006

FY 2005 and 2004

2006-FO-0003 Additional Details to Supplement 11/15/2005 02/02/2006 10/01/2006

Our Reports on HUD’s FY 2005

and 2004 Financial Statements

2006-BO-1002 Review of Worcester Housing 11/29/2005 02/10/2006 11/29/2006

Authority Identified $1.9 million

of Its Public Housing Operating

Funds Used for Non-Program

Purposes, Worcester, MA

2006-CH-0001 Real Estate Assessment Center’s 11/30/2005 01/10/2006 12/31/2006

Physical Condition Assessment

Was Compromised

2006-KC-1001 The Columbia Housing Authority 11/30/2005 03/27/2006 11/30/2016

Is Unnecessarily Paying Housing

Choice Voucher Program Funds

for Overhoused Tenants, Columbia, MO

2006-PH-1003 The Franklin Redevelopment 11/30/2005 03/28/2006 03/31/2007

and Housing Authority Did Not

Adequately Administer Its Section

8 Program, Franklin, VA

2006-PH-1004 Homestead Funding Corp. Issued 12/02/2005 03/30/2006 11/30/2006

and Submitted for Endorsement

Loans with an Increased Risk of

Defaults and Claims, Allentown, PA
Report Report Title Issue Decision Final

Number Date Date Action

2006-LA-1003 The Owners of The Avenue 12/07/2005 02/08/2006 02/07/2007

Misused More Than $32,000 in

Project Funds, San Francisco, CA

2006-PH-0001 HUD Did Not Properly Award 12/07/2005 08/25/2006 10/30/2006

FY 2004 Healthy Homes and

Lead Hazard Control Grants

2006-KC-1002 First Magnus Financial 12/12/2005 04/06/2006 03/31/2007

Corporation Did Not Follow

HUD Regulations When

Underwriting 23 FHA Loans,

Overland Park, KS

2006-FW-1002 Baytown Housing Authority 12/13/2005 04/07/2006 10/31/2006

Improperly Advanced,

Transferred, and Encumbered

Its Public Housing Funds,

Baytown, TX

2006-DE-1001 First Magnus Financial 12/20/2005 04/06/2006 03/31/2007

Corporation Did Not Follow

HUD Requirements in

Underwriting 31 Insured

Loans, Denver, CO

2006-FW-1003 Palacios Housing Authority Did 12/22/2005 04/03/2006 11/30/2006

Not Fully Comply with HUD’s

Standards, Palacios, TX

2006-CH-1005 Fairfield Metropolitan Housing 12/30/2005 04/28/2006 12/31/2006

Authority Used Annual

Contributions Contract Funds

for Development Activities Outside

Its Annual Contributions Contract,

Lancaster, OH

2006-CH-1006 Northstar Community 12/30/2005 05/25/2006 10/30/2006

Development Corporation

Inappropriately Used More Than

$120,000 in Economic Development

Initiative-Special Purpose Grant

Funds and HUD’s Interest in More

Than $180,000 in Grant Funds Was

Not Secured, Detroit, MI

2006-PH-1005 The Housing Authority of the 01/10/2006 04/28/2006 05/01/2007

County of Butler Used HUD

Assets Improperly to Develop and

Support Its Nonfederal Entities,

Butler, PA

164 Tables
Report Report Title Issue Decision Final

Number Date Date Action

Tables 165

2006-AT-1002 The Housing Authority of the 01/11/2006 05/11/2006 03/31/2007

City of Prichard’s Controls over

the Sale of Affordable Housing

Units, Use of Sales Proceeds, and

Expenditure of Low-Income Funds

Were Inadequate, Prichard, AL

2006-AT-1003 Certified Home Loans of Florida 01/12/2006 04/03/2006 03/31/2007

Did Not Always Comply with

FHA Requirements, Miami, FL

2006-AT-1004 The Housing Authority of the 01/13/2006 04/25/2006 12/31/2008

City of Prichard Did Not Ensure

Section 8 Subsidy Payments Were

for Eligible Units, Tenants, and

Landlords, Prichard, AL

2006-KC-1004 Major Mortgage Improperly 01/20/2006 05/08/2006 03/31/2007

Submitted Late Requests for

Endorsement of FHA Loans,

Cheyenne, WY

2006-FW-1004 K Hovnanian American 01/26/2006 05/25/2006 01/26/2007

Mortgage, LLC, Violated

Underwriting Requirements

and Did Not Meet All Quality

Control or Branch Requirements,

Plano, TX

2006-SE-1001 Idaho Housing and Finance 01/26/2006 05/23/2006 12/31/2008

Association Did Not Monitor

Subsidized Multifamily Projects

in Accordance with Regulations or

its Annual Contributions Contract

with HUD, Boise, ID

2006-DP-0003 Vulnerability Assessment of 01/31/2006 04/19/2006 06/30/2008

HUD’s Computer Network

2006-KC-1005 Matrix Financial Services 01/31/2006 05/11/2006 05/31/2007

Corporation’s St. Louis Branch

Did Not Properly Underwrite

and/or Close 40 FHA Loans,

St. Louis, MO

2006-NY-1002 WomenRising, Inc., Did Not 01/31/2006 05/11/2006 04/30/2007

Always Comply with HUD’s

Supportive Housing Program,

Jersey City, NJ
Report Report Title Issue Decision Final

Number Date Date Action

2006-NY-1003 The Housing Authority of the 02/14/2006 08/17/2006 12/31/2008

City of Newark’s Controls Over

Bond Financing Activities, Obtaining

Supporting Documentation, and

Legal Settlements Require Improvement,

Newark, NJ

2006-PH-1007 The Loan Origination Process 02/15/2006 06/15/2006 02/15/2007

and Quality Control Plan of

American Mortgage, Inc., Did

Not Comply with HUD Regulations

and Requirements, Cherry Hill, NJ

2006-NY-1004 Mount Vernon Urban Renewal 02/16/2006 06/23/2006 06/20/2007

Agency, Section 8 Housing Choice

Voucher Program Has Administrative

and Financial Management

Weaknesses, Mount Vernon, NY

2006-NY-1005 Utica Municipal Housing 02/21/2006 06/22/2006 01/02/2007

Authority, Operational and

Administrative Weaknesses Have

Resulted in Unsupported and

Ineligible Expenditures, Utica, NY

2006-AT-1006 The Municipality of San Juan 02/23/2006 05/15/2006 01/30/2007

Housing Authority Did Not

Ensure Section 8 Assisted Units

Were Decent, Safe, and Sanitary,

San Juan, PR

2006-SE-1002 Northeast Washington Housing 02/27/2006 06/16/2006 10/31/2006

Solutions Improperly Administered

Housing Choice Vouchers,

Spokane, WA

2006-LA-1008 Housing Authority of the City 03/01/2006 03/24/2006 10/30/2006

of Los Angeles Did Not

Adequately Administer and

Maintain Its Section 8 Waiting

List, Los Angeles, CA

2006-BO-1004 Mount Saint Francis Health 03/03/2006 05/19/2006 08/08/2007

Center, Providence, RI

2006-LA-1009 Fontana Native American 03/03/2006 03/17/2006 03/17/2007

Indian Center Did Not

Adequately Administer Its

Supportive Housing Program

Grant, Fontana, CA

166 Tables
Report Report Title Issue Decision Final

Number Date Date Action

Tables 167

2006-LA-1010 The Owner and Agent of 03/03/2006 06/23/2006 12/31/2006

Holiday Apartments, LA PRO 30,

and Two Worlds II Mismanaged

Project Finances and Operations,

Los Angeles, CA

2006-BO-1005 Hartford Housing Authority 03/10/2006 07/07/2006 10/31/2006

Had Housing Choice Voucher

Program Deficiencies Resulting in

More Than $2.6 Million in Costs

Exceptions, Hartford, CT

2006-CH-1007 Huntington National Bank, 03/15/2006 09/18/2006 08/10/2008

Supervised Lender, Generally

Complied with Requirements

Regarding Submission of Late

Requests for Endorsement and

Underwriting of Loans, Columbus, OH

2006-KC-1007 American Lending Group Did 03/15/2006 06/08/2006 05/31/2007

Not Properly Originate 9 Loans

and Did Not Have Adequate Quality

Control Procedures, St. Peters, MO

2006-PH-1008 1st Preference Mortgage 03/23/2006 05/11/2006 04/30/2007

Corporation, York, PA, and

Greenbelt, MD, Did Not

Originate All FHA Loans in

Accordance with HUD

Requirements, York, PA

2006-PH-1009 The Housing Authority of the 03/23/2006 05/24/2006 03/23/2007

City of Annapolis Did Not

Adequately Administer Its Section

8 Waiting List, Annapolis, MD

2006-BO-1006 Coventry Health Center, 03/28/2006 05/19/2006 08/31/2008

Providence, RI

2006-FW-1006 America’s Mortgage Resource, 03/28/2006 07/14/2006 10/31/2007

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

2006-AT-1007 The Housing Authority of the 03/30/2006 07/20/2006 07/31/2011

City of Winston-Salem Used

More Than $4.9 Million in

Operating Subsidies for Other

Programs, Winston-Salem, NC
Report Report Title Issue Decision Final

Number Date Date Action

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.

REPORTS EXCLUDED FROM TABLE:

35 audits under repayment plans

32 audits under formal judicial review,

investigation, or legislative solution

168 Tables

2006-CH-1008 US Bank NA, Supervised 03/31/2006 09/18/2006 08/14/2008

Lender, Did Not Always

Comply with HUD’s

Requirements Regarding Late

Requests for Endorsements and

Underwriting of Loans,

Minneapolis, MN

2006-FW-1007 BSM Financial LP Originated 03/31/2006 08/18/2006 10/01/2007

Loans on Overvalued Properties

to Less Than Creditworthy

Borrowers, Putting Borrowers

and HUD at Risk, Allen, TX
Table C

Inspector General Issued Repor Inspector General Issued Report with Questioned and Unsuppor t with Questioned and Unsupported

Costs at September 30, 2006

(Thousands)

Report s Number of Questioned Unsupported

Audit Reports Costs Costs

A1 For which no management 39 46,020 16,682

decision had been made by the

commencement of the reporting

period

A2 For which litigation, legislation, 10 19,113 9,667

or investigation was pending at

the commencement of the

reporting period

A3 For which additional costs were - 1,665 9

added to reports in beginning

inventory

A4 For which costs were added to 0 0 0

noncost reports

B1 Which were issued during the 63 66,374 34,207

reporting period

B2 Which were reopened during the 0 0 0

reporting period

 Subtotals (A + B) 112 133,172 60,565

C For which a management 531 39,450 9,520

decision was made during the

reporting period

(1) Dollar value of disallowed costs

 Due HUD 252 11,752 3,366

 Due program participants 37 22,528 5,180

(2) Dollar value of costs not 153 5,170 974

 disallowed

D For which management decision 12 30,312 18,652

had been made not to determine

costs until completion of litigation,

legislation, or investigation 

E For which no management 47 63,410 32,393

decision had been made by <111>4 <61,724>4 <32,392>4

the end of the reporting period 

1 39 audit reports also contain recommendations with funds to be put to better use.

2 9 audit reports also contain recommendations with funds due program participants.

3 15 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.

Tables 169
Table D

Inspector General Issued Repor Inspector General Issued Report with Recommendations That Funds Be

Put to Better Use at September 30, 2006

(Thousands)

Report s Number of Dollar Value

 Audit Reports

A1 For which no management decision had been 36 170,441

made by the commencement of the reporting

period

A2 For which litigation, legislation, or investigation 7 105,692

was pending at the commencement of the

reporting period

A3 For which additional costs were added to reports - 1,243

in beginning inventory

A4 For which costs were added to noncost reports 2 35,550

B1 Which were issued during the reporting period 48 286,094

B2 Which were reopened during the reporting period 0 0

 Subtotals (A + B) 93 599,020

C For which a management decision was made 491

 210,642

during the reporting period

(1) Dollar value of recommendations that were

 agreed to by management

 Due HUD 222 127,139

 Due program participants 28 45,089

(2) Dollar value of recommendations that were 163

 38,414

 not agreed to by management

D For which management decision had been made 10 117,298

not to determine costs until completion of

litigation, legislation, or investigation

E For which no management decision had been 34 271,080

made by the end of the reporting period

1 39 audit reports also contain recommendations with questioned costs.

2 3 audit reports also contain recommendations with funds due program participants.

3 14 audit reports also contain recommendations with funds agreed to by management.

170 Tables
Explanations of Tables C and D Explanations of Tables C and D

The Inspector General Act Amendments of 1988 require Inspectors General and agency

heads to report cost data on management decisions and final actions on audit reports. The

current method of reporting at the “report” level rather than at the individual audit

“recommendation” level results in misleading reporting of cost data. Under the Act, an

audit “report” does not have a management decision or final action until all questioned

cost items or other recommendations have a management decision or final action. Under

these circumstances, the use of the “report” based rather than the “recommendation”

based method of reporting distorts the actual agency efforts to resolve and complete action

on audit recommendations. For example, certain cost items or recommendations could

have a management decision and repayment (final action) in a short period of time. Other

cost items or nonmonetary recommendation issues in the same audit report may be more

complex, requiring a longer period of time for management’s decision or final action.

Although management may have taken timely action on all but one of many

recommendations in an audit report, the current “all or nothing” reporting format does

not take recognition of their efforts.

The closing inventory for items with no management decision on Tables C and D

(Line E) reflects figures at the report level as well as the recommendation level.

  

Tables 171

Appendix 3 Appendix 3

Index
174 Index

Index

State Page Numbers

Alabama 68, 113, 128

Arizona 14, 18, 69, 70, 132, 133

Arkansas 84, 93

California 14, 17, 20, 21, 26, 29, 30, 54, 57, 58, 59, 60, 61, 62, 63, 64,

66, 68, 70, 77, 81, 82, 88, 89, 106, 119, 124, 127, 128, 129,

130, 131, 132, 133

Colorado 14, 17, 19, 24, 124, 127, 128, 130, 131

Connecticut 52, 54, 71, 72, 78, 125

District of Columbia 11, 26, 71, 104, 130

Florida 36, 40, 54, 55, 61, 62, 63, 65, 66, 68, 69, 80, 95, 113, 128,

132, 133

Georgia 22, 26, 42, 53, 67, 124, 128

Illinois 17, 18, 26, 27, 28, 33, 34, 37, 51, 53, 54, 57, 65, 67, 70, 106,

125, 127, 129, 130, 135

Indiana 56, 91, 94, 106, 131, 132, 133, 135

Kansas 21, 24, 26, 29, 67, 134

Kentucky 45

Louisiana 94, 105, 107, 108, 109, 110, 111

Maryland 19, 46, 59, 64, 82

Massachusetts 20, 49, 51, 54, 59, 60, 61, 68, 71, 72, 73, 81, 82, 92, 94, 127,

128, 135

Michigan 14, 27, 29, 35, 40, 41, 50, 58, 59, 126, 131, 135

Minnesota 53, 62, 68, 70, 124, 126, 132

Mississippi 107, 111, 112

Missouri 24, 25, 29, 61, 66, 67, 69, 70, 77, 78, 82, 95, 134

Montana 14, 53, 66

Nebraska 41, 43, 44, 66

Nevada 22, 42, 59, 63, 70, 133

New Hampshire 63, 65

New Jersey 13, 19, 21, 22, 23, 33, 36, 44, 51, 66, 71, 92

New Mexico 52, 54

New York 13, 23, 24, 25, 29, 39, 50, 57, 59, 72, 81, 82, 83, 84, 93, 94,

95, 130, 132,

North Carolina 16, 28, 52, 53, 62, 72

Ohio 12, 34, 35, 44, 45, 55, 64, 67, 82, 129

Oklahoma 70, 127

Oregon 64, 67

Pennsylvania 13, 18, 25, 26, 40, 46, 51, 57, 58, 72, 93, 105, 125

Puerto Rico 36, 51, 86, 87

Rhode Island 76, 83
Index 175

State Page Numbers

South Carolina 43, 81, 124

South Dakota 133

Tennessee 25, 33, 62, 65, 94, 132

Texas 12, 36, 38, 39, 53, 70, 78, 81, 105, 106, 126, 131, 134

Utah 27, 78, 83,

Vermont 65

Virgin Islands 53

Virginia 23, 24, 27, 43, 60, 63, 93, 126,

Washington 88, 134

Wisconsin 126, 129

  

HUD OIG Operations HUD OIG Operations HUD OIG Operations

Telephone Listin Telephone Listing
178 HUD OIG Operations Telephone Listing

Office of Audit Office of Audit 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 215-656-3401

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 210-475-6895

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

Hurricane Recovery Oversight 504-589-7267
HUD OIG Operations Telephone Listing 179

Office of Office of 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 804-771-2100

Region 4 Atlanta, GA 404-331-3359

Miami, FL 305-536-3087

Greensboro, NC 336-547-4000

Nashville, TN 615-736-7000

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 713-718-3197

Little Rock, AR 501-324-5409

Oklahoma City, OK 405-609-8601

San Antonio, TX 210-475-6822

Region 7/8 Kansas City, KS 913-551-5866

St. Louis, MO 314-539-6559

Denver, CO 303-672-5350

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 602-379-7251

Sacramento, CA 916-930-5693

Las Vegas, NV 702-366-2144

Seattle, WA 206-220-5380

Hurricane Recovery Oversight 202-708-0390

Report fraud, waste, and mismanagement

 in HUD programs and operations by:

Calling the OIG Hotline: 1-800-347-3735

Faxing the OIG Hotline: 202-708-4829

Sending written information to:

Department of Housing and Urban Development

Inspector General Hotline (GFI)

451 7th Street, SW

Washington, DC 20410

Emailing the OIG Hotline: hotline@hudoig.gov

Internet:

http://www.hud.gov/complaints/fraud_waste.cfm

All information is confidential,

and you may remain anonymous.
Semiannual Repor Semiannual Report to Congress

April 1, April 1, April 1, 2006, through September 30, ough September 30, ough September 30, 2006

www.hud.gov/offices/oi v/offices/oig

No. 56 HUD-2006-10-OIG