type: other

jurisdiction: US

text: b' Office of Inspector General\n U.S. Department of Housing and Urban Development\n\n\nSemiannual Report\n to Congress\n October 1, 2005, through March 31, 2006\n\x0c Profile of Performance\n For the Period, October 1, 2005, through March 31, 2006\n Audit and Investigation Results Audit Investigation Hotline Combined\n\nRecommendations That Funds Be Put to Better Use $589,887,746 $2,352,885 $592,240,631\nManagement Decisions on Audits with Recommendations $549,804,443 $549,804,443\nthat Funds be Put to Better Use\nQuestioned Costs $52,223,731 $52,223,731\nManagement Decisions on Audits with Questioned Costs $58,627,445 $58,627,445\nIndictments/Informations 747 747\nConvictions/Pleas/Pretrial Diversions 443 443\nCivil Actions 33 33\nInvestigative Recoveries/Receivables $165,353,197 $82,697 $165,435,894\nFunds Put to Better Use $67,475,744 $67,475,744\nCollections from Audits $28,210,875 $28,210,875\nAdministrative Actions 13 1174 1187\nPersonnel Actions 24 24\nArrests 1,536 1,536\nSearch Warrants 58 58\nWeapons Seized 3 3\nSubpoenas Issued 4 448 452\n\x0cInspector General\xe2\x80\x99s Message\n It is with great pride that I present the U.S. Department of\n Housing and Urban Development (HUD) Office of Inspector\n General (OIG) Semiannual Report to the Congress for the first half\n of fiscal year 2006. In the time since our last report, HUD OIG\n employees \xe2\x80\x93 auditors, agents, attorneys and support staff \xe2\x80\x93 have\n been hard at work on their assigned tasks. Whether it is\n Hurricane disaster relief, single-family housing fraud, Section 8\n rental subsidy fraud, or any fraud against HUD programs or\n operations, the HUD OIG is engaged and garnering results, for\n which we are justly proud.\n\n During the reporting period, we had $304,049,725 in Funds\nPut to Better Use, Questioned Costs of $52,223,731 and $165,435,894 in Recoveries and\nReceivables. This is exceptional work by our staff that has resulted in significant positive\nimpact on fraud and misuse of taxpayer dollars. I am grateful to the auditors, agents, and\nevaluators who worked so hard this year to achieve this milestone.\n\n I direct your attention to our high profile audits and investigations. HUD OIG staff\nincreased and improved their cooperation and collaboration with the Department, and as\na result, developed and implemented better and more effective audit recommendations.\nThe HUD OIG Office of Investigation agents also enhanced their cooperation with the\nDepartment as a new source or indicator for new investigative avenues.\n\n Our emphasis on the Section 8 Housing Choice Voucher program continues to be a\nhigh priority. Congress was clear that it wanted answers as to why the Section 8 program\nwas prone to fraud and waste. Our audit plan this year selected 15 programs at public\nhousing authorities. Although our audits found significant administrative non-compliance\nand improper payments, the living conditions of the residents was a greater concern. We\ninspected 254 units at three authorities (San Juan, PR; Miami-Dade, FL; and Winston-\nSalem, NC.) We found 91 percent did not meet minimum housing quality standards, and\n39 percent of the failed units had serious deficiencies. Tenants lived in units that were not\ndecent, safe, nor sanitary. The Department shared our concern about these conditions\nand agreed that housing assistance payments for units that did not meet standards had to\nstop.\n\n All of this led us to a more efficient and effective HUD OIG, better at recovering\ntaxpayer funds and bringing people to justice who perpetrate crimes.\n\n It is with obvious and justifiable pride that I thank the staff of the HUD OIG for their\ntireless work in their struggle against waste, fraud, and abuse on the Nation\xe2\x80\x99s housing\nand urban development programs.\n\n\n\n\n Kenneth M. Donohue\n Inspector General\n\nInspector General\xe2\x80\x99s Message iii\n\x0c Strategic Plan\n Vision\n We are a trusted and respected resource for HUD, Congress, and the American\n public in ensuring the integrity, efficiency, and effectiveness of HUD\n programs and operations. We are committed to working jointly with\n HUD management to achieve their goals.\n\n\n\n Mission\n \xc2\x84 Promote the integrity, efficiency, and effectiveness of HUD programs and\n operations to assist the Department in meeting its mission.\n \xc2\x84 Detect and prevent waste, fraud, and abuse.\n \xc2\x84 Seek administrative sanctions, civil recoveries and/or criminal prosecution\n of those responsible for waste, fraud, and abuse in HUD programs and\n operations.\n\n\n\n Goal 1 Goal 2 Goal 3\n Effectiveness Efficiency Our Employees\n Help HUD resolve its \xe2\x80\x9cMajor Maximize results and Become the \xe2\x80\x9cEmployer\n Management Challenges\xe2\x80\x9d provide responsive audit of Choice\xe2\x80\x9d among\n by being a relevant and and investigative work Offices of Inspectors\n problem-solving advisor to for mandated, requested, General.\n HUD and our Stakeholders. or self-initiated efforts.\n\n\n\n\n Objectives\n \xc2\x84 Contribute to Improving \xc2\x84 Achieve a highest \xc2\x84 Invest in people.\n the Integrity in Single Return on Investment \xc2\x84 Invest in the\n Family Insurance (ROI) with available organization.\n Programs. resources.\n \xc2\x84 Contribute to a Reduction \xc2\x84 Provide quality\n in Erroneous Payments in results to customers\n the Rental Assistance in a timely manner.\n Programs.\n \xc2\x84 Contribute to Improving\n HUD\xe2\x80\x99s Execution and\n Accountability of Fiscal\n Responsibilities.\n \xc2\x84 Contribute to resolving\n significant issues raised\n or confronted by HUD\n and our Stakeholders.\n\n\niv Strategic Plan\n\x0cStrategic Goals\n Goal 1 - Effectiveness\n Objectives:\n Contribute to improving the integrity of single-family insurance programs.\n Contribute to a reduction in erroneous payments in the rental assistance\n programs.\n Contribute to improving HUD\xe2\x80\x99s fiscal accountability.\n Contribute to resolving other significant issues raised or confronted by HUD and our\n stakeholders.\nTarget As of\n March Key Measurements\n 31, 2006\n 75% 3 75% of the recommendations reach management decisions within 120 days.\n\n 85% 3 85% of the dollars associated with recommendations are sustained.\n\n 80% 3 80% of all audits conducted are targeted at areas of significant interest to\n either HUD or OIG stakeholders.\n\n 80% 3 80% of stakeholders rate OIG products and services good or better.\n\n 66% 3 66% investigations referred for criminal, civil, or administrative action will\n focus on FHA single-family mortgage fraud and Section 8 rental assistance\n overpayment.\n\n Goal 2 - Efficiency\n Objectives:\n Maintain a high return on investment (ROI).\n Provide timely and quality results to customers.\nTarget As of\n March Key Measurements\n 31, 2006\n 8:1 3 Sustain a return on investment (ROI) of 8:1.\n\n 70% 3 70% of external audits completed within 2000 hours.\n\n 4/6 3 Regional investigative performance for regions without forensic auditors\nActions will average 4 actions per FTE per year. Regions with forensic auditors will\nper FTE average 6 actions per FTE per year..\n\n Goal 3- Employer of Choice\n Objectives:\n Invest in people.\n Invest in the organization.\nTarget As of\n March Key Measurements\n 31, 2006\nNov 06 3 Implement a leadership development program for succession planning.\n\n 80% NEW 80% of employees rate organization good or better.\n\n\nStrategic Goals v\n\x0c Audit Reports Issued by Program\n\n Single-Family Public and Indian\n Housing Housing\n 25% 40%\n\n\n\n\n Community\n Planning &\n Development Other Multifamily Housing\n 10% 12% 13%\n\n\n\n\n Monetary Benefits Identified by Program\n Single-Family\n Housing Public & Indian\n Community 6% Housing\n Planning 18%\n & Development\n 6%\n\n\n\n Multifamily\n Housing\n 6%\n Other\n 64%\n\n\n\n\n Monetary Benefits Identified in Millions of Dollars\n 450\n $411\n 400\n 350\n\n 300\n 250\n 200\n\n 150\n $114\n 100\n $36 $40 $41\n 50\n\n 0 Public and Multifamily Other Community Single-Family\n Indian Housing Planning & Housing\n Housing Development\n\n\n\n\nvi Audit Charts\n\x0c Investigation Cases Opened by Program (Total: 736)\n\n Community Planning\n & Development Other/GNMA\n Single-Family\n 3% (19)\n 6% (42) Housing\n 16% (115)\n\n Multifamily\n Housing\n 10% (74)\n\n\n\n\n Public and Indian Housing\n 65% (486)\n\n\n\n\n Investigation Recoveries by Program (Total: 165,353,197)\n Community Planning &\n Multifamily Development\n Housing 5% ($8,205,359) Other/GNMA\n 2% ($3,931,894)\n 0% ($30,685)\n Public & Indian\n Housing\n 5% ($8,829,801)\n\n\n\n\n Single-Family\n Housing\n 88% ($144,355,458)\n\n\n\n\nInvestigation Charts vii\n\x0c Acronyms List\n AIGA Assistant Inspector General for Audit\n AIGI Assistant Inspector General for Investigations\n ARIGA Assistant Regional Inspector General for Audit\n ASAC Assistant Special Agent in Charge\n ATF Bureau of Alcohol Tobacco and Firearms\n CDBG Community Development Block Grants\n CID Criminal Investigation Division\n CPD Community Planning and Development\n DAIGA Deputy Assistant Inspector General for Audit\n DAIGI Deputy Assistant Inspector General for Investigation\n DEA Drug Enforcement Administration\n DOJ U.S. Department of Justice\n FBI Federal Bureau of Investigation\n FDIC Federal Deposit Insurance Corporation\n FEMA Federal Emergency Management Agency\n FFMIA Financial Management Improvement Act of 1996\n FHA Federal Housing Administration\n FHASL Federal Housing Administration Subsidiary Ledger\n FINCEN Financial Crimes Enforcement Network\n FIRMS Facilities Integrated Resources Management System\n FY Fiscal Year\n GAO Government Accountability Office\n GNMA Government National Mortgage Association (aka Ginnie Mae)\n HAP Housing Assistance Payment\n HHS U.S. Department of Health and Human Services\n HIV Human Immunodeficiency Virus\n HKFTF Hurricane Katrina Fraud Task Force\n HOME Home Investment Partnership Program\n HOPWA Housing Opportunities for Persons with AIDS\n HRRC Hurricane Recovery and Response Center\n HUD U.S. Department of Housing and Urban Development\n IG Inspector General\n\n\nviii Acronyms List\n\x0c IRS Internal Revenue Service\n JTTF Joint Terrorism Task Force\n LAS Loan Accounting System\n MAHRA Multifamily Assisted Housing Reform Act\n NAHRO National Association of Housing and Redevelopment Officials\n OA Office of Audit\n OI Office of Investigation\n OIG Office of Inspector General\n OMB Office of Management and Budget\n OND Officer Next Door\n PDDA Presidentially-Declared Disaster Areas\n PFCRA Program Fraud Civil Remedies Act\n PHA Public Housing Authorities\n PHSI Public Housing Safety Initiatives\n PIH Office of Public and Indian Housing\n PMA President\xe2\x80\x99s Management Agenda\n REAC Real Estate Assessment Center\n REAP Resource Estimation and Allocation Process\n REO Real Estate Owned\n RESPA Real Estate Settlement and Procedures Act\n RHIIP Rental Housing Integrity Improvement Project\n RIGA Regional Inspector General for Audit\n SA Special Agent\n SAC Special Agent in Charge\n SSA Social Security Administration\n SSN Social Security Number\n TEAM Total Estimation and Allocation Mechanism\n TND Teacher Next Door\n USAO U.S. Attorney\xe2\x80\x99s Office\n USDA U.S. Department of Agriculture\n USMS U.S. Marshals Service\n USPS U.S. Postal Service\n VA U.S. Department of Veterans Affairs\n VOE Verifications of Employment\n\n\n\nAcronyms List ix\n\x0c Table of Contents\n Chapter 1 - HUD\xe2\x80\x99s Management and Performance Challenges 1\n The HUD Office of Inspector General 2\n Major Issues Facing HUD 2\n Chapter 2 - HUD\xe2\x80\x99s Single Family Housing Programs 9\n Audits 10\n Investigations 18\n Chapter 3 - HUD\xe2\x80\x99s Public and Indian Housing Programs 33\n Audits 34\n Investigations 47\n Chapter 4 - HUD\xe2\x80\x99s Multifamily Housing Programs 61\n Audits 62\n Investigations 67\n Chapter 5 - HUD\xe2\x80\x99s Community Planning and Development Programs 71\n Audits 72\n Investigations 76\n Chapter 6 - Hurricane Relief Oversight 83\n Chapter 7 - Other Significant Audits and Investigations/OIG Hotline 91\n Audits 92\n Investigations 96\n OIG Hotline 96\n Chapter 8 - Outreach Efforts 99\n Chapter 9 - Review of Policy Directives 107\n Proposed Rules 108\n Proposed Notices 109\n Mortgagee Letter 110\n Chapter 10 - Audit Resolution 115\n Delayed Actions 116\n Significant Management Decisions with Which the OIG Disagrees 119\n Federal Financial Management Improvement Act of 1996 121\n Appendix 1 - Audit Reports Issued 123\n Appendix 2 - Tables 131\n Table A - Audit Reports Issued Prior to Start Period with No Management\n Decision at March 31, 2006 132\n Table B - Significant Audit Reports Described in Previous Semiannual Reports\n in Which Final Action Had Not Been Completed as of March 31, 2006 134\n Table C - Inspector General Issued Reports with Questioned and Unsupported\n Costs at March 31, 2006 145\n Table D - Inspector General Issued Reports with Recommendations that Funds\n Be Put to Better Use at March 31, 2006 146\n Explanations of Tables C and D 147\n HUD OIG Operations Telephone Listing 149\n\n\n\nx Table of Contents\n\x0cReporting Requirements\nThe specific reporting requirements as prescribed by the Inspector General Act of 1978,\n as amended by the Inspector General Act of 1988, are listed below:\nSource/Requirement Pages\nSection 4(a)(2)-review of existing and proposed legislation and regulations. 107-114\nSection 5(a)(1)-description of significant problems, abuses, and 1-97, 107-122\ndeficiencies relating to the administration of programs and operations\nof the Department.\nSection 5(a)(2)-description of recommendations for corrective action with respect 9-97\nto significant problems, abuses, and deficiencies.\nSection 5(a)(3)-identification of each significant recommendation Appendix 2, Table B\ndescribed in previous semiannual report on which corrective action\nhas not been completed.\nSection 5(a)(4)-summary of matters referred to prosecutive authorities 9-97\nand the prosecutions and convictions that have resulted.\nSection 5(a)(5)-summary of reports made on instances where information No Instances\nor assistance was unreasonably refused or not provided, as required by\nSection 6(b)(2) of the Act.\nSection 5(a)(6)-listing of each audit report completed during the Appendix 1\nreporting period, and for each report, where applicable, the total\ndollar value of questioned and unsupported costs and the dollar value of\nrecommendations that funds be put to better use.\nSection 5(a)(7)-summary of each particularly significant report 9-97\nand the total dollar value of questioned and unsupported costs.\nSection 5(a)(8)-statistical tables showing the total number of Appendix 2, Table C\naudit reports and the total dollar value of questioned and\nunsupported costs.\nSection 5(a)(9)-statistical tables showing the total number of audit Appendix 2, Table D\nreports and the dollar value of recommendations that funds be put\nto better use by management.\nSection 5(a)(10)-summary of each audit report issued before the Appendix 2, Table A\ncommencement of the reporting period for which no management\ndecision had been made by the end of the period.\nSection 5(a)(11)-a description and explanation of the reasons for No Instances\nany significant revised management decisions made during the\nreporting period.\nSection 5(a)(12)-information concerning any significant management 119-121\ndecision with which the Inspector General is in disagreement.\nSection 5(a)(13)-the information described under section 05(b) of the 121\nFederal Financial Management Improvement Act of 1996.\n\n\nReporting Requirements xi\n\x0c\x0c Chapter 1\n HUD\xe2\x80\x99s Management\nand Performance Challenges\n\x0c The HUD Office of Major Issues Facing HUD\n Inspector General The Department\xe2\x80\x99s primary mission is to\n The U.S. Department of Housing and expand housing opportunities for American\n Urban Development (HUD) Inspector families seeking to better their quality of life.\n General is one of the original 12 Inspectors HUD seeks to accomplish this through a\n General authorized under the Inspector wide variety of housing and community\n General Act of 1978. Over the years, the development grant, subsidy, and loan\n Office of Inspector General (OIG) has forged programs. HUD\xe2\x80\x99s fiscal year (FY) 2006\n a strong alliance with HUD personnel in enacted budget is about $48 billion,\n recommending ways to improve including about $12 billion in emergency\n departmental operations and in prosecuting supplemental appropriations to address the\n program abuses. OIG strives to make a impact of the hurricanes that devastated the\n difference in HUD\xe2\x80\x99s performance and Gulf of Mexico coastal areas during 2005.\n accountability. OIG is committed to its Additionally, HUD assists families in\n statutory mission of detecting and obtaining housing by providing Federal\n preventing fraud, waste, and abuse and Housing Administration (FHA) mortgage\n promoting the effectiveness and efficiency insurance for single-family and multifamily\n of government operations. While properties. At the end of FY 2005, FHA\xe2\x80\x99s\n organizationally located within the outstanding mortgage insurance portfolio\n Department, OIG operates independently was about $416 billion. The Government\n with separate budgetary authority. This National Mortgage Association (GNMA),\n independence allows for clear and objective also known as Ginnie Mae, through its\n reporting to the Secretary and the Congress. mortgage-backed securities program, gives\n OIG\xe2\x80\x99s activities seek to issuers access to capital markets through the\n pooling of federally insured loans.\n Promote efficiency and effectiveness in\n With about 8,800 staff nationwide, HUD\n programs and operations,\n relies upon numerous partners for the\n performance and integrity of a large number\n Detect and deter fraud and abuse, of diverse programs. Among these partners\n are hundreds of cities that manage HUD\xe2\x80\x99s\n Investigate allegations of misconduct Community Development Block Grant\n by HUD employees, and (CDBG) funds, hundreds of public housing\n authorities that manage assisted housing\n Review and make recommendations funds, thousands of HUD-approved lenders\n regarding existing and proposed that originate and service FHA-insured\n legislation and regulations affecting loans, and hundreds of Ginnie Mae\n HUD. mortgage-backed securities issuers that\n provide mortgage capital.\n The Executive Office and the Offices of\n Audit, Investigation, Counsel, and Achieving HUD\xe2\x80\x99s mission continues to\n Management and Policy are located in be an ambitious challenge for its limited\n Headquarters. Also, the Offices of Audit and staff, given the agency\xe2\x80\x99s diverse mission, the\n Investigation have staff located in eight thousands of program intermediaries\n regions and numerous field offices. assisting the Department in this mission,\n and the millions of beneficiaries in its\n housing programs. HUD\xe2\x80\x99s management\n problems have for years kept it on the\n Government Accountability Office\xe2\x80\x99s (GAO)\n\n2 HUD\xe2\x80\x99s Management and Performance Challenges\n\x0clist of agencies with high-risk programs. Department. OIG submitted its latest\nHUD\xe2\x80\x99s management team, GAO, and OIG assessment on October 18, 2005. These\nshare the view that improvements in human reported challenges are the continued focus\ncapital, acquisitions, and information of our audit and investigative efforts. HUD\nsystems are essential in removing HUD is working to address these challenges and\nfrom its high-risk designation. More in some instances, has made significant\nspecifically, HUD must focus these progress in correcting them. The\nimprovements on rental housing assistance Department\xe2\x80\x99s management challenges and\nprograms and single-family housing current efforts to address these challenges\nmortgage insurance programs, two areas are as follows.\nwhere financial and programmatic exposure\nis the greatest. That HUD\xe2\x80\x99s reported Financial Management Systems. Since\nmanagement challenges are included as part FY 1991, OIG has annually reported that the\nof the President\xe2\x80\x99s Management Agenda lack of an integrated financial system in\n(PMA) is indicative of HUD\xe2\x80\x99s important role compliance with all Federal Financial\nin the Federal sector. HUD\xe2\x80\x99s current Management System requirements is a\nAdministration places a high priority on weakness in internal controls. While some\ncorrecting those weaknesses that put HUD progress has been made, a number of\non GAO\xe2\x80\x99s high-risk list. long-standing deficiencies remain. For the\n past several years, OIG\xe2\x80\x99s financial audits\n As of December 2005, HUD\xe2\x80\x99s PMA have also reported weaknesses in internal\nscoring status was \xe2\x80\x9cgreen\xe2\x80\x9d for three of the controls and security over HUD\xe2\x80\x99s general\nnine initiatives applicable to HUD. The data processing operations and specific\nstatus of the six remaining initiatives are applications. The effect of these weaknesses\nfour with a \xe2\x80\x9cyellow,\xe2\x80\x9d and two with a \xe2\x80\x9cred\xe2\x80\x9d is that HUD cannot be reasonably assured\nscore. Based upon a comprehensive set of that system information will remain\nstandards, an agency is \xe2\x80\x9cgreen\xe2\x80\x9d if it meets confidential, protected from loss, and\nall of the standards for success, \xe2\x80\x9cyellow\xe2\x80\x9d if available to those who need it without\nit has achieved some but not all of the interruption.\ncriteria, and \xe2\x80\x9cred\xe2\x80\x9d if it has even one of the\nnumber of serious flaws. HUD\xe2\x80\x99s most HUD has completed certification and\nnotable accomplishment during this accreditation for 41 of its 44 financial\nsemiannual reporting period was to achieve management systems. However, the quality\na \xe2\x80\x9cgreen\xe2\x80\x9d score for the E-Government of the underlying documents and the actual\ninitiative. HUD\xe2\x80\x99s baseline score for certification and accreditation process\nimproved financial performance remains at varied by application. While a number of\n\xe2\x80\x9cred\xe2\x80\x9d because of one repeat and one new vulnerabilities were closed, additional\nmaterial weakness reported in our audit of vulnerabilities, identified through oversight\nHUD\xe2\x80\x99s FY 2005 financial statements. Also, activities, were not corrected before\nthe Office of Management and Budget accreditation. In addition, certification and\n(OMB) established a new initiative for HUD accreditation of the general support systems\nin the area of \xe2\x80\x9ccredit program on which these applications reside have not\nmanagement,\xe2\x80\x9d and assigned a status score been completed and are ongoing.\nof \xe2\x80\x9cred.\xe2\x80\x9d\n The weaknesses noted in our FY 2005\n Each year in accordance with the Consolidated Financial Audit relate to the\nReports Consolidated Act of 2000, HUD OIG need to\nis required to submit a statement to the\nSecretary with a summary assessment of the Incorporate better risk factors and\nmost serious challenges facing the monitoring tools into FHA\xe2\x80\x99s single\n\n\nHUD\xe2\x80\x99s Management and Performance Challenges 3\n\x0c family insured mortgage program risk To address its human capital needs and\n analysis and liability estimation respond to the PMA, HUD developed a\n process and comprehensive Five-Year Strategic Human\n Capital Management Plan that identifies\n Continue to improve its review over three strategic goals for human capital:\n the FHA credit reform estimation\n process. Mission-focused agency to align\n employees and work to support HUD\xe2\x80\x99s\n In prior years, OIG reported on mission;\n weaknesses in HUD\xe2\x80\x99s compliance with\n Federal Financial Management System High quality workforce, which\n requirements, including the need to enhance recruits, develops, manages, and\n FHA\xe2\x80\x99s management controls over its retains a diverse workforce; and\n portfolio of integrated insurance and\n financial systems. During the past several Effective succession planning to\n years, HUD has made progress in ensure retirees over the next 5 years are\n implementing a new financial system at\n succeeded by qualified employees.\n FHA and addressing most of the weaknesses\n that OIG identified, including initiating a\n The human capital management plan is\n vision statement for a departmentwide\n the Department\xe2\x80\x99s primary tool for advancing\n fully integrated financial system. These\n its human capital transformation. To\n improvements enabled OIG to conclude that\n ensure HUD maintains progress toward\n the weakness in financial management\n accomplishing the goals outlined in its\n system requirements should be reclassified\n 5-year strategy, HUD tracks progress against\n from a material weakness to a reportable\n the interim milestones biweekly. In line with\n condition.\n its strategic plan, HUD has increased its\n focus on human capital management\n Departmentwide Organizational\n through a variety of initiatives.\n Changes and Human Capital Management.\n For many years, one of the Department\xe2\x80\x99s\n To address staffing imbalances and\n major challenges has been to effectively\n other human capital challenges, the\n manage its limited staff resources to\n Department has most recently embarked on\n accomplish its primary mission. In recent\n an \xe2\x80\x9coptimal organization study\xe2\x80\x9d to ensure\n years, the Department has contracted out\n HUD is positioned to provide maximum\n numerous functions essential to the\n service to its constituents. The focus of the\n accomplishment of its overall mission, in\n study is to develop a vision for the future by\n part due to staffing issues. Many of the\n assessing what HUD\xe2\x80\x99s work will be, how\n weaknesses facing HUD, particularly those\n HUD should be organized to carry out the\n concerning HUD\xe2\x80\x99s oversight of program\n work, and the required skills in relation to\n recipients, are exacerbated by HUD\xe2\x80\x99s\n full-time employees (FTE) and training\n resource management shortcomings.\n efforts. The final product for this effort is\n Accordingly, OIG considers it critical for the\n scheduled during the third quarter of the\n Department to address these shortcomings\n fiscal year.\n through the successful completion of\n ongoing plans. To operate effectively and\n HUD continued to implement its Five-\n hold individuals responsible for\n Year Strategic Human Capital Management\n performance, HUD needs to know that it has\n Plan, with results that are enabling it to\n the right number of staff with the proper\n recruit, develop, manage, and retain a high-\n skills in the right positions.\n performance workforce that is capable of\n effectively supporting HUD\xe2\x80\x99s mission.\n\n4 HUD\xe2\x80\x99s Management and Performance Challenges\n\x0c FHA Single-Family Origination. FHA\xe2\x80\x99s further strengthen lender accountability and\nsingle-family insurance programs enable take strong enforcement actions against\nmillions of first-time, minority, low-income program abusers that victimize first-time\nelderly, and other underserved households and minority homebuyers.\nto realize the benefits of homeownership.\nHUD manages about $368 billion in single- In support of HUD and the PMA, OIG\xe2\x80\x99s\nfamily insured mortgages. Effective Strategic Plan for FY 2006 gives priority to\nmanagement of this high-risk portfolio detecting and preventing fraud in FHA\nrepresents a continuing challenge for the mortgage lending through targeted audits\nDepartment. The PMA has committed HUD and investigations. OIG\xe2\x80\x99s audits target\nto tackling long-standing management lenders with high default rates. The detailed\nproblems that expose FHA homebuyers to testing focuses on mortgage loans that\nfraudulent practices. defaulted and resulted in FHA insurance\n losses. Results from these audits have noted\n HUD has taken a number of actions to significant lender underwriting deficiencies,\nreduce risks to homebuyers including the prohibited late endorsed loans, inadequate\nfollowing: quality controls, and other operational\n irregularities. OIG\xe2\x80\x99s recommendations have\n Established an automated systems sought monetary recoveries through loan\n control to preclude the predatory indemnifications exceeding $159.7 million,\n lending practice of \xe2\x80\x9cproperty flipping\xe2\x80\x9d loss reimbursements of more than $10.2\n on FHA-insured loans; million, and appropriate civil remedies.\n During the current semiannual reporting\n Established an \xe2\x80\x9cappraiser watch\xe2\x80\x9d period, OIG completed 31 external audits of\n FHA-approved mortgage lenders as well as\n process, wherein appraisers with poor\n three internal audits of single-family\n performance records are automatically\n program activities. Additionally, OIG\xe2\x80\x99s\n targeted for monitoring and\n investigative workload in single-family\n disqualification from program\n fraud prevention continues to grow\n participation if they violate FHA\n dramatically. During the current semiannual\n standards;\n period, OIG opened 115 investigative cases\n and closed 261 cases in the single-family\n Established an automated under- housing program area, resulting in 255\n writing system, the Technology Open indictments, 288 arrests, and 111\n to Approved Lenders (TOTAL) convictions/pleas/pretrial conversions.\n Scorecard to increase lender efficiency\n through more consistent, objective OIG\xe2\x80\x99s audit of FHA\xe2\x80\x99s FY 2005 financial\n evaluations of the credit worthiness of\n statements also reported a need to\n borrowers; and\n Incorporate better risk factors and\n Initiated a process for the electronic\n monitoring tools into its single-family\n verification of Social Security numbers\n insured mortgage program risk\n to further reduce fraud in FHA\n analysis and loan liability estimation\n applications.\n process,\n While the GAO and OIG have\n Continue improvement in the review\nreported improved monitoring of lender\n over the credit reform estimation\nunderwriting and default tracking and\nexpanded loss mitigation to help reduce process, and\nmortgage foreclosures, HUD needs to\n\n\nHUD\xe2\x80\x99s Management and Performance Challenges 5\n\x0c Continue enhancement of number of years in OIG\xe2\x80\x99s annual audits of\n management controls over the HUD\xe2\x80\x99s financial statements. However, HUD\n portfolio of integrated insurance and has demonstrated significant progress in\n financial systems. addressing weaknesses impacting the\n accuracy of payments made under these\n OIG has tailored its audit and programs. Most notably, HUD was the first\n investigation techniques to complement this agency to receive a \xe2\x80\x9cgreen\xe2\x80\x9d baseline goal\n need, to support HUD management score on the PMA \xe2\x80\x9celiminating improper\n improvements, and to provide an added payments\xe2\x80\x9d initiative and has maintained\n deterrence to mortgage fraud. OIG this score.\n developed a comprehensive training course\n for its staffs on auditing single-family The estimate of erroneous payments\n lenders and conducting single-family fraud that HUD reports in its Performance and\n investigations. To date, 154 auditors and 150 Accountability Report relates to HUD\xe2\x80\x99s\n investigators have completed the single- inability to ensure or verify the accuracy of\n family training courses. subsidy payments being determined and\n paid to assisted households. HUD has\n Public and Assisted Housing Program surpassed interim goals for reducing the FY\n Administration. HUD provides housing 2000 estimated $2 billion in net annual rental\n assistance funds under various grant and housing assistance overpayments. HUD\xe2\x80\x99s\n subsidy programs to public housing interim goals were for a 15 percent reduction\n agencies and multifamily project owners. in FY 2003, 30 percent reduction in FY 2004,\n These intermediaries, in turn, provide and 50 percent reduction in FY 2005. These\n housing assistance to benefit primarily low- goals were established based on the FY 2000\n income households. The Office of Public and estimates of improper payments attributed\n Indian Housing (PIH) and the Office of to both housing administrator errors in\n Housing monitor these intermediaries\xe2\x80\x99 subsidy determinations and tenant\n administration of the assisted housing underreporting of income upon which\n programs. benefits are based.\n\n Accurate and timely information about Although 60 percent of all subsidy\n households participating in HUD housing determinations were found to be in error in\n programs is necessary to allow HUD to 2000, that number declined to 41 percent in\n monitor the effectiveness of the program, FY 2003 and 34 Percent in FY 2004. The\n assess agency compliance with regulations, baseline estimate of gross annual improper\n and analyze the impacts of proposed payments has been reduced from $3.2 billion\n program changes. The level of reporting is a in 2000 to $1.6 billion in 2003 and $1.2 billion\n criterion for housing agencies\xe2\x80\x99 performance in 2004.\n in both the Public Housing Assessment\n System and the Section 8 Management Paralleling HUD efforts, OIG\xe2\x80\x99s\n Assessment Program. HUD\xe2\x80\x99s goal is to investigative and audit focus concentrates\n obtain 85 percent reporting of tenant data on fraudulent practices and the lack of\n into the system. compliance with the Section 8 program\n statute and requirements. To comply with a\n HUD\xe2\x80\x99s ability to effectively monitor congressional request, OIG conducted 21\n housing agencies and assisted multifamily external audits of the Section 8 Housing\n projects continues to present challenges in Choice Voucher program during the current\n achieving the intended statutory purposes semiannual reporting period. These external\n of the housing assistance funds. These audits addressed whether housing agencies\n weaknesses have been reported for a are correctly calculating subsidy amounts,\n\n\n6 HUD\xe2\x80\x99s Management and Performance Challenges\n\x0ccorrectly determining family income, assessment could be performed. HUD\xe2\x80\x99s\ncomplying with housing quality Office of Community Development (CPD)\nstandards, fully using authorized plans to reprogram existing funds of $380\nvouchers, and implementing controls to million for the disaster areas. To expedite\nprevent duplicative and fraudulent the process, CPD issued numerous waivers\nhousing assistance payments. OIG\xe2\x80\x99s to streamline its grant programs including\nrecommendations for these audits Home Investment Partnership program\nquestioned costs of more than $5 million and (HOME), Emergency Shelter Grants, and\nidentified more than $63 million that could CDBG.\nbe put to better use.\n HUD\xe2\x80\x99s response to Hurricanes Katrina\nAdministering Programs and Rita falls into three separate categories:\n (1) use of existing appropriations on the\nDirected Toward Victims of ground just before hurricane impact, (2) new\nHurricanes Katrina, Rita, and appropriations for hurricane relief, and (3)\n Federal Emergency Management Agency\nWilma (FEMA) funds administered by HUD in\n support of mission-critical assignments.\n HUD was provided $1.525 million to provide\n In the aftermath of Hurricanes Katrina, personnel to assist FEMA as part of the\nRita, and Wilma, the operations of HUD housing task force in Baton Rouge. HUD is\nhave been thoroughly tested in the Gulf administering the Katrina Disaster Housing\nCoast area and have created extraordinary Assistance Program (KDHAP), which was\nchallenges for the residents, HUD previously funded to a level of $79 million\nemployees, and the business community. and has received new appropriations of $390\nThe potential losses to HUD and its housing million in housing vouchers for families\nand community development programs are displaced by Rita and Katrina, and HUD has\nsignificant. received new appropriations of $11.5 billion\n in emergency CDBG funds for recovery\n Congress estimates that damage to expenses associated with Hurricanes Rita\nresidential structures will range from $17 to and Katrina. HUD is preparing to\n$33 billion. In the Presidentially Declared administer the new funds, which will be\nDisaster Areas (PDDA), HUD\xe2\x80\x99s FHA single- grants made directly to the five Gulf States\nfamily insurance fund insured more than impacted by the hurricanes. The Governors\n328,000 mortgages having an unpaid of Louisiana, Mississippi, Alabama, Florida,\nprincipal balance of $23 billion. The and Texas, respectively, have identified the\nhurricanes affected 79 Ginnie Mae issuers, appropriate State agency to receive the\ncausing GNMA to assess a $500 million risk funds and are submitting plans to HUD\nof loss to its investment portfolio. FHA\xe2\x80\x99s detailing how the block grant funds will be\nmultifamily program in the PDDA insured used.\n859 properties with an amortized principal\nbalance of $3 billion. Assets of HUD\xe2\x80\x99s public See Chapter 6 of this Semiannual Report\nhousing authorities (PHA) program for further information on the challenges\nsuffered tremendous damage, affecting both HUD faces in responding to these disasters\nproperty structures and housing of almost along with HUD OIG\xe2\x80\x99s efforts to prevent and\n102,000 families. The Housing Authority of detect fraud and provide audit coverage\nNew Orleans (HANO) received a $21.8 for the billions of dollars HUD is\nmillion grant from the public housing administering to aid in the recovery.\ncapital fund reserve for the cost and repair\nof its public housing inventory before a full\n\n\n\nHUD\xe2\x80\x99s Management and Performance Challenges\n 7\n\x0c\x0c Chapter 2\nHUD\xe2\x80\x99s Single-Family\n Housing Programs\n\x0c The Federal Housing Administration\xe2\x80\x99s The America\xe2\x80\x99s Mortgage\xe2\x80\x99s LaPlace\n (FHA) single-family programs provide branch manager formed an identity-of-\n mortgage insurance to mortgage lenders interest company, Imagine Foundation and\n that, in turn, provide financing to enable provided prohibited gifts to borrowers.\n individuals and families to purchase, Imagine Foundation provided $400,000 in\n rehabilitate, and construct a home. gift funds to 73 America\xe2\x80\x99s Mortgage\n borrowers. The Internal Revenue Service\n Audits (IRS) denied Imagine Foundation\xe2\x80\x99s\n application for nonprofit status because it\n did not meet nonprofit requirements.\n During this reporting period, the Office According to the IRS, America\xe2\x80\x99s Mortgage\xe2\x80\x99s\n of Inspector General (OIG) issued owner served on the board of Imagine\n 19 external audit reports in the single- Foundation. Under HUD requirements, the\n family housing program area. These reports gifts should be considered as inducements\n disclosed more than $7 million in to purchase, requiring the sales price to be\n questioned costs and more than $33 million reduced dollar for dollar in determining the\n in recommendations that funds be put maximum mortgage amount. Therefore,\n to better use. OIG reviewed 19 FHA HUD overinsured 73 FHA loans totaling\n single-family mortgage lenders. more than $7.6 million.\n\n Chart 2.1: Single-Family Housing Dollars Additionally, America\xe2\x80\x99s Mortgage did\n not originate and process loans in\n 50,000,000\n 40,000,000\n accordance with HUD\xe2\x80\x99s regulations, nor did\n 35,000,000 its quality control plan meet HUD\xe2\x80\x99s\n 30,000,000 regulations, further putting FHA-insured\n 25,000,000 loans at risk.\n 20,000,000\n 15,000,000\n OIG recommended that HUD require\n 10,000,000\n 5,000,000\n America\xe2\x80\x99s Mortgage to write down the loans\n 0 for the $400,000 in inappropriate gifts by\n Questioned Costs Funds Put to Better Use Imagine Foundation, indemnify 73 loans\n totaling $6.9 million, and reimburse HUD\n $300,000 for claims paid on four loans.\n Mortgagees, Loan Further, HUD should take administrative\n action as appropriate, including debarment\n Correspondents, and Direct and civil monetary penalties, against the\n Endorsement Lenders president and board of Imagine Foundation.\n America\xe2\x80\x99s Mortgage should develop and\n implement a quality control plan that\n The U.S. Department of Housing and\n complies with HUD\xe2\x80\x99s requirements before\n Urban Development (HUD) OIG audited\n it is allowed to underwrite additional loans.\n America\xe2\x80\x99s Mortgage Resource, Inc., of\n (Audit Report: 2006-FW-1006)\n Metairie, LA, a lender approved to originate\n loans under HUD\xe2\x80\x99s single-family mortgage\n HUD OIG audited BSM Financial LP\n insurance program. OIG selected America\xe2\x80\x99s\n because of an unusually high ratio of\n Mortgage because of its high default rate.\n defaults in HUD\xe2\x80\x99s San Antonio, TX,\n The objectives were to determine whether\n jurisdiction. The objective was to determine\n America\xe2\x80\x99s Mortgage followed HUD\n whether BSM followed HUD loan\n origination requirements and implemented\n origination requirements for the 51 loans\n a quality control plan in accordance with\n selected for review.\n HUD requirements.\n\n\n10 HUD\xe2\x80\x99s Single-Family Housing Programs\n\x0c Forty-seven percent of BSM\xe2\x80\x99s defaults OIG recommended that HUD take\ninvolved one seller, who owned 50 percent appropriate administrative action against\nof the lender. OIG reviewed 51 of the Major Mortgage for not following HUD\ndefaulted loans that involved this seller. The requirements and placing the insurance\nlender approved mortgages on overvalued fund at unnecessary risk. At a minimum,\nproperties because the lender allowed an the actions taken should include requiring\nidentity-of-interest seller to add ineligible Major Mortgage to indemnify improperly\nand unsupported costs to the home submitted loans currently insured and\nconstruction costs and inadequately reimburse HUD for known and future losses\nreviewed the appraisals. Also, the lender on foreclosed properties. (Audit Report:\ndid not adequately document analyses of 2006-KC-1004)\nborrowers\xe2\x80\x99 credit. Further, the lender\xe2\x80\x99s\nprocessing had technical deficiencies. HUD OIG audited Ryland Mortgage\nConsequently, HUD and the borrowers Company\xe2\x80\x99s loan origination activities for its\nunnecessarily incurred increased risks Tempe, AZ, branch office. OIG selected the\nthrough higher insurance exposure and Ryland branch in response to a request from\nhigher mortgage payments as evidenced by HUD\xe2\x80\x99s Santa Ana Homeownership Center\nthe borrowers defaulting on their Quality Assurance Division. The objectives\nmortgages. were to determine whether Ryland acted in\n a prudent manner and complied with HUD\n OIG recommended that HUD require regulations, procedures, and instructions in\nthe lender to reimburse the insurance fund its approval of FHA-insured mortgages and\nalmost $2 million for foreclosure losses whether it adequately implemented its\nincurred on 19 loans, buy down 28 loans by quality control plan.\n$320,000 for the amounts added to the loans,\nand after the buydown, reamortize and Ryland did not comply with HUD\nindemnify HUD for the more than $2.7 requirements and regulations in originating\nmillion remaining balance on these 28 loans. 23 of the 24 loans we reviewed. The 23 loans\nIn addition, OIG recommended that HUD totaling more than $3 million had multiple\nensure the lender implements adequate origination deficiencies that should have\nprocedures to originate loans in accordance precluded their approval. In addition,\nwith HUD requirements. (Audit Report: Ryland did not adequately implement its\n2006-FW-1007) quality control plan. As a result, HUD\n remains at a risk of loss on 20 of the loans,\n HUD OIG audited Major Mortgage of valued at $2.7 million, and incurred other\nCheyenne, WY, a lender. OIG selected actual losses of more than $85,000.\nMajor Mortgage because of its high rate of\nlate requests for endorsement. The objective OIG recommended that HUD take\nof the audit was to determine whether appropriate administrative action against\nMajor Mortgage complied with HUD Ryland by seeking recovery for 14 of the\nrequirements when submitting late requests loans totaling more than $85,000 in partial\nfor endorsement. claims, loan modification, special\n forbearance, and inflated sales prices;\n Of the 1,814 late requests for seeking indemnification of more than $2.7\nendorsement, 51 loans did not comply with million against future losses on 20 loans; and\nHUD requirements and, therefore, should requiring Ryland to reimburse a borrower\nnot have been endorsed. These loans for $4,000 in unallowable fees. (Audit\nincreased the risk to the FHA insurance fund Report: 2006-LA-1001)\nby $5.6 million and caused HUD to incur\nrelated claims and losses.\n\n\nHUD\xe2\x80\x99s Single-Family Housing Programs 11\n\x0c HUD OIG audited United Mortgage addition, Matrix charged excessive,\n Corporation, Hauppauge, NY, a lender unsupported, and/or unallowable closing\n approved under HUD\xe2\x80\x99s single-family direct fees totaling almost $8,000 on 13 loans.\n endorsement program. The objectives of the\n audit were to determine whether United OIG recommended that HUD require\n Mortgage complied with HUD regulations Matrix to reimburse losses for properties\n in the origination of FHA loans and that have defaulted and indemnify those not\n developed and implemented a quality defaulted on all improperly underwritten\n control plan that complied with HUD loans. Also, HUD should require Matrix to\n requirements. buy down the principal balance of the 13\n loans not properly closed. (Audit Report:\n United Mortgage did not follow HUD 2006-KC-1005)\n requirements in the approval of 13 loans\n valued at more than $1.7 million, resulting HUD OIG audited US Bank NA of\n in an unnecessary risk to the FHA insurance Minneapolis, MN, a lender approved to\n fund. It also did not follow HUD originate, underwrite, and submit insurance\n requirements when evaluating borrowers endorsement requests under HUD\xe2\x80\x99s single-\n related to an additional seven loans family direct endorsement program. OIG\n reviewed. As a result, mortgages selected US Bank for audit because of its\n amounting to more than $1 million were high late endorsement rate. The objectives\n approved for unqualified borrowers, were to determine whether US Bank\n causing HUD to assume an unnecessary complied with HUD\xe2\x80\x99s regulations,\n insurance risk. procedures, and instructions in the\n submission of insurance endorsement\n OIG recommended that HUD require requests and in the underwriting of FHA\n United Mortgage to reimburse HUD for the loans.\n loss incurred from claims and fees paid on\n one loan amounting to approximately US Bank did not always comply with\n $155,000 and indemnify HUD for more than HUD\xe2\x80\x99s requirements regarding late requests\n $1.6 million against future losses on the 12 for insurance endorsement. It improperly\n loans currently insured with material submitted 67 (1.52 percent) late requests for\n underwriting deficiencies. OIG further endorsement out of 4,406 loans tested. The\n recommended that HUD require United loans were either delinquent or otherwise\n Mortgage to indemnify the seven active did not meet HUD\xe2\x80\x99s then requirement of six\n loans valued at approximately $1 million if monthly consecutive timely payments after\n HUD determines the loans should not have delinquency but before submission to HUD.\n been approved. (Audit Report: 2006-NY- US Bank also incorrectly certified that both\n 1001) the mortgage and escrow accounts for six\n loans and the escrow accounts for taxes,\n HUD OIG reviewed 65 FHA loans hazard insurance, and mortgage insurance\n sponsored by the St. Louis, MO, branch of premiums for 14 loans were current.\n Matrix Financial Services Corporation to\n determine whether Matrix properly Further, US Bank inappropriately\n underwrote and closed the loans for underwrote 13 loans out of 28 loans reviewed\n endorsement. OIG selected Matrix because that went to claim. Deficiencies included\n more than 18 percent of the loans closed in unallowable amounts when determining the\n 2003 defaulted within 2 years. debt for six streamline refinanced loans;\n missing, outdated, or inadequate\n OIG found that Matrix did not properly documentation required to support\n underwrite 32 loans with original mortgage borrower income for seven purchase loans;\n amounts totaling nearly $3.3 million. In and understatement of the borrowers\xe2\x80\x99\n\n12 HUD\xe2\x80\x99s Single-Family Housing Programs\n\x0cexpenses for three loans. For the 13 loans employment and credit histories. As a\nreviewed, US Bank incorrectly certified the result, HUD\xe2\x80\x99s insurance fund is at increased\nintegrity of the data supplied by other risk in connection with loans totaling more\nlenders used to determine the quality and than $2.2 million.\ninsurance eligibility of one loan and\nincorrectly certified that due diligence was OIG recommended that HUD take\nused in underwriting the remaining 12 appropriate administrative action against\nloans. These improperly submitted and First Magnus for not following HUD\ninappropriately underwritten loans requirements, including requiring First\nincreased the risk to HUD\xe2\x80\x99s FHA insurance Magnus to indemnify 21 loans with original\nfund. mortgage amounts of more than $2 million\n and to indemnify HUD for future losses on\n OIG recommended that HUD require two properties not yet sold, for which HUD\nUS Bank to indemnify HUD for any future paid claims totaling more than $221,000.\nlosses on 14 loans with a total mortgage (Audit Report: 2006-KC-1002)\nvalue of more than $1.5 million, reimburse\nHUD nearly $455,000 for the actual losses it HUD OIG audited Huntington National\nincurred on 14 loans, and indemnify HUD Bank of Columbus, OH, a lender approved\nfor any future losses from more than to originate, underwrite, and submit\n$129,000 in claims paid on three loans once insurance endorsement requests under\nthe properties are sold. OIG further HUD\xe2\x80\x99s single-family direct endorsement\nrecommended that HUD implement program. OIG selected Huntington for audit\nadequate procedures and controls to because of its high late endorsement rate.\naddress the deficiencies cited in this report. The objectives were to determine whether\nOIG also recommended that HUD take Huntington complied with HUD\xe2\x80\x99s\nappropriate action against US Bank for regulations, procedures, and instructions in\nviolating the requirements in effect at the the submission of insurance endorsement\ntime when it submitted 18 loans with a requests and underwriting of FHA loans.\nmortgage value of more than $2 million\nwithout the proper 6-month payment Huntington generally complied with\nhistories. In addition, OIG recommended HUD\xe2\x80\x99s requirements on late requests for\nthat HUD determine legal sufficiency to insurance endorsement; however, it\npursue remedies under the Program Fraud improperly submitted 20 late requests for\nCivil Remedies Act against US Bank and/or endorsement out of 761 loans tested. The\nits principals for the incorrect certifications loans were either delinquent or otherwise\ncited in this audit report. (Audit Report: did not meet HUD\xe2\x80\x99s then requirement of six\n2006-CH-1008) monthly consecutive timely payments after\n delinquency but before submission to HUD.\n HUD OIG reviewed 45 FHA loans Huntington also incorrectly certified that all\nunderwritten by the Overland Park, KS, payments due were made by the borrowers\nbranch office of First Magnus Financial before or within the month due for 12 loans.\nCorporation to determine whether First\nMagnus followed HUD regulations in Further, Huntington generally\nunderwriting the loans. complied with HUD\xe2\x80\x99s underwriting\n requirements. However, it underwrote two\n Of the 45 loans reviewed, 23 contained FHA loans that later defaulted due to\nmaterial deficiencies that affected the overstated income, understated liabilities,\ninsurability of the loans. Material and a lack of valid compensating factors to\ndeficiencies included unsupported income approve the two loans. Huntington also\nand assets, questionable gift funds, charged excessive and/or unallowable fees\nunderreported liabilities, and questionable on five loans and incorrectly certified that\n\nHUD\xe2\x80\x99s Single-Family Housing Programs 13\n\x0c due diligence was used in underwriting 5 Its quality control plan did not include all\n of the 32 loans reviewed. required elements as prescribed by HUD.\n\n OIG recommended that HUD require OIG recommended that HUD require\n Huntington to indemnify HUD for any Certified to indemnify HUD against future\n future losses on 14 loans improperly losses on four loans totaling more than\n submitted for endorsement with a total $660,000 and to reimburse HUD for a loss of\n mortgage value of more than $1.4 million more than $728,000 for claims paid for five\n and take appropriate action against loans. OIG further recommended that HUD\n Huntington for violating the requirements take appropriate measures to ensure that\n on two loans with a mortgage value of nearly Certified conducts required quality control\n $178,000. OIG also recommended that HUD reviews and its written quality control plan\n require Huntington to indemnify HUD for complies with HUD requirements. Finally,\n any future losses on two defaulted loans OIG recommended that HUD take\n with a total mortgage value of more than administrative action, as appropriate, up to\n $228,000 that were inappropriately and including civil monetary penalties.\n underwritten, require Huntington to (Audit Report: 2006-AT-1003)\n reimburse the borrowers or HUD as\n appropriate more than $1,300 in excessive HUD OIG audited American Mortgage,\n and/or unallowable fees charged on five Inc., of Cherry Hill, NJ, a lender approved\n loans, and implement adequate procedures to originate FHA single-family mortgage\n and controls to address the deficiencies loans, on the recommendation of HUD\n cited. In addition, OIG recommended that officials because it had a high default rate.\n HUD pursue sanctions under the Program The objectives were to determine whether\n Fraud Civil Remedies Act. (Audit Report: American complied with HUD regulations,\n 2006-CH-1007) procedures, and instructions in the\n origination of FHA loans and whether\n HUD OIG audited Certified Home American\xe2\x80\x99s quality control plan, as\n Loans of Florida, Inc., in Miami, FL, a lender implemented, met HUD requirements.\n approved by HUD to originate and\n underwrite loans under HUD\xe2\x80\x99s single- For 15 of the 23 loans reviewed,\n family mortgage insurance program. OIG American did not exercise due diligence in\n selected Certified for review because of risk its review of assets and liabilities or resolve\n factors associated with defaulted loans. The inconsistencies in calculations, signatures,\n audit objectives were to determine whether and Social Security numbers. Further,\n Certified complied with HUD regulations, American could not locate three case files\n procedures, and instructions in the and charged ineligible fees of more than\n origination and underwriting of FHA- $4,500 on nine loans. In addition, American\xe2\x80\x99s\n insured single-family mortgages and quality control plan and the corresponding\n implemented its quality control plan as contractor agreement for quality control\n required. reviews did not contain requirements to\n identify patterns of early defaults and\n Certified did not follow HUD commonalities among loan origination\n requirements when underwriting 14 loans participants, and the contractor did not\n totaling more than $1.8 million. It approved perform required on-site branch reviews.\n the loans based on inaccurate employment,\n income, and gift information and other OIG recommended that HUD consider\n deficient and/or unverified documentation. administrative action against American,\n In addition, it did not fully implement its including indemnification on 15 loans\n quality control plan and did not conduct the valued at more than $1.6 million; require that\n required number of quality control reviews. American refund ineligible fees; and require\n\n14 HUD\xe2\x80\x99s Single-Family Housing Programs\n\x0cAmerican to develop written internal loan endorsement, and implemented adequate\norigination procedures to more closely quality control procedures.\nmonitor its loan origination process. OIG\nalso recommended that HUD require American Lending Group did not\nAmerican to revise its quality control plan properly originate eight loans, improperly\nto include reviews for patterns and submitted one loan for late insurance\ncommonalities among the loan origination endorsement, and did not implement\nparticipants and ensure the contractor adequate quality control procedures.\nperforms on-site branch reviews. (Audit\nReport: 2006-PH-1007) OIG recommended that HUD require\n American Lending Group to indemnify\n HUD OIG audited the Plano, TX, HUD for current and future losses due to\nbranch office of K Hovnanian American improperly originated and late endorsed\nMortgage Company, LLC, because of its loans and implement changes to its quality\nhigh defaults, specifically defaults involving control procedures. (Audit Report: 2006-\nloans with one specific underwriter and one KC-1007)\nspecific appraiser. The audit objectives were\nto determine whether K Hovnanian HUD OIG audited Allied Mortgage\nfollowed HUD origination requirements, Group of Bala Cynwyd, PA, a lender\ncomplied with HUD branch requirements approved to originate loans insured under\nin its Plano office, and implemented a HUD\xe2\x80\x99s single-family mortgage program,\nquality control plan according to HUD because its default rate was above the\nrequirements. national average. The audit objective was\n to determine whether Allied complied with\n K Hovnanian violated HUD HUD regulations, procedures, and\nunderwriting, branch, and quality control instructions in the origination of loans.\nrequirements. As a result, it increased the\nrisk to the insurance fund for five Of the 28 loans reviewed, Allied did not\nimproperly underwritten loans with an fully comply with HUD requirements for 10\noriginal loan amount of more than $1.3 loans valued at $799,571. It did not exercise\nmillion and overcharged borrowers more due diligence in the review of assets and\nthan $31,000. liabilities, ensure all borrowers met the\n minimum investment requirement, and\n OIG recommended that HUD require verify rental history. In addition, Allied\nK Hovnanian to indemnify the five loans, charged more than $1,200 for ineligible\nreimburse losses on the four loans that had commitment fees and overcharges for credit\nsignificant underwriting deficiencies, and reports on 11 loans. Further, Allied did not\nreimburse borrowers for unallowable establish and implement a quality control\nclosing costs. OIG also recommended that plan in accordance with HUD regulations,\nHUD require K Hovnanian to comply with and the reviews performed by the contractor\nHUD\xe2\x80\x99s quality control and branch hired by Allied did not address all HUD-\nrequirements. (Audit Report: 2006-FW- required elements.\n1004)\n OIG recommended that HUD require\n HUD OIG audited the FHA loan Allied to indemnify seven loans totaling\norigination process of American Lending almost $600,000 and reimburse HUD more\nGroup in St. Peters, MO, because if its high than $200,000 on three loans that went into\ndefault rate. The objectives of the audit were default, require Allied to develop internal\nto determine whether American Lending procedures to more closely monitor its\nGroup properly originated FHA loans, underwriting procedures, require Allied to\nproperly submitted late requests for reimburse borrowers the balance of\n\nHUD\xe2\x80\x99s Single-Family Housing Programs 15\n\x0c approximately $1,000 that it erroneously whether 1st Preference acted in a prudent\n charged them, and require Allied to revise manner and complied with HUD\n and implement its quality control plan to regulations, procedures, and instructions in\n comply with HUD requirements. (Audit the origination of loans.\n Report: 2006-PH-1006)\n Of the loans selected for review, 1st\n HUD OIG audited the Allentown, PA, Preference\xe2\x80\x99s York, PA, and Greenbelt, MD,\n branch of Homestead Funding Corporation, branch offices did not originate 38 percent\n a lender approved to originate mortgage of them in accordance with HUD\xe2\x80\x99s loan\n loans under HUD\xe2\x80\x99s single-family direct origination requirements. The branch\n endorsement program. OIG selected offices did not fully comply with HUD\n Homestead because of its high default rate, requirements for six loans valued at\n and it was recommended by HUD. The $561,506. 1st Preference did not exercise due\n objective was to determine whether diligence in the review of assets and gifts\n Homestead complied with HUD\xe2\x80\x99s obtained during the loan closing process.\n regulations, procedures, and instructions in These deficiencies contributed to an\n the origination of loans. increased risk to the FHA insurance fund.\n In addition, 1st Preference did not complete\n Of the 11 loans OIG selected for review, quality control reviews or site reviews of\n Homestead did not fully comply with its branch offices in a timely manner or\n requirements for four of the loans valued at document the review of loans that went into\n more than $270,000. Homestead did not early default. As a result, 1st Preference did\n exercise due diligence in the review of assets not identify or correct problems with\n and accepted faxed documents from accuracy, validity, and completeness of its\n realtors. These deficiencies contributed to loan origination in a timely manner.\n an increased risk for HUD\xe2\x80\x99s insurance fund.\n In addition, Homestead did not complete its OIG recommended that HUD require 1st\n quality control reviews in a timely manner. Preference to indemnify HUD for\n the loans that defaulted. OIG also\n OIG recommended that HUD require recommended that HUD require 1 st\n Homestead to indemnify HUD on two loans Preference to develop internal procedures to\n it issued contrary to HUD\xe2\x80\x99s loan origination more closely monitor its origination and\n procedures and on two loans that went into underwriting procedures and strengthen its\n default, causing HUD to pay a claim. internal control procedures to ensure\n Further, OIG recommended that reviews are completed in a timely manner\n Homestead develop internal procedures to and reviews of the branch offices and\n more closely monitor its underwriting defaulted loans are documented. (Audit\n procedures and ensure that required quality Report: 2006-PH-1008)\n control reviews are completed within HUD\xe2\x80\x99s\n required timeframe. (Audit Report: 2006- HUD OIG reviewed 51 FHA loans\n PH-1004) underwritten by First Magnus Financial\n Corporation\xe2\x80\x99s Denver, CO, branch office.\n HUD OIG audited the York, PA, and OIG selected First Magnus for audit because\n Greenbelt, MD, branch offices of 1 st of its high default rate. The objective was to\n Preference Mortgage Corporation, a lender determine whether First Magnus followed\n approved to originate single-family HUD requirements in underwriting the\n mortgage loans. OIG selected these branch loans.\n offices because their average default rates\n were above the States\xe2\x80\x99 average default rates. Of the 51 loans reviewed, 32 required\n The audit objective was to determine full underwriting and 19 were streamline\n\n\n16 HUD\xe2\x80\x99s Single-Family Housing Programs\n\x0crefinances. Twelve of the fully underwritten OIG recommended that HUD\nloans contained significant underwriting require that American Title correct the\ndeficiencies. OIG also found 21 files had problems, improve controls, complete all\noverinsured mortgages and unallowable disbursements, and pay HUD more than\nfees. As a result, First Magnus placed HUD\xe2\x80\x99s $4,000 in interest. (Audit Report: 2006-DE-\ninsurance fund at risk for more than $1.6 1002)\nmillion by not properly underwriting 12\nloans, overinsured mortgages in the amount\nof approximately $10,000, and charged\nunallowable fees totaling $1,611.\n\n OIG recommended that HUD require\nFirst Magnus to indemnify and/or\nreimburse HUD for the potential and actual\nlosses on 11 remaining loans with significant\ndeficiencies, reimburse the appropriate\nparties for the overinsured and unallowable\ncharges, and develop policies and\nprocedures to ensure adequate supervision\nover its underwriting process. (Audit\nReport: 2006-DE-1001)\n\nContractor Activities\n In response to a request from the\nDenver Homeownership Center \xe2\x80\x99s Real\nEstate Owned Division, HUD OIG audited\nAmerican Title Services, a contractor closing\nsales of HUD homes in Denver, CO. The\nobjective was to determine whether\nAmerican Title complied with contract\nterms for closing sales of HUD homes.\n\n American Title did not disburse funds\non time or in correct amounts, improperly\ncommingled HUD funds with retail funds,\nearned interest on closing funds, and did not\nreimburse HUD for bank charges.\nAmerican Title\xe2\x80\x99s improper handling of\nclosing funds increased HUD\xe2\x80\x99s and\nhomebuyers\xe2\x80\x99 risk of not meeting financial\nobligations and homebuyers\xe2\x80\x99 risk of not\nreceiving funds to which they were entitled.\nHowever, American Title\xe2\x80\x99s performance has\nimproved since HUD cut back its number\nof closings in August 2005.\n\n\n\n\nHUD\xe2\x80\x99s Single-Family Housing Programs 17\n\x0c Investigations insurance fraud. Coconspirator Donald\n Fazio pled guilty to one count of conspiracy\n and 11 counts of money laundering and\n During this reporting period, OIG\n agreed to a forfeiture and money judgment\n opened 115 investigation cases and closed\n of $2,594,169 on September 19, 2005.\n 261 cases in the single-family housing\n Konstantin and Fazio, both mortgage\n program area. Judicial action taken on\n brokers and branch managers at the now\n these cases during the period included\n defunct Brucha Mortgage Bank, conspired\n $144,355,458 in investigative recoveries, 255\n with nonprofit entities in securing\n indictments/informations, 111 convictions/\n FHA-insured mortgages for unqualified\n pleas/pretrial diversions, 288 arrests, 18\n borrowers by submitting false loan\n civil actions, 1 personnel action, and 85\n documentation. As a result of their scheme,\n administrative actions.\n HUD realized losses of $11.6 million.\n\n Chart 2.2: Single-Family Recoveries Neeraj Mody, a loan officer with\n Challenge Mortgage, was sentenced in U.S.\n False Statements\n 1% RESPA Property Disposition\n District Court, Northern District of Illinois,\n Loan Other\n Origination 1% 4% 2% Chicago, IL, to 9 months in prison and 2\n Title 1\n 37%\n 2%\n years supervised release and ordered to pay\n $756,150 in restitution following his guilty\n plea to mail fraud. Mody and codefendant\n Theresa Holt, assistant director at North East\n Austin, a nonprofit organization approved\n Flipping\n 53%\n by HUD to acquire HUD-owned properties\n Total Recoveries $144,355,458 at a 30 percent discount and resell the\n properties under HUD\xe2\x80\x99S Direct Sales\n Program, personally acquired then resold\n Single-family fraud is an investigative HUD\xe2\x80\x99s discounted properties and provided\n priority for the Office of Investigation. OIG false North East Austin employment\n continues mortgage fraud initiatives information to qualify for mortgages.\n nationwide that will help reduce fraud in Approximately 100 properties valued at $5.7\n the FHA single-family mortgage program. million were involved.\n Some of the investigations discussed in this\n report were conducted jointly with Federal, Leticia Martinez, a real estate agent at\n State, and local law enforcement agencies. Portillo Realty, and Teresa Romero, a loan\n The results of OIG\xe2\x80\x99s more significant officer at PacWest Financial, were each\n investigations are described below. indicted in U.S. District Court, Central\n District of California, Riverside, CA, on\n three counts of conspiracy, false statements,\n Loan Origination Fraud and aiding and abetting. Martinez and\n Romero, along with other coconspirators,\n Gary Konstantin, former branch allegedly defrauded HUD and commercial\n manager and loan officer, Brucha Mortgage lenders by ordering, purchasing, and using\n Bank, was found guilty in a civil proceeding fraudulent employment documents and\n in U.S. District Court, Brooklyn, NY, in a Federal income tax returns to originate and\n forfeiture hearing seeking an $11.6 million approve FHA-insured mortgage loans for\n monetary judgment against him. On unqualified buyers. To date, HUD has\n September 29, 2005, Konstantin was found realized losses of approximating $120,000\n guilty on 61 counts of conspiracy, wire fraud, involving 10 properties.\n mail fraud, money laundering, and\n\n\n18 HUD\xe2\x80\x99s Single-Family Housing Programs\n\x0c William Mendez, a former managing 2004, Molina pled guilty to two counts of\nrealtor for William E. Mendez Team, Inc., wire fraud and one count of aiding and\nRE/MAX 100, Inc., pled guilty in U.S. abetting. On November 7, 2005, Nelly\nDistrict Court, Denver, CO, to one count of Rubiano, a former Notary Public, was\nwire fraud and one count of money sentenced to 3 years probation and ordered\nlaundering. Jose Alfredo Ramirez, a realtor to pay total restitution of $655,920 ($406,692\nwith William E. Mendez Team, pled guilty to HUD and $249,228 to Dynamic\nto one count of wire fraud. Ramirez was Investments, Inc.) pursuant to her guilty\npreviously indicted on September 29, 2005. plea to wire fraud and aiding and abetting.\nNicholas Lopez, a fraudulent document Molina, Rubiano, and others caused the\nvendor at William E. Mendez Team, was completion and submission of FHA-insured\nsentenced to 5 years probation and ordered mortgage applications containing false\nto pay HUD $40,984 in restitution. Lopez employment, income, and credit\nwas previously indicted on April 6, 2005. information for unqualified buyers. The\nBenedicta Gomez, owner of 1Service, an defendants generated approximately $1.6\nincome tax and bookkeeping company, was million in fraudulent FHA-insured\narrested after her September 13, 2005, mortgages in Los Angeles County, and HUD\nindictment charging her with five counts of losses are estimated at $406,174.\nwire fraud and aiding and abetting and\none count of criminal forfeiture. Mendez Francine Sweet, a loan processor with\nand the above coconspirators assisted American International Mortgage Bankers\nunqualified homebuyers in obtaining FHA- (AIMB), and Matthew Francis, a loan officer\ninsured mortgages by providing false with AIMB, were sentenced in U.S. District\nSocial Security numbers (SSN), income Court, Eastern District of New York, Lake\ninformation, and Federal income tax returns. Success, NY, following their previous guilty\nHUD realized losses approximating $2.35 pleas to false statements and conspiracy.\nmillion on more than 300 FHA-insured Sweet was sentenced to 1 year and 1 day\nproperties. imprisonment and 3 years supervised\n release and ordered to pay $878,760 in\n George Rivas, a loan officer with Guild restitution. Sweet, Francis, and AIMB\nMortgage Company, pled guilty in facilitated the approval of FHA-insured\nU.S. District Court, Central District of mortgages for unqualified borrowers in\nCalifornia, Los Angeles, CA, to two counts metropolitan New York and Nassau and\nof mail fraud. Rivas, along with Suffolk Counties. More than 90 percent of\ncoconspirators, created straw-buyers, FHA-insured mortgages originating from\nprovided downpayment funds, and AIMB contained one or more altered\nprepared and used fraudulent income, documents. HUD\xe2\x80\x99s losses are estimated at\nidentity, and other documents to originate $239,235 as a result of foreclosures. .\nand approve FHA-insured mortgage loans\nfor unqualified buyers. To date, HUD has Devon Bowie, president of Neighborhood\nrealized losses estimated at $1.8 million Mortgage Bankers, and Barry Fauntleroy,\ninvolving 46 FHA-insured properties. president of EON, a real estate investment\n company, were sentenced in U.S. District\n Manuel Molina, also known as Manny Court, District of New Jersey, Newark, NJ,\nMolina, an unlicensed real estate agent and following their earlier guilty pleas to one\nloan officer, was sentenced in U.S District count of conspiracy to commit false\nCourt, Central District of California, Los statements. Bowie was sentenced to 2 years\nAngeles, CA, to 6 months incarceration and probation and ordered to pay HUD $500,000\n36 months probation and ordered to pay in restitution within 90 days of sentencing.\nHUD $380,823 in restitution. On October 4, Fauntleroy was sentenced to 21 months\n\n\nHUD\xe2\x80\x99s Single-Family Housing Programs 19\n\x0c incarceration and 3 years probation and Los Angeles, CA, on one count each of\n ordered to pay HUD $524,000 in restitution. conspiracy, wire fraud, mail fraud, and\n In addition to Bowie and Fauntleroy, aiding and abetting. Gatmitan and an\n coconspirators Stacie Morrero, an unnamed coconspirator allegedly used the\n underwriter at Neighborhood Mortgage same loan applicant for three distinct FHA-\n Bankers, and Sean Mason, a closing attorney insured mortgages from three different\n at EON, each pled guilty to a one-count lenders to facilitate closing all mortgage\n information charging them with falsification loans on the same day, thus hiding from\n of documents submitted to HUD. Peter Port, lenders the simultaneous approval of the\n owner of Port Abstract, was sentenced to 5 three loans on the same day for the same\n months incarceration and one year applicant. To date, HUD has realized losses\n probation, fined $10,000, and ordered to pay estimated at $720,000.\n HUD $500,000 in restitution. Keith Miles, a\n real estate contractor and owner of Mid- Michael Sedor, an attorney/closing\n South Atlantic Asset Holding Company, was agent with Penn State Abstract Agency, and\n sentenced to 2 years probation and ordered Louis Fierro, a loan officer with FT Mortgage\n to pay HUD $26,000 in restitution. In Company, MNC Mortgage, and First\n addition, Norm Murphy, president of Horizon Home Loan Corporation, were\n Garden State Searches, was arrested and sentenced in U.S. District Court, Middle\n pled guilty in State court to engaging in the District of Pennsylvania, Dover, PA,\n unauthorized practice of law for falsifying following their May 2003 guilty pleas to\n a real estate deed. Bowie, Fauntleroy, and conspiracy to defraud the U.S. Government.\n the above coconspirators assisted Sedor was sentenced to 7 months\n unqualified borrowers with obtaining FHA- incarceration, 7 months home confinement,\n insured mortgages by submitting false loan and 2 years supervised release. Fierro was\n documentation and appraisals, purchased sentenced to 15 months incarceration,\n properties using borrower funds, failed followed by 2 years of supervised release.\n to complete promised renovations, Sedor, Fierro, and coconspirators created\n and overcharged borrowers excessive fraudulent gift letters and other documents,\n origination and discount fees. As a result, provided downpayment funds, and paid\n HUD realized losses in excess of $1.2 million creditors for unqualified buyers, obtaining\n on 33 FHA-insured loans. more than $16.6 million in FHA-insured\n mortgages on more than 150 properties. To\n Idalmis Preval Zayas, a real estate date, HUD losses are estimated at $192,000.\n agent, pled guilty in U.S. District Court,\n Eastern District of Virginia, Norfolk, VA, to Patrick Singletary, Robert Singletary,\n false statements. Zayas created false income Peter Russo, and Clifford Shaw were\n tax returns and credit letters for unqualified charged in a superseding indictment in U.S.\n buyers securing FHA-insured mortgages on District Court, Middle District of Florida,\n properties used in the transportation and Jacksonville, FL, with conspiracy, false\n housing of illegal aliens. To date, five statements to HUD, wire fraud, and bank\n additional defendants pled guilty to charges fraud violations. In addition, a forfeiture\n of using false information to purchase order for $17 million in assets, including six\n homes with FHA-insured mortgages and residential properties, three businesses, and\n transporting and harboring illegal aliens for ten vehicles was issued. The defendants\n personal gain. allegedly conspired in a property-flipping\n scheme involving inflated appraisals and\n Carlos Gatmitan, a real estate broker straw-purchasers channeled through\n and owner of Investors Plus, a mortgage Tropical Mortgage, Sunshine Mortgage,\n brokerage entity, was indicted in U.S. Universal Title, and CAL and Eagle\n District Court, Central District of California, Investments, entities they owned and\n\n20 HUD\xe2\x80\x99s Single-Family Housing Programs\n\x0coperated. To date, HUD has realized losses Chris Liano, a certified HUD appraiser\nof $7.3 million. and owner of CLA, Inc., and Robert Dosch,\n a certified HUD appraiser employed at CLA,\n Lorena Marquez, an escrow officer at were each sentenced in U.S. District Court,\nSouth Coast Title Company, was indicted in Eastern District of New York, Long Island,\nU.S. District Court, Central District of NY. Liano was sentenced to 3 years\nCalifornia, Los Angeles, CA, on one count probation and ordered to pay HUD\nof mail fraud. On November 22, 2005, Mario $63,037,314 in restitution following his April\nIzquierdo, an assistant loan officer with 6, 2001, guilty plea to false statements to\nCapital Mortgage, was indicted on four institutions insured by the Federal Deposit\ncounts of wire fraud. Marquez and Insurance Corporation (FDIC). In addition,\nIzquierdo allegedly supplied downpayment Liano forfeited $125,000. Dosch was\nfunds and/or purchased false identity sentenced to 3 years probation and ordered\ndocumentation to secure FHA-insured to pay HUD $8,427,610 in restitution\nmortgages for unqualified borrowers. To following his November 13, 2000, guilty plea\ndate, $1,483,167 in FHA-insured loans has to false statements. Dosch also forfeited\nresulted in HUD losses of $441,556. $75,000. Liano and Dosch overvalued\n appraisals on more than 300 FHA-insured\n Howard Thaler, a disbarred attorney properties originated and issued from the\nworking as a mortgage broker and now defunct Mortgage Lending of America,\nspeculator, was convicted in U.S. District Ryan\xe2\x80\x99s Express Equities, and Smithhaven\nCourt, Southern District of New York, Mortgage, mortgage companies formerly\nYonkers, NY, on two counts of making false located in Long Island, NY. As a result, 448\nstatements, two counts of making false FHA-insured properties defaulted, and\nstatements to HUD, four counts of mail HUD realized losses of more than $94.5\nfraud, one count of wire fraud, and one million.\ncount of conspiracy. Thaler was sentenced\nto 7-years incarceration and 3 years Morgan Haines and Theodore\nsupervised release, and ordered to pay Antonucci, Jr., both investors, pled guilty in\n$522,496 in restitution. Thaler was involved U.S. District Court, Western District of New\nin fraudulent real estate transactions, to York, Rochester, NY. Haines pled guilty to\ninclude preparing false documents to assist one count of false statements to HUD, and\nnonqualified homebuyers in securing FHA- Antonucci pled guilty to one count of\ninsured mortgages and selling property conspiracy to commit bank fraud. In\nowned by an estate and retaining the sale addition, on December 12, 2005,\nproceeds. coconspirator William O\xe2\x80\x99Keefe was\n sentenced to 2 years incarceration and 5\n Matthew Nagy pled guilty in U.S. years supervised release and ordered to pay\nDistrict Court, Western District of Texas, the U.S. Department of Justice (DOJ)\nAustin, TX, to one count of wire fraud. $281,616 in restitution. Haines, Antonucci,\nNagy purchased residential property using and O\xe2\x80\x99Keefe purchased homes in the\nfalse documents and misrepresented his Rochester, NY, area, flipped the properties\nintent to occupy the property as his primary to each other at inflated values, provided\nresidence. Nagy and 19 codefendants were false documentation to secure FHA or\npreviously indicted for conspiracy, mail conventional financing on the properties,\nfraud, wire fraud, bank fraud, money and defaulted on mortgage loans in excess\nlaundering, and aiding and abetting for of $1 million shortly afterward. To date,\nallegedly defrauding federally insured HUD has paid claims on two FHA-insured\nfinancial institutions and mortgage lenders properties and realized losses of $186,475.\nof more than $15 million.\n\n\nHUD\xe2\x80\x99s Single-Family Housing Programs 21\n\x0c Humberto Maravi, a loan officer with computer sales and service business in\n Ark Mortgage, was sentenced in U.S. Freeport, IL, prepared false verification of\n District Court, District of New Jersey, employment and credit letters for potential\n Newark, NJ, to 3 years probation and FHA borrowers. Barnes, who provided false\n ordered to pay HUD $561,775 in restitution employment, landlord, and gift letters,\n following his previous guilty plea to purchased and resold three properties with\n conspiracy and false statements. Maravi FHA-insured mortgages to unqualified\n recruited and assisted nonqualified buyers. Nicks, Nelson, and Barnes admitted\n borrowers in obtaining FHA-insured to causing more than $100,000 in HUD losses\n mortgages by completing fraudulent as a result of foreclosures.\n mortgage applications and submitting\n fraudulent employment, financial, and other In U.S. District Court, Eastern District\n loan documentation. HUD realized losses of Michigan, Detroit, MI, a $41 million\n of more than $1.8 million when 37 properties settlement agreement under the False\n defaulted. Claims Act and the Program Fraud Civil\n Remedies Act (PFCRA) was reached\n Kristin Bilynsky, a former real estate between ABN AMRO Mortgage Group, Inc.,\n agent, was sentenced in U.S. District Court, DOJ Civil Division, and HUD FHA. The\n Eastern District of Pennsylvania, settlement terms include a $16 million plus\n Philadelphia, PA, to 5 years probation and lump sum payment, and ABN AMRO\n fined $13,000. Bilynsky pled guilty on July Mortgage Group, Inc., waiving more than\n 15, 2004, to making false statements to HUD $24 million in FHA claims, resulting from\n and aiding and abetting. Bilynsky provided 783 defaulted FHA-insured mortgages\n false employment documentation, enabling containing false FHA underwriting\n her sister to obtain an FHA-insured certifications. The settlement further\n mortgage. eliminates potential future litigation on\n approximately 28,000 FHA-insured loans\n Michael Fedynich, owner of Westgate also containing false FHA underwriting\n Realty, agreed to an $802,035 civil judgment certifications.\n with the DOJ under the False Claims Act.\n Fedynich previously pled guilty in U.S. Michael Dronet, a developer doing\n District Court, Northern District of Illinois, business as Homebuyer\xe2\x80\x99s, was sentenced in\n Chicago, IL, to providing downpayment U.S. District Court, Baltimore, MD, to 1 year\n funds and false closing certifications in the and 1 day in prison and 3 years supervised\n origination and sale of 10 FHA-insured release and ordered to pay HUD $756,268 in\n properties resulting in HUD losses of restitution following his previous guilty plea\n $516,429. to conspiracy to make false statements. In\n or about 1998, Dronet purchased low-priced\n Chad J. Nicks, Dale Nelson, and Tasha homes, performed minor repairs, and resold\n Barnes, also known as Tasha Thompson, the properties at inflated prices. Dronet\n each pled guilty in U.S. District Court, introduced potential buyers to codefendant\n Northern District of Illinois, Rockford, IL, Bart Arconti, a former loan officer with\n to one count of false statements to HUD. Capital Mortgage Bankers, who prepared\n Nicks, Nelson, and Barnes were previously false documents for nonqualified borrowers\n indicted in June 2005. Nicks, who owned who obtained FHA-insured mortgages.\n and operated Planet Wireless, a cellular HUD realized losses greater than $750,000\n telephone store in Freeport, IL, prepared when 18 FHA-insured loans defaulted.\n false verification of credit letters for potential\n FHA borrowers. Nelson, who owned and Sharon Blake pled guilty in U.S. District\n operated AMD Sales and Services, a Court, Middle District of Pennsylvania,\n\n\n22 HUD\xe2\x80\x99s Single-Family Housing Programs\n\x0c Harrisburg, PA, to processing and insured properties and realized losses\n originating FHA-insured loans containing approximating $3,224,417.\n fraudulent information. Blake, a former loan\n processor with Sunset Mortgage Company, Wilfred Changasie pled guilty in U.S.\n was previously convicted for her District Court, District of Massachusetts,\n participation in an FHA mortgage-flipping Springfield, MA, to three counts of wire\n scheme. From 1998 to 2001, Blake and an fraud and conspiracy to launder money. On\n unnamed coconspirator originated 85 FHA- January 13, 2006, Paul Starnes, David\n insured home loans containing fraudulent McCoy, and Marc Brown, real estate brokers,\n information. Forty of the loans, valued at pled guilty to two counts of wire fraud and\n more than $1.2 million, contained fictitious one count of conspiracy to commit money\n information, resulting in HUD losses of laundering and are subject to forfeitures up\n $740,559. Blake also conspired with to $15 million. Changasie, Starnes, McCoy,\n property speculators Earl Ginter, Jr., David and Brown are 4 of 13 defendants indicted\n Walsh, and Ronald Fruth to provide on September 9, 2005, for wire fraud and\n borrowers with downpayment funds and conspiracy to launder money in a property-\n fabricated gift fund letters. Ginter, Walsh, flipping scheme; the remaining nine\n and Fruth were previously convicted. defendants await trial. The defendants\n acquired more than 70 single-family\n Palmida Casanova, also known as properties in the Springfield area, including\n Palmira Sosa, Ruth Lizarraga, and Palmira several through HUD\xe2\x80\x99s Real Estate Owned\n Martinez, were indicted in U.S. District (REO) program, inflated the values as much\n Court, Central District of Utah, Salt Lake as 200 percent, and falsified documents to\n City, UT, on five counts of FHA violations, facilitate property flips. Approximately $5.9\n four counts of misuse of a SSN, two counts million in FHA-insured mortgages is at risk.\n of possession of false identification, and five\n counts of aiding and abetting. Cassanova Jeff Smith, a realtor with Green Castle\n and coconspirators allegedly recruited and Realty, was sentenced in U.S. District Court,\n assisted unqualified illegal alien District of New Jersey, Newark, NJ, to 5\n homebuyers in obtaining FHA-insured months home imprisonment, 3 years\n mortgages without valid SSNs, legal probation, and ordered to pay HUD $115,593\n status, or accurate employment history. To in restitution. On January 18, 2006,\n date, HUD has foreclosed 87 FHA- Christopher Santarsiero was sentenced to 6\n months home imprisonment and 5 years\n\n\n\n\nCopyright, 2006. The Republican - Springfield, MA. Reprinted with permission.\n\n\n\n\n HUD\xe2\x80\x99s Single-Family Housing Programs 23\n\x0c probation and also ordered to pay HUD FHA-insured mortgages. HUD realized\n $115,593 in restitution. Both Smith and losses approximating $1,123,030.\n Santarsiero previously pled guilty to one\n count of conspiracy to commit false Ifiok Equere, loan broker and real estate\n statements. Smith and Santarsiero investor operating as Omega and Paradigm\n conspired with loan officer David Mortgage, pled guilty in U.S. District Court,\n Cobianchi, U.S. Mortgage, to create and Eastern District of Missouri, St. Louis, MO,\n submit fraudulent documents allowing to false statements to HUD and felony\n unqualified borrowers to obtain FHA- possession of a firearm. Equere, previously\n insured mortgages. As a result of their indicted on October 13, 2005, admitted using\n scheme, about 20 FHA-insured mortgages false documents to flip properties and broker\n defaulted, resulting in HUD losses FHA-insured mortgages, causing HUD\n approximating $320,000. Cobianchi pled losses of $105,000. Equere, who has a prior\n guilty in May 2005 and awaits sentencing. felony conviction for conspiracy to import\n heroin, also admitted to illegally possessing\n Sean Teelucksingh, a former loan officer a firearm.\n with Maxwell Mortgage, who pled guilty on\n April 6, 2005, to one count of conspiracy to Bryon Fitchpatrick, Shatanya Douglas,\n commit wire fraud and false statements to also known as Shatanya Fitchpatrick,\n HUD, was sentenced in U.S. District Court, Kathleen Fitchpatrick, Manjur Alam, Phillip\n Middle District of Florida, Tampa, FL, to 18 Fish, Deverell Jones, and Demond Reed were\n months incarceration and 3 years charged in a 13-count superseding\n supervised release and was ordered to pay indictment in U.S. District Court, District of\n $199,900 in restitution ($65,505 jointly and Kansas, Wichita, KS, alleging conspiracy to\n severally), in addition to a $100,000 defraud HUD, wire fraud, and aiding and\n monetary judgment. Teelucksingh was abetting. Bryon Fitchpatrick and Shatanya\n further ordered to attend substance abuse, Fitchpatrick, husband and wife real estate\n anger management, interpersonal investors and owners of ABS Rentals and\n relationship, and respect for authority Investments, allegedly used straw-buyers\n counseling and prohibited from incurring Kathleen Fitchpatrick, Jones, and Reed to\n new credit charges, opening additional lines purchase HUD-owned properties as\n of credit, acquiring/obligating himself for owners/occupants. Alam, a realtor with\n major purchases without probation officer ReMax Preferred Properties, and Fish, a\n approval, or engaging in any employment realtor with Prudential Dunning, allegedly\n that provides him access to personal and/or knew HUD-owned properties were\n financial information of others. purchased for investment purposes but\n Teelucksingh used false identities, false processed the property sales as owner/\n income information, and straw-buyers to occupant, thus preventing true owner/\n obtain conventional and FHA-insured loans occupants and nonprofit entities any\n for his personal benefit. opportunity to acquire the properties. In\n addition, Alam allegedly knew Byron\n Brothers Paul and William Peterson, Fitchpatrick stored illegal drugs in and used\n doing business as Peterson Land and drug proceeds to purchase HUD-owned\n Development, were each found guilty of one properties. Byron Fitchpatrick is also\n count of conspiracy and one count of false charged with unlawful possessing of a\n statements in U.S. District Court, Central firearm in furtherance of drug trafficking\n District of California, Los Angeles, CA. The and unlawful possession of illegal drugs\n Petersons knowingly conspired and made with the intent to distribute.\n false, fictitious, and fraudulent statements\n to HUD when purchasing properties with Kenneth Jenkins and coconspirators\n Sabena Ingalls, Walter Jenkins, Ronald\n Rogers, Rita Jackson-Paulk, and Thomas\n24 HUD\xe2\x80\x99s Single-Family Housing Programs\n\x0cHarper were ordered in a U.S. District Court, originator, and instructed to pay HUD\nCamden, NJ, restitution hearing, to pay $76,123 in restitution. Coconspirator Axel\nHUD $134,774, National City Mortgage Bonilla, a former loan officer at Main Street\n$142,155, and $10,240 to five individual Mortgage and Ark Mortgage, pled guilty to\nborrowers who suffered financial hardship. two counts of mail fraud on February 10,\nThe court further ordered the restitution to 2006. Bonilla assisted unqualified borrowers\ncommence upon release from incarceration. in obtaining FHA-insured mortgages by\nKenneth Jenkins and the above providing false documents and paying\ncoconspirators were indicted, convicted, and Barlow $500 to $1,500 for each fraudulent\nsentenced on numerous counts involving FHA-insured loan she approved. Bonilla\nwire fraud, conspiracy, possession and/or further embezzled and converted more than\ndistribution of controlled substances, and $1.2 million in investor funds by creating\nmoney laundering. Kenneth Jenkins, a drug false documents, reporting fictitious\nwholesaler, organized and operated a $1 investment earnings, and using investor\nmillion scheme using crack cocaine profits funds to purchase residential properties. To\nto buy abandoned and dilapidated date, HUD has realized losses of $76,123\nresidential properties in Camden, perform when six FHA-insured mortgages\ncosmetic repairs, and flip the properties at defaulted.\ninflated values to unqualified buyers,\nsecuring fraudulent FHA-insured loans. Kings Mortgage Services, Inc., entered\n into a settlement agreement with the United\n Gordon Nelson, a real estate developer States Attorney\xe2\x80\x99s Office, Eastern District of\nwith Jae Horn-Gerber, and Linda Martz California, Fresno, CA, and HUD. Kings\nwere sentenced in U.S. District Court, Mortgage Services\xe2\x80\x99 former agent, Carol\nNorthern District of Illinois, Chicago, IL, for Mercer, was convicted on January 13, 2003,\ntheir previous guilty pleas to a real-estate of making a false statement to HUD for\ngift fund scheme. Nelson was sentenced to preparing or causing to be prepared false\n1 year home confinement and 3 years documentation for four FHA-insured\nprobation; Horn-Gerber was sentenced to 2 mortgages. Kings Mortgage Services, Inc.,\nyears probation and ordered to perform 120 agreed to pay HUD $147,936.\nhours of community service; Martz was\nsentenced to 1 year probation and ordered Patricia Mays pled guilty in U.S. District\nto perform 100 hours of community service. Court, Northern District of Illinois, Chicago,\nThe defendants were ordered to pay HUD IL, to multiple counts of mail fraud and wire\n$650,000 in restitution, jointly and severally fraud. Mays admitted she participated in a\nwith other co-defendants. Nelson, Horn- real estate fraud scheme and submitted false\nGerber, Martz, and other codefendants loan documents for unqualified borrowers\nprovided unqualified buyers downpayment obtaining FHA-insured mortgages on\nfunds to obtain FHA-insured mortgages. properties located in south Chicago. HUD\nHUD losses exceed $650,000 and involve realized more than $3 million in losses\nmore than 40 FHA-insured properties. involving more than 30 properties.\n\n Laura Barlow, a former underwriter Violet Duarte, an office assistant with\nwith Main Street Mortgage Service and Ark Platinum Capital Mortgage Company, was\nMortgage, pled guilty in U.S. District Court, sentenced in U.S. District Court, Central\nDistrict of New Jersey, Trenton, NJ, to a one- District of California, Los Angeles, CA, to 3\ncount Information charging her with false years probation and ordered to pay HUD\nstatements and conspiracy. On February 24, $1,013,966 in restitution following her May\n2006, Barlow was sentenced to 3 years 26, 2004, guilty plea on two counts of\nprobation, ordered to refrain from any wire fraud. Duarte purchased and\nemployment as an underwriter/loan used fraudulent documents to assist\n\nHUD\xe2\x80\x99s Single-Family Housing Programs 25\n\x0c nonqualifying borrowers in securing FHA- more than $25 million. HUD realized losses\n insured mortgages. As a result, HUD greater than $1.9 million when 58 FHA-\n realized losses of more than $1 million when insured loans defaulted.\n 13 FHA-insured properties foreclosed.\n Nancy Rios, a loan officer with Colorado\n Katrina Soukkaseum, a manager with Bank and Trust, pled guilty in Colorado State\n Freedom Financial Mortgage Company District Court, Jefferson County, Denver,\n (FFMC), was sentenced in U.S. District CO, to one count of theft of $15,000 or more.\n Court, Eastern District of Arkansas, Little Rios fraudulently originated 30 FHA-\n Rock, AR, to 3 years probation and ordered insured mortgages by assisting with the\n to pay five financial institutions $15,735 in creation of fraudulent documentation for\n restitution following her May 19, 2005, nonqualified borrowers. As a result, HUD\n guilty plea to one count of conspiracy. From realized losses of $194,617.\n January 2000 to March 2002, Soukkaseum\n and coconspirators employed with FFMC Donald W. Gupton, president of Donald\n and Absolute Abstract and Title (AAT) failed W. Gupton, Inc., doing business as Dynasty\n to disclose inflated fees, provided false and Homes of Henderson, Superior Housing\n misleading information, and falsified loan Center, Creative Real Estate, Manufacturing\n origination and title history documents Housing Sales Center, CRE Properties LLC,\n relating to at least 84 loans valued at more and M&G Properties, Inc. (The Companies),\n than $3.5 million. In addition, Soukkaseum and Richard Meador, a sales manager for\n and codefendants conspired to commit Real Gupton, pled guilty in U.S. District Court,\n Estate Settlement and Procedures Act Eastern District of North Carolina, Raleigh,\n (RESPA) violations by charging borrowers NC. Gupton pled guilty to one count of\n tremendous document preparation fees conspiracy and one count of money\n payable to Jefferson Doc Prep ( JDP); laundering; Meador pled guilty to one count\n accepting higher yield spread premiums of conspiracy to commit money laundering.\n from funding lenders; and failing to disclose Gupton further agreed to forfeit his or The\n the relationship among FFMC, AAT, and Companies\xe2\x80\x99 real property, a Harley\n JDP. Davidson motorcycle, a Lexus automobile,\n and more than $11 million in cash or other\n Mark Young, former owner and branch assets. The Companies were indicted on one\n manager of the now defunct Nevada First count of conspiracy and one count of money\n Residential Mortgage Company (NFRMC), laundering on March 8, 2006. In addition to\n was sentenced in U.S. District Court, District Gupton, Meador, and The Companies,\n of Nevada, Las Vegas, NV, to 78 months Donald Scott Carroll, a former salesperson\n incarceration and 3 years supervised release at Creative Real Estate and Manufacturing\n and ordered to pay HUD $457,740 in Housing Sales Center, was charged with\n restitution. On September 1, 2005, Young false statements, mail fraud, wire fraud, and\n was found guilty of 32 counts of submitting bank fraud in an information filed on\n false information to HUD and one count of December 22, 2005. Between 1999 and 2002,\n conspiracy. From May 2000 to June 2002, Gupton, Meador, and others, using The\n Young conspired with NFRMC employees Companies, bought and sold more than 150\n and employees of General Realty to manufactured and mobile homes, some\n manufacture and submit false employment including land, and assisted unqualified\n and income documentation for borrowers in obtaining FHA-insured\n nonqualifying borrowers, mostly illegal mortgages valued at more than $18 million\n immigrants from Mexico, and directed loan by using fictitious trade-ins, providing cash\n officers and processors to originate 233 and fabricated gift letters, and falsely\n fraudulent FHA-insured loans valued at inflating values and/or certifying land\n\n\n26 HUD\xe2\x80\x99s Single-Family Housing Programs\n\x0cownership. To date, HUD realized losses of FHA-insured loans using bogus documents.\n$5,818,681, and Gupton agreed to pay HUD As a result, HUD realized losses of $302,365\n$4,668,586 in restitution. when 11 FHA-insured loans defaulted.\n\n Steven Winter, a realtor with Kent\nAmlin Realty, pled guilty in U.S. District\n Identity Fraud/False Social\nCourt, Southern District of Ohio, Columbus, Security Numbers\nOH, following the filing of an information\ncharging him with four counts of filing false Steven Anthony Watt, also known as\nFederal income tax returns, and six counts Jayru Watt, was indicted and pled guilty in\nof false statements. Winter admitted to U.S. District Court, Northern District of\nfalsifying credit, employment, and rental Ohio, Cleveland, OH, to four counts of\nhistory documents to qualify 70 borrowers conspiracy and false oaths in bankruptcy.\nfor FHA-insured mortgages on properties Watt was sentenced to 4 months\nhe was personally selling and failing to incarceration and 2 years probation for\nreport the property sales proceeds to the IRS. acquiring and using a SSN under a fictitious\nHUD realized losses of $170,000 as a result name to obtain credit, secure an FHA-\nof foreclosure action on seven properties. insured mortgage, and file bankruptcy.\n\n Mario Mendoza, a real estate broker Jesus Bernal-Hernandez pled guilty in\nwith Weichart Realtors; Kenneth DiPrenda, U.S. District Court, District of Utah, Salt\na former loan officer with AMS Mortgage; Lake City, UT, to one count of false\nand Myriam Vaca, a check casher for statements and one count of false\nMendoza, pled guilty in U.S. District Court, bankruptcy documents. Bernal-Hernandez\nNew Jersey, Newark, NJ, to an information was indicted on April 27, 2005, and arrested\ncharging them with conspiracy to submit on August 15, 2005, for assuming another\xe2\x80\x99s\nfalse statements to HUD. In addition, Linda identity and using false identity documents\nSerrano, a closing attorney, pled guilty to to secure an FHA-insured mortgage and file\nmaking false statements to HUD. Mendoza, bankruptcy. HUD\xe2\x80\x99s loss is estimated at\nDiPrenda, Vaca, and Serrano recruited and $123,026.\nassisted unqualified borrowers with\nobtaining FHA-insured mortgages by\n Florentino Ipina was sentenced in U.S.\nsubmitting fraudulent gift letters and\n District Court, Northern District of Texas,\nemployment, identity, and other loan\n Dallas, TX, to 1 year and 1 day incarceration\ndocumentation. HUD realized losses in\n and 2 years supervised release and ordered\nexcess of $349,000 when 12 FHA-insured\n to pay HUD $17,877 in restitution. Ipina,\nproperties defaulted. Mendoza was arrested\n an undocumented alien, pled guilty in July\non December 2, 2005.\n 2005 to one count of misuse of an SSN. Ipina\n used a false SSN to obtain and later default\n Stefan Crosby pled guilty in U.S. on an FHA-insured loan, causing a $17,877\nDistrict Court, District of Nevada, Las loss to HUD. Ipina will be deported upon\nVegas, NV, to one count of false statements completion of his prison term.\nto HUD and one count of conspiracy.\nCrosby was indicted on September 13, 2005,\n Jorge Acevedo-Velzquez was indicted in\nfor conspiring with Lionel Crosby, his\n U.S. District Court, Middle District of\nbrother, and providing fraudulent\n Georgia, Macon, GA, for false statements\nemployment, income, identification, and\n and use of false identification. Acevedo-\nother documentation to unqualified straw-\n Velzquez allegedly provided false\nbuyers obtaining FHA-insured loans. In\n identification documents to obtain and later\naddition, both Stefan and Crosby applied for\n\n\nHUD\xe2\x80\x99s Single-Family Housing Programs 27\n\x0c default on an FHA-insured mortgage, sentenced to 10 months incarceration and\n causing a $47,053 loss to HUD. ordered to pay HUD $47,711 in restitution.\n Collins, one of several subject homebuyers\n Enrique O. Montanez, an undocumented who participated in a real estate scheme,\n alien homebuyer, was sentenced in 3 rd used a false SSN and false income\n District Court, County of Salt Lake, Salt information to obtain an FHA-insured\n Lake City, UT, to 3 years probation and mortgage. Sheila Lockett and Tracey\n ordered to pay HUD $50,817 restitution and Lockhart, also known as Tracey Richardson,\n report to Immigration and Customs were sentenced for using false SSNs and\n Enforcement (ICE) for deportation. income information to obtain FHA-insured\n Montanez pled guilty to one count of forgery mortgages. Lockett was sentenced to 2 years\n and one count of communications fraud on probation following her October 3, 2005,\n August 8, 2005, for using a false SSN to guilty plea to making false statements.\n obtain and later default on an FHA-insured Lockhart was sentenced to 15 months\n mortgage. incarceration and ordered to pay HUD\n $57,244 in restitution following her\n Maria Brito, Mario Morales Alvarez, and November 1, 2005, guilty plea to making\n Adriana Osorio Mendoza, undocumented false statements and aiding and abetting.\n alien homebuyers, were arrested pursuant\n their November 2005 indictment in 17th Sonia Ramirez and Albertico Galindo,\n Judicial District, Adams County, Brighton, previously indicted for false statements and\n CO, for offering a false instrument for possession of false paper, were each\n recording, criminal impersonation to gain a sentenced in U.S. District Court, District of\n benefit, and forged instrument possession. Colorado, Denver, CO, to 3 years probation.\n Brito, Alvarez, and Mendoza allegedly The court further ordered Ramirez to pay\n purchased properties and obtained FHA- HUD $10,192 in restitution. Ramirez and\n insured mortgages using fraudulent Galindo, two of several subject homebuyers\n immigration cards and SSNs. To date, HUD who participated in a real estate scheme,\n has not sustained a loss. used false SSNs and income information to\n obtain an FHA-insured mortgage. To date,\n Michael Hatton was indicted in U.S. HUD has realized losses of $2,310,030\n District Court, Eastern District of Virginia, involving approximately 90 homes with an\n Norfolk, VA, for false statements and using estimated FHA-insured loan value of $13.5\n a false SSN. Hatton allegedly used a false million.\n SSN and concealed prior bankruptcies when\n applying for an FHA-insured mortgage on Tonya Hill, a mortgage broker and real\n property in Portsmouth, VA. estate investor with Sunset Mortgage, was\n sentenced in U.S District Court, Eastern\n Odie Webster, a former realtor with District of Missouri, St. Louis, MO, to 6\n Metro Brokers, pled guilty in U.S. District months home confinement and ordered to\n Court, District of Colorado, Denver, CO, to pay $401,914 in restitution to HUD and other\n two counts of false statements and lenders. Hill pled guilty to bank fraud,\n possession of false papers. Webster was bankruptcy fraud, false statements to HUD,\n previously indicted on April 20, 2005, and and misuse of an SSN on November 1, 2005.\n arrested on April 27, 2005. Webster and Hill flipped properties using false\n coconspirators assisted unqualified documents to secure FHA-insured and\n homebuyers in obtaining FHA-insured conventional mortgages. Hill also\n mortgages using false SSNs and income purchased her personal residence using a\n information. Daryl Collins, indicted on false SSN to hide her assets from U.S.\n April 20, 2005, for Social Security fraud, was\n\n\n28 HUD\xe2\x80\x99s Single-Family Housing Programs\n\x0cBankruptcy Court. As a result, HUD Milton G. Goddard, doing business as\nrealized a $30,163 loss. West Coast Land Group (WCLG), was\n sentenced in U.S. District Court, Eastern\n In Kansas City, KS, and Kansas City, District of Michigan, Detroit, MI, to 18\nMO, 33 undocumented aliens were months incarceration and 2 years supervised\narrested on State of Kansas felony charges release and ordered to pay $31,000 in\nissued by the Johnson County, KS, District restitution to numerous victims. Goddard\nAttorney\xe2\x80\x99s Office involving identify theft previously pled guilty to one count of wire\nand false statements to FHA for their roles fraud for his role in a bankruptcy scheme.\nin a mortgage fraud scheme. Between Goddard and codefendants accepted\nFebruary 2002 and September 2004, an mortgage payments from distressed\nunidentified loan officer and two real estate homeowners attempting to avoid\nagents allegedly originated approximately foreclosure and deposited their funds into a\n$5 million in FHA-insured mortgage loans WCLG bank account but failed to pay\nfor illegal aliens using false SSNs. mortgage loans as promised. To date, 120\n FHA-insured mortgages were identified.\n Maria Carmen Garcia, a loan officer at\nSummit Mortgage, was sentenced in U.S. Donald Kingston, owner of DBK\nDistrict Court, District of Arizona, Phoenix, Properties, pled guilty in U.S. District Court,\nAZ, to 5 years probation and ordered to pay District of Utah, Salt Lake City, UT, to one\nHUD $105,201 in restitution, jointly and count of bankruptcy fraud. Kingston\nseverally with codefendant Leonel Estrella. perpetrated an equity-skimming scheme\nGarcia pled guilty to one count of false throughout the State of Utah by obtaining\nstatements to HUD on July 25, 2005. On quit-claim deeds from property owners in\nFebruary 27, 2006, Leonel Estrella, a real financial distress, failed to pay mortgage\nestate agent, was sentenced to 5 years payments while collecting rents, and filed\nprobation and ordered to pay HUD $105,201 bankruptcy to stall foreclosure proceedings.\nin restitution, jointly and severally with To date, HUD losses exceed $150,000\ncodefendant Maria Carmen Garcia, and involving six properties.\n$12,363 to Washington Mutual Bank FA.\nFrom May 2000 through August 2002, Barbara Kessinger, also known as Sheila\nGarcia used false documents and SSNs Murphy, pled guilty in U.S. District Court,\nprepared by her brother, Leonel Estrella, to Northern District of Illinois, Chicago, IL, to\nqualify mutual clients for FHA-insured and one count of bankruptcy fraud. Kessinger\nconventional home loans. HUD realized acquired one FHA-insured and two U.S.\nlosses of $140,310 when five FHA-insured Department of Veterans Affairs (VA) loan-\nloans defaulted. guaranteed properties using a bogus name\n and SSN, failed to make mortgage\n Edward Futch, also known as Edward payments, and filed multiple sham\nDaniels, pled guilty in U.S. District Court, bankruptcies to hinder foreclosure\nEastern District of Virginia, Norfolk, VA, to proceedings. As a result of her actions, HUD\nan information charging him with one count and VA realized losses of $74,000 and\nof making false statements to HUD. $36,000, respectively.\nFutch admitted he purchased property and\nsecured an FHA-insured mortgage using a Mark Neusch and Michael Davis, real\nfalse SSN, fraudulent identity, and other estate investors and managing members of\nfalse documents. M&M Properties LLC and Reliable\n Properties LLC, were each indicted in the\nBankruptcy Fraud U.S. District Court, District of Utah, Salt\n Lake City, UT, on one count of equity\n\n\nHUD\xe2\x80\x99s Single-Family Housing Programs 29\n\x0c skimming and three counts of bankruptcy single-family property disposition closing\n fraud. Neusch and Davis obtained quit- agent, allegedly diverted and retained\n claim deeds through misrepresentations to closing funds in lieu of wiring closing\n property owners, failed to make mortgage proceeds to HUD. As a result of his scheme,\n payments while collecting rents, and filed HUD losses are estimated at $2.8 million.\n bankruptcy to forestall foreclosure\n proceedings. HUD realized losses of Todd Stall and Daniel Curtin, former\n $470,000 when 17 FHA-insured properties partners in the law firm of Hankin, Hanig,\n foreclosed. Stall, Caplicki, Redl, and Curtin, each pled\n guilty in U.S. District Court, Southern\n Other Fraud/Crimes District of New York, Poughkeepsie, NY, to\n one count of violating RESPA. From January\n 2001 through December 2004, Stall and\n Kathleen Johnson, a HUD-approved Curtin provided no professional services but\n real estate broker at RE/MAX Realty, was accepted $106,300 from Crystal Clear\n sentenced in U.S. District Court, Rochester, Abstract Title when they sold title insurance\n NY, to 5 years probation and 6 months home and supplied settlement services.\n confinement and ordered to pay HUD\n $22,800 in restitution. In April 2005, Johnson In Rochester, NY, Rita Zambito, a real\n pled guilty to one count of mail fraud for estate agent/broker for Realty USA, and\n collecting earnest deposits from potential Kevin Parker, a private investor, entered into\n buyers, failing to deposit their funds in an PFCRA settlements agreeing to pay HUD\n earnest deposit account, and keeping $9,000 and $5,500, respectively. Parker\n approximately $26,000 for personal use. In purchased two HUD REO properties as an\n addition, Johnson prepared and mailed owner/occupant through Zambito and sold\n false prequalification letters from or rented the properties immediately after\n mortgage companies and banks to First the properties closed.\n Preston Management Company, certifying\n prospective buyers for financing. Edward Carrillo, owner of Sahara\n Investments, pled guilty in Superior Court,\n Donald Lee Liverman, a developer Maricopa County, Phoenix, AZ, to two\n doing business as 1st Homes, pled guilty in counts of fraudulent schemes. Carrillo was\n U.S. District Court, Eastern District of previously indicted on nine counts of\n Virginia, Richmond, VA, to one count of fraudulent schemes, six counts of theft, and\n Federal tax evasion. Liverman, previously one count of unlicensed real estate activity.\n indicted on numerous charges including Carrillo accepted $989,800 in investor funds\n FHA fraud, purchased distressed to teach HUD\xe2\x80\x99s preforeclosure business\n properties; flipped the properties to first- procedures and purchase investment\n time homebuyers; failed to disclose properties. Carrillo failed to acquire\n significant structural problems, termites, investment properties as promised or return\n and/or water damage; and hid the property investor funds.\n defects by generating fake repair completion\n letters from contractors. HUD losses are yet In Newark, NJ, Denise Jones, a\n to be determined. Northern New Jersey State Prison payroll\n clerk, entered into a false claims civil\n Norvel Brown, president of Mississippi settlement agreement, consenting to pay the\n Valley Title, was indicted in U.S. District U.S. Government $61,200. Jones purchased\n Court, Eastern District of Missouri, two HUD Officer Next Door (OND)\n Herculaneum, MO, on two counts of wire properties within 6 months and falsely\n fraud. From 2000 to 2005, Brown, a HUD\n\n\n30 HUD\xe2\x80\x99s Single-Family Housing Programs\n\x0ccertified each OND property as her sole Murray Beitman was sentenced in\nresidence. Cumberland County Common Plea Court,\n Carlisle, PA, to 2 years incarceration and\n Carl A. Clayton was sentenced in U.S. ordered to pay $30,685 in restitution to the\nDistrict Court, Baltimore, MD, to 2 years victim for his role in a counterfeit\nsupervised probation and ordered to pay Government National Mortgage Association\nrestitution of $18,000 following his (GNMA) mortgage-backed certificate\nSeptember 2005 guilty plea to making false scheme. Beitman swindled the savings of\noccupancy statements to HUD. In May an elderly woman when he sold her a\n2000, Clayton purchased property from counterfeit GNMA certificate, claiming it to\nHUD through HUD\xe2\x80\x99s OND program, failed be worth $1.2 million on maturity in 30\nto occupy the property for the required 3- years.\nyear period, and rented the property to a\ntenant approximately 30 days after closing. Jamal Zafar, a real estate investor, pled\nAfter purchasing and renting the OND guilty in Nassau County Criminal Court,\nproperty, Clayton entered into a law Mineola, NY, to one count of attempted\nenforcement officer\xe2\x80\x99s lease with the Housing criminal possession of a forged instrument.\nAuthority of Baltimore City and resided in Zafar swindled two victims into investing\na HUD-assisted building paying $150 in $165,000 for the purchase of property with\nmonthly rent. Clayton later relocated to Section 8 subsidies, promising the victims\nNew York, NY, where he resided for the Section 8 rent monies and proceeds from the\nremainder of the OND-required 3-year future property sale. With the victims\xe2\x80\x99\noccupancy period. money, Zafar purchased the property,\n collected Section 8 rents, sold the property\n John Henry Davis, correctional officer, to another buyer, and realized $100,000 in\nIronwood State Prison, Blythe, CA, was sale proceeds. Zafar, released on his own\nindicted in U.S District Court, Los Angeles, recognizance on the condition he returns\nCA, on one count of false statements. Davis $55,000 to the victims and $5,000 to the court,\nallegedly purchased a house through HUD\xe2\x80\x99s faces an 18-month to 3-year jail sentence if\nOND/Teacher Next Door (TND) program, he fails to comply.\nrented the property for 34 months, and\nfalsely certified he resided at the property James Anthony Street, a police officer\nand the property was his sole residence. As with United States Postal Inspection Service\na result, HUD losses approximate $60,000. (USPIS), was indicted in U.S. District Court,\n Los Angeles, CA, on two counts of making\n Realtor Rohan A. Johnson, also known false statements to HUD. Street, a\nas Ato Ra Ajah El, and real estate consultant participant in HUD\xe2\x80\x99S OND program,\nDonovan Gilpin, doing business as Pre allegedly owned property in Bloomington,\nAmble Properties, were indicted in U.S. CA, at the same time he submitted written\nDistrict Court, Central Islip, NY, on one certifications claiming his OND property in\ncount of conspiring to defraud HUD and VA Long Beach, CA, was his sole property and\nin a multimillion dollar HUD- and VA- residence. Street, who purchased the OND\nowned property fraud scheme. Johnson and property for $48,500, recently sold the\nGilpin allegedly filed fraudulent deeds on property for $335,000.\none VA- and 14 HUD-owned properties,\npreventing banks from deeding foreclosed Steven Marquez, a loan officer at\nproperties to HUD or HUD and VA from Primera Mortgage Company, was indicted\nselling the properties to legitimate buyers. on two counts of theft in Cook County\nJohnson and Gilpin were arrested on Circuit Court, Chicago, IL. Marquez\nDecember 9, 2005. allegedly deceived property owners and\n\n\nHUD\xe2\x80\x99s Single-Family Housing Programs 31\n\x0c acquired rights to their property, sold the Brooklyn, NY, on one count of wire fraud\n property, and collected the sale proceeds. and one count of conspiracy to defraud HUD\n The property owners, believing they were and Countrywide Home Loans. Jones\n refinancing their $250,000 FHA-insured allegedly submitted false documents to\n mortgage, mistakenly signed \xe2\x80\x9cpower of HUD and Countrywide Home Loans when\n attorney\xe2\x80\x9d papers assigning their he flipped his FHA-insured property to his\n homeownership rights to Marquez. The cousin, Rohan Vickers, who obtained an\n FHA-insured mortgage is in foreclosure. FHA-insured mortgage on the property\n from First Funding Mortgage Bankers. Jones\n In Newark, NJ, Toni Cruz, a New Jersey received proceeds in excess of $51,000, as\n transit police officer, entered into a false well as a short payoff on his original FHA-\n claims civil settlement agreement for insured mortgage serviced by Countrywide\n $62,000 with DOJ. Cruz, who owned a Home Loans. Countrywide Home Loans,\n principal residence, purchased a property unaware the property for which it approved\n through HUD\xe2\x80\x99s OND program and falsely a short payoff was later flipped to straw-\n certified the OND property was her sole buyer Vickers for $75,000 more than the\n residence. approved purchase price, submitted an\n insurance claim to HUD in excess of $85,000.\n Dwayne Jones was indicted in U.S. Jones was arrested on March 16, 2006, and\n District Court, Eastern District of New York, Vickers was arrested on March 21, 2006.\n\n\n\n\n32 HUD\xe2\x80\x99s Single-Family Housing Programs\n\x0c Chapter 3\nHUD\xe2\x80\x99s Public and Indian\n Housing Programs\n\x0c The U.S. Department of Housing and including PHA activities with related\n Urban Development (HUD) provides grants nonprofit entities, and PHA pension plan\n and subsidies to more than 4,100 forfeiture policy. In addition, OIG\n public housing authorities (PHA) conducted a corrective action verification\n nationwide. More than 3,100 PHAs review.\n manage public housing units, and almost\n 1,000 with no public housing, manage units\n under Section 8 programs. Many PHAs\n Section 8 Housing Choice\n administer both public housing and Section Voucher Program Activities\n 8 programs. HUD also provides assistance\n directly to PHAs\xe2\x80\x99 resident organizations to HUD OIG audited the Miami Dade\n encourage increased resident management Housing Agency\xe2\x80\x99s, Miami, FL, Section 8\n of public housing developments and to Housing Choice Voucher program as part\n promote the formation and development of of OIG\xe2\x80\x99s strategic plan. The objective was\n resident management entities and resident to determine whether Section 8-assisted\n skills programs. Programs administered by units met housing quality standards in\n PHAs are designed to enable low-income accordance with HUD requirements.\n families, the elderly, and persons with\n disabilities to obtain and reside in housing Of the 120 Section 8 units inspected, 117\n that is safe, decent, sanitary, and in good did not meet minimum housing quality\n repair. standards. Thirty-eight units had significant\n housing quality violations. Projecting the\n Audits results of the statistical sample to the\n population indicates at least 12,387 of the\n During this reporting period, the Office Agency\xe2\x80\x99s 13,200 units did not meet\n of Inspector General (OIG) issued 31 reports: minimum housing quality standards.\n one internal audit and 30 external audits in Further, 3,265 units had significant housing\n the Public and Indian Housing (PIH) quality standards violations. As a result,\n program area. These reports disclosed more tenants lived in units that were not decent,\n than $23 million in questioned costs and safe, and sanitary, and HUD made housing\n about $100 million in recommendations that assistance payments for units that did not\n funds be put to better use. During this meet standards.\n reporting period, OIG reviewed the Section\n 8 Housing Choice Voucher program OIG recommended that HUD require\n activities, and public housing activities, the Agency to inspect all of the 117 Section 8\n housing choice voucher-assisted units to\n Chart 3.1: Public and Indian Housing Dollars verify that corrective actions were taken by\n the landlord, and if not, to abate the rents or\n 100,000,000 terminate the tenants\xe2\x80\x99 vouchers. The Agency\n 90,000,000 should also develop and implement an\n 80,000,000 internal control plan to ensure units meet\n 70,000,000 housing quality standards and inspections\n 60,000,000\n meet HUD requirements to prevent an\n 50,000,000\n 40,000,000\n estimated $25.9 million from being spent on\n 30,000,000 units with significant violations. Further,\n 20,000,000 HUD should reduce or offset $7,300 of the\n 10,000,000 Agency\xe2\x80\x99s administrative fees for the 38 units\n 0 with significant housing quality standards\n Questioned Costs Funds Put to Better Use\n violations. (Audit Report: 2006-AT-1001)\n\n\n\n34 HUD\xe2\x80\x99s Public and Indian Housing Programs\n\x0c HUD OIG audited the Housing payments it paid and administrative fees it\nAuthority of the City of Prichard\xe2\x80\x99s, Prichard, earned for ineligible units. Also, since the\nAL, Housing Choice Voucher program as Authority had inadequate internal controls\npart of its strategic plan. The objectives of over processing tenant files, HUD should\nthe audit were to determine whether the reduce the Authority\xe2\x80\x99s administrative fees\nAuthority only paid housing assistance by 10 percent for fiscal years (FY) 2003 and\npayments for units that were decent, safe, 2004, approximately $233,000. Finally, HUD\nand sanitary; properly determined tenant should require the Authority to repay\neligibility and subsidy amounts; and made ineligible costs of more than $22,000 for the\nhousing assistance payments only to eligible conflict-of-interest violation. (Audit Report:\nlandlords. 2006-AT-1004)\n\n The Authority failed to ensure that its HUD OIG audited the Housing\nunits receiving housing assistance Authority of the City of Winston-Salem\xe2\x80\x99s,\npayments met housing quality standards. Salem, NC, Housing Choice Voucher\nOf the 65 units reviewed, 97 percent, or 63, program as part of the OIG strategic plan.\ndid not meet housing quality standards. Of The objective was to determine whether\nthe 63 units, 45 were in material units met housing quality standards.\nnoncompliance with housing quality\nstandards. In addition, the Authority paid Of the 67 units OIG inspected, 51 did\nmore than $63,000 for ineligible units, not meet minimum housing quality\nincluding more than $8,000 for failed units standards. Of the 51 units, 26 were in\nrequiring housing assistance payment material noncompliance with housing\nabatements and approximately $55,000 for quality standards. As a result, HUD made\nunits that lacked annual inspections. It also housing assistance payments for units that\nearned more than $6,000 in administrative did not meet standards. OIG estimates that\nfees for ineligible units. OIG estimates that over the next year, HUD will pay housing\nHUD paid more than $14 million in housing assistance payments of more than $6.4\nassistance payments on units that may not million for units in material noncompliance\nhave met housing quality standards. In with housing quality standards.\naddition, the Authority\xe2\x80\x99s internal controls\nover processing tenant files were not OIG recommended that HUD require\ncomplete. Finally, the Authority violated the Authority to inspect the 51 units that did\nFederal and local conflict-of-interest not meet minimum housing quality\nprovisions by allowing an Authority standards to verify that the landlords took\nemployee and board member to rent to a appropriate corrective actions. If\nhousing choice voucher holder, resulting in appropriate actions were not taken, HUD\nmore than $22,000 paid to this ineligible should abate the rents or terminate the\nlandlord. tenants\xe2\x80\x99 vouchers. OIG also recommended\n that HUD require the Authority to\n OIG recommended that HUD terminate implement an internal control plan to ensure\nthe Authority\xe2\x80\x99s Section 8 Housing Choice its Section 8 units meet housing quality\nVoucher program and transfer it to another standards and inspections meet HUD\nAlabama housing authority, require the requirements to prevent an estimated $6.4\nAuthority to immediately abate the Section 8 million from being spent on units that are\nhousing assistance payments or terminate in material noncompliance with standards.\ntenant vouchers on the 63 units that do not (Audit Report: 2006-AT-1005)\nmeet housing quality standards if\ndeficiencies are not corrected, and repay\nmore than $69,000 for housing assistance\n\n\nHUD\xe2\x80\x99s Public and Indian Housing Programs 35\n\x0c HUD OIG audited the Municipality of incorrectly received more than $841,000 in\n San Juan Housing Authority\xe2\x80\x99s, San Juan, PR, funding; 2) improperly charged more than\n Section 8 Housing Choice Voucher program $714,000 in administrative costs to the\n to determine whether units met housing program; 3) approved unreasonable rents,\n quality standards in accordance with HUD resulting in ineligible and prospective\n requirements. ineligible costs totaling more than $595,000;\n 4) paid housing assistance payments for\n Of the 67 units OIG inspected, 63 did substandard housing; and 5) did not account\n not meet minimum housing quality for and failed to collect its portable voucher\n standards. Of the 63 units, 25 were in receivables. As a result, OIG identified\n material noncompliance with housing questioned costs and opportunities for funds\n quality standards. As a result, tenants lived to be put to better use totaling more than\n in units that were not decent, safe, and $2.6 million.\n sanitary, and HUD made housing assistance\n payments for units that did not meet OIG recommended that HUD require\n standards. OIG estimates HUD will pay the Authority to 1) implement procedures\n housing assistance payments more than $5.8 to properly track and report housing\n million for units in material noncompliance assistance payments and administrative fees\n with housing quality standards over the and repay HUD more than $841,000; 2)\n next year. repay the program more than $714,000 and\n properly allocate administrative costs; 3)\n OIG recommended that HUD require repay the program more than $159,000 for\n the Authority to inspect all units that did unreasonable rents and inspection costs; 4)\n not meet minimum housing quality develop and implement an effective quality\n standards to verify that the landlords took control process to ensure reliable\n appropriate corrective actions to make the inspections, correction of substandard\n units decent, safe, and sanitary. If housing, and abatement of payments for\n appropriate actions were not taken, the housing that does not meet HUD standards;\n Authority should abate the rents or and 5) establish procedures to reconcile all\n terminate the tenants\xe2\x80\x99 vouchers. HUD portability receivables, reimburse\n should also require the Authority to authorities for any overpayments, and\n implement an internal control plan and follow up on past-due accounts. (Audit\n incorporate it into the Authority\xe2\x80\x99s Section 8 Report: 2006-BO-1005)\n administrative plan to ensure units meet\n housing quality standards and inspections HUD OIG audited the Mount Vernon\n meet HUD requirements. (Audit Report: Urban Renewal Agency\xe2\x80\x99s, Mt. Vernon, NY,\n 2006-AT-1006) administration of its Section 8 Housing\n Choice Voucher program. The objectives\n As part of its FY 2005 annual audit plan, were to determine whether the Agency (1)\n HUD OIG reviewed the Section 8 Housing correctly billed HUD for housing choice\n Choice Voucher program of the Hartford vouchers used; (2) complied with HUD\n Housing Authority in Hartford, CT. The program requirements for tenant admission,\n objective was to determine whether the rental subsidy calculations, and housing\n Authority properly administered the quality standards; and (3) implemented\n program in accordance with its annual financial management controls to ensure\n contributions contracts and HUD that Housing Choice Voucher program\n requirements. funds were adequately safeguarded.\n\n The Authority 1) inaccurately reported The Agency over-requisitioned housing\n leasing and cost data to HUD and assistance payments and administrative fees\n\n\n36 HUD\xe2\x80\x99s Public and Indian Housing Programs\n\x0cfrom HUD, resulting in more than $1.7 better use approximately $521,000 in Section\nmillion in overpayments. The Agency also 8 funding, and (4) institute controls to ensure\ndid not properly use or maintain its waiting that the board of commissioners approves\nlist, conduct recertifications in a timely any program changes before they are\nmanner, or document that all units met implemented. (Audit Report: 2006-FW-\nhousing quality standards. Further, the 1001)\nAgency made duplicate and ineligible\nhousing assistance payments, inadequately HUD OIG reviewed the Columbia\nsupported expenditures, and used Housing Housing Authority\xe2\x80\x99s, Columbia, MO,\nChoice Voucher program funds for other Housing Choice Voucher program to\nprograms. identify savings the Authority will realize\n by ensuring tenants are in appropriate-size\n OIG recommended that HUD recoup units.\nthrough offset against future payments the\noverpaid housing assistance payments and The Authority unnecessarily paid more\nadministrative fees received, instruct the than $216,000 in program funds for 99\nauditee to implement controls and tenants with units larger than necessary. By\nprocedures to properly maintain its waiting enhancing its procedures to ensure that\nlist, and ensure the auditee develops and program tenants receive the proper voucher\nimplements financial controls to adequately size and subsidy payments, the Authority\nsupport expenditures and use Housing could avoid future losses of approximately\nChoice Voucher program funds only for that $300,000 and be able to provide vouchers to\nprogram. (Audit Report: 2006-NY-1004) additional tenants.\n\n HUD OIG audited the Section 8 OIG recommended that HUD require\nHousing Choice Voucher program of the Ft. the Authority to correct vouchers for units\nWorth Housing Authority in Ft. Worth, TX, larger than allowed by the Authority\xe2\x80\x99s\nto determine whether the Authority administrative plan, repay more than\nproperly applied the subsidy size standards $216,000 for excess housing assistance\nin its administrative plan. payments, and develop and implement\n procedures to ensure that tenants receive\n The Authority had sound policies correct-size vouchers. (Audit Report: 2006-\nregarding assignments of tenant subsidy KC-1001)\nsize; however, it did not follow its policy\nwhen it neglected to change voucher sizes HUD OIG audited the Housing Choice\nfor as many as 382 tenants. This resulted in Voucher program of Northeast Washington\nmore than $180,000 in ineligible and Housing Solutions in Spokane, WA, to\nunsupported payments and potential determine whether it complied with HUD\noverpayments of approximately $521,000 requirements.\nover the next 3.7 years. Further, the\nAuthority enacted policy changes without The Authority made housing assistance\napproval from its board of commissioners. payments of almost $450,000 through the\n use of vouchers for 154 families whose\n OIG recommended that HUD require eligibility was unknown. HUD paid the\nthe Authority to (1) repay ineligible housing Authority more than $58,000 to administer\nassistance overpayments of more than these vouchers. In addition, the Authority\n$5,000, (2) repay or support questioned costs did not correctly report its fiscal year 2005\nof more than $175,000, (3) develop and Section 8 Management Assessment Program\nimplement procedures to ensure it assigns score and did not have an adequate plan\nthe correct subsidy size for all tenants to for allocating indirect salary costs.\n\n\nHUD\xe2\x80\x99s Public and Indian Housing Programs 37\n\x0c OIG recommended that HUD require OIG recommended that HUD require\n the Authority to determine the eligibility of the Authority to immediately correct\n the 154 families and return any ineligible tenants\xe2\x80\x99 vouchers, repay the unnecessary\n housing assistance payments, recoup the costs incurred, and develop and implement\n appropriate amount of administrative fees, procedures that improve controls over\n perform an on-site verification of the assigning voucher sizes. (Audit Report:\n Authority\xe2\x80\x99s 2006 Section 8 Management 2006-KC-1006)\n Assistance Program score, and require the\n Authority to submit a plan for allocating HUD OIG reviewed the Section 8\n indirect salaries. (Audit Report: 2006-SE- Housing Choice Voucher program of the St.\n 1002) Joseph Housing Authority in St. Joseph,\n MO, to determine whether the Authority\n At the request of the executive director paid excess subsidies for units that are larger\n of the Housing Authority of the City than the needs of the tenant.\n of Los Angeles, Los Angeles, CA, HUD\n OIG conducted a review of the The Authority overhoused 16 tenants\n Authority\xe2\x80\x99s Section 8 rent reasonableness when it subsidized an additional bedroom\n determinations for the Housing Choice for medical purposes without proper\n Voucher program. justification, resulting in overpayments of\n more than $20,000 from 2002 through\n The Authority did not adequately January 2006. By correcting its weak\n document rent reasonableness controls, the Authority can avoid future\n determinations to ensure Section 8 rents overpayments totaling more than $54,000.\n were reasonable before entering into\n housing assistance payment contracts. OIG recommended that HUD (1) ensure\n that the Authority immediately correct\n OIG recommended that the Authority overhoused tenants\xe2\x80\x99 vouchers and repay\n support or reimburse HUD more than the overpayments and (2) verify that the\n $186,000 in unsupported Section 8 housing Authority implements procedures to ensure\n assistance payments and follow the that each tenant receives the proper voucher\n established policies and procedures for rent size to avoid additional overpayments.\n reasonableness determinations. (Audit (Audit Report: 2006-KC-1008)\n Report: 2006-LA-1002)\n HUD OIG audited Inglewood Housing\n HUD OIG reviewed the Section 8 Authority\xe2\x80\x99s, Inglewood, CA, administration\n Housing Choice Voucher program of the of its Section 8 Housing Choice Voucher\n Housing Authority of Kansas City, Kansas program to determine whether the\n City, MO, to determine whether the Authority administered its program\n Authority paid excess subsidies for tenant in compliance with pertinent HUD\n units that were larger than necessary. requirements and its annual contributions\n contract and operated its program in an\n The Authority unnecessarily paid effective and efficient manner.\n nearly $31,000 in program funds for 50\n tenants in units that were larger than The Authority did not comply with\n necessary or allowed by the Authority\xe2\x80\x99s program requirements relating to portability\n administrative plan. The Authority could procedures and responsibilities, tenant\n avoid future losses of more than $73,000 by certification, housing quality standards\n enhancing its controls, thereby allowing it requirements, housing assistance payment\n to provide vouchers to additional tenants. register maintenance, and salary allocation\n and procurement procedures. In addition,\n\n\n38 HUD\xe2\x80\x99s Public and Indian Housing Programs\n\x0cthe Authority\xe2\x80\x99s organizational structure and Angeles, CA, in response to a request from\nmanagement responsibilities were not its executive director regarding his concern\nclearly defined, and its financial reporting over the management of the Authority\xe2\x80\x99s\nfunction was ineffective and inefficient. waiting list. The objective was to determine\nFinally, the Authority did not request whether the Authority complied with\nadditional funds from HUD when needed applicable laws and regulations when\nto alleviate its cash deficit problems. placing registrants on the waiting list and\n selecting applicants in the proper order to\n OIG recommended that HUD require receive housing vouchers.\nthe City of Inglewood\xe2\x80\x99s mayor and board of\ncommissioners to replace the current The Authority did not adequately\nexecutive director and housing manager, administer and maintain its waiting list in\nestablish a separate housing authority accordance with program requirements and,\ncommission, and require the City of thus, may not have selected applicants in\nInglewood to designate sufficient finance the proper order.\ndepartment personnel dedicated to work\nsolely on Authority-related financial OIG recommended that HUD require\nreporting activities. (Audit Report: 2006- the Authority to engage a dedicated team to\nLA-1004) analyze, purge, and update its waiting list\n to ensure that it is accurate and complete;\n HUD OIG audited the Franklin evaluate and implement any needed\nRedevelopment and Housing Authority\xe2\x80\x99s, changes to its administrative plan; and\nFranklin, VA, Section 8 Housing Choice provide training to employees on the revised\nVoucher program to determine whether the waiting list procedures and policies. (Audit\nAuthority adequately administered its Report: 2006-LA-1008)\nSection 8 program according to HUD\nrequirements. HUD OIG audited the Section 8\n Housing Choice Voucher program of the\n The Authority often made incorrect Housing Authority of the City of Annapolis,\nhousing assistance payments and did not Annapolis, MD, as part of its FY 2006 annual\nperform required quality control reviews of audit plan. The objective was to determine\nits Section 8 tenant files. Additionally, it did whether the Authority adequately\nnot verify rent reasonableness and allowed administered the program according to\nan apparent conflict-of-interest situation to HUD requirements.\nexist.\n The Authority generally administered\n OIG recommended that HUD require the program according to HUD\nthe Authority to repay more than $9,000 in requirements but did not adequately\nhousing assistance overpayments and administer its waiting list. It did not follow\nreimburse tenants more than $1,500 in controls in its Section 8 administrative plan\nhousing assistance underpayments. OIG requiring it to update and purge its waiting\nalso recommended that the Authority list annually or maintain its Section 8\nstrengthen its internal controls to ensure it applications in a permanent file in the order\nadequately administers its Section 8 in which the applicants applied for\nprogram and prevent future apparent assistance. These controls were needed to\nconflict-of-interest situations. (Audit ensure that families received assistance as\nReport: 2006-PH-1003) quickly and efficiently as possible and to\n provide assurance that the Authority\n HUD OIG audited the Housing provided fair and consistent treatment of\nAuthority of the City of Los Angeles, Los families.\n\n\nHUD\xe2\x80\x99s Public and Indian Housing Programs 39\n\x0c OIG recommended that HUD require approximately $134,800 in transfers and\n the Authority to provide adequate encumbrances. Further, the Authority could\n management oversight to ensure its Section not demonstrate that it equitably distributed\n 8 waiting list is updated and purged salary costs between its HUD and non-HUD\n annually and its Section 8 applications are activities because it did not support salary\n maintained in a permanent file in order of payments with required activity reports or\n date and time of the application. (Audit equivalent documentation. As a result, the\n Report: 2006-PH-1009) Authority cannot support $1.1 million in\n salary costs allocated to its HUD programs.\n Public Housing Authority OIG recommended that HUD require\n Management of Assets the Authority to repay its HUD programs\n at least $792,300; provide support for or\n HUD OIG audited Baytown Housing repay $1.2 million in unsupported transfers,\n Authority in Baytown, TX, due to concerns encumbrances, and salary costs; and\n expressed by the Houston Office of Public implement procedures and controls to\n Housing. The objectives were to determine correct the weaknesses identified. Proper\n whether the Authority used resources procedures and controls should help ensure\n subject to the annual contributions contract that the Authority will properly use and\n only for expenses of that program. support the $5.9 million in HUD funding it\n will receive next year. (Audit Report: 2006-\n The Authority inappropriately used FW-1002)\n public housing funds to support its\n nonprofit and related entities. For some of HUD OIG reviewed the Housing\n the transfers, the Authority\xe2\x80\x99s executive Choice Voucher and Public Housing\n director altered transfer documentation. As Operating Fund programs at the Worcester\n of March 31, 2005, the Authority owed the Housing Authority in Worcester, MA, as\n low-rent and Section 8 programs more than part of its FY 2005 annual audit plan. The\n $792,300, and it could not support objectives were to determine whether the\n\n\n\n\n Copyright, 2006. Baytown Sun - Baytown, TX. Reprinted with permission.\n\n\n\n40 HUD\xe2\x80\x99s Public and Indian Housing Programs\n\x0cAuthority improperly used Federal funds improperly used more than $462,000 in\nfor expenses of its State program and Section 8 funds.\nproperly allocated salary and other expenses\nto its Housing Choice Voucher and Public OIG recommended that the Authority\nHousing Operating Fund programs. repay its Section 8 programs the more than\n $462,000, which it improperly used to\n The Authority did not use its Federal support its other programs. The Authority\nfunds in compliance with its annual took action to repay that amount during the\ncontributions contracts. It used its public audit. OIG further recommended that HUD\nhousing operating funds to pay require the Authority to create and\nexpenditures for State-subsidized housing implement internal controls to track its\nprograms and other Federal programs. As Section 8 administrative and housing\na result, the Authority did not have more assistance funds during the year, reconcile\nthan $1.9 million available for its Public and settle its Section 8 due-to/due-from\nHousing Operating Fund program. account monthly, and stop improperly using\nAdditionally, the Authority could not Section 8 funds to support its other\nsupport the salary and benefits expenses programs, thereby ensuring $462,000 will be\ncharged to its Housing Choice Voucher and used for the appropriate program over the\nPublic Housing Operating Fund programs. next year. (Audit Report: 2006-PH-1001)\n\n OIG recommended that HUD require HUD OIG audited the Housing\nthe Authority to monthly reimburse its Authority of the County of Butler, Butler,\nrevolving fund the amounts owed by its PA, as part of its FY 2005 audit plan. The\nprograms and cease the practice of using audit objective was to determine whether\npublic housing operating funds to pay for the Authority properly used HUD funds to\nnonprogram costs. In addition, the develop and support its affiliated nonfederal\nAuthority should conduct a time study to entities.\ndetermine the appropriate allocation of\nsalary and benefits for its Federal programs The Authority improperly used HUD\nand develop and implement a HUD- assets as collateral to obtain two lines of\napproved cost allocation plan for salaries credit totaling $1.1 million. As of August\nand employee benefits. The FY 2006 2005, it owed more than $888,000 on the lines\naccounting records should be adjusted of credit, placing significant HUD assets at\naccordingly. (Audit Report: 2006-BO-1002) risk. It also did not properly record these\n loans in its financial records. In addition,\n HUD OIG audited the Alexandria the Authority failed to properly allocate all\nRedevelopment and Housing Authority in applicable salary costs and improperly paid\nAlexandria, VA, to determine whether it salaries estimated at more than $205,000\nimproperly used Section 8 funds to support from Federal funds for work its employees\nits other programs. performed for its nonfederal entities.\n\n Contrary to its consolidated annual OIG recommended that HUD require\ncontributions contracts, the Authority did the Authority to modify its financial\nnot track its Section 8 administrative and instruments to release the funds as collateral\nhousing assistance funds during the year or and allow the more than $888,000 to remain\nmonitor and periodically settle the Section available for HUD-intended purposes. OIG\n8 programs\xe2\x80\x99 due-to/due-from account to and also recommended that HUD require the\nprevent it from using Section 8 funds to Authority to properly record its lines of\nsupport its other programs. As a result, it credit in its financial records. Finally, OIG\n\n\n\nHUD\xe2\x80\x99s Public and Indian Housing Programs 41\n\x0c Copyright, Pittsburgh Post-Gazette, 2006, all rights reserved. Reprinted with permission.\n\n\n recommended that HUD require the HUD OIG reviewed the Palacios\n Authority to recover approximately Housing Authority\xe2\x80\x99s, Palacios, TX, low-rent\n $205,000 from nonfederal entities for and Section 8 Housing Choice Voucher\n improperly allocated employee expenses programs to determine whether the\n and develop a reasonable method for Authority operated the programs in\n allocating future salaries and expenses. accordance with HUD requirements.\n (Audit Report: 2006-PH-1005)\n\n\n\n42 HUD\xe2\x80\x99s Public and Indian Housing Programs\n\x0c The Authority could not provide OIG recommended that HUD reduce\nsupport for funds transferred between its the Authority\xe2\x80\x99s housing assistance payments\nSection 8 and low-rent housing programs. by the amount of the net overpayments on\nThe Authority also made minor errors in its its next Section 8 year-end settlement\ntenant files and did not always ensure units statement. Additionally, OIG recommended\nwere decent, safe, and sanitary. OIG that HUD require the Authority to follow its\ndetermined the Authority\xe2\x80\x99s lack of Section 8 administrative plan and to prepare\ncompliance did not materially affect its periodic reports showing the results of file\nhousing programs and it can easily correct reviews and any actions taken. OIG further\nthe deficiencies identified. recommended that HUD require the\n Authority to perform the necessary reviews\n OIG recommended that HUD require to ensure recertifications and inspections are\nthe Authority to implement a budget-based done when required. (Audit Report: 2006-\napproach in its operations, including using PH-1002)\nan approved documented cost allocation\nplan, which will result in the Authority\nmaintaining support for an estimated\n Public Housing Authority Activity with\n$44,600 in future fund transfers. Further, Nonprofit Entities\nHUD should require the Authority to\nimplement a quality control plan to review HUD OIG audited the Housing\nall new tenant rent calculations, obtain Authority of the City of Prichard\xe2\x80\x99s, Prichard,\nadditional inspection training, and include AL, administration of its nonprofit activities\nan exterior conditions assessment when it and homeownership programs at the\nconducts unit inspections. (Audit Report: request of HUD. HUD expressed concerns\n2006-FW-1003) regarding the nonprofit\xe2\x80\x99s ventures into areas\n other than housing, such as the purchase of\n HUD OIG audited the operations of the a shopping center and the Authority\xe2\x80\x99s use\nSuffolk Redevelopment and Housing of the proceeds from the sale of its public\nAuthority in Suffolk, VA, as part of its FY housing units. The objectives were to\n2005 annual audit plan. The audit objective determine the validity of these two concerns.\nwas to determine whether the Authority\ncarried out its operations in accordance with Although the Authority only used low-\napplicable HUD requirements. income housing funds to pay for authorized\n nonprofit-entity activities, its programs to\n For the most part, the Authority carried make affordable homes available to low- and\nout its operations in accordance with moderate-income persons were inadequate.\napplicable HUD criteria. It properly As of June 1, 2005, the Authority had a\ninspected its Section 8 units, followed proper waiting list of more than 250 potential\ncontracting procedures, and properly homebuyers, while 139 homes were\nsupported its drawdown of HUD funds. available for sale. Although the Authority\nHowever, it did not always properly was not selling the homes in its inventory, it\ncalculate Section 8 tenant income and utility planned to seek approval to use\nallowances, resulting in net overpayments approximately $3.8 million in HUD grant\nof more than $5,000. Additionally, for one funds to build additional homes. In\nof its public housing developments, the addition, it did not include sales proceeds\nAuthority sometimes did not perform and estimated proceeds of more than $11.6\nrequired annual inspections or properly million from its homeownership programs\nrecertify the tenants. in its 5-year public housing authority plan.\n The funds have remained idle since 2002.\n Finally, the Authority inappropriately\n\n\nHUD\xe2\x80\x99s Public and Indian Housing Programs 43\n\x0c advanced more than $806,000 in public OIG recommended that HUD obtain a\n housing funds to pay for other programs\xe2\x80\x99 legal opinion as to the disposition of $3.7\n expenses. million in funds being retained by the\n Authority and its Housing Finance\n OIG recommended that HUD require Corporation, review the documentation\n the Authority to aggressively market its provided to determine whether city services\n Section 5(h) and Housing Opportunities for were provided in accordance with the\n People Everywhere (HOPE 1) homes as cooperation agreement and seek\n affordable housing to ensure that HUD reimbursement for any amounts not\n funds provided for the construction of these supported, and require the Authority to seek\n homes are used as intended and the homes HUD approval for general liability\n are not allowed to deteriorate. OIG also settlements and ensure that contract services\n recommended that HUD require the are provided as required. (Audit Report:\n Authority to demonstrate it has the 2006-NY-1003)\n capability to sell its remaining units before\n requesting more than $3.8 in HUD grant HUD OIG audited the Fairfield\n funds to build additional homes. Further, Metropolitan Housing Authority\xe2\x80\x99s,\n OIG recommended that HUD require the Lancaster, OH, activities with its related\n Authority to include in its 5-year plan more nonprofit organization. The Authority was\n than $11.6 million in proceeds and its plans selected for audit because it was identified\n for using the funds. (Audit Report: 2006- as having high-risk indicators of nonprofit\n AT-1002) development activity. The objective was to\n determine whether the Authority\n HUD OIG audited the Housing improperly diverted or pledged resources\n Authority of the City of Newark in Newark, for the benefit of non-HUD developments.\n NJ. The objectives were to determine\n whether the Authority\xe2\x80\x99s (1) Housing Finance The Authority improperly transferred\n Corporation conducted its operations in more than $520,000 of its HOPE 1 and 5(h)\n accordance with HUD regulations, (2) Homeownership Plan sales proceeds to its\n payments made to the City of Newark in nonprofit, the Lancaster Community\n addition to the payments in lieu of taxes for Housing Corporation. The Authority\n municipal services were allowable, (3) costs received more than $337,000 from 10 HOPE\n for legal settlements were properly 1 properties sold in 1995 and $78,000 from\n authorized, and (4) self-insurance program two 5(h) Homeownership Plan properties\n was cost effective. sold in 1996. The sales proceeds were pooled\n and invested in certificates of deposit,\n The Authority (1) may not be accumulating interest until 2004, when the\n conducting its bond financing activities in Authority transferred the proceeds to the\n accordance with HUD requirements; (2) Corporation. The transfer occurred without\n could not substantiate that the $6.9 million HUD approval and did not follow Federal\n paid to the City of Newark was for requirements regarding the use of the\n necessary, reasonable, and additional proceeds. The Authority also transferred\n services provided to the Authority; (3) ownership of three properties that were\n settled general liability claims without rehabilitated using HUD\xe2\x80\x99s McKinney grant\n obtaining prior written HUD approval; and funds to the Corporation without HUD\n (4) could not assure that more than $1.2 approval. The Corporation sold one\n million in legal settlements paid under the property in 2004. The Authority and/or the\n self-insurance program were processed in Corporation did not reimburse HUD for\n a cost-effective manner. more than $23,000 used to rehabilitate the\n property.\n\n\n44 HUD\xe2\x80\x99s Public and Indian Housing Programs\n\x0cCopyright, 2006. The Columbus Dispatch - Columbus, OH. Reprinted with permission.\n\n\n\n OIG recommended that HUD require OIG recommended that HUD require\n the Authority to (1) reimburse its HOPE 1 the Authority to repay ineligible costs of\n and 5(h) Homeownership Plan programs more than $4.9 million to its public housing\n more than $520,000 from nonfederal funds fund, establish a procedure that requires the\n for the improper transfer of the sales executive director to provide monthly\n proceeds to its nonprofit; (2) reimburse financial documents to the board before\n HUD more than $23,000 from nonfederal meetings to assist the board in providing\n funds for the McKinney grant funds used oversight, and obtain a release of\n to rehabilitate the one property; and (3) encumbered assets in the amount of\n implement procedures and controls to $475,000 for use as originally intended. OIG\n correct the weaknesses identified. (Audit also recommended that HUD determine\n Report: 2006-CH-1005) whether the Authority substantially\n defaulted on its contract. (Audit Report:\n Low-Rent Housing Program 2006-AT-1007)\n\n HUD OIG audited the low-rent housing\n HUD OIG audited the Housing program of the Utica Municipal Housing\n Authority of the City of Winston-Salem, Authority in Utica, NY, to determine\n Winston-Salem, NC, to determine whether whether it complied with the provisions of\n the Authority used funds subject to its low- its annual contributions contract.\n income housing annual contributions\n contract for the benefit of other programs The Authority improperly disbursed\n or entities without HUD approval. more than $511,000 in operating funds for\n health benefits of retired employees. It did\n In violation of its contract with HUD, not ensure that all procurements allowed for\n the Authority used more than $4.9 million full and open competition, procured legal\n in operating subsidies to pay expenses of services without executing a contract, made\n other Federal and nonfederal programs. contract payments without adequate\n Further, the Authority violated its contract supporting documentation, and failed to\n by encumbering assets when it executed a enforce contract provisions for elevator\n guarantee of payment agreement for a construction services. The Authority\n $475,000 loan for an affiliated entity. As a incurred questionable costs of more than\n result, the funds were not available for $140,000 and did not completely earn the\n operation or modernization of public administrative fees it was paid as a contract\n housing units, and assets are at risk. administrator for the Section 8 program\n\n\n HUD\xe2\x80\x99s Public and Indian Housing Programs 45\n\x0c since it failed to conduct required OIG recommended that HUD\n management reviews and meet its implement procedures and controls over the\n monitoring responsibilities. physical assessment subsystem to correct\n the deficiencies addressed. (Audit Report:\n OIG recommended that HUD require 2006-CH-0001)\n the Authority to establish controls and\n procedures to ensure compliance with all\n applicable board, procurement, and contract\n administration policies and procedures;\n submit documentation to justify all\n unsupported costs; and reimburse the\n program from nonfederal funds all amounts\n found to be ineligible. In addition, the\n Authority should enforce the damage clause\n of its elevator contract and collect all penalty\n income for program use. (Audit Report:\n 2006-NY-1005)\n\n HUD\xe2\x80\x99s Real Estate Assessment\n Center\xe2\x80\x99s (REAC) Housing\n Inspections\n HUD OIG reviewed HUD\xe2\x80\x99s Real Estate\n Assessment Center \xe2\x80\x99s (REAC) housing\n inspections and oversight and controls over\n its housing inspection process. OIG initiated\n the review as part of its strategic plan to help\n HUD improve the execution of its fiscal\n responsibilities. The objective was to\n determine whether REAC had adequate\n controls to safeguard the integrity of its\n housing inspection data.\n\n Without REAC\xe2\x80\x99s knowledge, confidential\n information maintained in its system was\n accessed and used inappropriately by\n unauthorized persons. The unauthorized\n persons drew a sample of housing authority\n units before the inspector \xe2\x80\x99s scheduled\n inspection. REAC\xe2\x80\x99s controls and procedures\n for securing its housing information after a\n download and before the upload of\n inspection data were not in place to assure\n that only authorized users had access to\n HUD\xe2\x80\x99s confidential information. OIG\n informed the REAC\xe2\x80\x99s Deputy Assistant\n Secretary of other minor deficiencies in a\n memorandum, dated November 22, 2005.\n\n\n46 HUD\xe2\x80\x99s Public and Indian Housing Programs\n\x0c Investigations Robert Askew III, former Section 8\n tenant, Oakland Housing Authority (OHA),\n During this reporting period, OIG was indicted in U.S. District Court, Northern\n opened 486 investigation cases and closed District of California, Oakland, CA, on nine\n 393 cases in the PIH program area. Judicial counts of mail fraud and one count of false\n action taken on these cases during the statements. The indictment also included\n period included $8,829,801 in investigative criminal forfeiture provisions. From 1999\n recoveries, 386 indictments/informations, through 2002, Askew allegedly reported he\n 287 convictions/pleas/pretrial diversions, was disabled, unemployed, and had no\n 1,093 arrests, 12 civil actions, 19 personnel assets on OHA and Social Security\n actions, and 991 administrative actions. Administration (SSA) disability\n certifications, when Askew was self-\n Chart 3.2: Public and Indian Housing employed, actively operating a home\n renovation/improvement business known as\n Recoveries\n Askew & Company; owned four cars, a\n motorcycle, residential property in Oakland,\n False Other Embezzlement CA, and rental property in Sacramento, CA;\n Statements\n 2%\n 12% 7% PHA Fraud and made bank account deposits of $87,058\n 10%\n Public in 1999, $52,365 in 2000, $211,014 in 2001,\nCorruption\n 15% and $407,606 in 2002. Askew was arrested\n on October 19, 2005. HUD losses are\n estimated at $35,500.\n Section 8\n 54%\n Total Recoveries $8,829,801 Debra Utley pled guilty in U.S. District\n Court, Middle District of Tennessee,\n Public housing rental assistance fraud Nashville, TN, to one count of theft of public\n is an investigative priority for the Office of money and agreed to pay Nashville Metro\n Investigation. OIG runs rental assistance Development Housing Agency $10,983 in\n fraud initiatives nationwide to reduce fraud restitution. Utley failed to report her August\n in HUD rental assistance programs and 2000 employment at Vanderbilt University\n support the HUD Rental Housing Integrity Medical Center.\n Improvement Project (RHIIP). Some of the\n investigations discussed in this report were Alisa Covington, a Lakeland Housing\n conducted jointly with Federal, State, and Authority (LHA) public housing resident,\n local law enforcement agencies. The was arrested in Lakeland, FL, on a State of\n results of OIG\xe2\x80\x99s more significant Louisiana arrest warrant for probation\n investigations are described below. violations. Covington\xe2\x80\x99s probation stemmed\n from a Louisiana conviction for possession\n with intent to sell 11 pounds of marijuana.\n Rental Assistance Fraud LHA was notified of Covington\xe2\x80\x99s arrest and\n began terminating Covington from their\n Linton White, a Topeka Housing housing assistance program. Covington was\n Authority (THA) public housing tenant, extradited by the Lakeland Police\n pled guilty in Topeka, KS, State court to an Department.\n information charging him with theft. White\n falsified his housing assistance application Ernest Stevenson, a Section 8 landlord,\n by failing to report his Missouri sexual and Paula Petruk, also known as\n predator classification to authorities in the Paula Stevenson, a Duluth Housing\n State of Kansas and THA. White received Redevelopment Authority (DRHA) Section\n $6,493 in housing assistance payments to 8 tenant, each pled guilty in U.S. District\n which he was not entitled.\n\n HUD\xe2\x80\x99s Public and Indian Housing Programs 47\n\x0c Court, District of Minnesota, Duluth, MN, Turnage allegedly filed false annual housing\n to one count of conspiracy. Stevenson and certifications by failing to report her prior\n Petruk, who received housing assistance criminal convictions for prostitution, auto\n from DHRA, failed to disclose joint accounts theft, forgery, and narcotics; her current\n and co-ownership of real estate located in probation status; or her use of numerous\n Duluth. HUD\xe2\x80\x99s loss is estimated at $54,000. aliases. IHA removed Turnage from the\n rental assistance program.\n Jacinda Stokes and Sherrell Lanier,\n former Lakeland Housing Authority (LHA) Rocky Stubbs, a Section 8 landlord with\n Section 8 tenants, were arrested after Coshocton Metropolitan Housing Authority\n complaints were filed in State court, (CMHA), was sentenced in Coshocton\n Lakeland, FL, charging them with public County Court, Coshocton, OH, to 3 years\n assistance fraud. Stokes and Lanier probation and ordered to pay CMHA $27,000\n allegedly failed to disclose earned income in restitution. Stubbs, leasing his property\n on their annual Section 8 recertification to CMHA, resided at his property with a\n forms submitted to LHA. HUD\xe2\x80\x99s loss is CMHA Section 8 recipient and concealed\n estimated at $19,261. their living arrangement from CMHA.\n\n Carresha Skiffer, a former Inglewood Tyrone Mock, a Cuyahoga Metropolitan\n Housing Authority (IHA) Section 8 Housing Authority (CMHA) Section 8\n recipient, was charged in Superior Court, landlord, was sentenced in U.S. District\n County of Los Angeles, Inglewood, CA, Court, Northern District of Ohio, Cleveland,\n with one count of theft and one count of OH, to 46 months incarceration and 3 years\n obtaining money under false pretenses. supervised release and ordered to pay\n Skiffer allegedly filed false annual housing CMHA $37,438 in restitution. Mock\n certifications by failing to claim income she previously pled guilty to providing\n earned from operating an adult-sexually- fraudulent information to obtain multiple\n oriented business out of her subsidized properties, leasing the properties to CMHA\n apartment or rents she collected from tenants, residing in one leased property with\n subleasing her unit for extended periods. a CMHA Section 8 recipient, failing to pay\n IHA removed Skiffer from the rental mortgages associated with the properties,\n assistance program. and filing bankruptcies to stop foreclosure\n proceedings and continued to receive\n Maverick E. Jackson, a Section 8 CMHA housing assistance payments.\n landlord, Aiken Housing Authority (AHA),\n was indicted in U.S. District Court, District Carol Tharpe, a former Seattle Housing\n of South Carolina, Aiken, SC, on two counts Authority (SHA) Section 8 tenant, was\n of submitting false documents to AHA. sentenced in U.S. District Court, Western\n Jackson allegedly lived in a subsidized unit District of Washington, Seattle, WA, to 5\n and falsely certified that he had no years probation and ordered to pay SHA\n relationship to a tenant in his unit, who was $37,500 in restitution for her previous guilty\n his half brother and an AHA Section 8 plea to one count of theft. From 1997 through\n applicant. HUD\xe2\x80\x99s loss is estimated at $6,100. 2004, Tharpe understated her income on\n annual SHA certifications.\n Kelly Turnage, a former Inglewood\n Housing Authority (IHA) Section 8 Sherrell A. Lanier, a Lakeland Housing\n recipient, was charged in Superior Court, Authority (LHA) Section 8 tenant, was\n County of Los Angeles, Inglewood, CA, charged in an information filed in the 10th\n with one count of theft and one count of Judicial Circuit, State of Florida, Lakeland,\n obtaining money under false pretenses. FL, with one count of public assistance\n\n\n48 HUD\xe2\x80\x99s Public and Indian Housing Programs\n\x0cfraud. From January 2001 through February Tony Jones, former St. Petersburg\n2004, Lanier allegedly failed to report Housing Authority (SPHA) landlord, was\nemployment income and received $8,114 in sentenced in U.S. District Court, Middle\nLHA housing benefits to which she was not District of Florida, Tampa, FL, to 4 months\nentitled. incarceration and 3 years supervised release\n with 4 months home detention and ordered\n Xavier Williams, New York City to pay HUD $31,606 in restitution, jointly\nHousing Authority (NYCHA) public and severally with codefendant Natalie\nhousing tenant and member of a violent Jones, and $26,000 to the U.S. Government\nBronx-based gang called Sex, Money and solely. On June 8, 2005, Jones was convicted\nMurder Crew, was sentenced in U.S. District of conspiracy to defraud HUD. Tony Jones\nCourt, Southern District of New York, New leased his residence to SPHA and SPHA\nYork, NY, to life imprisonment without Section 8 tenant Natalie Jones, his wife, but\nparole. Williams was convicted on July 8, failed to report to SPHA that he resided with\n2005, after a 7-week trial involving public his wife at his residence. As a result of his\nhousing fraud, narcotics and firearms actions, Jones received $31,606 in housing\ntrafficking, money laundering, racketeering, assistance to which he was not entitled.\nand attempted murder violations. Williams\noperated a narcotics and money-laundering Angelina Lyles, former DuPage\nenterprise from his public housing unit at Housing Authority (DHA) Section 8 tenant,\nNYCHA\xe2\x80\x99S Bronx River Houses and was found guilty in U.S. District Court,\nprovided false statements on his annual Northern District of Illinois, Chicago, IL, of\npublic housing recertifications. three counts of false statements. Lyles failed\n to report her income, the presence and full-\n Jacinda Stokes, a Lakeland Housing time income of her husband, her criminal\nAuthority (LHA) Section 8 tenant, was record, and bank accounts to the DHA.\ncharged in an information filed in 10th HUD loss is estimated at $15,000.\nJudicial Circuit, State of Florida, Lakeland,\nFL, with one count of public assistance Paul and Kristen West, former King\nfraud. From April 2001 through July 2005, County Housing Authority (KCHA) Section\nStokes allegedly failed to report 8 recipients, were each charged in King\nemployment income and received $11,147 County Superior Court, Seattle, WA, with\nin LHA housing benefits to which she was one count of theft. The Wests allegedly failed\nnot entitled. to report their employment or income\n earned on their initial KCHA Section 8\n Geno Wilson, a former Inglewood application or annual recertifications. Since\nHousing Authority (IHA) Section 8 April 2002, Paul and Kristen West have\nrecipient, was charged in Superior Court, received more than $28,000 in housing\nCounty of Los Angeles, Inglewood, CA, assistance payments to which they were not\nwith four counts of filing a false document entitled.\nwith a public office, one count of obtaining\nmoney under false pretenses, and one count Dannette Thomas, an Inglewood\nof grand theft. Wilson allegedly failed to Housing Authority (IHA) Section-8\ndisclose his 1991 sexual offender conviction recipient, was charged in Superior Court,\non his initial IHA Section 8 application or County of Los Angeles, Inglewood, CA,\non IHA annual certifications. Since with one count of grand theft, one count of\nFebruary 2002, Wilson has received an obtaining money under false pretenses, and\nestimated $50,000 in Section 8 housing one count of filing a false document with a\nassistance payments to which he was not public office. Thomas allegedly failed to\nentitled. report the 6-month residency and income of\n\n\nHUD\xe2\x80\x99s Public and Indian Housing Programs 49\n\x0c her brother Billy Thomas, a convicted sex Barbara Singleton, a Rochester Housing\n offender, to IHA on her housing certification. Authority (RHA) Section 8 tenant, and Larry\n Dannette Thomas was arrested on an Pradia, RHA landlord, were each charged\n outstanding warrant, and Billy Thomas was in U.S. District Court, Western District of\n arrested on parole violations and possession New York, Rochester, NY, with one count\n of crack cocaine at Thomas\xe2\x80\x99s IHA subsidized of conspiracy, false statements, and theft of\n unit. government funds. From 1998 through 2004,\n Singleton and Pradia allegedly conspired to\n Toria Woods, an Inglewood Housing collect more than $70,000 in RHA Section 8\n Authority (IHA) Section-8 recipient, was housing assistance payments when\n charged in Superior Court, County of Los Singleton certified that Pradia was her\n Angeles, Inglewood, CA, with one count of landlord residing elsewhere on annual\n grand theft, one count of obtaining money recertification and other RHA documents.\n under false pretenses, and one count of filing\n a false document with a public office. Brooks Rice was sentenced in U.S.\n Woods allegedly failed to claim District Court, Eastern District of Tennessee,\n unauthorized tenants residing in her unit, Chattanooga, TN, to 21 months confinement\n income she gained from an identity theft and 26 months supervised release and\n scheme, use of aliases, or her prior criminal ordered to pay HUD $16,565 in restitution.\n history on IHA annual housing On September 15, 2005, Rice pled guilty to\n certifications. As a result, she received one count of use of a false Social Security\n approximately $20,375 in housing assistance number (SSN). Rice used a fraudulent SSN\n payments to which she was not entitled. to obtain Section 8 benefits she was not\n IHA has removed Woods from its rental entitled to receive.\n assistance program.\n Celestine Gallegos, San Francisco\n Kamilah Rainey and Iris Riley were Housing Authority (SFHA) and Housing\n arrested pursuant criminal complaints filed Authority of the County of San Mateo\n in the 10th Judicial Circuit, State of Florida, (HACSM) housing assistance recipient, was\n Lakeland, FL, on Section 8 fraud charges. charged with one count of false statements\n Rainey and Riley are current Lakeland in an information filed in U.S. District Court,\n Housing Authority (LHA) Section 8 tenants Northern District of California, San\n who allegedly underreported their incomes Francisco, CA. On December 16, 2005,\n during annual recertifications submitted to Gallegos pled guilty to receiving housing\n LHA. HUD\xe2\x80\x99s loss is approximately $21,435. assistance payments simultaneously from\n SFHA and HACSM, receiving $13,285 to\n Sharon Dixon, a Miami-Dade Housing which she was not entitled.\n Authority (MDHA) Section 8 tenant, was\n indicted in U.S. District Court, Southern Benzalda Delarosa was indicted on two\n District of Florida, Miami, FL, on false felony counts of theft in Washington\n statements to HUD and theft of government Superior Court for Grays Harbor County,\n funds. Dixon was arrested after her Aberdeen, WA. Delarosa allegedly failed to\n indictment. From January 2001 through report all household resident income and\n December 2004, Dixon allegedly submitted received $11,000 in HUD Section 8 funds and\n false applications to MDHA for HUD $12,000 in Washington Department of Social\n Section 8 subsidies by failing to disclose her and Health Services welfare benefits to\n Miami-Dade County Transit Authority which she was not entitled.\n employment. HUD\xe2\x80\x99s loss is estimated at\n $49,500.\n\n\n\n50 HUD\xe2\x80\x99s Public and Indian Housing Programs\n\x0c Evelyn Bessent was charged with theft \xe2\x80\x9cVictoria\xe2\x80\x99s Secret\xe2\x80\x9d merchandise from her\nof government funds in an information filed subsidized housing unit. Between January\nin U.S. District Court, Southern District of 2000 and January 2005, Stevanovich\nFlorida, West Palm Beach, FL. Bessent, a allegedly deposited approximately $280,000\nparticipant in the Palm Beach County cash into eight bank accounts, but failed\nHousing Authority Section 8 Housing to report the funds to HUD or the state of\nChoice Voucher program, allegedly used her MA, and received $59,765 in housing\nvoucher to reside in a home she co-owned benefits and $57,790 in welfare benefits she\nwith her spouse and concealed ownership was not entitled to receive.\nof two additional residential properties\noccupied by Section 8 program participants. In Bucks County Court of Common\nBessent received $21,255 in housing Pleas, Bucks County, PA, Herbert and\nassistance payments to which she was not Annette Smith entered guilty pleas to felony\nentitled. charges of theft, criminal conspiracy, and\n false swearing. The Smiths, residents of\n An Essex County Superior Court Grand subsidized housing, Bucks County Housing\nJury, Salem, MA, indicted Jennifer Authority (BCHA), failed to report Herbert\nStevanovich, a former Andover Section 8 Smith\xe2\x80\x99s 30-year criminal history including\ntenant, on two counts of larceny and four two sex offender convictions to BCHA. The\ncounts of criminal perjury. Stevanovich was Smiths were evicted from BCHA housing.\npreviously convicted of selling stolen\n\n\n\n\n Copyright, 2006. Eagle Tribune - Lawrence, MA. Reprinted with permission.\n\n\n\nHUD\xe2\x80\x99s Public and Indian Housing Programs 51\n\x0c Andrea Henderson was charged with Michael Washington, a former Section\n four felony counts of grand theft, filing false 8 landlord, pled guilty to one felony count\n documents with a public office, and of grand theft in State of California Superior\n obtaining money under false pretenses in Court, County of San Mateo, San Mateo, CA.\n Superior Court, County of Los Angeles, Washington was sentenced to 90 days in\n Inglewood, CA. In 2004 and 2005, county jail and 3 years probation and\n Henderson allegedly filed false housing ordered to pay approximately $15,668 in\n certifications with the Inglewood Housing restitution to the Housing Authority of the\n Authority (IHA) by failing to identify her County of San Mateo (HACSM). From\n husband, Darryl Kennedy, a convicted sex December 2002 to December 2003,\n offender, and two unauthorized individuals Washington received approximately $15,668\n as residents in her Section 8 subsidized unit. in Section 8 housing assistance payments\n As a result, Henderson received $14,000 in from HACSM for a tenant who had moved\n housing assistance payments to which she from her unit.\n was not entitled.\n Ebony Lucien, a Section 8 recipient, was\n A civil complaint was filed by the U.S. charged in Superior Court, County of Los\n Attorney\xe2\x80\x99s Office, District of New Angeles, Los Angeles, CA, with one count\n Hampshire, Concord, NH, against Amy of perjury, one count of grand theft, one\n McPherson, John Nionakis, and Delilah count of unlawfully making a false financial\n Properties Inc. The complaint, filed on statement, and two counts of filing a false\n behalf of HUD, U.S. Department of Health document with a public office. In 2003 and\n and Human Services (HHS), U.S. 2004, Lucien allegedly filed false housing\n Department of Agriculture (USDA), and certifications with both City of Los Angeles\n SSA, seeks approximately $382,000 and civil and County of Los Angeles Housing\n penalties against McPherson, Nionakis, and Authorities, receiving $11,721 in housing\n Delilah Properties, Inc., under the False assistance payments to which she was not\n Claims Act. On November 14, 2005, entitled.\n McPherson, a former Section 8 recipient, was\n sentenced to 6 months in prison and 3 years Jacqueline Watson, a Section 8 tenant,\n supervised release and ordered to pay HUD, was charged in a complaint filed in Superior\n USDA, and HHS $67,547 in restitution Court of California, Solano County, Vallejo,\n following her previous guilty plea to CA, with one count of grand theft. Watson\n multiple counts of false statements. allegedly failed to report her incarceration\n McPherson received Section 8 subsidies at and absence for more than 1 year from her\n a home she owned under the corporate Vallejo Housing Authority Section 8 unit.\n name of Delilah Properties, Inc., in Exeter, The loss to HUD is estimated at $40,625.\n NH.\n Barbara Mack, former Section 8 tenant,\n Kelly M. Summerour, Tracy Curry- Tampa Housing Authority (THA), was\n Culbreath, and Wanda T. Nolan, former indicted in U.S. District Court, Middle\n Internal Revenue Service (IRS) employees, District of Florida, Tampa, FL, on two counts\n were each indicted in U.S. District Court, of theft of government funds and one count\n Northern District of Georgia, Atlanta, GA, of bankruptcy fraud. Mack allegedly\n on two counts of false statements. acquired and used two SSNs to obtain HUD\n Summerour, Curry-Culbreath, and Nolan housing assistance and SSA disability\n allegedly provided false verifications of benefits while earning employment income,\n employment to Atlanta and Decatur/Dekalb obtaining a Federal Housing Administration\n Housing Authorities, fraudulently receiving (FHA)-insured mortgage, and filing\n $38,532 in housing assistance payments. bankruptcy. Mack allegedly failed to report\n employment income earned to THA or\n\n52 HUD\xe2\x80\x99s Public and Indian Housing Programs\n\x0capproximately $23,455 in Section 8 and MMHA, before her scheme was detected by\n$61,788 SSA disability benefits she received New York and Connecticut banks.\nto the bankruptcy court. On February 3,\n2006, Mack was arrested in Clearwater, FL. Quiana Adams pled guilty to 35 counts\n of theft of government funds, four counts of\n Sharon Smith, a superior court judicial false statements, and one count of\nclerk, Union, NJ, pled guilty to an conspiracy in U.S. District Court, Southern\ninformation filed in U.S. District Court, District of Florida, Miami, FL. Adams\xe2\x80\x99\nNewark, NJ, charging her with one count spouse, Anthony Boatwright, pled guilty to\nof theft of government funds. From January two counts of false statements and one count\n2002 to September 2005, Smith caused of conspiracy. Adams and Boatwright,\nfraudulent verification of employment participants in the Section 8 Housing Choice\nforms to be submitted to the Elizabeth Voucher program, provided false household\nHousing Authority (EHA), resulting in composition and income information to the\nSmith defrauding EHA of approximately Miami-Dade Housing Agency to qualify for\n$20,714. housing assistance. Adams and Boatwright\n received $37,229 in housing assistance\n Tyeshia Borela, a former San Francisco benefits to which they were not entitled.\nHousing Authority (SFHA) Section 8 tenant, They were arrested on December 8, 2005.\nwas indicted in U. S. District Court,\nNorthern District of California, San Nasir Javaid and Nancy Kharsa, former\nFrancisco, CA, on one count of false San Francisco Housing Authority (SFHA)\nstatements to HUD. From 2002 to 2005, Section 8 landlord and tenant, each pled\nBorela allegedly claimed a nonexistent guilty in U.S. District Court, Northern\ndaughter, failed to report her actual income, District of California, San Francisco, CA, to\nand subleased her SFHA Section 8 one count of making false statements to\nsubsidized unit. In addition, Borela HUD. Under the plea agreement, Javaid and\nallegedly provided false income information Kharsa agreed to pay HUD $51,717 in\nduring her November 2004 bankruptcy restitution. From 1998 to 2002, Javaid and\nfiling. As a result, she received Kharsa participated in a scheme to defraud\napproximately $64,000 in Section 8 housing HUD\xe2\x80\x99s Section 8 program by using SFHA\nassistance and $36,000 in discharged debts and/or HUD multifamily housing assistance\nto which she was not entitled. payments received by Javaid, Kharsa, and\n Javaid\xe2\x80\x99s mother, Jhan Noor, to purchase two\n Billy Nsubuga, a former Section 8 properties in El Cerrito and San Francisco,\ntenant, Malden Massachusetts Housing CA. As a result, Javaid and Kharsa received\nAuthority (MMHA), pled guilty to an approximately $51,717 in Section 8 housing\nInformation filed in U.S. District Court, assistance benefits to which they were not\nBoston, MA, charging six counts of bank entitled.\nfraud, five counts of mail fraud, five counts\nof identity theft, and one count of identity Kalsoum Berro, a Michigan State\ndocument fraud. Nsubuga opened bank Housing Development Authority (MSHDA)\naccounts in Massachusetts, New York, and Section 8 tenant, and her husband, Hassan\nConnecticut with cash deposits in the names Berro, a MSHDA Section 8 landlord, were\nof others using altered passports from each charged in 19 th District Court,\nUganda, The Republic of Congo, and South Dearborn, MI, with one count of violating\nAfrica and bogus identification documents the State Housing Development Authority\nfrom California. Nsubuga received more Act of 1996. Hassan and Kalsoum Berro\nthan $100,000, which was not reported to allegedly had lived together since 1990 and\n\n\n\nHUD\xe2\x80\x99s Public and Indian Housing Programs 53\n\x0c received $94,000 in housing assistance Authority of the County of San Mateo\n payments to which they were not entitled. (HACSM) Section 8 tenant, was sentenced\n in U.S. District Court, Northern District of\n Farid Bayot, real estate broker and California, San Francisco, CA, to 2 years\n owner of Global One Realty, Inc., Aurora, probation and ordered to pay HACSM\n CO, was charged in an information filed in $25,582 in restitution for her previous guilty\n U.S. District Court, District of Colorado, plea to false statements to HUD. Jones,\n Denver, CO, with one count of loan and while living in and receiving public housing\n credit applications generally. Bayot assistance from SFHA, applied for and\n allegedly assisted Littleton Housing received Section 8 housing assistance\n Authority (LHA) Section-8 tenant, payments from HACSM. As a result, Jones\n Hamidullah Sarwary, in purchasing the received $25,582 in Section 8 housing\n home in which Sarwary resided and for assistance to which she was not entitled.\n which Sarwary received LHA housing\n assistance payments. As a result of his\n action, HUD realized losses of $3,000.\n PHA Employee Theft/\n Embezzlement\n Jessica Jackson-Elston, former Rock\n Island Housing Authority (RIHA) Section 8 Douglas Hamond, former maintenance\n tenant, along with Fabiola Munoz and Julio general foreman, Utica Housing Authority\n Gallegos, former Moline Housing Authority (UHA), was arrested and charged with five\n (MHA) public housing tenants, were counts of petty theft and one count of perjury\n charged in Rock Island Circuit Court, Rock in Oneida County Court, Utica, NY.\n Island, IL, with multiple counts of theft and Hamond allegedly misused UHA\xe2\x80\x99S credit\n identity fraud. Jackson-Elston allegedly card for personal purchases.\n failed to report her husband\xe2\x80\x99s ownership of\n her RIHA Section 8 subsidized unit, and In Grand Rapids, MI, Jerome\n Munoz and Gallegos allegedly failed to Wisniewski, former executive director,\n report income and/or used false identities Manistee Housing Commission (MHC), was\n and SSNs on MHA annual recertifications. sentenced to 3 years in prison and 3 years\n As a result of their actions, the collective loss probation and ordered to pay HUD\n to HUD exceeds $35,000. Jackson-Elston $1,308,522 in restitution after he pled guilty\n was terminated from the RIHA rental to embezzlement and unlawful monetary\n assistance program. transactions. Wisniewski, in a scheme to\n defraud MHC of more than $1.2 million,\n Mary Martin, former St. Petersburg funneled MHC\xe2\x80\x99S funds into a fictitious\n Housing Authority (SPHA) Section 8 tenant, company he created and used the money to\n pled guilty in U.S. District Court, Middle purchase a 1989 Rolls Royce Silver Spur, a\n District of Florida, Tampa, FL, to one count 1999 Porsche 911, and two residential\n of theft of government funds. Martin failed properties.\n to report income earned by her resident\n spouse to SPHA and claimed a resident Jane A. Burchett, former executive\n daughter while the daughter received her director, Wymore Housing Authority\n own Section 8 housing benefits from Pinellas (WHA), was sentenced in U.S. District\n County Housing Authority. As a result, Court, District of Nebraska, Omaha, NE, to\n HUD realized an estimated $36,997 loss. 3 years probation and ordered to pay WHA\n Martin was arrested on March 1, 2006. $19,977 in restitution. Burchett, who was\n convicted of Federal program fraud on\n Ranina Jones, former San Francisco August 18, 2005, embezzled approximately\n Housing Authority (SFHA) and Housing $26,683 from WHA by issuing inflated WHA\n\n\n54 HUD\xe2\x80\x99s Public and Indian Housing Programs\n\x0cpayroll checks to an employee, forging the embezzlement and theft from an Indian\nemployee\xe2\x80\x99s signature, and cashing the tribal organization. During 2004, Phillips\nchecks. skimmed $7,000 in cash rental proceeds\n from YSHA.\n Wilma A. Nicholson, former executive\ndirector of the Housing Authority of the City Bernard Meyer, former Williamsport\nof Alamo (HACA), was sentenced in U.S. Housing Authority (WHA) executive\nDistrict Court, Southern District of Georgia, director, was sentenced in U.S. District\nAlamo, GA, to 10 months incarceration and Court, Middle District of Pennsylvania,\n3 years supervised release and ordered to Williamsport, PA, to 1 year supervised\npay HACA $46,169 in restitution. Nicholson probation and ordered to pay HUD $9,766\npreviously pled guilty to one count of theft in restitution. Meyer was charged with\nof government funds for pilfering cash conflict of interest for failing to disclose his\ndwelling receipts from HACA. financial interest in several properties\n housing Section 8 tenants through WHA and\n Michael Mullins and David Carte, failing to obtain a waiver from HUD. Meyer\nformer Cuyahoga Metropolitan Housing received $9,766 in housing assistance checks\nAuthority (CMHA) employees, each pled on behalf of Section 8 tenants over 6 years.\nguilty in Court of Common Pleas, Cuyahoga Meyer resigned his position when charged,\nCounty, Cleveland, OH, to a one-count and Williamsport City Council dissolved\ninformation charging them with theft. WHA, assigning WHA duties to Lycoming\nMullins and Carte claimed labor hours on County Housing Authorities.\nCMHA time sheets and received CMHA\nwage payments while working at other jobs. Thomas Herrera, former executive\nMullins and Carte were each sentenced to 2 director, Pueblo de Cochiti Housing\nyears probation and ordered to pay CMHA Authority (PCHA), pled guilty in U.S.\nrestitution of $8,214 and $8,813 respectively. District Court, District of New Mexico,\n Albuquerque, NM, to one count of theft and\n Lawrence Bower, former Williamsport one count of embezzlement from an Indian\nHousing Authority (WHA) board member, tribal organization. From February to\nwas indicted in U.S. District Court, Middle November 2003, Herrera embezzled PCHA\nDistrict of Pennsylvania, Williamsport, PA, funds by issuing unauthorized PCHA\nfor allegedly making false statements to checks to himself, forging PCHA board\nHUD. Bower allegedly failed to apply for members\xe2\x80\x99 signatures, cashing the checks,\nor obtain a waiver from HUD to participate and using the funds for personal expenses.\nin the WHA Section 8 program as required. HUD realized losses of $78,448.\nBower, in his position as WHA board\nmember, approved monthly WHA housing Stan Self, former executive director for\nassistance checks made payable to him, Hugo Housing Authority (HHA), Hugo,\nreceiving a total of $25,324 over 11 years. OK, and Region VI Housing Authority,\nThe Williamsport City Council dissolved Roswell, NM, was indicted in U.S. District\nWHA, assigning WHA duties Lycoming Court, Eastern District of Oklahoma,\nCounty Housing Authorities. Muskogee, OK, on one count of mail fraud.\n Self pled guilty to the charge during a plea\n Jaymie Jo Phillips, former Yankton hearing on December 29, 2005. Self, as\nSioux Housing Authority (YSHA) executive director of HHA, embezzled HHA\noccupancy specialist, was sentenced in U.S. funds by providing HHA consulting\nDistrict Court, District of South Dakota, services according to his employment\nSioux Falls, SD, to 3 years probation and contract on 25 occasions, collecting the\nordered to pay YSHA $8,389 in restitution payments on behalf of HHA, failing to remit\nfollowing her previous guilty plea to the payments to HHA, and using the funds\n\nHUD\xe2\x80\x99s Public and Indian Housing Programs 55\n\x0c for his personal benefit. Self resigned from James H. Tate, former executive\n HHA after receiving a limited denial of director, Junction City, KS, Housing\n participation (LDP) suspension from HUD. Authority (JCHA), was sentenced in U.S.\n Self was then hired as executive director, District Court, District of Kansas, Topeka,\n Region VI Housing Authority, Roswell, NM, KS, to 5 months prison, 5 months house\n but resigned this position on December 30, arrest and 3 years probation and ordered to\n 2005. As a result of his actions, HUD pay JCHA $102,701 in restitution. On\n realized losses of $6,304. August 23, 2005, Tate pled guilty to theft of\n government property for stealing $102,701\n Loren Goldtooth, former executive from JCHA by purchasing personal items\n director, KI:KI Association, the HUD- on JCHA credit cards. Tate paid his\n funded tribally designated housing entity unauthorized JCHA credit card expenses\n of the Tohono O\xe2\x80\x99Odham Indian Nation, and using the electronic signature password of\n certified public accountant doing business the JCHA board chairman to approve the\n as Goldtooth & Company, P.C., was indicted issuance of checks from JCHA\xe2\x80\x99S\n on February 6, 2006, in U.S. District Court, computerized accounting program.\n District of Arizona, Tucson, AZ, on two\n counts of embezzlement and theft from an John C. Wolfe, Sr., former executive\n Indian tribal organization, three counts of director, Marionville Housing Authority\n failing to file Federal individual income tax (MHA), was charged in a felony complaint\n returns, and two counts of failing to file filed in 39th Missouri Judicial Circuit Court,\n Federal corporate income tax returns. From Marionville, MO, with two counts of\n February 2000 through August 16, 2002, stealing. From April 2003 through August\n Goldtooth allegedly embezzled $216,531 of 2004, Wolfe allegedly embezzled $23,267\n KI:KI Association funds and failed to file from MHA by issuing himself payroll\n Federal individual and/or corporate tax checks not reported to or approved by the\n returns for 1999 through 2002. On February MHA board of directors.\n 16, 2006, Goldtooth was arrested.\n\n\n\n\n Copyright, 2006. Arizona Daily Star - Tucson, AZ. Reprinted with permission.\n\n\n\n\n56 HUD\xe2\x80\x99s Public and Indian Housing Programs\n\x0c Barbara Gilbert, former executive\ndirector, Buena Housing Authority (BHA),\nwas sentenced in Atlantic County Court,\nNewark, NJ, to 180 days in prison and 3\nyears probation and ordered to permanently\nforfeit public employment and pay HUD\nrestitution in an amount to be determined.\nGilbert pled guilty to two counts of theft by\ndeception on December 9, 2005. Gilbert\nused BHA checks and BHA\xe2\x80\x99s Home Depot\naccount to pay for and obtain more than\n$7,800 in personal purchases.\n\n Serena Parker, a former Greensboro\nHousing Authority (GHA) intake specialist,\nalong with Teresa Thomas and Vivian\nPandora Bailey, fictitious GHA landlords,\nwere each indicted in U.S. District Court,\nMiddle District of North Carolina,\nGreensboro, NC, on seven counts of mail\nfraud and seven counts of aiding and\nabetting. Parker allegedly accessed GHA\xe2\x80\x99S\ncomputer system, illegally added Thomas\nand Bailey as GHA landlords, and caused\nthe mailing of 48 fraudulent housing\nassistance checks totaling more than $70,000\nto both Thomas and Bailey. Copyright, 2006. The Republican -\n Springfield, MA. Reprinted with permission.\nPHA Contract Fraud\n Nicholas Kastounakis, doing business\n In the Eastern District of Michigan, as Manny\xe2\x80\x99s Plumbing & Heating, pled guilty\nDetroit, MI, LaToya Cotton, a former to a six-count information filed in U.S.\ncontractor for Michigan State Housing District Court, District of Massachusetts,\nDevelopment Authority (MSHDA), entered Springfield, MA, charging him with three\ninto a plea agreement with the U. S. counts of bribery and three counts of aiding\nAttorney\xe2\x80\x99s Office, following the filing of a and abetting. Katsounakis, a contractor for\ncriminal information charging Cotton with Springfield Housing Authority (SHA), was\none count of theft/embezzlement and one involved in a kickback scheme with\ncount of criminal forfeiture against her Raymond Asselin, former SHA executive\nproperty valued at $750,780. Cotton, doing director, and Arthur Sotirion, former SHA\nbusiness as Washtenaw Payee Services, a deputy director.\nformer MSHDA contractor who\nadministered the Washtenaw County William Moorehead, doing business as\nSection 8 rental assistance program, created William Moorehead and Associates (WMA),\nfalse tenant files and inspections and acknowledged a joint liability of $2.8 million\ndiverted $1,052,701 in housing assistance to the U.S. Government in a stipulation for\npayments to herself over 10 years. entry of consent judgment filed in U.S.\n District Court, Northern District of Illinois,\n\n\n\n\nHUD\xe2\x80\x99s Public and Indian Housing Programs 57\n\x0c Chicago, IL. Moorehead, a property housing tenants, were arrested at Las Palmas\n manager for many housing authorities and public housing complex in Coamo, PR, on\n privately owned Section 8 developments, outstanding arrest warrants relating to the\n created fraudulent records and money sale and distribution of firearms and drugs.\n transfers to hide missing and misused\n funds. Moorehead also directed Francisco Frias was arrested at his New\n codefendants Patricia Taylor and Brian York City Housing Authority public\n Townsend, accountants at WMA, to create housing unit in New York, NY, on a warrant\n false bank records and write checks drawn for making terror threats out of Stamford,\n on accounts containing insufficient funds. CT, by the NY/NJ High Intensity Drug\n Trafficking Area Regional Fugitive Task\n Eric Ackerman, a plumbing contractor Force. A bullet resistant vest, 64 grams of\n for Buffalo Municipal Housing Authority cocaine, a 9mm semiautomatic weapon,\n (BMHA), pled guilty in U.S. District Court, drug paraphernalia, and $5,945 in cash were\n Buffalo, NY, to one count of false statements seized during a search of his unit.\n to HUD. Ackerman falsely certified his\n qualifications as a minority business Six Chester Housing Authority (CHA)\n enterprise (MBE) and distribution of BMHA public housing and Section 8 voucher\n work to other MBE companies. As a result, tenants were arrested at CHA public\n he received approximately $1.75 million housing units or subsidized residences in\n in BMHA contracts to which he was not Chester, PA, on outstanding warrants,\n entitled. including one warrant charging attempted\n murder.\n Fugitive Felon As a result of an ongoing fugitive felon\n initiative, 10 individuals were arrested\n Michael Deuso, a Franklin County throughout Windham County, VT, on\n Housing Authority Section 8 recipient and outstanding State warrants. Several\n fugitive, was arrested at his apartment in individuals arrested received Section 8\n Turners Falls, MA, for probation violations, housing assistance either through the\n including smuggling drugs into a New Vermont State Housing Authority or\n Mexico prison. Brattleboro Housing Authority.\n Jose Verdejo-Santiago, a public housing Juan Almodovar, an illegal resident of a\n tenant, Puerto Rico Housing Authority public housing unit was arrested in\n (PRHA), was arrested at his Covadonga Worcester, MA, for failure to register as a\n public housing unit in Trujillo Alto, PR, on sex offender. Almodovar, previously\n an outstanding fugitive-felon arrest warrant convicted of rape in New York, failed to\n relating to the illegal sale and distribution register as a sex offender in either New York\n of firearms and drugs. At the time of his or Massachusetts.\n arrest, 259 heroin decks, 340 units of\n marijuana, and five grams of pure heroin\n Dashonn Graves, a management\n were seized from his apartment.\n information specialist, Plainfield Housing\n Authority and City of Orange Housing\n Joel Moreno, Ithier Rivera, Jose A. Authority, was arrested in Newark, NJ, on\n Rivera, Luis Melendez, Jose Ortiz, Omar an outstanding warrant for failing to fulfill\n Moreno, Jose G. Rivera, Jose M. Rivera, requirements of his pretrial intervention\n Ramon Martinez, Carlos Cruz, Lizette (PTI) program. Graves, originally arrested\n Rivera, and Yaritza Franceshi, all Puerto in April 2002 for credit card fraud and\n Rico Housing Authority (PRHA) public larceny, pled guilty to embezzling $37,000\n\n\n58 HUD\xe2\x80\x99s Public and Indian Housing Programs\n\x0cfrom his previous employer. Graves was Regina Battles, Tashanique Leonard,\nsentenced to 1 year pretrial probation and Brenda Vazquez, and Michael Martin, four\nrestitution of $25,000. In March 2004, after tenants of the Springfield Housing\nfailing to meet probation requirements, Authority (SHA), Sullivan Public Housing\nMiddlesex County District Attorney\xe2\x80\x99s Development, were arrested on outstanding\nOffice, MA, issued an arrest warrant for warrants in Springfield, MA.\nGraves.\n Sixteen individuals were arrested on\n Dion Johnson of Richmond, VA, was outstanding State warrants throughout\narrested in North Carolina on charges that Windsor County, VT, as part of an ongoing\nhe failed to reregister as a sex offender. In Fugitive Felon Initiative. Several of the\nApril 1991, Johnson was convicted of felony individuals targeted were Vermont State\nrape and breaking and entering; later Housing Authority Section 8 residents.\nconvictions include attempted rape,\nrobbery, assault, grand larceny, and failing\nto register as a violent sexual offender. In\n Other Fraud/Crimes\nMarch 2005, Johnson registered as a violent\nsex offender living in a Richmond Veronika Smith-Riley, a loan processor\nRedevelopment and Housing Authority with Commonwealth United Mortgage, was\n(RRHA) unit leased to his mother. Johnson sentenced in U.S. District Court, Southern\nfailed to reregister after 90 days as required. District of Florida, Miami, FL, to 11 months\n imprisonment and 3 years probation and\n HUD OIG participated in a United ordered to perform 450 hours of community\nStates Marshal\xe2\x80\x99s Service (USMS) fugitive service. Smith-Riley previously pled guilty\nfelon apprehension plan dubbed \xe2\x80\x9cOperation to one count of conspiracy to commit mail\nCity Sweep\xe2\x80\x9d from March 6 through March fraud. Smith-Riley, using false loan\n31, 2006, in the Washington, DC, information, enabled a straw-buyer to\nmetropolitan area. HUD OIG and other secure a mortgage and quit claimed the\nmembers of the Capital Area Regional property back to her. Smith-Riley then\nFugitive Task Force (CARTF) arrested leased the property to the Miami-Dade\nfugitives with outstanding warrants on Housing Authority (MDHA) for use in its\ncharges ranging from parole violations to rental assistance program. MDHA\nhomicide. Three hundred-fifteen of terminated Smith-Riley\xe2\x80\x99s contract as a result\nWashington, DC\xe2\x80\x99s most notorious criminals of her actions.\nwere arrested by CARTF. Some outstanding\nwarrants included crimes involving sex A 25-count felony criminal complaint\noffenses, homicides, assault, drugs, and was filed in State Court, Los Angeles, CA,\nburglary and/or robbery. Many of the against Anthony Miller, a 12-year public\narrests occurred in and around DC Housing housing resident, and coconspirator\nAuthority public housing properties and Marjorie Craddock, a former insurance\nHUD multifamily properties located in agent, Western Southern Life Insurance\nWashington, DC. In addition to the 315 Company. Miller and Craddock were each\nfugitives arrested, CARTF seized nine charged with three counts of insurance\nweapons, various types of narcotics, $28,000 fraud, two counts of grand theft, and one\ncash, and one vehicle. HUD OIG is count of conspiracy. In addition, Miller was\naccessing HUD rental assistance databases charged with 10 counts of forgery, and\nto identify and investigate numerous cases Craddock was charged with nine. On\nof rental assistance fraud. Operation City January 18, 2006, Miller was arrested as a\nSweep accounts for the largest multiagency primary suspect in an unsolved homicide.\nmass arrest plan of its kind in the District of On January 25, 2006, an arrest warrant was\nColumbia during a 3-week period. issued for Craddock. Miller and his family\n\nHUD\xe2\x80\x99s Public and Indian Housing Programs 59\n\x0c reside at Jordan Downs Public Housing retrieve a shotgun found by WHA\n Apartment Complex in Los Angeles. Miller, maintenance employees in a WHA Addison\n the alleged beneficiary on 54 life insurance Street Apartments housing unit formerly\n policies, including a policy on the murder leased to his mother.\n victim, paid approximately $2,000 in cash\n monthly for the policies, an amount not Thomas C. McGee and Andrea Wilks\n supported by his reported Social Security were each indicted by a State of Missouri\n Supplemental Security Income (SSI) and Aid grand jury, in St. Louis, MO, on one count\n to Families with Dependant Children of second degree robbery, one count of\n (AFDC) benefits. kidnapping, four counts of false\n impersonation, one count of attempted\n Danilo Rico, a former East Hartford stealing, and two counts of stealing over $500\n Housing Authority (EHHA) Section 8 by deceit. Allegedly, McGee and Wilks\n tenant, was indicted in U.S. District Court, obtained the tenant list of Greater Bethlehem\n District of Connecticut, East Hartford, CT, Elderly, a HUD-funded elderly housing\n on one count of possession of a firearm by a project and, posing as police officers and/or\n convicted felon for possessing a 9 mm detectives, attempted to steal or embezzle\n handgun seized during a Federal search assets of the elderly.\n warrant at his EHHA Section 8 unit on\n August 31, 2005. EHHA terminated Rico Fifteen unauthorized tenants were\n from its rental assistance program. found residing at the Worcester Housing\n Authority (WHA) Great Brook Valley\n Clarence E. Baker, Jr., a Section 8 tenant Gardens Housing Development in\n at Canterbury Towers Apartments, was Worcester, MA. During the interview of one\n charged in a State criminal complaint, in unreported tenant, police observed\n Worcester, MA, with felony charges of marijuana in plain view and arrested the\n presenting a false claim to a government unreported tenant on drug charges. A\n agency and larceny over $250 by false juvenile reported missing for 6 months was\n pretense. Baker also failed to report his found hiding in another unit.\n sexual offender conviction on housing\n assistance documents. Louis Douglas, a Section 8 recipient, was\n charged in Superior Court, County of Los\n Louis Hanley was sentenced in U.S. Angeles, Los Angeles, CA, with three felony\n District Court, District of Massachusetts, counts of failing to register annually as a\n Worcester, MA, to 4 years incarceration and convicted sex offender. Douglas, previously\n 3 years supervised release following his convicted in 1997 of committing lewd and\n October 5, 2005, guilty plea to one count of lascivious acts on a child under the age of\n interstate travel for the purpose of dealing 14, allegedly failed to disclose his status as\n in firearms without a license. Hanley, a a lifetime sex offender to the City of Los\n convicted felon, traveled from Maine to the Angeles Housing Authority before\n Worcester Housing Authority (WHA) to obtaining housing assistance benefits.\n\n\n\n\n60 HUD\xe2\x80\x99s Public and Indian Housing Programs\n\x0c Chapter 4\nHUD\xe2\x80\x99s Multifamily\nHousing Programs\n\x0c In addition to multifamily housing The project had more than $4.4 million\n developments with U.S. Department in questionable cash disbursements and\n of Housing and Urban Development accrued expenses. Under the direction of\n (HUD)-held or HUD-insured mortgages, the the owner and identity-of-interest\n Department owns multifamily projects management agent, the project made\n acquired through defaulted mortgages, questionable cash disbursements of more\n subsidizes rents for low-income than $1.6 million and accrued questionable\n households, finances the construction or expenses of more than $192,000 while in a\n rehabilitation of rental housing, and non-surplus-cash position, and the owner\n provides support services for the elderly and identity-of-interest management agent\n and handicapped. billed HUD more than $2.4 million for\n services not provided. In addition, the\n Audits general manager of the management agent\n received a salary as the assistant\n administrator of the nursing home, resulting\n During this period, the Office of\n in more than $112,000 in unnecessary\n Inspector General (OIG) issued nine\n expenses.\n external reports and one internal report in\n the multifamily housing program area.\n OIG recommended that HUD 1) pursue\n These reports disclosed more than $15\n the recovery of double the amount of\n million in questioned costs and more than\n questionable cash disbursements to\n $19 million in recommendations that funds\n identities of interest; 2) obtain support or\n be put to better use.\n reimbursements for unsupported and\n unnecessary disbursements; 3) pursue the\n Over the past 6 months, OIG has\n recovery of questionable distributions to\n audited owner and management agent\n non-identities-of-interest; 4) take\n operations with an emphasis on combating\n appropriate action to prevent payment of\n equity skimming. The results of OIG\xe2\x80\x99s more\n ineligible and unnecessary cash\n significant audits are described below.\n disbursements after the audit period; 5)\n require the project to develop and\n Chart 4.1: Multifamily Housing Dollars implement procedures that ensure only\n 25,000,000 eligible expenses are paid from project funds\n 20,000,000\n and that documentation is maintained to\n support the eligibility of payments made; 6)\n 15,000,000\n require the project to replace the\n 10,000,000\n management agent; and 7) pursue all\n 5,000,000 applicable administrative sanctions against\n 0 the owner, management agent, and identity-\n Questioned Costs Funds Put to Better Use\n of-interest companies. (Audit Report: 2006-\n BO-1004)\n Owner and Management HUD OIG audited Holiday Apartments,\n Agent Operations LA Pro 30, and Two Worlds II in Los\n Angeles, CA, to assess HUD\xe2\x80\x99s concerns over\n HUD OIG audited Mount Saint Francis inappropriate disbursements and determine\n Health Center in Woonsocket, RI, to whether the projects were administered in\n determine whether the owner complied with compliance with HUD requirements.\n its HUD regulatory agreement and other\n applicable laws and regulations. The owner and identity-of-interest\n management agent used project funds to\n\n\n62 HUD\xe2\x80\x99s Multifamily Housing Programs\n\x0cpay more than $2.6 million in ineligible and disbursements occurred while the project\nunsupported costs, including excessive and was in a non-surplus cash position and/or\nunreasonable charges by an identity-of- in default of its HUD-insured loan. HUD\ninterest maintenance contractor, excessive sold the project\xe2\x80\x99s note and lost more than\ncharges for the management agent\xe2\x80\x99s $6.3 million. OIG identified more than $1.8\npresident, unsupported rent charges and million in questionable cash disbursements\ncapital improvement expenses for the made by the project\xe2\x80\x99s owner and/or\nmanagement agent\xe2\x80\x99s office, and ineligible management agent. The disbursements\nownership expenses. OIG anticipates were used to pay for non-project-related\nsimilar additional questionable costs expenses, loan repayments, excessive\ncontinued after the end of the audit period management fees, and unnecessary services\nthat could cost the projects another $457,000. while the project was in a non-surplus-cash\nOIG\xe2\x80\x99s building inspections identified more position and/or in default of its HUD-\nthan 240 health or safety violations, which insured loan.\nresulted in more than $561,000 in housing\nassistance payments for units and buildings OIG recommended that HUD pursue\nthat were not decent, safe, and sanitary. In the recovery of double the amount of\naddition, the owner and identity-of-interest questionable cash disbursements to\nmanagement agent did not effectively identities of interest, support or reimburse\nmanage the projects, to include not the insurance fund for unsupported costs,\naccurately calculating, reporting, and and require reimbursement of\nresolving more than $655,000 in project disbursements that were deemed\nliabilities. unnecessary to the nursing home. (Audit\n Report: 2006-BO-1006)\n OIG recommended that HUD require\nthe owner to repay the respective projects HUD OIG reviewed the books and\nfor the ineligible costs and provide support records of the Villas at Camelback Crossing\nfor the reasonableness of unsupported costs Phase I, a 264-unit multifamily housing\nor repay the projects. In addition, HUD project located in Glendale, AZ, at the\nshould require the owner to correct unit request of HUD. HUD expressed concerns\ndeficiencies and obtain new management, regarding the owner\xe2\x80\x99s use of project funds.\naccounting, and maintenance services. The objective was to determine whether the\n(Audit Report: 2006-LA-1010) owner and its identity-of-interest\n management agent used project funds only\n HUD OIG reviewed the books and for reasonable operating expenses and\nrecords of Coventry Health Center of necessary repairs as required by the\nCoventry, RI, to determine whether regulatory agreement.\nCoventry Health Center Associates, L.P.,\nand/or Sterling Health Care Management The project\xe2\x80\x99s owner, Millenium\nCompany, an identity-of-interest Communities, Inc., and American West\nmanagement agent, used the project\xe2\x80\x99s funds Communities, LLC, the project\xe2\x80\x99s identity-of-\nin compliance with the regulatory interest management agent, inappropriately\nagreement and HUD\xe2\x80\x99s requirements. used more than $1 million in project funds\nCoventry was selected for audit because the for ineligible purposes in violation of the\nnursing home was in default. regulatory agreement. The ineligible uses\n included more than $300,000 in international\n Coventry\xe2\x80\x99s owner and/or management wire transfers to unknown entities, more\nagent used project funds for inappropriate than $26,000 for payments on unauthorized\nand unsupported disbursements. loans, and more than $180,000 for payment\nThe inappropriate and unsupported of project construction costs. Additional\n\n\nHUD\xe2\x80\x99s Multifamily Housing Programs 63\n\x0c improper uses included more than $80,000 default on its HUD-insured mortgage. The\n paid to management agent supervisory ineligible uses included $262,000 in\n personnel and corporate officers; net international wire transfers to unknown\n payments of approximately $65,000 to other entities, more than $101,000 for payments\n identity-of-interest projects; and payments on unauthorized loans, $100,000 to an\n of more than $116,000 for unallocated unknown certificate of deposit account, and\n payroll, health insurance, and other approximately $79,000 for payment of\n expenses of the identity-of-interest project construction costs. Additional\n Camelback II project. The project owner improper uses included more than $151,000\n and/or management agent lacked paid to corporate officers and management\n documentation to support additional agent supervisory personnel and net\n disbursements of more than $165,000 for payments of $119,000 to other identity-of-\n credit card expenses, legal expenses, interest projects. The owner and/or\n insurance expenses, and other costs. management agent also lacked\n Further, the project did not obtain required documentation to support additional\n HUD approval of its management agents disbursements of more than $182,000 for\n and inappropriately paid approximately credit card expenses, real estate taxes, and\n $104,000 in management fees. other costs. Further, the owner did not\n obtain required HUD approval for American\n OIG recommended that HUD ensure West to serve as the project\xe2\x80\x99s management\n that the owner reimburses the project\xe2\x80\x99s agent and allowed another identity-of-\n operating account for the inappropriate interest project to retain $12,000 in project\n expenses and provides documentation for revenue.\n the unsupported payments or reimburses\n those amounts that cannot be supported to OIG recommended that HUD ensure\n the project\xe2\x80\x99s operating account. (Audit that the owner reimburses the project\xe2\x80\x99s\n Report: 2006-LA-1005) operating account for the ineligible\n disbursements and provides documentation\n HUD OIG reviewed the books and for the unsupported payments or\n records of the Villas at Camelback Crossing reimburses those amounts that cannot be\n Phase II, a 240-unit multifamily housing supported to the project\xe2\x80\x99s operating account.\n project located in Glendale, AZ, at the (Audit Report: 2006-LA-1006)\n request of HUD. HUD expressed concerns\n regarding the owner\xe2\x80\x99s use of project funds. HUD OIG reviewed the books and\n The objective was to determine whether the records of the Villas at Augusta Ranch, a 238-\n owner and its identity-of-interest unit multifamily housing project located in\n management agent used project funds only Mesa, AZ, at the request of HUD. HUD\n for reasonable operating expenses and expressed concerns regarding the owner\xe2\x80\x99s\n necessary repairs as required by the use of project funds. The objective was to\n regulatory agreement. determine whether the owner and its\n identity-of-interest management agent used\n The project\xe2\x80\x99s owner, Camelback project funds only for reasonable operating\n Crossing II Limited Partnership, and expenses and necessary repairs as required\n American West Communities, LLC, the by the regulatory agreement.\n project\xe2\x80\x99s general partner and identity-of-\n interest management agent, inappropriately The project\xe2\x80\x99s owner, Tegan\n used more than $1 million in project funds Communities, Inc., and American West\n for ineligible purposes during a period when Communities, LLC, the project\xe2\x80\x99s identity-of-\n the project did not have surplus cash interest management agent, inappropriately\n available for distribution and/or was in used more than $965,000 in project funds for\n\n\n64 HUD\xe2\x80\x99s Multifamily Housing Programs\n\x0cnonproject (ineligible) purposes in violation $32,800 from nonproject funds. (Audit\nof the regulatory agreement. The ineligible Report: 2006-LA-1003)\nuses included approximately $367,000 in\nwire transfers to unknown entities, HUD OIG reviewed the books and\napproximately $137,000 for payments on an records of The Sanctuary, a 39-bed assisted\nunauthorized line of credit, and $8,600 for living facility located in Geneva, OH. The\npayment of project construction costs. review was part of OIG\xe2\x80\x99s efforts to combat\nAdditional improper uses included more multifamily equity skimming on HUD\xe2\x80\x99s\nthan $78,000 paid to management agent Federal Housing Administration (FHA)\nsupervisory personnel and corporate insurance fund. OIG chose the project based\nofficers and net payments of approximately upon its negative surplus-cash position\n$72,000 to other identity-of-interest projects. since 2002 and indications that project funds\nThe owner lacked documentation to support or assets were not used as required. The\nadditional disbursements of more than objective was to determine whether the\n$246,200 for credit card expenses, legal owner/management agent used project\nexpenses, and other costs. Further, the funds in compliance with the regulatory\nproject did not obtain required HUD agreement and HUD\xe2\x80\x99s requirements.\napproval of its management agent and\ninappropriately paid more than $56,000 in Eld-Terra, Incorporated, the managing\nmanagement fees. general partner of The Sanctuary of Geneva\n Limited Partnership, improperly used more\n After OIG\xe2\x80\x99s audit, the project was sold, than $43,000 in project funds from February\nand the HUD-insured mortgage was paid 2003 through January 2005, when the project\nin full, canceling HUD\xe2\x80\x99s insurance liability was in a non-surplus-cash position. The\non the project. Accordingly, OIG did not general partner inappropriately disbursed\nrecommend repayment of the ineligible $37,000 to repay owner advances to the\ncosts identified but recommended that HUD project and approximately $1,000 for non-\npursue double damages remedies under the project-related legal services. Also, the\nequity skimming statues for the misuse of general partner lacked documentation to\nproject funds. (Audit Report: 2006-LA- support that more than $5,000 in project\n1007) funds was properly used.\n\n In response to a request from HUD\xe2\x80\x99s OIG recommended HUD require the\nOffice of Multifamily Housing in San general partner to reduce the project\xe2\x80\x99s\nFrancisco, CA, HUD OIG audited The management fee liability for the\nAvenue, a 145 bed assisted living facility. inappropriate payments, provide\nThe objective was to determine whether documentation to support the unsupported\nproject funds were administered in payments or reduce the project\xe2\x80\x99s\ncompliance with the regulatory agreement management fee liability for the appropriate\nand HUD requirements. amount, and implement procedures and\n controls to ensure that future repayments\n The project\xe2\x80\x99s owner misused more than of owner advances are made only from\n$32,800 in project funds by entering into a project surplus cash or with prior HUD\nfood service contract that had excessive approval and project funds are used\ncosts and paid Feng Shui Consulting for according to HUD\xe2\x80\x99s requirements. (Audit\nineligible expenses. Report: 2006-CH-1002)\n\n OIG recommended that HUD require\nthe owner to repay The Avenue more than\n\n\n\nHUD\xe2\x80\x99s Multifamily Housing Programs 65\n\x0c Section 8 Contract\n Administrators\n In response to a request from HUD, OIG\n audited the Idaho Housing and Finance\n Association in Boise, ID. The objective was\n to determine whether Idaho Housing\n monitored projects in accordance with its\n annual contributions contract with HUD to\n ensure that project funds were expended\n appropriately.\n\n Idaho Housing inappropriately allowed\n excessive owner distributions; duplicate and\n other unsupported reimbursements from\n replacement reserves; a conflict-of-interest\n to exist between itself and The Housing\n Company, a nonprofit owner of subsidized\n multifamily projects; and excessive\n management fees. These deficiencies\n resulted in questioned costs of more than\n $3.8 million and unsupported costs of more\n than $182,000.\n\n OIG recommended that HUD require\n Idaho Housing to reimburse the affected\n projects\xe2\x80\x99 residual receipts accounts for the\n excessive distributions, duplicate\n reimbursement, and excessive management\n fees; provide supporting documentation or\n reimburse the affected projects\xe2\x80\x99 replacement\n reserve accounts for unsupported\n reimbursements; and take corrective action\n to resolve the conflict of interest relationship.\n OIG also recommended that HUD obtain a\n formal legal opinion to determine whether\n the 1988 housing assistance payments\n amendments subject the owners of the\n projects to limitations on distributions in\n accordance with 24 CFR 883.702(e). (Audit\n Report: 2006-SE-1001)\n\n\n\n\n66 HUD\xe2\x80\x99s Multifamily Housing Programs\n\x0c Investigations falsified her reported income and failed to\n disclose property she owned in Sacramento,\n During this reporting period, OIG CA. Under the plea agreement, Williams\n opened 74 investigation cases and closed 105 agreed to pay HUD $45,072 in restitution for\n cases in the multifamily housing program Section 8 subsidies to which she was not\n area. Judicial action taken on these cases entitled.\n during the period included $3,931,894 in\n investigative recoveries, 60 indictments/ Carsereena Red Dog, a Section 8\n informations, 30 convictions/pleas/pretrial Moderate Rehabilitation recipient and\n diversions, 101 arrests, 1 civil action, 1 accountant for Opportunities Inc. (OI), a\n personnel action, and 81 administrative HUD funded nonprofit organization in\n actions. Great Falls, MT, along with Leslie Red Dog,\n also an OI Section 8 Moderate Rehabilitation\n recipient, were each indicted in U.S. District\nChart 4.2: Multifamily Housing Recoveries\n Court, District of Montana, Billings, MT, on\n Contract Fraud\n one count of conspiracy and one count of\n Embezzlement 1% Davis Bacon false statements to HUD. Carsereena and\n Section 8 2% 3%\n 9% False Statements Leslie Red Dog allegedly failed to report all\n 15% income on annual rental assistance\n recertification documents submitted to OI.\n As a result, HUD\xe2\x80\x99s loss is estimated at\n $36,000.\n Equity Skimming\n Total Recoveries $3,931,894 70% Rosalyn Tillery, a former Section 8\n tenant at La Salle Apartments, a HUD-\n subsidized multifamily housing complex,\n Multifamily rental assistance fraud is was indicted in U.S. District Court, Northern\n one of the investigative priorities for the District of California, San Francisco, CA, on\n Office of Investigation. OIG continues rental one count of making false statements to\n assistance fraud initiatives nationwide that HUD. From July 1995 through December\n will help reduce fraud in HUD rental 2001, Tillery allegedly failed to claim her\n assistance programs and support the employment with the County and City of\n HUD Rental Housing Integrity San Francisco or her 1997 purchase and co-\n Improvement Project (RHIIP). Some of the ownership of a single-family residence in\n investigations discussed in this report were Hercules, CA, on HUD documents. As a\n conducted jointly with Federal, State, and result, Tillery received approximately\n local law enforcement agencies. The $35,759 in Section 8 housing assistance to\n results of OIG\xe2\x80\x99s more significant which she was not entitled.\n investigations are described below.\n Shaneen Edwards, a Miami Department\n of Community Development (MDCD)\n Rental Assistance Fraud Section 8 tenant, was indicted in U.S. District\n Court, Southern District of Florida, Miami,\n Olandria Williams, a former Section 8 FL, on two counts of false statements to HUD\n tenant at Shoreview Apartments, a HUD- and 44 counts of theft of government funds.\n subsidized housing complex, pled guilty in Edwards allegedly concealed her\n the U.S. District Court, Northern District of employment as a teacher with the Miami-\n California, San Francisco, CA, to one count Dade County Public Schools to qualify for\n of false statements to HUD. Williams continued MDCD housing assistance, and\n\n\n\n HUD\xe2\x80\x99s Multifamily Housing Programs 67\n\x0c failed to use her subsidized unit as her Manila McCloud, a Miami Department\n primary residence. As a result, HUD of Community Development (MDCD)\n realized losses of $25,445. Section 8 tenant, was indicted in U.S. District\n Court, Southern District of Florida, Miami,\n Rhonda Olkowski, a former Section 8 FL, on one count of false statements to HUD\n tenant, South Middlesex Opportunity and 39 counts of theft of government funds.\n Council (SMOC), was sentenced in the U.S McCloud allegedly concealed her\n District Court, Boston, MA, to 6 months employment with Miami-Dade Transit\n probation and ordered to pay HUD $30,360 Agency to qualify for MDCD housing\n in restitution for her guilty plea to one count assistance and failed to use her subsidized\n of false statements on November 9, 2005. unit as her primary residence. As a result,\n From February 2001 to April 2004, HUD realized losses of $22,695.\n Olkowski, whose husband is a U.S. Federal\n Air Marshal, failed to report her husband\xe2\x80\x99s Alan C. Maki, a Section 8 tenant at\n income on SMOC documents. Canterbury Towers Apartments, a HUD-\n assisted multifamily housing complex, was\n charged in Worcester District Court,\n Worcester, MA, with perjury and larceny\n over $250 by false pretense. Maki allegedly\n failed to disclose his previous sex offender\n conviction on housing assistance\n documents.\n\n Eight Walnut Grove Apartment Section\n 8 tenants were arrested in Kansas City, MO,\n on outstanding felony warrants involving\n fraud, tampering, and other charges by the\n Kansas City, MO, Police Department; State\n of Missouri, Division of Family Services,\n Department of Social Services Investigation\n Section; and HUD OIG. Five of the felony\n warrants relate to housing assistance fraud\n cases filed against Walnut Grove project-\n based Section 8 tenants for failing to report\n income.\n\n Theft and Embezzlement\n Golam Mostafa, owner of Mostafa\n Contracting and T&MTT, construction\n companies based in Brooklyn, NY, was\n found guilty in U.S. District Court, Southern\n District of New York, New York, NY, on five\n counts of Federal income tax evasion and\n one count of filing a false Federal Income\n Tax Return. From 1997 through 2003,\n Mostafa Contracting and T&MTT received\n Copyright, 2006. Daily News - Boston, MA. $17,708,578 in HUD funds through ARCO,\n Reprinted with permission. a $425 million HUD contractor that\n\n\n\n68 HUD\xe2\x80\x99s Multifamily Housing Programs\n\x0cmanaged Caldwell Houses, Gates Avenue embezzled cash rents from tenants and utility\nHouses, Jose Diego Beekman, JD Beekman, reimbursements from HUD associated with\nMedgar Evers, Mott Haven 6, Willow Street these units. HUD\xe2\x80\x99s loss is $87,775.\nApartments, West Street Apartments,\nOxford Knolls Apartments, 31 North\nVirginia Avenue, Willard J. Price, and\n Other Fraud/Crimes\nPueblo, all HUD mortgagee in possession\n(MIP) multifamily properties. Mostafa\xe2\x80\x99s American Management Incorporated\ncontract with HUD/ARCO required him to (AMI), a property management company for\ncomplete all building and unit renovations HUD-owned multifamily properties, was\nand rehabilitations on HUD MIP named in a civil complaint filed in U.S.\nmultifamily properties, but Mostafa District Court, Eastern District of Michigan,\nsubcontracted building and unit Detroit, MI. AMI and its employees\nrenovations back to ARCO employees allegedly fabricated repair and service\ninstead. From 1998 through 2002, while subcontracts totaling $133,364 at HUD-\nunder contract with HUD/ARCO, Mostafa owned multifamily properties managed by\nsent approximately $7 million to Bangladesh AMI. The complaint further alleges AMI\nvia a money remitter, reporting this amount facilitated the issuance of purchase orders\nas a cost-of-goods-sold expense for income for employee labor previously paid by HUD.\ntax purposes. Mostafa was arrested on\nMarch 22, 2005, by HUD OIG and remains Mark Rolfsema, a former Section 8\nincarcerated. tenant, Andover Commons Apartments,\n was sentenced in U.S. District Court,\n Jill M. Trayner, former executive director, District of Massachusetts, Andover, MA, to\nUnited Methodist Retirement Center of 57 months incarceration and 3 years\nTampa, Inc., also known as Methodist Place, supervised release following his previous\na HUD multifamily housing complex for the guilty plea to possession of child\nelderly, pled guilty in U.S. District Court, pornography. Rolfsema possessed child\nMiddle District of Florida, Tampa, FL, to a one- pornography found during a search of his\ncount information charging her with theft of Section 8 apartment.\ngovernment funds. The plea agreement\nrequires Trayner to pay $366,228 in restitution Joel Hernandez Pedroso, was arrested\nto Methodist Place. Trayner diverted in Miami, FL, following the unsealing of a\nMethodist Place program funds into an Federal indictment charging Hernandez\nunknown account and used the funds to pay Pedroso with one count of conspiracy to\nher gambling, vehicle, credit card, and other commit fraud against the United States.\npersonal expenses. Trayner was arrested Hernandez Pedroso, in conjunction with\nafter her plea. employees of Maloney Properties and\n United Housing Management, allegedly\n Jessica Elaine Thompson Miller, Green facilitated and received approximately\nRiver Management, Inc., was charged in $8,000 in cash from at least five individuals\nState Court, Payne County, OK, Stillwater, in exchange for Section 8 subsidized units\nOK, with one count of embezzlement. From at several HUD-assisted multifamily\nMay 1992 until December 2003, Miller was housing complexes in Boston. During the\nthe on-site manager for Southern Heights investigation, Hernandez Pedroso fled to\nApartments, a HUD-subsidized multifamily Miami where he was arrested by HUD OIG,\ncomplex. Miller allegedly moved tenants into U.S. Marshal\xe2\x80\x99s Service, and the Miami Police\nvacant units, reported tenant move outs when Department.\ntenants remained in their apartments, and\n\n\n\nHUD\xe2\x80\x99s Multifamily Housing Programs 69\n\x0c Copyright, 2006. The Enterprise - Brockton, MA. Reprinted with permission.\n\n\n Wanda Mercado, former Property on Mercado\xe2\x80\x99s personal residence in\n Manager for Peabody Properties, was Brockton, MA.\n indicted in U.S. District Court, Boston, MA,\n on five counts of bribery. Mercado solicited Francis Oppong, an illegal resident of\n and accepted approximately $26,000 in Lincoln Village Apartments, a HUD-assisted\n bribes from five Section 8 applicants in multifamily housing complex, was arrested\n exchange for subsidized rental units at in Worcester, MA, on an outstanding\n Schoolhouse 77, a Boston multifamily Immigration and Customs Enforcement\n complex. In addition to criminal charges, deportation warrant.\n Peabody Properties placed a $350,000 lien\n\n\n\n\n70 HUD\xe2\x80\x99s Multifamily Housing Programs\n\x0c Chapter 5\nHUD\xe2\x80\x99s Community Planning\nand Development Programs\n\x0c The Office of Community Planning and eligible activities and adequately monitored\n Development (CPD) seeks to develop viable their performance to ensure they were paid\n communities by promoting integrated in accordance with the contract terms, met\n approaches that provide decent housing, contract objectives, and properly accounted\n suitable living environments, and expanded for Emergency Demolition and Repair\n economic opportunities for low- and program income.\n moderate-income persons. The primary\n means toward this end is the development The City paid more than $1 million in\n of partnerships among all levels of ineligible costs associated with 5 of the 17\n government and the private sector. activities reviewed. Of the ineligible costs,\n more than $831,000 related to activities\n Audits ineligible under the CDBG program, and\n approximately $207,000 related to an activity\n that was ineligible under the cited eligibility\n During this reporting period, the Office\n category. OIG also identified more than\n of Inspector General (OIG) issued eight\n $394,000 allocated for ineligible activities for\n external audit reports in the CPD program\n the City\xe2\x80\x99s CDBG program year beginning\n area. These reports disclosed nearly $2\n July 1, 2005. In addition, although the City\n million in questioned costs and more than\n paid subrecipients in accordance with the\n $1 million in recommendations that funds\n contracts, we could not always determine\n be put to better use.\n whether the contract objectives were met.\n OIG audited Community Development\n The City also did not properly account\n Block Grant (CDBG) program, Home\n for approximately $147,000 in CDBG\n Investment Partnership program (HOME),\n program income generated through its\n and Special Purpose Grants program.\n Emergency Demolition and Repairs\n program. In addition, more than $525,000\n in receivables is at risk of not being returned\n Chart 5.1: Community Planning and because of ineffective internal controls over\n Development Dollars the program receipts.\n 5,000,000\n 4,000,000\n OIG recommended that HUD require\n the City to develop and implement\n 3,000,000\n procedures to ensure that only eligible\n 2,000,000\n activities meeting CDBG program objectives\n 1,000,000 are funded. In addition, HUD should\n 0 require the City to repay more than $831,000\n Questioned Costs Funds Put to Better Use\n in ineligible costs, repay approximately\n $207,000 in costs that were improperly\n classified as direct homeownership\n Community Development assistance, reprogram more than $394,000\n Block Grant Program allocated for ineligible activities in the\n program year beginning July 1, 2005, repay\n more than $62,000 in Emergency Demolition\n HUD OIG audited the City of Hartford,\n and Repair program income, and provide\n CT, Division of Grants Management,\n support for or repay the more than $85,000\n regarding its administration of the CDBG\n in Emergency Demolition Repair program\n program in response to a Hotline complaint.\n payments. (Audit Report: 2006-BO-1001)\n The objectives were to determine whether\n the City awarded grants to subrecipients for\n\n\n\n72 HUD\xe2\x80\x99s Community Planning and Development Programs\n\x0c This is the sixth of HUD OIG\xe2\x80\x99s ongoing\naudits of the Lower Manhattan\n Special Purpose Grant\nDevelopment Corporation\xe2\x80\x99s administration Program\nof the CDBG Disaster Recovery Assistance\nfunds, which were provided to the State of HUD OIG audited NorthStar\nNew York as a result of the September 11, Community Development Corporation\xe2\x80\x99s\n2001, terrorist attacks on the World Trade Economic Development Initiative \xe2\x80\x93 Special\nCenter in New York City, NY. The auditee Purpose Grant in Detroit, MI, as part of its\ndisbursed $64 million of these funds during 2005 annual audit plan. OIG chose\nOIG\xe2\x80\x99s audit period of April 1 through NorthStar\xe2\x80\x99s Grant because it disbursed 90\nSeptember 30, 2005. The objectives of the percent or more of its funds. The objectives\ncurrent review were to determine whether were to determine whether NorthStar used\nthe auditee disbursed the funds in its Grant funds in accordance with HUD\xe2\x80\x99s\naccordance with HUD-approved action requirements and recorded HUD\xe2\x80\x99s interest\nplans, expended the funds for eligible on the assisted properties.\nplanning and administrative expenses in\naccordance with applicable laws and NorthStar improperly used more than\nregulations, and maintained a financial $123,000 in Grant funds and lacked\nmanagement system that adequately documentation to support that nearly $2,000\nsafeguarded the funds. in Grant funds was used according to\n NorthStar\xe2\x80\x99s amended budget. In addition,\n The auditee generally disbursed NorthStar used more than $184,000 in Grant\nDisaster Recovery Assistance funds in funds to acquire or aid in the acquisition of\naccordance with the HUD-approved action and/or rehabilitate real property; however,\nplans. The auditee also expended the funds it did not place covenants on the properties\xe2\x80\x99\nfor eligible planning and administrative titles, assuring nondiscrimination based on\nexpenses in accordance with applicable laws race, color, national origin, or handicap.\nand regulations and maintained a financial Further, NorthStar did not record HUD\xe2\x80\x99s\nmanagement system that adequately interest on the properties\xe2\x80\x99 titles.\nsafeguarded the funds. However,\nweaknesses in the auditee\xe2\x80\x99s control OIG recommended that HUD\nprocedures permitted funds to be disbursed require NorthStar to reimburse HUD\ncontrary to the terms of its subrecipient from nonfederal funds for the\nagreements and charged to the wrong inappropriate expenses; provide\nprogram. More than $259,000 was supporting documentation or reimburse\ndisbursed contrary to a subrecipient HUD for unsupported expenses; implement\nagreement, $7.5 million was disbursed for procedures and controls to address the\neligible costs but without auditee approval deficiencies identified; and record covenants\nas required, and more than $7,000 was and liens on the titles. If the covenants and\ncharged to the wrong program. liens are not recorded, NorthStar should\n reimburse HUD the more than $184,000\n OIG recommended that HUD require used on the properties. (Audit Report: 2006-\nthe auditee to obtain reimbursement for the CH-1006)\nmore than $259,000 disbursed contrary to\nthe subrecipient agreement, strengthen its HUD OIG audited the City of St. Ignace,\ncontrols over the Disaster Recovery MI\xe2\x80\x99s Economic Development Initiative \xe2\x80\x93\nAssistance funds to ensure that funds are Special Purpose Grant as part of its 2005\nnot disbursed without proper approval and/ annual audit plan. OIG chose the City\xe2\x80\x99s\nor authorization, and obtain reimbursement grant because it had disbursed 90 percent\nfor more than $7,000 charged to the wrong or more of its funds. The objectives were to\nprogram. (Audit Report: 2006-NY-1006)\n\nHUD\xe2\x80\x99s Community Planning and Development Programs 73\n\x0c determine whether the City used its Grant OIG recommended that HUD require\n funds in accordance with HUD\xe2\x80\x99s the City to record a covenant on the title,\n requirements and recorded HUD\xe2\x80\x99s interest assuring nondiscrimination based on race,\n on the assisted property. color, national origin, or handicap and\n record a lien on the property title for the\n The City used the Grant funds in access road showing HUD\xe2\x80\x99s interest in the\n accordance with HUD\xe2\x80\x99s requirements. It assisted property. If the covenant and lien\n used the funds to pay for the construction are not recorded, the City should reimburse\n of the St. Ignace Public Library. However, HUD approximately $47,600 for the Grant\n it did not place a covenant on the property funds used to pay for the construction of the\n title for the library, assuring access road. (Audit Report: 2006-CH-1003)\n nondiscrimination based on race, color,\n national origin, or handicap. Supportive Housing Program\n OIG recommended that HUD assure HUD OIG audited the Fontana Native\n the covenant, executed on October 18, 2005, American Indian Center in Fontana, CA, in\n on the library\xe2\x80\x99s property title, ensuring response to a request from HUD. The\n nondiscrimination based on race, color, objectives were to determine whether the\n national origin, or handicap, includes HUD\xe2\x80\x99s Center administered its Supportive Housing\n remedies in the event that discrimination Program grant in accordance with HUD\n occurs. The appropriately executed requirements and its grant agreement.\n covenant with HUD\xe2\x80\x99s remedies should help\n ensure that the City protects HUD\xe2\x80\x99s interest The Center spent more than $194,500\n in the more than $223,000 in Grant funds in grant funds for ineligible, unsupported,\n used for the library. (Audit Report: 2006- and unnecessary expenses. Additionally, the\n CH-1001) Center \xe2\x80\x99s financial management and\n record-keeping systems were inadequate.\n HUD OIG audited the City of\n Rhinelander, WI\xe2\x80\x99s Economic Development HUD OIG recommended that HUD\n Initiative \xe2\x80\x93 Special Purpose Grant. OIG require the Center to reimburse the grant or\n chose the City\xe2\x80\x99s grant because it had repay HUD for the ineligible, unsupported,\n disbursed 90 percent or more of its funds. and unnecessary expenses. OIG also\n The objectives were to determine whether recommended that HUD require the Center\n the City used its Grant funds in accordance to establish and implement financial\n with HUD\xe2\x80\x99s requirements and recorded management and record-keeping systems\n HUD\xe2\x80\x99s interest on the assisted property. that meet Federal requirements and not\n award the Center additional funding until\n The City used the Grant funds in it has implemented adequate systems and\n accordance with HUD\xe2\x80\x99s requirements. It controls. (Audit Report: 2006-LA-1009)\n used $120,000 in Grant funds to pay for the\n reconstruction of U.S. Highway 8, which In response to a complaint from the\n included the construction of a rail spur Government Accountability Office (GAO),\n crossing and access road. However, it did HUD OIG completed a limited review of\n not place a covenant on the property title Women Rising, Inc., located in Jersey City,\n for the access road, assuring NJ. The complaint generally alleged that the\n nondiscrimination based on race, color, grantee was misappropriating funds in\n national origin, or handicap. Further, HUD regard to reimbursable expenses and the\n did not request that the City record HUD\xe2\x80\x99s payment of salaries under its Program\n interest on the access road\xe2\x80\x99s property title. Home, part of HUD\xe2\x80\x99s Supportive Housing\n program. The review objectives were to\n\n\n74 HUD\xe2\x80\x99s Community Planning and Development Programs\n\x0cdetermine whether the allegations in the\ncomplaint were valid, the grantee had\nadequate controls over disbursements and\ndrawdowns, and the grantee\xe2\x80\x99s cost\nallocation plan was approved by HUD.\n\n The allegations in the complaint\nregarding HUD funding were not valid. The\ngrantee generally had adequate controls\nover disbursement and drawdowns;\nhowever, more than $94,000 of the final\ndrawdown was not supported by invoices\nor evidence that costs were incurred.\nAdditionally, the grantee\xe2\x80\x99s cost allocation\nplan had not been approved by HUD.\n\n OIG recommended that the grantee be\ndirected to provide documentation to\nsupport more than $94,000 in drawdowns\nor reimburse HUD for the unsupported\ncosts. In addition, the grantee should ensure\nthat all drawdowns are properly supported\nwith documentation and submit its cost\nallocation plan to HUD for review and\napproval. (Audit Report: 2006-NY-1002)\n\n\n\n\nHUD\xe2\x80\x99s Community Planning and Development Programs 75\n\x0c Investigations probation and ordered to pay the U.S.\n Department of Justice (DOJ) $5,000 in\n During this reporting period, OIG restitution. On December 14, 2005, Lippa\n opened 42 investigative cases and closed and Mark Stedman, former City of\n 36 cases in the CPD program area. Judicial Rochester rehabilitation specialists, were\n action taken on these cases during the sentenced for their earlier guilty pleas to one\n period included $8,205,359 in investigative count of bribery. Lippa was sentenced to 5\n recoveries, 43 indictments/informations, months incarceration, 5 months home\n 13 convictions/pleas/pretrial diversions, 49 confinement, and 3 years probation; fined\n arrests, 2 civil actions, 3 personnel actions, $3,000; and ordered to perform 40 hours of\n and 17 administration actions. community service. Stedman was sentenced\n to 2 years probation and 6 months home\n confinement and fined $1,000. Lippa and\n Chart 5.2: Community Planning and Stedman solicited kickbacks from\n Development Recoveries contractors in exchange for City of\n Rochester rehabilitation contracts. The City\n False Statements Embezzlement\n 1% 11% of Rochester Rehabilitation program\n Theft of Government Kickbacks receives $2 million yearly in HUD CDBG\n Property\n 2%\n 3% and HOME grant funds to rehabilitate\n housing for low-income families in the City\n of Rochester.\n\n Public Corruption\n Emmanuel Onunwor, the former mayor\n 83% and director of East Cleveland Department\n Total Recoveries $8,205,359\n of Community Development (ECDCD), a\n HUD-funded organization, and Cuyahoga\n Metropolitan Housing Authority (CMHA)\n Some of the investigations discussed in\n Section 8 landlord, was sentenced in U.S.\n this report were conducted jointly with\n District Court, Northern District of Ohio,\n Federal, State, and local law enforcement\n Cleveland, OH, to 9 years in prison and 3\n agencies. The results of OIG\xe2\x80\x99s more\n years probation and ordered to pay the\n significant investigations are described\n Bankruptcy Court and Internal Revenue\n below.\n Service (IRS) $5,111,000 in restitution.\n Onunwor was convicted of violating the\n Public Corruption Racketeering Influenced Corrupt\n Organizations Act (RICO), mail fraud,\n Jose Cipolla, a contractor with Mardell extortion, witness tampering, and filing false\n Construction Company, and Frank Guido, Federal income tax returns from 1998 to\n owner of Franklin Construction Company, 2002. Onunwor solicited and received\n were sentenced in U.S. District Court, bribes, kickbacks, and secret payoffs\n Western District of New York, Rochester, through intermediaries using HUD funds as\n NY, following their earlier guilty pleas to one an inducement for contractor bribes while\n count of perjury for lying to a Federal grand he was director of ECDCD and mayor of East\n jury by denying they paid kickbacks to City Cleveland. In addition, Onunwor filed false\n of Rochester rehabilitation specialist David disclosure forms with the Ohio Ethics\n Lippa. Cipolla was sentenced to 6 months Commission and failed to disclose his receipt\n home confinement and 5 years probation of Section 8 housing assistance payments\n and ordered to pay HUD $5,000 in from CMHA to the Bankruptcy Court or IRS.\n restitution; Giudo was sentenced to 5 years\n\n\n\n76 HUD\xe2\x80\x99s Community Planning and Development Programs\n\x0c Copyright, 2006. Downtown Express - New York, NY. Reprinted with permission.\n\n\n Mark Marcucilli, assistant director of September 11, 2001, terrorist attacks. Mark\nhousing management, New York State Marcucilli was arrested on December 21,\nDivision of Housing and Community 2005.\nRenewal (DHCR), and his father, Fred\nMarcucilli, were each indicted in U.S. Warren Godbolt, former executive\nDistrict Court, New York, NY, on eight director, Progressive Training Associates\ncounts of conspiracy to commit mail fraud (PTA), a non-profit organization receiving\nand theft of government funds. The funds through HUD\xe2\x80\x99s Supportive Housing\nMarcucillis allegedly deceived and obtained Program, and Ernest Newton, a former State\nHUD and Lower Manhattan Development senator, were sentenced in U.S. District\nCorporation (LMDC) funds by falsely Court, Bridgeport, CT, followingtheir\nclaiming residence in the lower Manhattan earlier guilty pleas. Godbolt was sentenced\nWorld Trade Center area. HUD provided to 6 months home confinement, 5 years\n$2.7 billion for LMDC, an organization probation, and ordered to perform 300 hours\ncreated to coordinate the rebuilding and of community service and pay a $25,000 fine.\nrevitalization of lower Manhattan after the Godbolt pled guilty on August 2, 2005, to\n\n\nHUD\xe2\x80\x99s Community Planning and Development Programs 77\n\x0c two counts of bribery and one count of the former Springfield Housing Authority\n conspiracy for embezzling more than executive director, facilitated Keough\xe2\x80\x99s\n $100,000 from PTA, which he used for a receipt of $50,000 in consulting fees from a\n cruise and to purchase a BMW automobile publicly funded housing project for\n and for paying a $5,000 bribe to Newton for negotiating a Hampden County position for\n his assistance in securing a $125,000 grant his son, James Asselin. James Asselin was\n for PTA. Newton was sentenced to 5 years convicted of embezzling more than $600,000\n prison and 3 years probation and ordered from a CDBG-funded agency in March 2004.\n to pay the State of Connecticut Elections\n Enforcement Commission approximately\n $14,000 in restitution. Newton pled guilty\n on September 20, 2005, to one count of\n bribery, one count of mail fraud and one\n count of tax evasion, for accepting a $5,000\n bribe from Godbolt and assisting PTA in\n securing a $125,000 grant.\n\n Francis G. Keough III, the former\n director of Friends of the Homeless, Inc.\n (FOH), Angel T. Guzman, and Michael P.\n Hallahan, former employees of FOH, were\n charged in a 50-count superseding\n indictment with conspiracy to defraud the\n U.S. Government, obstruction of justice,\n extortion, mail fraud, theft of honest\n services, false statements, perjury, criminal\n contempt, filing false Federal income tax\n returns, and witness tampering in U.S.\n District Court, Springfield, MA. The\n superseding indictment also seeks more\n than $1 million in forfeitures. On January\n 13, 2006, Guzman and Hallahan were\n arrested; Keough remains in Federal\n custody pending trial.\n\n The superseding indictment charges\n Keough, Guzman, and Hallahan with\n receiving CDBG and Emergency Shelter\n Grants funds for their personal use and\n conspiring to produce and issue false\n documents. Further charges allege Keough\n received more than $225,000 in salary\n payments to which he was not entitled,\n concealed income and expenses to avoid\n paying Federal income tax, pilfered\n appliances from FOH, used shelter and city\n employees to rehabilitate his beach house\n in Rhode Island, and provided jobs and Copyright, 2006. The Republican - Springfield, MA.\n housing in exchange for sex or cash. The Reprinted with permission.\n indictment also alleges Raymond Asselin,\n\n\n78 HUD\xe2\x80\x99s Community Planning and Development Programs\n\x0c Reverend Lamar Wright, president and administered by HIV Services, was\nchief executive officer of Save Our Children sentenced to 3 months home confinement\nCommunity Project (SOCC) and SOCC and 3 years probation and ordered to pay\nsubsidiary People United For Change the Arkansas Department of Human\n(PUFC), nonprofits funded by HUD, signed Services $15,427 in restitution. On October\na pretrial diversion agreement in U.S. 4, 2005, Langston pled guilty to one count\nDistrict Court, Eastern District of Arkansas, of theft of Federal property. From May 2003\nLittle Rock, AR, and agreed to pay the through March 2004, Langston admitted\nArkansas Department of Human Services taking approximately $16,000 from a PV\n$14,000 in restitution and perform 100 hours bank account, creating a false invoice, and\nof community service in return for 18 giving $2,000 to codefendant Thrower.\nmonths deferred adjudication. Wright, Langston kept the remaining funds,\npreviously indicted on June 7, 2005, approximately $14,000, for services he never\nadmitted to aiding and abetting in the theft performed.\nof Federal grant money. From April 2002\nthrough January 2003, Wright transferred Richard Goyette, mayor of Chicopee,\nFederal grant money from SOCC and PUFC MA, was indicted in U.S. District Court,\nbank accounts to his personal account; wrote Springfield, MA, on two counts of extortion.\nchecks from his personal account to Goyette allegedly extorted two $5,000 cash\ncodefendant Lola Thrower, the former campaign contributions: one from a\nprogram administrator for Human developer holding a contract with\nImmunodeficiency Virus (HIV) Services, Chicopee\xe2\x80\x99s Office of Economic Development\nArkansas Department of Health, a HUD- (ECD), a HUD funded entity, and the second\nand Health and Human Services (HHS)- from a local towing company. In return for\nfunded State organization; and fabricated the cash contributions, Goyette allegedly\ninvoices and other documents to hide the promised the developer he would intercede\nmoney transfers and personal checks to on his behalf in a planned ECD project and\nThrower. In addition, Lee Langston, former promised the towing company continuation\nexecutive director of Positive Voices (PV), a of city contracts. Goyette was arrested on\nnonprofit subgrantee of Federal funds November 1, 2005.\n\n\n\n\n Copyright, 2006. The Republican - Springfield, MA. Reprinted with permission.\n\n\nHUD\xe2\x80\x99s Community Planning and Development Programs 79\n\x0c Copyright, 2006. The Republican - Springfield, MA. Reprinted with permission.\n\n\n Anthony M. Ardolino, former Empire State Development Corporation\n Springfield City chief of staff, Chester J. (ESDC) of $ 118,876 in Federal grant money.\n Ardolino, former Springfield police officer, ESDC is a HUD-funded nonprofit\n and Matthew D. Campagnari, a real estate established to provide assistance to\n developer, were indicted in U.S. District businesses in lower Manhattan after the\n Court, Springfield, MA, on 16 counts of September 11, 2001, terrorist attacks. Sheng\n conspiracy to defraud the U.S. Government Yu, president of American McKinley\n filing false Federal income tax returns, and Venture Management, Inc., allegedly\n witness tampering. A fourth individual, obtained a Business Recovery Grant (BRG)\n John J. Walsh, doing business as J. Walsh and attempted to fraudulently obtain a\n and Sons Building and Remodeling, was Small Firm Attraction and Retention\n also charged with perjury and obstruction Grant (SFARG) through ESDC.\n of justice. Anthony Ardolino allegedly\n attempted to steer HUD CDBG funds to the Jarmena To, a General Services\n Fa\xc3\xa7ade program, a program established Administration (GSA) employee, pled guilty\n to renovate downtown Springfield in U.S. District Court, Southern District of\n storefronts. Several bars owned by the New York, New York, NY, to one count of\n Ardolinos and Campagnari were included theft of government funds. To, indicted on\n in the storefront renovations. The July 1, 2005, fraudulently obtained Lower\n defendants were arrested on October 31, Manhattan Development Corporation\n 2005, after the indictments were unsealed. (LMDC) grant funds after subletting and\n relocating from a LMDC qualified\n Theft/Embezzlement apartment. LMDC, a HUD-funded\n nonprofit, was created to assist in the\n revitalization of lower Manhattan after the\n Chang Sheng Yu, a Chinese national and September 2001 terrorist attacks.\n resident of Queens, NY, was arrested and\n indicted on eight counts of theft of\n Yvonne Grimes, former executive\n government funds, mail fraud, and\n director, Amistad Development Corporation\n submission of false Social Security numbers\n (ADC), a HUD-funded nonprofit, pled guilty\n for his role in a scheme to defraud HUD and\n in Court of Common Pleas, Cuyahoga\n\n\n80 HUD\xe2\x80\x99s Community Planning and Development Programs\n\x0cCounty, Cleveland, OH, to forgery and submitting a fictitious HUD block grant\ntheft. Grimes was sentenced to 2 years study and false documentation supporting\nprobation and ordered to pay HUD $1,200 $30,000 in phony expenses to the City of\nin restitution. Grimes prepared, signed, and Milwaukee.\nsubmitted a claim for a round-trip airline\nticket she did not use and expended ADC In a Civil Judgment filed in U.S. District\nfunds to pay personal expenses. Court, New York, NY, Arthur Gregory\n agreed to pay $36,500 to settle civil fraud\n Letitia Slack, a former employee of East charges filed by the U.S. Government under\nSaint Louis Community Development the False Claims Act. Gregory submitted\n(ESLCD), was sentenced in U.S. District false lease documents and secured two Small\nCourt, Southern District of Illinois, East St. Business grants from the World Trade Center\nLouis, IL, to 18 months in prison and Small Firm Attraction and Retention Grant\nordered to pay HUD $158,279 in restitution Program (SFARG), a HUD-funded nonprofit\nand $41,588 in delinquent taxes. On organization created to redevelop lower\nNovember 3, 2005, Slack pled guilty to an Manhattan after the September 11, 2001,\ninformation charging her with mail fraud terrorist attacks.\nand tax evasion. Slack admitted she\nembezzled $158,279 from ESLCD, a James Thomas Jr., owner of Thomas\nnonprofit organization funded by HUD Wrecking, pled guilty to an Information filed\nthrough the HOME and CDBG programs. in U.S. District Court, Eastern District of\nFrom 2002 to 2005, Slack created false Missouri, St. Louis, MO, charging him with\nvendor numbers and invoices to receive one count of Federal income tax evasion.\nchecks for services and materials not Thomas admitted using his company as the\nprovided. Slack, using her personal \xe2\x80\x9cfront company\xe2\x80\x9d for Spiritas Wrecking to\nchecking account, deposited and spent the satisfy the HUD-funded St. Louis\nfictitious vendor payments. Community Development Authority\xe2\x80\x99s\n (CDA) regulations relating to minority\nOther Fraud/Crimes business participation in the renovation of\n old St. Louis City Hospital. Thomas\n funneled Spiritas Wrecking payroll checks\n Mhammad Aziz Abu-Shawish was through his company to make it appear as if\nsentenced in U.S. District Court, Eastern a minority contractor was involved in the St.\nDistrict of Wisconsin, Milwaukee, WI, to 3 Louis City Hospital project, as certified to\nyears incarceration and 3 years supervised CDA. Thomas agreed to run Spiritas\xe2\x80\x99 payroll\nrelease, ordered to pay HUD $75,000 in through his company in return for Spiritas\nrestitution, and fined $1,000. On July 13, forgiving a debt owed by Thomas.\n2005, Abu-Shawish was found guilty of\n\n\n\n\nHUD\xe2\x80\x99s Community Planning and Development Programs 81\n\x0c\x0c Chapter 6\nHurricane Relief Oversight\n\x0c \xe2\x80\x9cI think it\xe2\x80\x99s important to\n remember why we\xe2\x80\x99re here.\n We\xe2\x80\x99re here for one reason: to\n help the citizens and\n communities affected by\n Hurricane Katrina. \xe2\x80\xa6 The\n road to full recovery is long\n and I expect that we will be\n there every step of the way to\n support the process that helps\n the displaced families and\n disaster-stricken communities\n rebuild, recover, and reclaim\n their lives.\xe2\x80\x9d\n Remarks by Inspector General\n Kenneth M. Donohue regarding\n the hurricane-affected States\n while in Biloxi, MI - March 3, 2006.\n\n\n\n Introduction and Background\n Hurricanes Katrina, Rita, and Wilma The destruction and aftereffects of\n had a dramatic impact on HUD\xe2\x80\x99s Gulf Coast Hurricanes Katrina, Wilma, and Rita will\n operations as well as residents, HUD present challenges to HUD OIG that will far\n employees, and the business community. surpass the reconstruction of lower\n The potential losses to HUD and its housing Manhattan following the September 11\n and community development programs are attack. HUD OIG\xe2\x80\x99s continuing oversight of\n significant. OIG\xe2\x80\x99s Offices of Audit and the funds allocated to the Lower Manhattan\n Investigation continue to maintain a Redevelopment Corporation has become a\n presence in the Gulf Coast disaster area. template on how to oversee funds allocated\n HUD OIG has established a base of to recovery from such disasters.\n operations in New Orleans and has Consequently, the HUD OIG audit and\n established new offices in Baton Rouge, LA, investigative staffs have started to provide\n and Hattiesburg, MS. To accomplish its a continuing and comprehensive review of\n goals, OIG will readdress its available assets the expenditure of funds and will stand\n and will reallocate them as availability and guard against those who would seek to\n demand rise. HUD OIG foresees and defraud the government.\n anticipates a continuing leadership role in\n detecting and preventing fraud regarding\n disaster recovery funding in the Gulf Coast\n States and elsewhere.\n\n\n\n\n84 Hurricane Relief Oversight\n\x0cAudit Is monitoring/analyzing HUD\n contracting efforts relating to disaster\n In the wake of the Gulf Coast disaster, recovery efforts as part of the U.S.\nthe HUD OIG Office of Audit has responded Department of Health and Human\nquickly to establish an office for Hurricane Services (HHS) Contract Oversight\nKatrina oversight to prepare for the long Task Force.\nprocess of recovery. The Office of Audit and\nHUD are not generally first responders; Is working with OIG legal counsel to\nhowever, the Office of Audit has established gain access to FEMA data for\nan office, developed an audit plan, and matching purposes.\nbegun reviews in the disaster areas. The\nOffice of Audit\xe2\x80\x99s initial assignment was to Is conducting an internal audit of the\nevaluate HUD\xe2\x80\x99s use of real estate owned HUD contracting process relating to di-\n(REO) properties to house disaster evacuees. saster recovery.\nIt also is performing audits of the more than\n$17 million in contracts issued for disaster- Is monitoring the FEMA mission\nrelated procurement activities. These assignment activities and internal\nreviews are timely and will assist in controls.\nestablishing a presence and acting as a real-\ntime deterrent to waste and abuse in HUD\xe2\x80\x99s\nactivities. Below is a summary of the\nongoing Katrina audit-related activities.\n\n HUD OIG, Office of Audit, Hurricane\nRecovery Audit Oversight Division\n\n Has started audits of HUD\xe2\x80\x99s use of\n REO properties to house disaster\n evacuees including management and\n marketing contractors\xe2\x80\x99 rehabilitation\n cost billings.\n\n Is currently reviewing two\n management and marketing\n contractors in two States.\n\n Is identifying/analyzing all fund\n drawdowns (usage) by PHAs in the\n disaster areas for audit and\n investigation followup.\n\n Has identified PHAs providing\n KDHAP vouchers; is planning an\n audit of the KDHAP voucher process/\n matching review.\n\n Has reviewed all HUD waivers to\n assure that statutory requirements are\n not waived.\n\n\nHurricane Relief Oversight 85\n\x0c Investigations (SAR) that will be given to HUD grantees,\n subgrantees, and others associated with\n The HUD OIG Office of Investigation delivering disaster funds. The SAR is a\n immediately responded to the HUD method of informing HUD OIG of suspected\n challenges and role in rebuilding the Gulf irregularities in the delivery of HUD\n Coast by establishing the Hurricane Katrina program money. OIG forensic auditors have\n Fraud Task Force (HKFTF). This task force been assigned to review temporary housing\n works jointly with the Federal Bureau of programs and FEMA payments to HUD-\n Investigation (FBI), the U.S. Department of assisted housing residents. OIG plans to use\n Justice (DOJ) Command Center in Baton forensic auditors to review all programs that\n Rouge, LA and State investigative agencies are not audited by the Office of Audit.\n to investigate fraud in all HUD programs\n affected by the hurricanes in the Gulf. HUD OIG opened 18 cases during the\n HKFTF is based in New Orleans with semiannual reporting period, ending March\n personnel also assigned in Arlington and 31, 2006, which resulted in six indictments,\n Houston, TX; Baton Rouge, LA; and six arrests, and two convictions.\n Hattiesburg, MS.\n Hurricane-Related Benefit\n To assist with the many oversight\n responsibilities of an endeavor of this Fraud\n magnitude, the Hurricane Recovery\n Oversight Division (HROD) was also Carolyn Richard and George Davis III\n established in the Office of Investigation were convicted by a Federal jury in\n Headquarters. HROD is responsible for: Harrisburg, PA, for providing false\n (1) liaison; (2) research, analysis and information on their applications for\n recommendations; (3) monitoring, reporting emergency housing through the Housing\n and dissemination; and (4) strategic Choice Voucher and public housing\n planning and implementation of Office of programs. Richard and Davis, who\n Investigation directives associated with relocated to Columbia, PA, from New\n disaster assistance and recovery. Orleans, LA, following Hurricane Katrina,\n applied for housing assistance with\n The Office of Investigation has created Lancaster City Housing Authority (LCHA)\n a far-reaching fraud prevention program but failed to report their extensive criminal\n designed to (1) create a training course for histories, including Richard\xe2\x80\x99s incarceration\n agents/auditors and program officials to in Louisiana and later release as a result of\n teach them to identify fraud in CPD/grant Hurricane Katrina flooding.\n programs; (2) sponsor fraud prevention\n meetings between HUD OIG and the major Gilbert Gasice, a housing choice\n programs of HUD; and (3) sponsor fraud voucher recipient, was indicted in U.S.\n prevention meetings between HUD OIG and District Court, Eastern District of California,\n industry groups, the Mortgage Bankers Sacramento, CA, on two counts of mail and\n Association, the Public Housing Authorities wire fraud, and two counts of making false\n Directors Association, the National statements. Gasice was arrested in\n Association of Housing and Redevelopment Georgetown, CA, after he allegedly schemed\n Officials, private insurance companies, to defraud the County of Sacramento, when\n multifamily owners, public housing it was discovered that he claimed to have\n executive directors, State governments, and been a victim of Hurricane Katrina and\n economic development agencies. As part of received monetary and lodging aid from the\n our fraud prevention program, HUD OIG Red Cross and other charitable\n has created a suspicious activity report organizations. As a part of his scheme,\n\n\n86 Hurricane Relief Oversight\n\x0cGasice moved from his subsidized unit in In Baton Rouge, LA, Assistant Inspector\nSacramento, CA, and relocated to General for Investigation (AIGI) Joseph\nGeorgetown, CA, but failed to report his Haban, DAIGI John McCarty, and Assistant\nmove from the subsidized unit as required Special Agent in Charge (ASAC) Thomas\nand failed to live in the subsidized unit as Luke of HKFTF briefed DOJ Command\nhis sole residence. The loss to HUD is Center members consisting of the U.S.\napproximately $6,000. Attorneys from Louisiana and Mississippi\n as well as FBI special agents. The Command\n Jermine O. White, Stevie Lawson, and Center is directed by U.S. Attorney David\nMorris L. Singleton were arrested and Dugas of the Middle District of Louisiana.\nindicted in Baton Rouge, LA, for falsely The briefing covered HUD programs\nrepresenting themselves as hurricane affected by the hurricanes and the\nevacuees displaced from public housing due opportunity for fraud to be committed\nto Hurricane Katrina and using their status within FHA single-family and multifamily\nas hurricane evacuees to receive FEMA programs, CPD grants, and public housing.\nmonetary assistance. The investigation Early coordination was established for\ndetermined that White, Lawson, and exchange of data, joint investigations, and\nSingleton did not live in public housing strategies of future initiatives.\nduring the hurricanes and received benefits\nto which they were not entitled. AIGI Joseph Haban, DAIGI John\n McCarty, and ASAC Thomas Luke met\nHurricane-Related OIG the senior State management teams with\n both the Mississippi Development\nHotline Authority and the Louisiana Recovery\n Authority in Jackson, MS, and Baton\n During this reporting period, the Rouge, LA, respectively, to discuss their\nHotline received and processed 81 action plans for the use of HUD CDBG\ncomplaints related to Hurricanes Katrina, in rebuilding their communities. They\nRita, and Wilma. discussed means by which to combat fraud\n opportunities and audit weaknesses within\nHurricane-Related their plans. They agreed to develop a\n proactive program integrity campaign\nOutreach directed at homeowners, contractors, and\n employees of the States.\n In Gulfport, MS, Inspector General Ken\nDonohue met with the Gulf Coast State Special Agent in Charge (SAC) Joseph\nauditors whose States where damaged by Clarke and HUD OIG special agents located\nthe Hurricanes of 2005. Assistant Inspector in New Orleans, LA, Atlanta, GA, and\nGeneral for Audit (AIGA) James Heist, Arlington, TX, met with HUD KDHAP\nDeputy Assistant Inspector General for coordinators and FEMA Disaster Recovery\nAudit (DAIGA) Bob Gwin, and Deputy Centers. They presented fraud awareness\nAssistant Inspector General for briefings and distributed HUD OIG Hotline\nInvestigation (DAIGI) \xe2\x80\x93 Inspections and materials to their staffs.\nEvaluations John McCarty briefed the State\nauditors from Florida, Alabama, Mississippi, DAIGI John McCarty and SAC Joseph\nLouisiana, and Texas on HUD programs, Clarke led the efforts of special agents and\naudit applications, and fraud prevention. other HUD OIG staff assigned to damage\nMississippi State Auditor Phil Bryant assessment teams, who began at the water\nchaired the meeting. line in New Orleans, LA, and photographed,\n assessed, and documented hurricane-\n\n\nHurricane Relief Oversight 87\n\x0c related damage to all HUD public housing\n and multifamily projects in the States of\n Louisiana and Mississippi.\n\n In Jackson, MS, ASAC Thomas Luke,\n SAC Larry Amaker, Supervisory Forensic\n Auditor Windell Durant, and Senior Special\n Agent Sandra Hackworth addressed\n the Southeastern Affordable Housing\n Management Association about issues\n affecting multifamily development in the\n Gulf Coast region and opportunities for\n fraud associated with hurricane recovery\n funding.\n\n ASAC Thomas Luke and Supervisory\n Forensic Auditor Windell Durant have\n developed fraud prevention training and\n scheduled presentations to the Mississippi\n Development Authority\xe2\x80\x99s homeowner\n service centers, property appraisers, and\n contract employees overseeing quality\n control programs. Training seminars are\n scheduled for Gautier, Gulfport, and Bay\n St. Louis, MS.\n\n AIGI Joseph Haban and DAIGI John\n McCarty met with the Mortgage Bankers\n Association in Washington, DC, to establish\n fraud prevention training and fraud-\n reporting protocols for disaster-related\n matters.\n\n ASAC Thomas Luke and SAC Larry\n Amaker are working with Louisiana\n Recovery Authority officials located in\n Baton Rouge, LA, to establish lines of\n communication and coordinate fraud\n prevention efforts.\n\n\n\n\n88 Hurricane Relief Oversight\n\x0cPictures of HUD OIG\xe2\x80\x99s Hurricane Relief and\nRecovery Efforts\n\n\n\n\n HUD Inspector General Kenneth Donohue (center),\n AIGI Joseph Haban, and DAIGI Lester Davis survey\n damage at Abundance Development\nHUD OIG special agents at Industrial Canal levee\nbreach.\n\n\n\n\n SAC Joseph Clarke organizing HUD OIG\xe2\x80\x99s\n Operation Hurricane Assessment in New Orleans,\nHUD OIG special agents at the Industrial Canal\n LA.\nlevee breach overlooking lower 9th Ward.\n\n\n\n\n HUD Inspector General Kenneth Donohue stands\n below waterline viewing damage at Abundance\nHUD OIG special agents assessing damage in New Development.\nOrleans, LA.\n\n\n Hurricane Relief Oversight 89\n\x0c AIGI Haban (left) and IG Donohue (right) outside of\n the Housing Authority of New Orleans.\n\n\n\n\n Christopher Homes\n\n\n\n\n Malta Square\n\n\n\n\n B.W. Cooper Extention\n\n\n\n\n90 Hurricane Relief Oversight\n\x0c Chapter 7\n Other Significant HUD Audits\nand Investigations/OIG Hotline\n\x0c Audit analysis and liability estimation\n process and\n During this reporting period, the Office\n Continue to improve its review over the\n of Inspector General (OIG) issued nine\n internal reports involving areas of U.S. FHA credit reform estimation process.\n Department of Housing and Urban\n Development (HUD) operations that do not OIG also reported on six reportable\n fall under major HUD programs reported conditions in internal controls related to the\n in previous chapters. need to\n\n OIG\xe2\x80\x99s more significant audits are Comply with Federal Financial\n discussed below. Management System requirements\n and continue to enhance FHA\xe2\x80\x99s\n management of controls over its\n Chart 7.1: Other Significant Audit Dollars\n portfolio of integrated insurance and\n 450,000,000 financial systems,\n 400,000,000\n 350,000,000\n 300,000,000\n Improve oversight and monitoring\n 250,000,000 of subsidy calculations and\n 200,000,000 intermediaries\xe2\x80\x99 program performance,\n 150,000,000\n 100,000,000\n Further strengthen controls over\n 50,000,000\n 0\n HUD\xe2\x80\x99s computing environment,\n Questioned Costs Funds Put to Better Use\n\n Improve personnel security practices\n for access to the Department\xe2\x80\x99s critical\n Audit of HUD\xe2\x80\x99s Financial financial systems,\n Statements Improve processes for reviewing\n obligation balances, and\n HUD OIG audited HUD\xe2\x80\x99s fiscal year\n (FY) 2005 consolidated financial statements\n Improve controls for developing\n in accordance with the Chief Financial\n estimates of budget authority required\n Officers Act of 1990, and the report on those\n for the Section 236 Interest Reduction\n financial statements is included in HUD\xe2\x80\x99s FY\n 2005 Performance and Accountability Report. Program.\n In OIG\xe2\x80\x99s opinion, HUD\xe2\x80\x99s FY 2005 financial\n statements were presented fairly. In In addition, HUD did not substantially\n conjunction with OIG\xe2\x80\x99s audit of HUD\xe2\x80\x99s FY comply with the Federal Financial\n 2005 financial statements, OIG also reported Management Improvement Act (FFMIA)\n on two material weaknesses related to regarding system requirements. The audit\n HUD\xe2\x80\x99s need to also identified more than $377 million in\n excess obligations recorded in HUD\xe2\x80\x99s\n records, which represent funds that HUD\n Incorporate better risk factors and\n could put to better use. (Audit Report: 2006-\n monitoring tools into Federal Housing\n FO-0003)\n Administration\xe2\x80\x99s (FHA) single-family\n insured mortgage program risk\n\n\n\n\n92 Other Significant HUD Audits and Investigations/OIG Hotline\n\x0cAudit of the Process HUD Used to were not denied awards they should have\n received. (Audit Report: 2006-PH-0001)\nAward its FY 2004 Healthy\nHomes and Lead Hazard Control HUD\xe2\x80\x99s Information Security\nProperly Program and Practices\n In response to a number of HUD OIG performed an annual\ncongressional inquiries and complaints, independent evaluation of HUD\xe2\x80\x99s\nHUD OIG audited the process HUD used information security program and practices\nto award its FY 2004 Healthy Homes and as directed by the Federal Information\nLead Hazard Control grants. The objective Security Management Act of 2002 (FISMA).\nof the audit was to determine whether the\ngrants were properly awarded. HUD has made significant efforts to\n improve its system security program, but\n HUD did not properly evaluate 34 of 72 continued progress is needed to fully\nsuccessful applications reviewed, comply with Federal requirements. HUD\nrepresenting $92.7 million of the $168 has appointed a chief information security\nmillion (55 percent) awarded. HUD officer, revised its information security\nimproperly awarded eight grants for $20.5 policy, and completed certification and\nmillion. OIG could not determine the accreditation for more than 90 percent of its\npropriety of the remaining 26 grant applications. However, the quality of the\napplications receiving $72.3 million because underlying documents and the certification\nthe documents needed to support HUD\xe2\x80\x99s and accreditation process vary by\naward decisions could not be provided. In application. While a number of\naddition, HUD files pertaining to 54 of 55 vulnerabilities have been corrected,\napplications (98 percent) reviewed for additional vulnerabilities, identified\napplicants that did not receive funding did through oversight activities, were not\nnot support the decision to reject the grant corrected before accreditation.\napplications. Of these 54 applicants, HUD\ndenied one applicant approximately HUD program officials and system\n$365,700 in grant funds that it was eligible owners have not fully met their\nto receive. responsibilities as specified in FISMA,\n section 3544(a). Also, HUD has not fully\n OIG recommended that HUD (1) implemented an agencywide information\nimplement controls to ensure it properly system security program as specified in\nevaluates the grant applications and FISMA, section 3544(b). Improvements are\nsupports all awards; (2) continue recovery needed in maintaining an adequate system\nefforts or obtain a legal opinion to determine inventory, categorizing security impact level\nwhether it can pursue recovery of the $20.5 properly for information systems, providing\nmillion in improperly awarded grants it sufficient training to program officials and\nprovided to eight applicants; (3) depending contractor staff, and developing and testing\non the legal opinion, obtain the necessary contingency plans. (Audit Report: 2006-DP-\ndocumentation to support the award 0801)\ndecisions relating to 26 other applicants\nreceiving $72.3 million in grant funds and\nrecover the amounts it determines were HUD\xe2\x80\x99s Financial System\nimproperly awarded; and (4) review the\nremaining 135 applications that did not HUD OIG audited certain components\nreceive awards to ensure these applicants of HUD\xe2\x80\x99s financial system to determine\n\n\nOther Significant HUD Audits and Investigations/OIG Hotline 93\n\x0c whether it is capable of performing the cost directories, and configuration of network\n management function as defined in Joint services of HUD\xe2\x80\x99s Unix operating system.\n Financial Management Improvement\n Program (JFMIP) publication JFMIP-SR-02- HUD has generally implemented the\n 01, \xe2\x80\x9cCore Financial System Requirements,\xe2\x80\x9d Unix operating system configuration\n dated November 2001. settings properly. However, weaknesses in\n the configuration of network services still\n HUD\xe2\x80\x99s core financial systems (1) cannot exist, and user access and security controls\n perform all of the mandatory cost to files and directories are not sufficiently\n management functions specified in JFMIP tightened.\n SR-02-01 and (2) cannot accumulate\n nonfinancial data that would be needed to OIG\xe2\x80\x99s report presents detailed results of\n internally calculate cost management our assessment and appropriate\n information. Without these capabilities, recommendations for corrective action that\n HUD\xe2\x80\x99s core financial system does not will improve HUD\xe2\x80\x99s overall security posture\n provide all of the nonfinancial data elements through recommended configurations. OIG\n needed to support the integration of budget, has determined that the contents of this\n cost, and performance measures. This report would not be appropriate for public\n information is obtained from sources that disclosure; therefore, it has limited its\n include both automated and manual distribution to selected HUD officials.\n processes, procedures, controls, data, (Audit Report: 2006-DP-0002)\n software, and support personnel that are not\n integrated through a common database or\n electronically interfaced with the core\n FHA Financial Statements\n financial system.\n Urbach, Kahn, and Werlin, LLP (UKW),\n OIG recommended that HUD develop audited FHA\xe2\x80\x99s financial statements for the\n compliant cost management functional year ending September 30, 2005.\n requirements that support the integration\n of budget, cost, and performance measures UKW concluded that FHA\xe2\x80\x99s fiscal year\n as part of the HUD Integrated Financial 2005 principal financial statements were\n Management Improvement Project. presented fairly, in all material respects, in\n While HUD disagreed with OIG\xe2\x80\x99s conformity with accounting principles\n recommendation, OIG obtained generally accepted in the United States of\n documentation from the Project that America.\n includes mandatory functional\n requirements for the accumulation of UKW\xe2\x80\x99s consideration of internal control\n nonfinancial data. (Audit Report: 2006-DP- over financial reporting resulted in the\n 0001) following matters being identified as\n reportable conditions and with respect to the\n first two items, material weaknesses:\n Security Configuration\n Assessment of HUD\xe2\x80\x99s Servers FHA must incorporate better risk\n factors and monitoring tools into its\n HUD OIG completed a security single-family insured mortgage\n configuration assessment of HUD\xe2\x80\x99s servers program risk analysis and loan\n on which FHA financial applications reside. liability estimation process.\n The objective of the audit was to review user\n access, security controls to files and\n\n\n\n94 Other Significant HUD Audits and Investigations/OIG Hotline\n\x0c FHA management must continue to systems through the performance of\n improve its review over the credit penetration testing.\n reform estimation process.\n Although HUD has implemented\n FHA must continue to enhance the controls to protect its network from external\n management of controls over its intruders, internal penetration testing\n portfolio of integrated insurance and identified security configuration and\n financial systems. technical controls deficiencies.\n\n UKW found no reportable instances of OIG has determined that the contents\nnoncompliance with certain provisions of of this report would not be appropriate for\napplicable laws, regulations, contracts, and public disclosure; therefore, it has limited\ngrant agreements. (Audit Report: 2006-FO- its distribution to selected HUD officials.\n0002) (Audit Report: 2006-DP-0003)\n\n\nAudit of the Government Audit of HUD\xe2\x80\x99s Information\nNational Mortgage Association\xe2\x80\x99s Security Program Compliance\n(Ginnie Mae) Financial with Federal Requirements\nStatements HUD OIG audited HUD\xe2\x80\x99s information\n security program compliance with Federal\n HUD OIG audited the Government requirements. OIG evaluated (1) the\nNational Mortgage Association\xe2\x80\x99s (Ginnie adequacy of the categorization of HUD\xe2\x80\x99s\nMae) financial statements for FY 2005. major systems, (2) whether HUD\xe2\x80\x99s Office of\n the Chief Information Officer has developed\n The financial statements present fairly security policies and implemented and\nthe financial position of Ginnie Mae in all monitored enterprisewide controls, and (3)\nmaterial respects. There were no material whether HUD program officials and system\nweaknesses or reportable conditions in owners have properly implemented\nGinnie Mae\xe2\x80\x99s internal controls or reportable information security responsibilities\ninstances of noncompliance with laws, assigned to them.\nregulations, and provisions or contracts.\n(Audit Report: 2006-FO-0001) HUD has made considerable progress\n in implementing a comprehensive,\nNetwork Vulnerability entitywide information system security\n program. However, there are several\nAssessment matters that require management attention:\n (1) HUD\xe2\x80\x99s program officials and system\n HUD OIG completed a network owners have not properly categorized\nvulnerability assessment of HUD to evaluate HUD\xe2\x80\x99s application systems and utilities,\nwhether its network security systems, which could result in unnecessary\nincluding security controls and practices, expenditure of funds; (2) HUD\xe2\x80\x99s Office of the\nadequately protect the integrity, Chief Information Officer has not fully\nconfidentiality, and availability of data and implemented an effective entitywide\ninformation from unauthorized access to its information security program; and (3)\n HUD\xe2\x80\x99s program officials and system owners\n have not complied with security\n\n\n\n\nOther Significant HUD Audits and Investigations/OIG Hotline 95\n\x0c Investigation OIG Hotline\n During this reporting period, OIG The HUD OIG Hotline is operational 5\n opened 19 investigation cases and closed 6 days a week, Monday through Friday, from\n cases involving areas of HUD operations 10:00 a.m. to 4:30 p.m. The Hotline is staffed\n that do not fall under specific program by seven full-time OIG employees, who take\n categories. Judicial action taken on these allegations of waste, fraud, abuse, or serious\n cases during the period included $30,685 in mismanagement in HUD or in HUD-funded\n investigative recoveries, three indictments/ programs from HUD employees,\n informations, five arrests, and two contractors, and the public and coordinate\n convictions/pleas/pretrial diversions. reviews with internal audit and investigative\n units or with HUD program offices.\n Some of the investigations discussed in\n this report were conducted by OIG, while During this reporting period, the\n others were conducted jointly with Federal, Hotline received and processed 9,416\n State, and local law enforcement agencies. complaints \xe2\x80\x93 73 percent received by\n The results of OIG\xe2\x80\x99s more significant telephone, 22 percent by mail, and 5 percent\n investigations are described below. by e-mail. Every allegation received by the\n Hotline is logged into a database and\n James Joyce, a HUD employee, was tracked.\n indicted in U.S. District Court, District of\n New Hampshire, Manchester, NH, on two Of the complaints received, 1,270 were\n counts of possession of firearms and related to the mission of the OIG and were\n dangerous weapons in Federal facilities. addressed as Hotline cases. Hotline cases\n Joyce allegedly carried a knife and firearm are referred to OIG\xe2\x80\x99s Offices of Audit and\n into the HUD office at the Manchester Investigation or to HUD program offices for\n Federal building. action and response. The following\n illustration shows the distribution of Hotline\n Toulu Thao, a HUD housing specialist, case referrals by percentage.\n was indicted in U.S. District Court, Eastern\n District of California, Fresno, CA, on four Hotline closed 918 cases this reporting\n counts of false statements. Thao allegedly period. The closed Hotline cases included\n received $125,000 from organizations doing 146 substantiated allegations. The\n business with HUD but failed to disclose substantiated allegations resulted in four\n income, business arrangements, and/or administrative sanctions against HUD\n business agreements he had with these employees for personnel violations or\n organizations on his Office of Government against investors for improprieties involved\n Ethics (OGE) Form 450, \xe2\x80\x9cConfidential in the purchase of a home. The Department\n Financial Disclosure.\xe2\x80\x9d Thao was arrested on also took 142 corrective actions that resulted\n February 13, 2006. in $82,697 in recoveries of losses and\n $2,352,885 in HUD funding that could be put\n to better use. The recoveries included an\n unsupportable appraisal which resulted in\n an overinsured FHA-insured mortgage.\n Some of the funds that could be put to better\n use were the result of cases in which tenants\n improperly reported their incomes or family\n composition to qualify for rental assistance.\n\n\n\n\n96 Other Significant HUD Audits and Investigations/OIG Hotline\n\x0c Chart 7.2: Hotline Cases Opened by Program Area\n\n\n OIG Audit and Other HUD\n Investigation Offices\n 9% 5%\n Single-Family\n Housing\n 6%\n Public and Indian\n Housing\n 67% Multifamily\n Housing\n 13%\n\n\n\n\n Chart 77.3\n .3\n .3:: Hotline Dollar Impact from Program Offices\n 2,500,000\n\n $1,995,252\n 2,000,000\n\n\n 1,500,000\n\n\n 1,000,000\n\n\n 500,000 $357,633\n\n $27,284 $17,164 $38,249\n 0\n Single-Family Housing Multifamily Housing Public and Indian Housing\n\n Recoveries $82,697 Funds Put to Better Use $2,352,885\n\n\n\n\n Chart 77.4\n .4\n .4:: Substantiated Cases by Type of Complaint Received by Hotline\n\n Owner/Occupant\n Violations Mismanagement\n Other 2% 2%\n 1%\n Rental Fraud and Conflict of\n Improprieties Interest\n 93% 2%\n\n\n\n\nOther Significant HUD Audits and Investigations/OIG Hotline 97\n\x0c\x0c Chapter 8\nOutreach Efforts\n\x0c To foster cooperative, informative, and Housing and Redevelopment Officials\n mutually beneficial relationships with (NAHRO) on February 5, 2006. Ms. Hobbs\n agencies and organizations whose intent is was a member of a three-person panel to\n to assist the accomplishment of the U.S. discuss housing oversight by the board\n Department of Housing and Urban of commissioners. Approximately 20\n Development\xe2\x80\x99s (HUD) mission, the Office of commissioners attended the session,\n Inspector General (OIG) participates in a which included a discussion regarding\n number of special outreach efforts. These the growing amount of fraud being detected\n efforts, as described below, are in addition in housing authorities.\n to OIG\xe2\x80\x99s regular coordination with Federal,\n State, and local law enforcement agencies, RIGA Frank Baca, Assistant Regional\n other OIGs, and various congressional Inspector General (ARIG) Will Nixon, and\n committees and subcommittees. During Senior Auditor Beth Howard gave a\n these outreach efforts, OIG presented the presentation on Single Family Mortgage\n results of its audit and investigative work Fraud to the Oklahoma City, OK,\n and discussed its goals, objectives, and Greater Metropolitan Title Association.\n provided information about its role and Approximately 425 realtors and title\n function. company representatives attended the\n meeting. Other speakers included officials\n Assistant Inspector General for from the Federal Bureau of Investigation\n Investigations (AIGI) R. Joseph Haban, (FBI) and First Fidelity Bank.\n Assistant Special Agent in Charge (ASAC)\n Robert Gale, and Special Agent (SA) Linda Special Agent in Charge (SAC) Robert\n Cisco attended a press conference headed Brickley, ASAC Rene Febles, and Senior\n by Senator Barbara Mikulski in Baltimore, Special Agent (SSA) Daniel Ellis participated\n MD. This press conference, used to in two presentations at Penn Del Associated\n publicize the final report prepared by the Housing Management Association\xe2\x80\x99s\n Baltimore City Flipping and Predatory (AHMA) annual seminar in Lancaster, PA.\n Lending (BCFPL) task force, announced that SAC Brickley described HUD OIG\xe2\x80\x99s\n Baltimore property flipping had dropped 77 investigative process and procedures to\n percent since 1999. The BCFPL task force follow when documenting files and referring\n focuses on five fronts in the war on flipping: matters for investigation. ASAC Febles and\n law enforcement, implementing regulatory SSA Ellis participated in a HUD Multifamily\n reforms, education and prevention efforts, Rental Housing Integrity Improvement\n victims\xe2\x80\x99 assistance, and rebuilding Project (RHIIP) workshop to promote\n neighborhoods. Since 2000, the U.S. cooperative working relationships among\n Attorney\xe2\x80\x99s Office, District of Maryland, has HUD, HUD OIG, and rental housing owners\n sought criminal charges against 104 and/or managers.\n defendants who participated in mortgage\n fraud within Baltimore City and Prince SAC Peter Emerzian, ASAC Diane\n Georges County. The results include 100 DeChellis, ASAC Maureen Nelting, and SA\n convictions and four acquittals. Senator Jessica Piecuch participated in a\n Paul Sarbanes, Congressman Elijah Massachusetts Anti-Gang Conference\n Cummings, and U.S. Attorney Rod sponsored by the Massachusetts U.S.\n Rosenstein were also in attendance. Attorney\xe2\x80\x99s Office in Boston, MA. Keynote\n speakers included the Massachusetts\n Regional Inspector General for Audit lieutenant governor, current and former\n (RIGA) Joan Hobbs of Los Angeles, CA, Boston police commissioners, and\n spoke at the Northern California/Nevada representatives from various Federal law\n Chapter of the National Association of enforcement agencies in Washington, DC.\n\n\n100 Outreach Efforts\n\x0c in conjunction with other agencies,\n discussed current schemes affecting the real\n estate industry and ways to coordinate\n efforts to prevent duplication when\n investigating fraud. Keynote speakers at the\n meeting included representatives from the\n City of Chicago Division of Housing and\n United States Attorney\xe2\x80\x99s Office. The\n Working Group is comprised of\n representatives from HUD, the State of\n Illinois/Division of Banks and Real Estate,\n the Internal Revenue Service (IRS), Fannie\n Mae, the Financial Crimes Enforcement\nSAC Peter Emerzian discussing HUD OIG\xe2\x80\x99s Network (FINCEN), the HUD Quality\nrelocation program\n Assurance Division, the Illinois Attorney\n General\xe2\x80\x99s Office, the FBI, Freddie Mac, the\n SAC Emerzian, a panelist addressing victim Chicago Police Department, the Cook\n intimidation, discussed HUD OIG\xe2\x80\x99s County States Attorney\xe2\x80\x99s Office, the U.S.\n relocation program. More than 300 Postal Inspection (USPIS), and the United\n members representing Massachusetts\xe2\x80\x99 local, States Trustee\xe2\x80\x99s Office.\n State, and Federal law enforcement and\n prosecutive agencies attended the SAC James Beaudette, ASAC Lori Chan,\n conference. and SA Jason Constantine offered an\n overview of HUD OIG, information on\n SAC James Beaudette and ASAC Lori rental assistance initiatives, a presentation\n Chan provided an overview of HUD OIG entitled \xe2\x80\x9cTrends in Housing Fraud,\xe2\x80\x9d and\n and mortgage fraud schemes to case studies to Federal and local fraud\n approximately 35 Institute of Appraisers, investigators in Seattle, WA. Those in\n Northwest regional members in San attendance included special agents from the\n Francisco, CA. After the presentation, SAC Social Security Administration (SSA) OIG,\n Beaudette and ASAC Chan hosted a the Washington Department of Social and\n question and answer forum. Health Services, and investigators assigned\n to housing authorities.\n SAC Robert Brickley presented HUD\n OIG\xe2\x80\x99s background, mission, and role in ASAC Larry Amaker and SA Michael\n criminal investigations at the Maryland Wagenhauser spoke at the National\n Chapter Appraisal Institute meeting held in Affordable Housing Management\n Atlantic City, NJ. SAC Brickley illustrated Association (NAHMA), Mid Atlantic\n Federal Housing Administration (FHA) Region, annual conference in Richmond,\n fraud and predatory lending schemes, VA. ASAC Amaker and SA Wagenhauser\n explained specific FHA violations, described explained HUD OIG\xe2\x80\x99s mission and ways in\n civil and administrative remedies, and which NAHMA can assist with identifying,\n expanded on appraisers\xe2\x80\x99 responsibilities to investigating, and prosecuting rental\n report wrongdoing. Approximately 30 assistance fraud in multifamily housing.\n individuals attended. ASAC Amaker and SA Wagenhauser also\n presented an overview of HUD OIG\xe2\x80\x99s\n SAC Barry McLaughlin hosted the fugitive felon and RHIIP initiatives.\n quarterly Northern Illinois Real Estate Approximately 250 individual attended the\n Fraud Working Group meeting in Chicago, conference.\n IL. This group, created by SAC McLaughlin\n\n\n Outreach Efforts 101\n\x0c ASAC Ray Espinosa participated in results to illustrate the nature of OIG\xe2\x80\x99s work.\n Northern Illinois University\xe2\x80\x99s Criminal The ARIGAs also talked about the\n Justice Career Fair in Dekalb, IL. ASAC environment and culture of OIG and career\n Espinosa, along with representatives from opportunities in the auditing field.\n the U. S. Secret Service and FBI, provided a\n presentation describing career and ARIGA Ed Schmidt, along with SAs\n internship opportunities with various law Jason Constantine and Charles Grace, gave\n enforcement agencies. a presentation describing the functions of\n HUD OIG to a group of newer employees at\n ASAC Brad Geary, along with the HUD regional office in Seattle, WA. The\n representatives from the FBI, the U.S. presentation was part of HUD\xe2\x80\x99s world\n Department of Veterans Affairs (VA) OIG, training program in the HUD Seattle\n and a private security firm, participated in regional office. ARIGA Schmidt described\n a panel discussion at a REO MAC HUD OIG\xe2\x80\x99s statutory missions, how HUD\n conference in New York City, NY. REO OIG is organized, the divisions and\n MAC is a national organization specializing responsibilities between the Offices of Audit\n in the purchase of HUD real estate owned and Investigation, areas of audit work, and\n (REO) properties. More than 50 people the audit reporting process. SAs\n attended a breakout session discussing Constantine and Grace explained the work\n various schemes and frauds affecting the of the Office of Investigation.\n real estate industry. SSA Kevin McBride\n from HUD OIG Headquarters also attended. ARIGA Ron Farrell and Auditor Kim\n Toler, Region 5, participated in Cleveland\n ASAC Brad Geary presented a fraud State University\xe2\x80\x99s 27th Annual Spring Career\n awareness briefing at the Appraisal Institute Fair in Cleveland, OH, on March 3, 2006,\n in Chicago, IL. ASAC Geary discussed along with more than 150 other employers.\n fraud schemes affecting HUD and the real Mr. Farrell and Ms. Toler spoke with more\n estate trade, along with newly implemented than 100 students about OIG\xe2\x80\x99s mission and\n changes in FHA underwriting and their the benefits of pursuing a student volunteer\n impact on the appraisal industry. More than position/career with HUD OIG. They\n 30 appraisers attended the meeting. accepted resumes from students interested\n in a student volunteer position with HUD\n Assistant Regional Inspector General OIG/Audit in Columbus, OH, or Detroit, MI.\n for Audit (ARIGA) Tom Towers and ASAC\n George Dobrovic presented an overview of ARIGA Fred Smith spoke to the Beta\n current OIG goals and initiatives to HUD Alpha Phi accounting association at the\n employees at the Detroit, MI, field office. University of Northern Colorado in Denver,\n The presentation also focused on how OIG CO. ARIGA Smith presented HUD\xe2\x80\x99s\n can be a resource to supplement their mission statement and strategic goals and\n detection of fraud, waste, and abuse. discussed ways in which OIG interacts with\n HUD to accomplish its mission and goals.\n ARIGAs Tanya Schulze and Vince ARIGA Smith also discussed HUD\xe2\x80\x99s mission\n Mussetter gave a presentation to the of increasing home ownership, supporting\n California State University, Los Angeles, community development, and increasing\n CA, Accounting Society. In response to their access to affordable housing free from\n request, ARIGAs Schulze and Mussetter discrimination, as well as the benefits of a\n gave a presentation to about 30 students on career in the Federal Government. ARIGA\n the background of HUD and OIG\xe2\x80\x99s mission, Smith fielded questions from the\n organization, and responsibilities. ARIGA approximately 20 student and professors in\n Mussetter also discussed some recent audit the audience.\n\n\n102 Outreach Efforts\n\x0c ASAC Michael Wilson provided an and various schemes used by criminals.\noverview of HUD OIG and single-family ASAC Harvell and SA Carter responded to\nfraud schemes at the Appraisal Institute in questions and encouraged reporting or\nDallas, TX. ASAC Wilson described contacting HUD OIG with waste, fraud,\ncommon criminal schemes and presented and/or abuse issues involving any HUD\ncase studies of single-family fraud program.\ninvestigations. Approximately 30 members\nof the Appraisal Institute attended. SAs Gary Diers and Kris Kanakares\n addressed the 2005 Annual Kansas NAHRO\n ASACs Brad Geary and Ray Espinosa convention held in Topeka, KS. SAs Diers\nprovided a presentation on the role and and Kanakares presented an overview of\nrelationship of HUD OIG and Joint successful fraud investigations in the Great\nTerrorism Task Force (JTTF) investigations Plains Region. Approximately 50 public and\nat the Anti-Terrorism Advisory Committee assisted housing professionals attended this\nmeeting sponsored by U. S. Attorney Patrick seminar.\nFitzgerald and the Chicago Office of the FBI\nin Chicago, IL. In addition to discussing SAs Jason Constantine and Charles\nHUD\xe2\x80\x99s four major program areas and frauds Grace presented HUD OIG\xe2\x80\x99s role regarding\nassociated with each, current JTTF/HUD Seattle Housing Authority (SHA) crime and\nOIG investigations from Detroit, fraud at a conference held at the King\nMilwaukee, and Indianapolis were County Police Academy, Burien, WA. Those\npresented to the 75 law enforcement in attendance included representatives from\nattendees. the Seattle Police Community Policing\n Division, Seattle Police Patrol Division, and\n ASAC Lori Chan presented HUD OIG Seattle City Prosecutors Office. SAs\ninitiatives at a Law Enforcement Database Constantine and Grace responded to\nSeminar hosted by the Northern District of questions and provided information on\nCalifornia U.S. Marshal\xe2\x80\x99s Service (USMS) referring SHA crimes to HUD OIG.\nand Western Regional Inspector General\nCouncil in Oakland, CA. ASAC Chan SA Heather Yanello provided\nresponded to inquiries during a question information on property flipping and\nand answer session. Approximately 150 mortgage fraud at the Suspicious Activity\nindividuals representing about 50 State, Reports (SAR) training seminar hosted by\ncounty, and local law enforcement agencies members of the Western New York SAR\nattended. review team in Buffalo, NY. SAR review\n team members include personnel from the\n ASAC Herschell Harvell, Jr., and SA U.S. Attorney\xe2\x80\x99s Office, IRS Criminal\nDavid Carter attended the Southern Investigation Division (CID), New York\nCalifornia Housing Authority Manager\xe2\x80\x99s State Attorney General\xe2\x80\x99s Office of the\nAssociation (SCHAMA) meeting at Inspector General, and U.S. Secret Service.\nRiverside County Housing Authority, The SAR training covered general guidelines\nRiverside, CA. ASAC Harvell presented in preparing SARs, SAR legal requirements\nHUD OIG\xe2\x80\x99s mission and strategies for an established by FINCEN, and information on\neffective alliance between housing property flipping and mortgage fraud. SA\nauthorities and HUD OIG and provided an Yanello also discussed mortgage fraud as a\noverview of HUD OIG\xe2\x80\x99s Sex Offender and financial crime, how mortgage fraud relates\nFugitive Felon initiatives and U.S. Postal to the Bank Secrecy Act, and a property\nService (USPS) OIG iiitiatives. SA Carter flipping scheme shown on the HBO\nprovided a brief overview of Section 8 series \xe2\x80\x9cThe Sopranos.\xe2\x80\x9d Approximately 100\nprogram fraud, \xe2\x80\x9cRed Flag\xe2\x80\x9d fraud indicators, bank compliance and bank investigators\n\n\nOutreach Efforts 103\n\x0c attended this training in person and via SAs Keith Fong and Eric Huhtala\n teleconferencing. presented an overview of HUD OIG\xe2\x80\x99s\n mission and role in investigating and\n SAs Donald Varner and Brian Caldwell prosecuting fraud to 25 attendees at a\n presented information on fraud scemes to Sacramento County District Attorney\xe2\x80\x99s\n 45 senior appraisers at the Appraisal Office training seminar in Sacramento, CA.\n Institute for Region IX in Atlanta, GA. An The audience included investigators from\n extensive question and answer forum the Sacramento County Department of\n followed the presentation. Human Assistance, Investigations Division,\n along with Child Action, Inc., a nonprofit\n SA Louis Mancini attended a U.S. contractor for Sacramento County child\n Department of Justice (DOJ)-sponsored assistance programs. Information on\n conference in Philadelphia, PA, to exchange detecting, preventing, and reporting fraud\n ideas and best practices for the DOJ- was also provided by SAs Fong and Huhtala.\n sponsored Public Housing Safety Initiatives\n (PHSI) under development in major US A Weed and Seed Panel, comprised of\n metropolitan areas. The purpose of the Donna Schulz, Law Enforcement\n conference was to facilitate continuity and Coordinator Manager and William Daniels,\n cooperation among all agencies Law Enforcement Coordinator, U.S.\n participating in the various PHSI with Attorney\xe2\x80\x99s Office; Delores McLaughlin,\n regard to law enforcement, community Brevard County Weed and Seed\n building, and crime prevention. The Coordinator; and ASAC Timothy Mowery,\n Philadelphia PHSI includes HUD OIG, HUD OIG, made individual presentations\n USMS, the Bureau of Alcohol, Tobacco, and for the Public Housing Authorities Directors\n Firearms (ATF), the Drug Enforcement Association (PHADA) during the 2006\n Administration (DEA), and the Philadelphia PHADA National Conference in St.\n Police Department. Petersburg, FL. ASAC Mowery\xe2\x80\x99s\n presentation reflected HUD OIG\xe2\x80\x99s effort to\n SA David Carranza provided an identify and remove sexual offenders,\n overview of HUD OIG\xe2\x80\x99s mission, structure, fugitive felons, and HUD program\n and resources to police officers and participants committing illicit drug offenses\n detectives from the Ventura, CA, Police from HUD-funded programs. Conference\n Department, Narcotics and Investigations attendees were advised on how local and\n Division, Crimes Suppression Team. SA national HUD OIG initiatives compliment\n Carranza also discussed HUD OIG\xe2\x80\x99s the overall objective of the Weed and Seed\n authority in the Fugitive Felon, Sexual Program, a HUD-funded DOJ-administered\n Offender, and Rental Assistance initiatives, program.\n along with the need for networking and\n information sharing to achieve common On October 5, 2005, Senior Auditor\n goals. In addition to SA Carranza, the Anthony Anderson and Auditor Lanre\n Ventura Housing Authority\xe2\x80\x99s deputy Iwayemi represented OIG at a career fair at\n director and housing manager provided Southern Illinois University in\n information and answered questions Edwardsville, IL. Anthony and Lanre met\n relating to housing eligibility, narcotic and with students during the event, offering\n violent crimes leading to terminations, information about OIG and explaining how\n sexual offender policies, and annual OIG hires employees and where it currently\n certifications and inspections of tenants and has openings. They collected about a dozen\n their housing units. resumes and, as requested by the students,\n forwarded two of the resumes to the Region\n III Office of Audit and two to the Region VII\n Office of Investigation.\n\n104 Outreach Efforts\n\x0c SA Joshua Stockman gave a SA Scott Savedow discussed fraudulent\npresentation to the Identity Theft schemes and the impact and consequences\nInvestigators of Arizona (IDTIA) at the of loan origination fraud on the FHA to the\nMaricopa County Sheriff \xe2\x80\x99s Training Mortgage Bankers Association during their\nAuditorium in Phoenix, AZ. SA Stockman\xe2\x80\x99s two-day Fraud Detection seminar in Miami,\npresentation focused on HUD OIG\xe2\x80\x99s FL. Approximately 40 bank and mortgage\nmortgage and rental assistance fraud company executives attended the seminar.\ninitiatives and included examples of\nsuccessful HUD OIG investigations in the SA Charles Grace presented the\nPhoenix metropolitan area. Approximately Inspector General\xe2\x80\x99s role in HUD programs\n75 representatives from varied law at the Association of Oregon Housing\nenforcement agencies, including the Authorities (AOHA) biannual meeting, held\nMaricopa County Sheriff \xe2\x80\x99s Office, the at the Portland Housing Authority in\nArizona Department of Public Safety, USPIS, Portland, OR. The attendees included\nthe Social Security Administration OIG, the Oregon housing authorities executive\nMaricopa County Attorney\xe2\x80\x99s Office, the directors and an Oregon State lobbyist from\nArizona Attorney General\xe2\x80\x99s Office, and Salem, OR. SA Grace responded to\npolice departments from Phoenix, Mesa, questions involving Section 8 tenant/\nand Chandler, attended. SA Stockman landlord fraud, prosecutorial advice, fraud\nresponded to questions relating to HUD indicators, budgetary items, and contact\nrental assistance programs, FHA mortgage information and advised AOHA members\ninsurance, and the Real Estate Settlement of HUD OIG\xe2\x80\x99s active pursuit of fraud\nProcedures Act (RESPA). investigations.\n\n SA James Carrieres gave presentations ARIGA Fred Smith spoke to the Beta\nto the San Diego, CA, Appraisal Institute Alpha Phi accounting association at the\nand Phoneix, AZ, Appraisals, a private University of Northern Colorado, Greeley,\ngroup of residential appraisers. SA CO. ARIGA Smith discussed HUD\xe2\x80\x99s\nCarrieres presentations included an mission statement and strategic goals and\noverview of HUD OIG and successful how OIG interacts with HUD to accomplish\nsingle-family fraud cases prosecuted in its mission and goals. ARIGA Smith\nArizona. Approximately 110 appraisers discussed how OIG accomplishes its\nattended these events. mission by conducting independent and\n objective audits, investigations, and other\n ASAC Brad Geary, along with a activities relevant to the HUD mission and\nrepresentative from the United States how OIG keeps the Secretary of HUD,\nTrustee\xe2\x80\x99s Office, Northern District of Illinois, Congress, and the American public fully and\nprovided three break-out presentations at a currently informed.\nBankruptcy Fraud Training seminar held at\nDepartment of Justice National Advocacy SA Neil McMullen met with members\nCenter, Columbia, SC. The presentations of the Hill Street Community Association\nfocused on the relationship between single- (HSCA) in Inglewood, CA. HSCA members\nfamily loan fraud and fraud within the include homeowners and landlords who\nbankruptcy courts. Those attending participate in the Inglewood Housing\nincluded Federal agents, assistant United Authority\xe2\x80\x99s (IHA) rental assistance program\nStates attorney\xe2\x80\x99s, and trial attorneys from by providing housing for Section 8\nUnited States Trustee\xe2\x80\x99s offices throughout recipients. SA McMullen provided an\nthe country. overview of HUD OIG\xe2\x80\x99s mission and\n authority, described ways in which HSCA\n members may assist IHA in preventing\n\n\nOutreach Efforts 105\n\x0c Section 8 fraud, and explained HUD OIG\xe2\x80\x99s Children, FHA, and Hurricane Relief\n successful partnership with the Inglewood programs. Approximately 35 FAHA\n Police Department in addressing gang and members attended.\n drug activity through Section 8\n fraud prosecutions. Both SA McMullen SA James Carrieres met with members\n and Inglewood Police Department of the Hispanic Association of Real Estate\n representatives emphasized the importance Professionals and provided an overview\n of community involvement in reducing of HUD OIG\xe2\x80\x99s mission, HUD\xe2\x80\x99s FHA\n violent criminal activity in subsidized programs, and successful single-family\n housing. fraud prosecutions in Phoenix, AZ.\n Approximately 100 real estate agents,\n SA Malinda Antonik presented HUD appraisers, loan officers, and escrow officers\n OIG\xe2\x80\x99s mission and role in preserving the attended.\n integrity of the HUD-funded programs at\n the Florida Association of Homes for the HUD Newark Field Office Director,\n Aging\xe2\x80\x99s (FAHA) 2006 Legislative Workshop Diane Johnson, presented the Newark, NJ,\n in Tallahassee, FL. Topics discussed HUD OIG Office of Investigation with a\n included HUD OIG\xe2\x80\x99s efforts to identify and certificate of appreciation in recognition of\n eliminate fraudulent schemes in HUD\xe2\x80\x99s the \xe2\x80\x9cblue ribbon service\xe2\x80\x9d provided to HUD\n Rental Assistance, Fugitive Felon, Missing clients in New Jersey.\n\n\n\n\n106 Outreach Efforts\n\x0c Chapter 9\nPolicy Directives\n\x0c Reviewing and making Use of Capital and Operating\n recommendations on legislation,\n regulations, and policy issues is a critical Funds for Financing Activities\n part of the Office of Inspector General\xe2\x80\x99s\n (OIG) responsibilities under the Inspector Conversion of Developments from\n General Act. During this 6-month\n reporting period, OIG reviewed 120 policy Public Stock: Methodology for\n notices. This chapter highlights some of Comparing Costs of Public\n OIG\xe2\x80\x99s recommendations on these\n notices as well as other policy directives.\n Housing and Tenant-Based\n Assistance\n Proposed Rules\n Public Housing Capital Fund\n HUD\xe2\x80\x99s Proposed Interim Rule for\n The following information about the\n Project-Based Voucher Rents for above three subject draft rules was included\n Units Receiving Low-Income in the March 31, 2005, Semiannual Report to\n Congress, and HUD has not reached a final\n Housing Tax Credits--24 CFR decision. Therefore, OIG is repeating the\n Part 983 issues in this report.\n\n This rule relates to project-based For the three subject draft rules, the\n vouchers in low-income housing tax credit Office of Public and Indian Housing (PIH)\n projects. HUD OIG did not concur with the has not conducted a risk assessment. The\n proposed interim rule since it did not Appropriations Act mandates that a risk\n allow for a comment period before assessment be conducted on each program.\n implementation and also because it did not The Department policy and handbooks\n provide support for the proposed action. provide the method for meeting the\n statutory requirement relating to a risk\n The Department was reviewing OIG\xe2\x80\x99s assessment and provide that a risk\n comments at the end of this semiannual assessment must be completed before\n reporting period. issuing a rule. Additionally, HUD OIG has\n communicated other issues on each draft\n rule and cannot concur in the proposed rules\n Housing Opportunities for until the issues are addressed.\n Persons with Aids\n For the conversion of developments\n This rule is proposed for the Housing from public stock, HUD incorporated OIG\n Opportunities for Persons with Aids comments and issued its final rule on March\n (HOPWA) program. OIG commented 21, 2006, to become effective April 20, 2006.\n because the proposed rule change does not The Department is still considering OIG\xe2\x80\x99s\n address several requirements that the comments on the other two rules.\n Inspector General believes are important.\n\n The Department is incorporating OIG\n changes but has not published the proposed\n rule as of the end of this semiannual\n reporting period.\n\n\n\n108 Policy Directives\n\x0cRevision to the Public Housing baseline comparisons, cost savings, final\n outcomes, and quality of life issues.\nOperating Fund Program (Final\nRule) The United States Housing Act of 1937\n as amended states that to ensure the\n The proposed final rule amends the accuracy of any housing agency\nregulations of the Public Housing Operating certification, HUD is authorized to require\nFund program to provide a new formula for an independent auditor to substantiate each\ndistributing operating subsidies to public certification submitted by the agency and\nhousing agencies and to establish withhold assistance to pay for the review.\nrequirements for housing agencies to The statutory requirement extends beyond\nconvert to asset management. Annually, the single audit compliance supplement\nabout $3 billion in operating subsidies is scope and will generate a separate\ndisbursed through the formula. OMB procurement for an attestation engagement.\nidentified the draft rule as being The draft rule does not provide the\neconomically significant. organizational element accountable for\n procuring this attestation engagement, the\n OIG provided the following comments indicators identifying the need for the\nto PIH concerning the proposed rule. attestation engagement, and the\n requirement for withholding funds.\n Executive Order 12898 requires HUD to\nidentify and address human health and Further, the United States Housing Act\nenvironmental effects of its policies, of 1937 as amended states that the formula\nprograms, and activities on minority should provide an incentive to encourage\npopulations and low-income populations. housing authorities to facilitate increases in\nAdditionally, it requires HUD to collect, earned income by families in occupancy and\nmaintain, and analyze information assessing the incentive may be used only to benefit\nenvironmental and human health risks low-income housing or residents of the\nborne by populations identified by race, agency. The draft rule does not provide for\nnational origin, or income. This is important control measures to ensure the benefits\nto ensure that nonassisted low-income accruing to the agency are used for low-\nfamilies are not adversely affected by the income housing or for residents of the\nplacement of assisted families. agency.\n\n The Department issued the \xe2\x80\x9cRegulatory The Office of Public and Indian Housing\nImpact Analysis of Revisions to the revised the draft rule and is currently\nOperating Fund Program,\xe2\x80\x9d subject to OMB issuing additional guidance to clear the\nCircular A-4. It specified the proposed need remainder of our comments.\nfor the formula as required by the circular.\nHowever, its discussion on the different Proposed Notices\nalternative approaches to the proposed rule\ndid not comply with the circular regarding\nthe enforcement methods, different degrees Project-Based Voucher Units\nof stringency, different requirements for with Low-Income Housing Tax\ndifferent geographic regions, performance\nstandards, market versus direct controls,\n Credit Allocations\nand informational measures rather than\nregulations. Also, its cost-benefit analysis The HUD draft notice was to supersede\ndid not comply with the circular regarding Notice PIH 2002-22 and add requirements\n for public housing agencies to cap rent\n\n\nPolicy Directives 109\n\x0c amounts under the project-based voucher of 1937. In OIG\xe2\x80\x99s opinion, the draft notice is\n program for units receiving low-income effectively extending the vouchers and is\n housing tax credits so as not to exceed the contrary to the provision on prohibiting\n tax credit rent based on the project-based funding for the Section 8 program in the\n final rule effective November 14, 2005. It statute.\n also addressed applicability based on the\n effective date of the rule. The Appropriation Acts for both fiscal\n years (FY) 2004 and 2005 state that no part\n OIG commented that the notice was not of the appropriation shall be available for\n clear in its language on the applicability as any program, project, or activity in excess\n well as all of the terminology included in of amounts set forth in the budget estimates\n the notice. Also the notice incorrectly stated submitted to Congress. HUD estimated in\n in the subject line and purpose that it the budget to Congress that HOME tenant-\n applied to project-based and tenant-based based assistance funds would assist 13,335\n programs. families. The notice does not provide a\n control measure for limiting tenant-based\n Based on OIG\xe2\x80\x99s comments, HUD assistance to 13,335 families and obtaining\n eliminated confusing and unnecessary compliance with the Appropriation Acts.\n wording and issued an amendment to\n Notice PIH 2002-22 rather than superseding Executive Order 12898 requires HUD to\n the notice. The language regarding identify and address human health and\n applicability was clarified to ensure the new environmental effects of its policies,\n final rule requirements are only applied to programs, and activities on minority\n projects selected after the effective date of populations and low-income populations\n the final rule. and to collect, maintain, and analyze\n information assessing environmental and\n Using HOME Tenant-Based human health risks borne by populations\n identified by race, national origin, or income.\n Assistance to Mitigate The draft notice does not specify the\n Displacement reporting methodology to obtain compliance\n with this executive order.\n The OIG did not concur with HUD\xe2\x80\x99s\n HUD regulations state that it is the\n draft notice for using HOME Investment\n policy of the Department to provide for\n Partnership funds to mitigate the\n public participation in rule making with\n displacement of low-income tenants who\n respect to all HUD programs and functions,\n are losing their monthly housing choice\n including matters that relate to grants, even\n voucher rental subsidy because the local\n though such matters would not otherwise\n housing authority must terminate housing\n be subject to rule making by law or executive\n assistance payments contracts with the\n policy. Therefore, HUD publishes notices of\n tenants\xe2\x80\x99 landlords due to insufficient\n proposed rule making in the Federal\n subsidy funds.\n Register and gives interested persons an\n opportunity to participate in the rule making\n OIG did not concur with the proposed\n through submission of written data and\n notice for the following reasons:\n arguments. Rules are defined as all or part\n of any HUD statement of general or\n The HOME Investment Partnership Act\n particular applicability and future effect\n states funds may not be used to provide\n designed to (1) implement, interpret, or\n tenant-based rental assistance or extend or\n prescribe law or policy or (2) describe HUD\xe2\x80\x99s\n renew tenant-based assistance under\n organization or its procedure or practice\n Section 8 of the United States Housing Act\n\n\n110 Policy Directives\n\x0crequirements. Rule making is defined as the successful prosecutions or other remedial\nprocess for considering and formulating the actions. OIG has pending investigations\nissuance, modification, or repeal of a rule. involving tenants who have defrauded PIH\nIn OIG\xe2\x80\x99s opinion, this draft notice meets the assistance programs. The draft notice\nstandard as a rule and should be published threatens to jeopardize current\nin the Federal Register for comment. investigations and to undermine the fairness\n of past convictions.\n The Department decided not to issue the\nproposed notice based on OIG\xe2\x80\x99s comments. The Office of Public and Indian Housing\n decided not to issue the draft notice based\nEstablishment of Amnesty on OIG\xe2\x80\x99s comments.\n\nProgram at Public Housing\nAgencies Resulting from\n Mortgagee Letters\nInspections of Family Income Special Authority for Use of Deed\n The OIG reported on this issue in the\n in Lieu of Foreclosure to Assist\nMarch 31, 2005, Semiannual Report to Victims of Hurricanes\nCongress, and HUD had not reached a final\ndecision as of that date. HUD drafted a mortgagee letter to make\n it easier for mortgagees to accept voluntary\n The draft Notice PIH 2004 provides conveyances of property from borrowers in\nrequirements to housing agencies that plan those cases in which, due to storm damage,\nto offer tenants amnesty as a result of the the home is not habitable and will not be\nUpfront Income Verification System restored. The proposed change included a\ndetecting a difference between the tenants\xe2\x80\x99 $5,000 incentive payment to the borrower or\nclaim of income and the income reported by mortgagee, as applicable, to complete a\ntheir employers or agencies providing deed-in-lieu agreement. OIG commented\nincome assistance. The Department that the $5,000 payment constituted an\ninitiated the Upfront Income Verification enhanced entitlement and an unexpected\nSystem to reduce subsidy errors resulting windfall to the borrowers but at a cost to\nfrom tenants underreporting or not HUD that simply increased claim losses\nreporting their income. without a material corresponding benefit.\n HUD believes this cost is more than offset\n OIG did not concur with this draft by a decrease in the interest and other costs\nnotice because it inappropriately empowers that would be payable in an insurance claim\nhousing agencies to decide who will be if the loans foreclose. OIG recommended\nprosecuted. The U.S. Code states that the that the deed-in-lieu transactions be tracked\nAttorney General of the United States is so that the Department could evaluate the\nresponsible for deciding who will be participation levels and borrower eligibility.\nprosecuted for a Federal offense. In the\nTenth Amendment to the United States It is not known if the Department will\nConstitution, the determination on who will monitor the transactions. The proposed\nbe prosecuted under State law is reserved letter was published May 3, 2006, after the\nto State authorities. end of this semiannual period as Mortgagee\n Letter 2006-10.\n OIG has investigated numerous cases\ninvolving tenants who falsely reported their\nincomes. These investigations resulted in\n\n\nPolicy Directives 111\n\x0c Expanded Streamline (K) Limited insurance and file a partial claim for the\n amount of the advance. Homeowners would\n Repair Program be required to sign a repayment agreement.\n\n HUD drafted a mortgagee letter to OIG commented that the agreement\n modify documentation and control should be securitized through a promissory\n requirements over 203(k) Rehabilitation note or other appropriate instrument and\n Mortgage loans, an acknowledged higher recorded as a lien against the property.\n risk Federal Housing Administration (FHA) Without a lien, recovery of the advance\n insurance program. The proposed change would not occur as a distribution from the\n eliminated the $5,000 repair minimum and closing of a future property sale, and the\n raised the maximum to $35,000. OIG agreement would not provide a strong and\n commented that financing as much enforceable legal document in seeking\n as $35,000 of \xe2\x80\x9cminor repairs\xe2\x80\x9d could repayment directly from the borrower.\n expose unwary borrowers to problems\n associated with past program abuses and The Department addressed our issues\n recommended that the Department require and published this proposal under\n a final inspection of the work when repair Mortgagee Letter 2005-46 on December 1,\n costs exceeded $15,000. 2005.\n\n HUD agreed and included the\n inspection requirement when it published\n Late Request for Endorsement\n Mortgagee Letter 2005-50, dated December Procedures/Certification\n 29, 2005. Eliminated, Proposed Mortgagee\n Tax-Exempt Status for Nonprofit Letter\n Downpayment Gift Providers HUD drafted a mortgagee letter to\n remove the certification requirement from\n HUD drafted a mortgagee letter FHA\xe2\x80\x99s late endorsement procedures. HUD\n regarding nonprofit \xe2\x80\x9cdownpayment believes the certification requirement does\n assistance providers\xe2\x80\x9d. OIG nonconcurred. not materially contribute to reducing\n insurance risk.\n The Department was reviewing OIG\xe2\x80\x99s\n nonconcurring comments at the end of the OIG nonconcurred because the\n semiannual reporting period. certification is a critical document in\n supporting and enforcing departmental\n remedies for noncompliance, and, therefore,\n Special Authority for Use of OIG disagrees with its proposed\n Partial Claims and Loan elimination. OIG has done significant\n Modifications to Assist Victims of testing of \xe2\x80\x9clate endorsement\xe2\x80\x9d compliance by\n major direct endorsement lenders as part of\n Hurricane Katrina its audit focus on FHA single-family lending\n practices beginning in 2004. OIG found that\n HUD drafted a mortgagee letter to lenders certified full compliance and\n provide financial relief to victims of eligibility for FHA insurance, when some\n Hurricane Katrina who owned FHA- loans were not eligible because the\n financed homes. The mortgagee letter borrowers were in arrears on their mortgage\n would allow lenders to advance up to 12 payments. OIG recommended that HUD\n months of principal, interest, taxes, and take appropriate remedies to reduce\n\n\n112 Policy Directives\n\x0cnoncompliance, including loan Premium Pricing on FHA-Insured\nindemnifications and Program Fraud Civil\nRemedies Act recoveries. It remains a Mortgages\nconcern because these ineligible late-\nendorsed loans were early defaults that were OIG reported on premium pricing on\nsubsequently endorsed for insurance. FHA-insured mortgages in the March 31,\n 2005, Semiannual Report to Congress, and\n The Department issued Mortgagee HUD had not reached a final decision.\nLetter 2005-23, which modified late\nendorsement procedures but retained a Department action on the proposed\ncertification requirement. letter was still pending at the end of this\n semiannual reporting period.\n\n\n\n\nPolicy Directives 113\n\x0c\x0c Chapter 10\nAudit Resolution\n\x0c In the audit resolution process, Office Audits of FHA\xe2\x80\x99s FY 1991 through\n of Inspector General (OIG) and U.S.\n Department of Housing and Urban 1995 Financial Statements\n Development (HUD) management agree\n upon the needed actions and timeframes for First issued March 27, 1992. FHA has\n resolving audit recommendations. Through prepared financial statements for 15 years\n this process, OIG hopes to achieve under the Chief Financial Officers Act,\n measurable improvements in HUD beginning with FY 1991. The audit of FHA\xe2\x80\x99s\n programs and operations. The overall FY 2005 financial statements discussed\n responsibility for assuring that the agreed- FHA\xe2\x80\x99s need to improve its review of the\n upon changes are implemented rests with credit reform estimation process as a\n HUD managers. This chapter describes material weakness. The finding revealed that\n significant pending issues for which FHA management did not adequately\n resolution action has been delayed. It also review the underlying data supporting the\n contains a status report on HUD\xe2\x80\x99s assumptions in the estimation cash flow or\n implementation of the Federal Financial functionality models. This resulted in\n Management Improvement Act of 1996 material errors in the FHA mark-to-market\n (FFMIA). In addition to this chapter on audit loan loss reserve and the liability for loan\n resolution, see appendix 2, table A, \xe2\x80\x9cAudit guarantee subsidy re-estimates. The audit\n Reports Issued before Start of Period with continues to recognize that FHA needs to (1)\n No Management Decision as of March 31, improve its information technology\n 2006,\xe2\x80\x9d and table B, \xe2\x80\x9cSignificant Audit (primarily accounting and financial\n Reports Described in Previous Semiannual management systems) to more effectively\n Reports in Which Final Action Had Not Been support FHA\xe2\x80\x99s business and budget\n Completed as of March 31, 2006.\xe2\x80\x9d processes and (2) continue to improve early\n warning and loss prevention for single-\n Delayed Actions family insured mortgages through more\n emphasis on monitoring lender\n underwriting and more effective use of loan\n Audits of HUD\xe2\x80\x99s FY 1991 through portfolio risk assessment tools. A weakness\n 1995 Financial Statements reported since the FY 1992 financial\n statement audit relates to the need for FHA\n to more effectively manage controls over its\n First issued June 30 1992. HUD has been information systems\xe2\x80\x99 general and\n preparing consolidated financial statements application level security controls. FHA\xe2\x80\x99s\n under the requirements of the Chief latest action plan continues to report\n Financial Officers Act for 15 years beginning progress toward resolving these remaining\n with fiscal year (FY) 1991. Various internal long-standing issues, with final actions\n control weaknesses have been reported in targeted over the next 3 years.\n these audits. As a result of the FY 2005\n financial audit process, OIG reported HUD\xe2\x80\x99s\n need to (1) incorporate better risk factors and Guild Mortgage Company DBA,\n monitoring tools into the Federal Housing Residential Mortgage Bankers,\n Administration\xe2\x80\x99s (FHA) single-family\n insured mortgage program risk analysis and\n Nonsupervised Direct Endorser -\n liability estimation process and (2) improve Downey, CA\n FHA\xe2\x80\x99s management review of the credit\n reform estimation process. Corrective action Issued July 9, 2004. Guild Mortgage\n plans to resolve these issues have final action Company (Guild) allowed predatory\n targeted by the end of calendar year 2006. lending practices, a prohibited net branch\n arrangement, and did not always follow\n\n116 Audit Resolution\n\x0cprudent lending practices. Guild allowed its satisfied and giving HUD 30 days to provide\nbranch, Residential Mortgage Bankers, to an action plan. On June 8, 2005, we received\ncharge excessive fees for underwriting and a response from the General Deputy\nprocessing, as well as allowing loan discount Assistant Secretary for Housing-Deputy\npoints and premium rate pricing for which Federal Housing Administration\nthe interest rates were not reduced and the Commissioner stating that the Office of\nborrowers did not receive any value or Housing did not agree that loans with\nservices for the charges. In addition, discount point charges, in which there was\nResidential Mortgage Bankers was no interest rate reduction, were a HUD or\nestablished as an independent mortgage Real Estate Settlement Procedures Act\ncorporation originating FHA loans without requirement. Further, the memorandum\nmeeting HUD\xe2\x80\x99s application and asset stated that the Real Estate Settlement\nrequirements. Guild also failed to establish Procedures Act Office would provide the\nappropriate loan processing and official written confirmation response on its\nunderwriting controls to ensure HUD decision regarding this issue by June 30,\nrequirements were followed during the loan 2005.\norigination process. OIG recommended that\nGuild (1) be referred to the Mortgagee In November 2005, OIG received the\nReview Board and assessed civil money referenced legal opinion, dated November\npenalties for engaging in predatory lending 3, 2005, whose subject line was \xe2\x80\x93 Availability\npractices, (2) be required to review and of Enforcement Action Under RESPA Based\nanalyze all FHA loans originated by on Discount Points Charged in Above-Par\nResidential Mortgage Bankers in which loan Loans. The opinion memorandum\ndiscount points were charged and there was concluded that Guild\xe2\x80\x99s charging of discount\nno interest rate reduction, (3) make refunds points in these transactions is contrary to\nas required by HUD regulations, (4) repay HUD\xe2\x80\x99s regulations and statements of policy\nHUD losses totaling more than $811,000, interpreting Section 8(b) of RESPA. It also\nand (5) indemnify the remaining loans noted that the statute of limitations expired\namounting to more than $159 million. before our audit and several appellate courts\n have questioned aspects of HUD\xe2\x80\x99s\n OIG received a management decision, interpretation of Section 8(b). The opinion\ndated November 8, 2004, which included a also concluded there may be a violation of\ndecision for recommendation 1C, which Section 4 of RESPA if the disclosures\nstates that a written legal opinion would be provided did not accurately describe the\nrequested from the Office of General function of the discount points. OIG\xe2\x80\x99s\nCounsel regarding loan discount points and conclusion, as described in the audit report,\npremium rate pricing. A legal opinion, dated was that the fees labeled as discount points\nDecember 7, 2004, from the Office of General were actually unearned fees disguised as\nCounsel only addressed the issue of discount points on the HUD-1 Settlement\npremium rate, pricing but the opinion went Statements. As a result, neither the Good\non to state that issues regarding discount Faith Estimates nor the HUD-1 Settlement\npoints would be addressed by the Office of Statements accurately described the\nReal Estate Settlement Procedures Act/ function of the fees labeled as discount\nOffice of Land Sales. HUD, however, closed points that went to the lender as additional\nthe recommendation on February 7, 2005, compensation instead of providing interest\nas having been satisfied. On March 29, 2005, rate deductions to the borrowers.\nOIG reopened this recommendation and\nissued a memorandum to the Assistant In a letter, dated December 22, 2005,\nSecretary for Housing, explaining that the OIG asked the Assistant Secretary for\noriginal recommendation had not been fully Housing to refer the lender to the Mortgagee\n\n\nAudit Resolution 117\n\x0c Review Board for civil money penalties for OIG recommended that HUD require U.S.\n the violations cited for the loans in question, Veterans Initiative and/or its continuums\n and we are still awaiting a reply. OIG Los Angeles Homeless Services Authority\n followed up with more correspondence on and City of Long Beach to (1) repay HUD\n February 8, 2006, with notification that none from nonfederal funds for the $6,589,242 in\n of the targeted action dates have been met SHP grant expenditures that did not have\n for the recommendations in the July 9, 2004, the required matching funds unless it can\n audit report. As of March 31, 2006, none of provide the supporting documentation, (2)\n the borrowers have received refunds and no comply with Federal requirements in\n civil money penalties have been assessed to carrying out its SHP grant activities, (3)\n the lender. The maximum civil money reimburse the SHP grants and/or repay\n penalty assessment is $6,500 per violation HUD from nonfederal funds for the $633,348\n up to a limit of $1.25 million for all violations in ineligible and unsupported expenses, (4)\n committed during any 1-year period. revise U.S. Veterans Initiative\xe2\x80\x99s financial\n (Report No. 2004-LA-1005) management system, (5) competitively\n procure the services in the business services\n United States Veterans Initiative, agreement, (6) develop and/or update the\n indirect cost rates, and (7) submit financial\n Inc. - Supportive Housing closeout reports for expired grants.\n Program Grantee - Inglewood,\n On April 4, 2005, the Deputy Secretary\n CA made final management decisions1 for this\n audit and the Office Community Planning\n Issued September 27, 2004. United and Development (CPD) agreed to complete\n States Veterans Initiative, Inc. \xe2\x80\x93 Supportive final actions by March 17, 2006. As part of\n Housing Program Grantee the management decision for finding 1, CPD\n agreed to contact the U.S. Department of\n Issued September 27, 2004. Contrary to Labor (DOL), the U.S Department of\n Federal regulations and grant requirements, Veterans Affairs (VA), and Americorp to\n U.S. Veterans Initiative was unable to determine whether their funds can be used\n support that it met cash matching funds as match for the SHP. If the funds can be\n requirements for any of the $7,222,590 in used, CPD agreed to request a legal opinion\n Supportive Housing Program (SHP) grant from HUD\xe2\x80\x99s Office of General Counsel\n funds expended during the audit period. (OGC) regarding (1) the definition of\n U.S. Veterans Initiative also spent at least \xe2\x80\x9cbudget line item\xe2\x80\x9d and (2) whether match\n $633,348 in SHP funds for ineligible may be applied project to project or used\n ($498,248) and unsupported ($135,100) based on budget line item or must be applied\n salaries and other expenses. We also found to the lower accounting level. If the funds\n that U.S. Veterans Initiative did not cannot be used as match, $1,254,570 will be\n administer its SHP grants in accordance disallowed. With regard to finding 2, CPD\n with requirements because it failed to (1) agreed to request a legal opinion from OGC\n develop an adequate financial management to determine whether approval can be\n system, (2) comply with procurement and granted after the fact for expenditures that\n contract administration requirements, (3) were not included as budget line items but\n establish and implement indirect cost rates were SHP eligible. Regarding finding 3,\n as required, and (4) close out expired grants. CPD agreed to suspend the processing of\n\n\n 1\n In our Semiannual Report to the Congress covering the period October 1, 2004, through March 31,\n 2005, we reported our disagreement with the Deputy Secretary\xe2\x80\x99s final management decision on this\n audit.\n\n118 Audit Resolution\n\x0cany new grant agreements until the audit determine the appropriateness of the course\nissues have been resolved. The Deputy of action for these recommendations. In\nSecretary also determined that grant addition, OIG advised CPD to obtain a\nrenewals, subsequent to those awarded written legal opinion from OGC to\nunder the 2004 Continuum of Care determine the allowability of the debt\ncompetition, will not be funded until repayment proposal to allow some of the\nmanagement decisions from the audit are debt to repaid with payment in kind to a\nresolved. Final action was scheduled to be third party grantee and whether such\ncompleted for findings 1 and 2 by January payments in kind, in the absence of a\n4, 2006, and for finding 3 by March 17, 2006. reduction by an equal amount of HUD\xe2\x80\x99s\n liability to the third party grantee, constitute\n On February 7, 2006, CPD sent a an augmentation of HUD\xe2\x80\x99s appropriation or\nmemorandum to provide a status update violation of the HUD Reform Act.\nand request revisions to the management Regarding finding 3, we advised that the\ndecisions and attached a December 19, 2005, management decision required all the audit\nlegal opinion from OGC. With regard to issues to be resolved before the corrective\nfinding 1, CPD had not yet determined action can be considered complete.\nwhether funds from DOL, VA, and Therefore, final action was past due as of\nAmericorp could be used as match for the March 31, 2006. (Report No. 2004-LA-1008)\nSHP. CPD explained that it had received\ninconsistent responses from the agencies;\ntherefore, on December 13, 2005, it had\n Significant Management\nrequested opinions from the agencies\xe2\x80\x99\ncounsels and is currently waiting for their\n Decision with Which the\nresponses. CPD requested an extension OIG Disagrees\nuntil June 30, 2006, to complete final action.\nWith regard to finding 2, OGC ruled that Section 5(a)(12) of the Inspector General\nCPD could grant approval for grant Act, as amended, requires that OIG report\nexpenditures that were not included as information concerning any significant\nbudget line items but were SHP eligible. management decisions with which OIG is\nBased on this opinion, CPD requested a in disagreement. During the current\nrevised management decision to revise the reporting period, OIG disagreed with\ndisallowed amounts and request our significant management decisions for one\nconcurrence to allow U.S. veterans to repay audits.\nthe disallowed costs through (1) a\nrepayment plan, (2) recovery through offsets\non active grants, and (3) recovery through\n Idaho Housing and Finance\nproperty in lieu of cash. On finding 3, CPD Association - Boise, ID\nrequested concurrence to close the\nrecommendation based on the receipt of the Issued September 16, 2005. Idaho Housing\nOGC legal opinion. and Finance (Idaho Housing), Boise, ID, did\n not follow Federal regulations and HUD\n On February 22, 2006, OIG responded guidelines when it allowed 10 project\nto CPD\xe2\x80\x99s memorandum and advised that for owners to prepay project mortgages.\nfinding 1, OIG cannot extend the final action According to the Housing Assistance\ntarget date since there was no change in the Payment (HAP) contracts for these projects,\nmanagement decision. Therefore, final the prepayment of the projects\xe2\x80\x99 permanent\naction is considered past due after March financing cancels the HAP contracts.\n31, 2006. With regard to finding 2, OIG However, Idaho Housing did not enforce the\nrequested supporting documentation to HAP contract termination, causing HUD to\n\n\nAudit Resolution 119\n\x0c pay more than $8.5 million in rent subsidies behalf of the owners, HUD\xe2\x80\x99s written\n in excess of fair market rents. approval to prepay.\n\n OIG found no documentation showing OIG believes the Office of Multifamily\n Idaho Housing informed HUD of the Housing\xe2\x80\x99s policy of allowing the owners of\n prepayments for 7 of the 10 projects it noninsured subsidized projects to\n reviewed. As a result, Idaho Housing did unilaterally choose one of the three options\n not give HUD the opportunity to offer any does not protect HUD\xe2\x80\x99s interests and comply\n options regarding the rent subsidies. Idaho with amendments made to Section 524 of\n Housing\xe2\x80\x99s failure to notify HUD of these MAHRA, effective September 30, 2001.\n prepayments is a violation of HUD\n regulations at 24 CFR 883.307(b)(2) and a The HAP contract termination for the 10\n breach of its annual contributions contract, projects in OIG\xe2\x80\x99s report is covered under\n which requires compliance with the U.S. MAHRA Sections 524(b)(1) and 524 (b)(2).\n Housing Act of 1937 and all applicable Therefore, by statute, HUD can only offer\n regulations and requirements. the HAP renewal option stated in Section\n 524(b)(1). Due to the application of an\n OIG recommended that HUD require annual adjustment factor through March\n Idaho Housing to reimburse HUD for the 1995, the 10 prepaid Idaho Housing projects\n $8.5 million in excessive subsidy payments in OIG\xe2\x80\x99s report had subsidized rents that\n for the projects without valid HAP contracts. were as much as 191 percent of applicable\n OIG also recommended that HUD fair market rents. OIG estimates that HUD\n renegotiate the terminated HAP contracts would save more than $1.3 million in excess\n with the owners and Idaho Housing, taking section 8 subsidy payments over the next\n into consideration the projects\xe2\x80\x99 condition year if it renegotiated the HAP contracts in\n and fair market rents. The Office of conformance with MAHRA.\n Multifamily Housing disagreed with both\n recommendations. Subsequently, OIG held Initially, OIG agreed to modify its two\n discussions with the Deputy Assistant recommendations and eliminate $8.5 million\n Secretary for Multifamily Housing to in ineligible costs if the Office of Multifamily\n discuss issues relating to HUD\xe2\x80\x99s policy on Housing would commit to changing its\n extending HAP contracts upon contract policy of allowing project owners to\n termination due to prepayment. unilaterally choose the option of extending\n HAP contracts that terminated due to\n Regarding the issue of prepaid projects, prepayment. OIG stated that any new policy\n the Office of Multifamily Housing stated must be in conformance with the applicable\n that HUD\xe2\x80\x99s practice since 2002 is to offer provisions of MAHRA. On March 14, 2006,\n owners who contact HUD the options of (1) the Assistant Inspector General for Audit\n extending the term of the HAP contract to referred the issue to the Assistant Secretary\n the originally scheduled maturity date of the for Housing because OIG could not reach\n permanent financing, (2) renewing the HAP an agreement with the Office of Multifamily\n contract under the provisions of the Housing on the two recommendations\n Multifamily Assisted Housing Reform Act within established timeframes.\n (MAHRA), or (3) opting out of the Section 8\n program. According to the Office of On March 31, 2006, the Inspector\n Multifamily Housing, it would have allowed General received a memorandum from the\n the HAP contract extensions using existing Deputy Secretary stating that he agreed with\n terms if Idaho Housing had (1) recognized the Office of Housing\xe2\x80\x99s proposed\n the termination provision at the time of the management decision. This decision states\n refinancing and (2) sought and received, on that the Office of Housing will not require\n\n\n120 Audit Resolution\n\x0cIdaho Housing to reimburse HUD for the requirements within 3 years or obtain Office\nexcessive subsidy payments and renegotiate of Management and Budget concurrence if\nthe subsidy contracts with the 10 project more time is needed. FFMIA requires OIG\nowners. OIG disagrees with the Deputy to report in its semiannual reports to the\nSecretary\xe2\x80\x99s management decision and Congress instances and reasons when an\nquestion HUD\xe2\x80\x99s reluctance to commit to agency has not met the intermediate target\nchanging its policy on prepaid, noninsured dates established in its mediation plan\nmultifamily housing projects to conform to required by FFMIA. In April 1998, HUD\nMAHRA. OIG has asked for a formal Office determined that 38 of its systems were not\nof General Counsel legal opinion on this in substantial compliance with FFMIA. At\nissue. (Report No. 2005-SE-1008) the end of 2005, the Department continued\n to report that 2 of its 44 financial\nFederal Financial management systems were not in\n substantial compliance with FFMIA. These\nManagement two systems are Loan Accounting\n\nImprovement Act of 1996 System(LAS), and Facilities Integrated\n Resources Management System (FIRMS).\n HUD is in the process of replacing LAS with\n FFMIA requires that HUD implement a commercial off-the-shelf software package\na remediation plan that will bring in the second quarter of 2006. HUD\nfinancial systems into compliance with reported FIRMS as noncompliant in its\nFederal Financial Management System 2005 self-assessment.\n\n\n\n\nAudit Resolution 121\n\x0c\x0c Appendix 1\nAudit Reports Issued\n\x0c Internal Reports\n 11 Audit Reports\n Chief Financial Officer (2 Reports)\n 2006-DP-0001 HUD Compliance with Joint Financial Management Improvement\n Program, Core Financial System Requirements for Cost Management,\n 10/07/2005.\n 2006-FO-0003 Additional Details to Supplement Our Reports on HUD\xe2\x80\x99s FY 2005\n and 2004 Financial Statements, 11/15/2005. Better Use: $377,593,323.\n Chief Information Officer (4 Reports)\n 2006-DP-0002 Security Configuration of FHA Unix Operating System, 10/31/2005.\n 2006-DP-0003 Vulnerability Assessment of HUD\xe2\x80\x99s Computer Network, 01/31/2006.\n 2006-DP-0004 Review of HUD\xe2\x80\x99s Information Security Program, 02/14/2006.\n Better Use: $9,980,000.\n 2006-DP-0801 OIG Response to Questions From the OMB Under the Federal\n Information System Management Act of 2002, 10/04/2005.\n Government National Mortgage Association (1 Report)\n 2006-FO-0001 GNMA Financial Statements for FY 2005 and 2004, 11/07/2005.\n Housing (2 Reports)\n 2006-FO-0002 FHA Financial Statements for FY 2005 and 2004, 11/07/2005.\n 2006-KC-0001 The HUD Office of Affordable Housing Preservation Appropriately\n Approved the Mark-to-Market Eligibility and Exception Rents, and\n Assessed the Physical Condition of Evergreen Terrace I, Joliet, IL,\n 02/09/2006.\n Lead Hazard Control (1 Report)\n 2006-PH-0001 HUD Did Not Properly Award FY 2004 Healthy Homes and Lead\n Hazard Control Grants, 12/07/2005. Questioned: $3,000,000; Better\n Use: $20,496,000.\n Public and Indian Housing (1 Report)\n 2006-CH-0001 Real Estate Assessment Center\xe2\x80\x99s Physical Condition Assessment Was\n Compromised, Washington, DC, 11/30/2005.\n\n\n\n\n124 Audit Reports Issued\n\x0cExternal Reports\n66 Audit Reports\nCommunity Planning and Development (8 Reports)\n2006-BO-1001 The Division of Grants Management, City of Hartford, CT, Paid\n $1,039,296 for Ineligible CDBG Activities, 10/07/2005. Questioned:\n $981,461; Unsupported: $85,581; Better Use: $1,127,861.\n2006-BO-1003 The City of Malden Working to Ensure Appropriate Use of CDBG and\n HOME Program Administrative Funds, Malden, MA, 01/23/2006.\n2006-CH-1001 HUD\xe2\x80\x99s Interest in More Than $220,000 in Economic Development\n Initiative-Special Purpose Grant Funds Awarded to the City of St.\n Ignace, MI, Was Not Secured, 11/10/2005. Better Use: $223,537.\n2006-CH-1003 HUD\xe2\x80\x99s Interest in $47,668 in Economic Development Initiative-Special\n Purpose Grant Funds Awarded to the City of Rhinelander, WI, Was Not\n Secured, 12/05/2005. Better Use: $47,668.\n2006-CH-1006 Northstar Community Development Corporation Inappropriately Used\n More Than $120,000 in Economic Development Initiative-Special\n Purpose Grant Funds and HUD\xe2\x80\x99s Interest in More Than $180,000 in\n Grant Funds Was Not Secured, Detroit, MI, 12/30/2005. Questioned:\n $125,342; Unsupported: $1,970; Better Use: $184,871.\n2006-LA-1009 Fontana Native American Indian Center Did Not Adequately Administer\n Its Supportive Housing Program Grant, Fontana, CA, 03/03/2006.\n Questioned: $194,541; Unsupported: $55,776.\n2006-NY-1002 WomenRising, Inc., Did Not Always Comply with HUD\xe2\x80\x99s Supportive\n Housing Program, Jersey City, NJ, 01/31/2006. Questioned: $94,759;\n Unsupported: $94,759.\n2006-NY-1006 Lower Manhattan Development Corporation, CDBG Disaster Recovery\n Assistance Fund, New York, NY, 03/31/2006. Questioned: $266,802.\nHousing (28 Reports)\n2006-AT-1003 Certified Home Loans of Florida Did Not Always Comply with FHA\n Requirements, Miami, FL, 01/12/2006. Questioned: $728,479; Better\n Use: $660,699.\n2006-BO-1004 Mount Saint Francis Health Center, Providence, RI, 03/03/2006.\n Questioned: $4,402,305; Unsupported: $2,743,728.\n2006-BO-1006 Coventry Health Center, Providence, RI, 03/28/2006. Questioned:\n $1,858,100; Unsupported: $992,979.\n2006-CH-1002 The General Partner of The Sanctuary of Geneva, OH, Improperly\n Used More Than $43,000 in Project Funds, 11/17/2005. Questioned:\n $43,484; Unsupported: $5,475.\n2006-CH-1004 Trustcorp Mortgage Company, Non-Supervised Lender, Substantially\n Complied with Requirements Regarding Late Requests for Endorsements\n and Underwriting of Loans, South Bend, IN, 12/22/2005. Questioned:\n $2,889; Better Use: $102,02.\n2006-CH-1007 Huntington National Bank, Supervised Lender, Generally Complied\n with Requirements Regarding Submission of Late Requests for\n Endorsement and Underwriting of Loans, Columbus, OH, 03/15/\n 2006. Questioned: $1,325; Better Use: $2,702,616.\n\n\nAudit Reports Issued 125\n\x0c 2006-CH-1008 US Bank NA, Supervised Lender, Did Not Always Comply with HUD\xe2\x80\x99s\n Requirements Regarding Late Requests for Endorsements and\n Underwriting of Loans, Minneapolis, MN, 03/31/2006. Questioned:\n $584,252; Unsupported: $129,686; Better Use: $2,957,090.\n 2006-DE-1001 First Magnus Financial Corporation Did Not Follow HUD Requirements\n in Underwriting 31 Insured Loans, Denver, CO, 12/20/2005. Questioned:\n $873,455; Unsupported: $638,618; Better Use: $1,936,792.\n 2006-DE-1002 American Title Services Did Not Comply with Contract Terms for\n Closing Sales of HUD Homes, Greenwood Village, CO, 02/01/2006.\n Questioned: $6,858.\n 2006-FW-1004 K Hovnanian American Mortgage, LLC, Violated Underwriting\n Requirements and Did Not Meet All Quality Control or Branch\n Requirements, Plano, TX, 01/26/2006. Questioned: $608,333; Better Use:\n $736,517.\n 2006-FW-1006 America\xe2\x80\x99s Mortgage Resource, Inc., Branch Manager Formed an\n Identity-of-Interest Entity That Provided Gift Funds; and Did Not\n Always Meet HUD Loan Origination and Quality Control Plan\n Requirements, Metairie, LA, 03/28/2006. Questioned: $708,258; Better\n Use: $6,904,509.\n 2006-FW-1007 BSM Financial LP Originated Loans on Overvalued Properties to Less\n Than Creditworthy Borrowers, Putting Borrowers and HUD at Risk,\n Allen, TX, 03/31/2006. Questioned: $1,989,588; Better Use: $3,084,886.\n 2006-KC-1002 First Magnus Financial Corporation Did Not Follow HUD Regulations\n When Underwriting 23 FHA Loans, Overland Park, KS, 12/12/2005.\n Questioned: $221,337; Better Use: $2,429,604.\n 2006-KC-1004 Major Mortgage Improperly Submitted Late Requests for Endorsement\n of FHA Loans, Cheyenne, WY, 01/20/2006. Questioned: $168,054;\n Unsupported: $132,562; Better Use: $1,098,180.\n 2006-KC-1005 Matrix Financial Services Corporation\xe2\x80\x99s St. Louis Branch Did Not\n Properly Underwrite and/or Close 40 FHA Loans, St. Louis, MO,\n 01/31/2006. Questioned: $234,122; Unsupported: $58,147; Better Use:\n $2,630,627.\n 2006-KC-1007 American Lending Group Did Not Properly Originate 9 Loans and Did\n Not Have Adequate Quality Control Procedures, St. Peters, MO,\n 03/15/2006. Questioned: $416,555; Unsupported: $364,198; Better Use:\n $646,907.\n 2006-LA-1001 Ryland Mortgage Company Did Not Follow HUD Requirements in the\n Origination of Insured Loans, Tempe, AZ, 10/31/2005. Questioned:\n $89,741; Better Use: $2,730,099.\n 2006-LA-1003 The Owners of The Avenue Misused More Than $32,000 in Project Funds,\n San Francisco, CA, 12/07/2005. Questioned: $32,851.\n 2006-LA-1005 The Villas at Camelback Crossing - Phase I Used Project Funds Totaling\n $1,039,034 for Ineligible or Undocumented Costs, Glendale, AZ,\n 12/13/2005. Questioned: $1,039,034; Unsupported: $165,051.\n 2006-LA-1006 The Villas at Camelback Crossing - Phase II Used Project Funds Totaling\n $1,008,215 for Ineligible or Undocumented Costs, Glendale, AZ,\n 12/13/2005. Questioned: $1,008,215; Unsupported: $182,595.\n\n\n\n\n126 Audit Reports Issued\n\x0c2006-LA-1007 The Villas at Augusta Ranch Used Project Funds Totaling $965,316 for\n Ineligible or Undocumented Costs, Mesa, AZ, 12/13/2005. Better Use:\n $17,710,686.\n2006-LA-1010 The Owner and Agent of Holiday Apartments, LA PRO 30, and Two\n Worlds II Mismanaged Project Finances and Operations, Los Angeles,\n CA, 03/03/2006. Questioned: $3,097,469; Unsupported: $719,899; Better\n Use: $1,246,866.\n2006-NY-1001 United Mortgage Corporation Did Not Always Comply with HUD/\n FHA Loan Origination Requirements, Hauppauge, NY, 11/18/2005.\n Questioned: $154,921; Better Use: $2,666,050.\n2006-PH-1004 Homestead Funding Corp. Issued and Submitted for Endorsement Loans\n with an Increased Risk of Defaults and Claims, Allentown, PA,\n 12/02/2005. Questioned: $175,594; Unsupported: $175,594; Better Use:\n $95,107.\n2006-PH-1006 Allied Mortgage Group Issued and Submitted for Endorsement Loans\n with an Increased Risk of Defaults and Claims, Bala Cynwyd, PA,\n 02/08/2006. Questioned: $205,164; Unsupported: $204,153; Better Use:\n $595,418.\n2006-PH-1007 The Loan Origination Process and Quality Control Plan of American\n Mortgage, Inc., Did Not Comply with HUD Regulations and\n Requirements, Cherry Hill, NJ, 02/15/2006. Questioned: $4,589; Better\n Use: $1,632,468.\n2006-PH-1008 1st Preference Mortgage Corporation, York, PA, and Greenbelt, MD,\n Did Not Originate All FHA Loans in Accordance with HUD\n Requirements, York, PA, 03/23/2006.\n2006-SE-1001 Idaho Housing and Finance Association Did Not Monitor Subsidized\n Multifamily Projects in Accordance with Regulations or Its Annual\n Contributions Contract with HUD, Boise, ID, 01/26/2006. Questioned:\n $4,050,085; Unsupported: $182,264; Better Use: $357,986.\nPublic and Indian Housing (30 Reports)\n2006-AT-1001 Miami Dade Housing Agency Did Not Ensure Section 8 Assisted Units\n Met Housing Quality Standards, Miami, FL, 12/21/2005. Questioned:\n $7,300; Better Use: $25,971,988.\n2006-AT-1002 The Housing Authority of the City of Prichard\xe2\x80\x99s Controls over the Sale\n of Affordable Housing Units, Use of Sales Proceeds, and Expenditure\n of Low-Income Funds Were Inadequate, Prichard, AL, 01/11/2006.\n Better Use: $15,444,527.\n2006-AT-1004 The Housing Authority of the City of Prichard Did Not Ensure Section\n 8 Subsidy Payments Were for Eligible Units, Tenants, and Landlords,\n Prichard, AL, 01/13/2006. Questioned: $325,374; Better Use: $14,625,468.\n2006-AT-1005 The Housing Authority of the City of Winston-Salem Did Not Ensure\n Section 8 Assisted Units Were Decent, Safe, and Sanitary, Winston-\n Salem, NC, 01/18/2006. Better Use: $6,435,360.\n2006-AT-1006 The Municipality of San Juan Housing Authority Did Not Ensure\n Section 8 Assisted Units Were Decent, Safe, and Sanitary, San Juan, PR,\n 02/23/2006. Better Use: $5,834,496.\n2006-AT-1007 The Housing Authority of the City of Winston-Salem Used More Than\n $4.9 Million in Operating Subsidies for Other Programs, Winston-\n Salem, NC, 03/30/2006. Questioned: $4,976,616; Better Use: $475,000.\n\n\nAudit Reports Issued 127\n\x0c 2006-BO-1002 Review of Worcester Housing Authority Identified $1.9 million of Its\n Public Housing Operating Funds Used for Non-Program Purposes,\n Worcester, MA, 11/29/2005. Questioned: $1,943,662; Better Use:\n $1,011,733.\n 2006-BO-1005 Hartford Housing Authority Had Housing Choice Voucher Program\n Deficiencies Resulting in More Than $2.6 Million in Costs Exceptions,\n Hartford, CT, 03/10/2006. Questioned: $1,715,809; Better Use: $960,332.\n 2006-CH-1005 Fairfield Metropolitan Housing Authority Used Annual Contributions\n Contract Funds for Development Activities Outside Its Annual\n Contributions Contract, Lancaster, OH, 12/30/2005. Questioned:\n $543,483.\n 2006-DE-1003 The Housing Authority of the City and County of Denver Properly\n Assigned Section 8 Voucher Sizes But Made Errors on Nine Vouchers,\n Denver, CO, 03/15/2006. Better Use: $26,683.\n 2006-FW-1001 The Fort Worth Housing Authority Did Not Properly Apply Its Section\n 8 Subsidy Size Standards for Existing Tenants, Fort Worth, TX,\n 10/21/2005. Questioned: $180,618; Unsupported: $174,667; Better Use:\n $2,646,373.\n 2006-FW-1002 Baytown Housing Authority Improperly Advanced, Transferred, and\n Encumbered Its Public Housing Funds, Baytown, TX, 12/13/2005.\n Questioned: $2,030,233; Unsupported: $1,237,873; Better Use: $5,956,761.\n 2006-FW-1003 Palacios Housing Authority Did Not Fully Comply with HUD\xe2\x80\x99s\n Standards, Palacios, TX, 12/22/2005. Better Use: $44,657.\n 2006-FW-1005 Albuquerque Housing Services Generally Complied with HUD\xe2\x80\x99s\n Standards, Albuquerque, NM, 02/16/2006.\n 2006-KC-1001 The Columbia Housing Authority Is Unnecessarily Paying Housing\n Choice Voucher Program Funds for Overhoused Tenants, Columbia,\n MO, 11/30/2005. Questioned: $216,352; Better Use: $300,276.\n 2006-KC-1003 The Omaha Housing Authority of Omaha, NE, Does Not Have\n Adequate Controls Over Its Housing Quality Standards Process and\n Tenant Eligibility Verification Procedures, Omaha, NE, 01/12/2006.\n Questioned: $58,511.\n 2006-KC-1006 The Housing Authority of Kansas City Unnecessarily Paid Housing\n Choice Voucher Program Funds for Overhoused Tenants, Kansas City,\n MO, 03/03/2006. Questioned: $30,946; Better Use: $73,692.\n 2006-KC-1008 Housing Authority of St. Joseph Overhoused 16 Tenants Under the\n Section 8 Housing Choice Voucher Program, St. Joseph, MO, 03/30/\n 2006. Questioned: $20,108; Better Use: $54,036.\n 2006-LA-1002 The Housing Authority of the City of Los Angeles Did Not Adequately\n Determine and Support Section 8 Rents, Los Angeles, CA, 11/07/2005.\n Questioned: $186,881; Unsupported: $186,881.\n 2006-LA-1004 Inglewood Housing Authority Did Not Adequately Administer Its\n Section 8 Housing Choice Voucher Program, Inglewood, CA, 12/07/\n 2005. Better Use: $975,833.\n 2006-LA-1008 Housing Authority of the City of Los Angeles, CA, Did Not Adequately\n Administer and Maintain Its Section 8 Waiting List, 03/01/2006.\n\n\n\n\n128 Audit Reports Issued\n\x0c2006-NY-1003 The Housing Authority of the City of Newark\xe2\x80\x99s Controls Over Bond\n Financing Activities, Obtaining Supporting Documentation, and Legal\n Settlements Require Improvement, Newark, NJ, 02/14/2006.\n Questioned: $7,228,933; Unsupported: $7,228,933; Better Use:\n $3,560,123.\n2006-NY-1004 Mount Vernon Urban Renewal Agency, Section 8 Housing Choice\n Voucher Program Has Administrative and Financial Management\n Weaknesses, Mount Vernon, NY, 02/16/2006. Questioned: $1,893,134;\n Unsupported: $699,934; Better Use: $4,868,715.\n2006-NY-1005 Utica Municipal Housing Authority, Operational and Administrative\n Weaknesses Have Resulted in Unsupported and Ineligible\n Expenditures, Utica, NY, 02/21/2006. Questioned: $758,087;\n Unsupported: $237,957; Better Use: $33,150.\n2006-PH-1001 The Alexandria Redevelopment and Housing Authority Improperly\n Used Section 8 Funds to Support Its Other Programs, Alexandria, VA,\n 10/04/2005. Questioned: $462,214; Better Use: $462,214.\n2006-PH-1002 The Suffolk Redevelopment and Housing Authority Did Not Always\n Follow HUD Requirements in Its Section 8 and Low-Rent Programs,\n Suffolk, VA, 10/17/2005. Questioned: $5,127.\n2006-PH-1003 The Franklin Redevelopment and Housing Authority Did Not\n Adequately Administer Its Section 8 Program, Franklin, VA, 11/30/\n 2005. Questioned: $9,662; Better Use: $1,520.\n2006-PH-1005 The Housing Authority of the County of Butler Used HUD Assets\n Improperly to Develop and Support Its Nonfederal Entities, Butler,\n PA, 01/10/2006. Questioned: $205,875; Unsupported: $205,875; Better\n Use: $973,982.\n2006-PH-1009 The Housing Authority of the City of Annapolis Did Not Adequately\n Administer Its Section 8 Waiting List, Annapolis, MD, 03/23/2006.\n2006-SE-1002 Northeast Washington Housing Solutions Improperly Administered\n Housing Choice Vouchers, Spokane, WA, 02/27/2006. Questioned:\n $460,319; Unsupported: $460,319.\n\n\n\n\nAudit Reports Issued 129\n\x0c\x0cAppendix 2\n Tables\n\x0c Table A\n Audit Reports Issued Prior to Start of Period with No\n Management Decision at March 31, 2006\n * Significant Audit Reports Described in Previous Semiannual Reports\n Report Number Reason for Lack of Issue Date/Target\n & Title Management Decision for Management\n Decision\n 2005-FW-1010 Broad Management decision has not been 05/26/2005\n Street Mortgage reached on one of the three reported 11/22/2005\n Company, recommendations. The Inspector General\n Subsidiary of referred the issue to the Deputy Secretary in\n Fieldstone Mortgage January 2006 because agreement could not be\n Company, reached with the Office of Housing. The\n San Antonio, TX recommendation relates to concerns that we\n have with this particular mortgagee\xe2\x80\x99s loan\n origination practices as they relate to the use\n of downpayment assistance from seller-\n funded nonprofit organizations. The\n concerns we have with these downpayment\n assistance transactions have been\n long-standing and are consistent with\n concerns reported by others, including the\n Government Accountability Office.\n Moreover, we have other mortgagee audit\n reports that have been issued or are in\n process that have similar issues with sellers\n increasing the original sales price to cover\n the buyer\xe2\x80\x99s required downpayment and the\n nonprofit downpayment assistance\n provider\xe2\x80\x99s fee. The Office of Housing has\n taken the position that, based on a 1998\n legal opinion, if the gift of downpayment\n assistance is made by the nonprofit entity to\n the buyer before closing, and the seller\xe2\x80\x99s\n contribution to the nonprofit entity occurs\n after the closing, then the buyer has not\n received funds that can be traced to the\n seller\xe2\x80\x99s contribution. The OIG believes that\n HUD should establish specific standards\n regarding a borrower\xe2\x80\x99s investments in the\n mortgaged property when a gift is provided\n by a nonprofit organization. As a result of\n the impasse, we have asked the Deputy\n Secretary to provide a final management\n decision.\n\n\n\n\n132 Tables\n\x0cReport Number Reason for Lack of Issue Date/Target\n& Title Management Decision for Management\n Decision\n\n2005-NY-1008 Lower Management decision has not been 09/27/2005\nManhattan reached on one of the four reported 03/26/2006\nDevelopment recommendations. On March 31, 2006,\nCorporation, the General Deputy Assistant Secretary\nCommunity for Community Planning and Development\nDevelopment Block indicated that he agreed with the audit\nGrant Program recommendation that the auditee consider\nDisaster Assistance additional action to recover $6 million in\nFund outstanding receivables from recipients of\nNew York, NY the Residential Grant Program. However,\n he did not agree that this amount should\n be shown as \xe2\x80\x9cfunds to be put to better use\xe2\x80\x9d\n in our report. OIG maintains that while the\n auditee may not be able to collect this\n entire amount from the recipients, any\n amounts collected by the auditee would\n represent amounts that would be available\n for other eligible program purposes.\n Accordingly, we believe that some amount\n should be recorded as \xe2\x80\x9cfunds to be put to\n better use.\xe2\x80\x9d The Inspector General referred\n the issue to the Assistant Secretary,\n Community Planning and Development,\n on April 7, 2006.\n\n\n\n\nTables 133\n\x0c Table B\n Significant Audit Reports Described in Previous Semiannual Reports in Which Final Action\n Had Not Been Completed as of March 31, 2006\n Report Report Title Issue Decision Final\n Number Date Date Action\n\n 1997-CH-1010 Major Mortgage Corporation, 09/17/1997 01/06/1998 10/15/2006\n Section 203(K) Rehabilitation\n Home Mortgage Insurance\n Program, Livonia, MI\n 2000-KC-0002 Housing Subsidy Payments 09/29/2000 02/21/2001 12/31/2006\n 2001-FO-0002 FHA, FY 2000 Financial 03/01/2001 07/24/2001 12/21/2006\n Statements\n 2001-FO-0003 HUD FY 2000 Financial 03/01/2001 07/18/2001 12/31/2006\n Statements\n 2001-CH-1007 Detroit, MI, Housing 05/16/2001 09/13/2001 06/30/2011\n Commission, Hope VI Program\n 2002-SF-0001 Nonprofit Participation, HUD 11/05/2001 08/30/2002 10/15/2006\n Single-Family Program\n 2002-FO-0002 FHA, FY 2001 and 2000 02/22/2002 05/30/2002 12/31/2006\n Financial Statements\n 2002-FO-0003 HUD, Financial Statements 02/27/2002 08/16/2002 11/15/2006\n FY 2001 and 2000\n 2002-PH-1001 Williamsport, PA, CDBG 03/19/2002 08/27/2002 09/01/2006\n and HOME Investment\n Partnership Programs\n 2002-BO-1003 Newport, RI, Resident 04/30/2002 09/16/2002 01/15/2008\n Council, Inc.\n 2002-AT-1002 Housing Authority of the City 07/03/2002 10/31/2002 04/30/2010\n of Tupelo, MS, Housing\n Programs Operations\n 2002-KC-0002 Nationwide Survey of HUD\xe2\x80\x99s 07/31/2002 11/22/2002 06/30/2006\n Office of Housing Section 232\n Nursing Home Program\n 2002-FW-1002 Houma, LA, Housing Authority, 09/18/2002 01/16/2003 04/15/2006\n Low Rent Housing Program,\n Cash & Procurement Controls\n 2002-FW-1003 New Mexico Public Interest 09/30/2002 03/31/2003 Note 1\n Education Fund, Outreach and\n Training Assistance Grant and\n Public Entity Grant,\n Albuquerque, NM\n\n\n\n\n134 Tables\n\x0cReport Report Title Issue Decision Final\nNumber Date Date Action\n\n2002-PH-1004 Tenants\xe2\x80\x99 Action Group of 09/30/2002 03/31/2003 03/29/2007\n Philadelphia, PA, Outreach and\n Training Assistance Grant\n2002-PH-1006 Legal Aid Bureau, Inc., 09/30/2002 03/31/2003 Note 1\n Outreach and Training\n Assistance Grant Number\n FFOT0020MD, Baltimore, MD\n2002-PH-1007 Legal Aid Bureau, Inc., 09/30/2002 03/31/2003 Note 1\n Outreach and Training\n Assistance Grant Number\n FFOT98012MD, Baltimore, MD\n2002-SF-1006 Legal Aid Society of Honolulu, 09/30/2002 03/31/2003 03/29/2007\n HI, Outreach and Training\n Assistance Grant\n2003-SE-1002 Tenants Union, Seattle, WA, 12/02/2002 03/31/2003 03/29/2007\n Outreach and Training Assistance\n Grant and Intermediary Training\n Assistance Grant\n2003-AT-1001 Northwestern Regional Housing 01/09/2003 06/02/2003 10/01/2006\n Authority, Public Housing\n Programs, Boone, NC\n2003-FO-0002 FHA, FY 2002 and 2001 01/21/2003 05/22/2003 12/31/2006\n Financial Statements\n2003-FW-1001 Housing Authority of the City 02/21/2003 06/20/2003 04/15/2006\n of Morgan City, LA, Low-Rent\n Program\n2003-AT-1003 Faifield, AL, Housing Authority, 03/24/2003 07/22/2003 10/01/2006\n Housing Programs\n2003-NY-1003 Empire State Development 03/25/2003 07/16/2003 06/30/2006\n Corporation, CDBG Disaster\n Assistance Funds, New York, NY\n2003-CH-1014 Coshocton, OH, Metropolitan 03/28/2003 07/28/2003 04/30/2047\n Housing Authority, Public\n Housing Program\n2003-DE-0001 HUD Office of Multifamily 03/31/2003 03/31/2003 Note 1\n Housing Assistance\n Restructuring\xe2\x80\x99s Oversight of\n the Sec 514 Program Activities\n2003-BO-1003 City Of Bridgeport, CT, Home 05/16/2003 09/16/2003 07/31/2006\n Investment Partnership Program\n2003-CH-1017 Housing Continuum, Inc., 06/13/2003 10/10/2003 Note 1\n Homebuyers Assistance\n Program, Geneva, IL\n\nTables 135\n\x0c Report Report Title Issue Decision Final\n Number Date Date Action\n\n 2003-AO-0002 HUD Training Academy 07/15/2003 10/24/2003 Note 1\n 2003-NY-1005 Empire State Development 09/30/2003 01/28/2004 03/31/2007\n Corporation, CDBG Disaster\n Assistance Funds, New York, NY\n 2003-BO-1002 Family Living Adult Care 11/04/2003 03/04/2004 09/30/2006\n Center, Biddeford and Saco, ME\n 2004-KC-1001 East Meyer Community 11/24/2003 03/29/2004 04/14/2006\n Association, Kansas City, MO\n 2004-CH-1001 Kankakee, IL, County Housing 11/26/2003 03/24/2004 Note 2\n Authority, Section 8 Housing\n Program\n 2004-DP-0001 FY 2003 Review of Information 12/01/2003 05/28/2004 12/31/2006\n Systems Controls in Support\n of the Financial Statements Audit\n 2004-BO-1004 Danbury, CT, Housing 12/05/2003 04/05/2004 12/01/2008\n Authority, Capital Fund\n Program\n 2004-FO-0003 HUD Financial Statements 12/19/2003 07/20/2004 11/15/2006\n FY 2003 and 2002\n 2004-AT-0001 Public Housing Agency 01/13/2004 05/20/2004 05/13/2006\n Development Activities\n 2004-AT-1001 Housing Authority of the 01/15/2004 05/14/2004 12/31/2006\n City of Cuthbert, GA,\n 2004-AO-0001 Award and Administration of 02/06/2004 06/30/2004 Note 2\n Lead-Based Paint Hazard\n Reduction Grants\n 2004-DP-1002 Application Control Review of 02/25/2004 07/14/2004 10/15/2006\n the Tenant Rental Assistance\n Certification System\n 2004-FW-1003 City of New Orleans, LA, 03/15/2004 09/07/2004 04/15/2006\n Section 108 Loan Program,\n Jazzland Theme Park\n 2004-AT-1006 Puerto Rico Public Housing 04/22/2004 07/12/2004 07/31/2006\n Administration, San Juan, PR\n 2004-LA-1003 Homewide Lending 05/19/2004 09/01/2004 10/15/2006\n Corporation, Nonsupervised\n Mortgagee, Los Angeles, CA\n 2004-SE-1004 Seattle, WA, Housing Authority, 05/21/2004 09/20/2004 04/30/2006\n MTW Demonstration Program\n 2004-PH-1007 City of McKeesport, PA, 05/28/2004 09/24/2004 03/31/2009\n CDBG Program\n\n\n136 Tables\n\x0cReport Report Title Issue Decision Final\nNumber Date Date Action\n\n2004-PH-1008 Safe Haven Outreach Ministry, 06/03/2004 08/31/2004 06/02/2006\n Inc., Washington, DC\n2004-FW-1007 City of New Orleans, LA, 06/22/2004 09/20/2004 04/15/2006\n Desire Community Housing\n Corporation\n2004-LA-1005 Guild Mortgage Company DBA, 07/09/2004 11/06/2004 Note 2\n Residential Mortgage Bankers,\n San Diego, CA\n2004-AT-0002 Effectiveness of the 07/12/2004 12/13/2004 12/31/2006\n Departmental Enforcement\n Center\n2004-KC-1003 Wells Fargo Home Mortgage, 07/16/2004 10/08/2004 Note 2\n Nonsupervised Direct\n Endorsement Lender,\n Des Moines, IA\n2004-AT-1012 Housing Authority of the City 08/02/2004 11/29/2004 12/31/2020\n of Durham, NC\n2004-PH-1010 Lambeth Apartments, Section 08/04/2004 10/02/2004 06/30/2006\n 236/Section 8, Multifamily\n Housing Review, Pittsburgh, PA\n2004-CH-1803 Somerset Point Nursing Home, 08/09/2004 08/09/2004 06/29/2006\n Multifamily Equity Skimming,\n Shaker Heights, OH\n2004-SE-1006 Apreva, Inc., Nonsupervised 08/19/2004 01/11/2005 10/31/2006\n Mortgagee, Bellevue, WA\n2004-CH-1008 Cornerstone Mortgage Group, 09/10/2004 01/05/2005 Note 2\n Limited Nonsupervised Loan\n Correspondent, Inverness, IL\n2004-PH-1012 Mortgage America Bankers, LLC, 09/10/2004 01/06/2005 03/31/2007\n Nonsupervised Loan\n Correspondent, Kensington, MD\n2004-NY-1004 Lower Manhattan Development 09/15/2004 01/12/2005 06/30/2006\n Corporation, CDBG Disaster\n Assistance Funds, New York, NY\n2004-FW-1009 Mays Property Management, Inc., 09/17/2004 02/23/2005 Note 2\n Multifamily Management Agent,\n Little Rock, AR\n2004-LA-1007 Housing Authority of Maricopa 09/22/2004 01/14/2005 Note 2\n County, Phoenix, AZ\n2004-LA-1008 United States Veterans Initiative, 09/27/2004 03/31/2005 Note 2\n Inc., Inglewood, CA\n\n\n\nTables 137\n\x0c Report Report Title Issue Decision Final\n Number Date Date Action\n\n 2004-DE-1004 New Freedom Mortgage 09/29/2004 01/28/2005 06/30/2006\n Corporation, Single-Family\n Direct Endorsement Mortgagee,\n Salt Lake City, UT\n 2005-KC-1001 Karim Enterprises, DBA Prime 10/04/2004 12/22/2004 06/30/2006\n Mortgage, Did Not Follow FHA\n Requirements, St. Charles, MO\n 2005-BO-1001 Waterbury Housing Authority, 10/31/2004 02/09/2005 12/31/2006\n Selected Programs, Waterbury, CT\n 2005-DP-0001 FY 2004 Review of Information 10/19/2004 02/16/2005 08/30/2006\n Systems Controls in Support of\n the Financial Statements Audit\n 2005-SE-1001 Tulalip Tribes Housing 10/21/2004 02/02/2005 06/30/2006\n Authority Cannot Account for\n Grant Funds, Marysville, WA\n 2005-FW-1801 Highland Meadows Apartments, 11/02/2004 02/24/2005 Note 2\n Dallas, TX\n 2005-LA-1801 The Carmichael Rehabilitation 11/04/2004 01/27/2005 Note 2\n Center, Carmichael, CA\n 2005-FW-1001 City of New Orleans, Section 108 11/05/2004 03/02/2005 04/15/2006\n Program, Louisiana ArtWorks,\n New Orleans, LA\n 2005-FO-0002 FHA\xe2\x80\x99s Financial Statements for 11/15/2004 11/15/2004 12/31/2006\n FY 2004 and 2003\n 2005-AT-1004 Housing Authority of the City 11/19/2004 03/15/2005 03/15/2015\n of Durham, NC\n 2005-CH-1003 Royal Oak Township Housing 11/29/2004 03/29/2005 10/31/2006\n Commission, Public Housing\n Program, Ferndale, MI\n 2005-PH-1003 The Town of Clifton, Single- 12/21/2004 04/19/2005 04/19/2006\n Family Property Disposition\n Discount Sales Program, Clifton, VA\n 2005-PH-1004 Corrective Action Verification 12/21/2004 04/20/2005 04/30/2007\n Review of the Housing Authority\n of Baltimore, MD, Section 8\n Certificate and Voucher Programs,\n Audit Report No. 2001-PH-1003\n 2005-CH-1004 Lakewood Care Center, 12/22/2004 10/07/2005 12/31/2006\n Multifamily Equity Skimming,\n Milwaukee, WI\n\n\n\n\n138 Tables\n\x0cReport Report Title Issue Decision Final\nNumber Date Date Action\n\n2005-CH-1801 RVA Properties Inc., 12/22/2004 12/26/2004 06/30/2006\n Multifamily Equity Skimming,\n Farmington Hills, MI\n2005-CH-1005 Wood Hills Assisted Living 01/12/2005 10/07/2005 12/31/2006\n Facility, Multifamily Equity\n Skimming, Kalamazoo, MI\n2005-LA-1805 Housing Authority of the City of 01/21/2005 04/05/2005 10/05/2006\n Los Angeles, CA\n2005-NY-1802 Arlington Arms, Jersey City, NJ 01/21/2005 04/11/2005 04/11/2006\n2005-KC-1003 Leader Mortgage Company, 01/25/2005 04/08/2005 Note 2\n Did Not Follow HUD\n Requirements When Processing\n Loans, Lenexa, KS\n2005-AT-1005 Pan American Financial 01/27/2005 05/17/2005 05/31/2006\n Corporation, Nonsupervised\n Direct Endorsement Lender,\n Guaynabo, PR\n2005-FW-1004 American Property Financial, 01/28/2005 05/27/2005 05/31/2006\n Nonsupervised Loan\n Correspondent, San Antonio, TX\n2005-SE-1003 Oregon Housing and 02/09/2005 05/27/2005 05/01/2006\n Community Services, Salem, OR\n2005-AT-1006 The Jefferson County Housing 02/24/2005 05/31/2005 04/23/2006\n Authority, Birmingham, AL\n2005-FW-1005 New Orleans African-American 02/25/2005 05/12/2005 04/15/2006\n Museum Mismanaged its CDBG\n and Did Not Comply with its\n Grant Agreements, New Orleans, LA\n2005-DE-1002 Boulder County Housing 03/09/2005 06/29/2005 12/31/2010\n Authority, Boulder, CO\n2005-PH-1007 Lehigh County Housing 03/09/2005 05/02/2005 01/30/2017\n Authority Could Not Support\n All Costs and Used HUD Funds\n to Support its Nonfederal Entities,\n Emmaus, PA\n2005-LA-1002 Housing Authority of Maricopa 03/14/2005 07/11/2005 08/31/2007\n County, Mixed Finance\n Development Activities,\n Phoenix, AZ\n2005-AT-1007 Interstate Financial Mortgage 03/15/2005 08/04/2005 07/31/2006\n Group Corporation, Nonsupervised\n Direct Endorsement Lender,\n Miami, FL\n\nTables 139\n\x0c Report Report Title Issue Decision Final\n Number Date Date Action\n\n 2005-PH-1008 The Housing Authority of the 03/24/2005 07/13/2005 12/31/2006\n City of Pittsburgh Did Not\n Effectively Implement its MTW\n Demonstration Program,\n Pittsburgh, PA\n 2005-AT-1008 Trust America Mortgage, Inc., 03/25/2005 07/25/2005 04/30/2006\n Nonsupervised Direct Endorsement\n Lender, Cape Coral, FL\n 2005-CH-1007 RBC Mortgage Company, 03/29/2005 08/05/2005 04/06/2007\n Nonsupervised Mortgagee,\n Houston, TX\n 2005-PH-1001 Criteria Governing Local 03/29/2005 07/27/2005 01/02/2007\n Government Participation in\n HUD\xe2\x80\x99s Single-Family Property\n Disposition Discount Sales Program\n 2005-CH-1010 Kankakee County Housing 04/08/2005 08/05/2005 05/10/2006\n Authority, Low-Rent Housing\n Program, Kankakee, IL\n 2005-FW-1008 City of New Orleans, Did Not 04/08/2005 05/26/2005 04/15/2006\n Contribute Approximately $3.6\n Million in HOME Funds,\n New Orleans, LA\n 2005-PH-1009 Richmond Development and 04/08/2005 07/28/2005 10/31/2006\n Housing Authority Did Not\n Always Properly Use HUD\n Funds, Richmond, VA\n 2005-SE-0001 Design and Implementation 04/12/2005 04/12/2005 04/12/2006\n of the Public Housing/Section 8\n MTW Demonstration Program\n 2005-AT-1009 The Housing Authority of 04/21/2005 08/09/2005 04/30/2006\n Fulton County, Atlanta, GA\n 2005-BO-1003 Milford Housing Authority, 04/25/2005 10/07/2005 12/31/2006\n Selected Programs, Milford, CT\n 2005-DE-1003 Citywide Home Loans, 05/04/2005 09/01/2005 08/31/2006\n Salt Lake City, UT\n 2005-DE-1004 Aspen Home Loans, American 05/06/2005 08/31/2005 06/30/2006\n Fork, UT\n 2005-DE-0001 HUD\xe2\x80\x99s Control Over FHA Claims 05/12/2005 09/09/2005 04/30/2006\n Payments\n 2005-LA-1003 First Source Financial USA, 05/12/2005 09/08/2005 11/30/2006\n Henderson, WV\n\n\n\n\n140 Tables\n\x0cReport Report Title Issue Decision Final\nNumber Date Date Action\n\n2005-KC-1006 Corinthian Mortgage 05/13/2005 09/09/2005 09/30/2006\n Corporation Did Not Always\n Comply with FHA Requirements,\n Mission, KS\n2005-NY-1005 The Housing Authority of the 05/26/2005 09/23/2005 12/31/2006\n City of Newark, Bond Financing\n Activities and Section 8 Housing\n Choice Voucher Administrative Fee\n Reserves, Newark, NJ\n2005-CH-1011 Stark Metropolitan Housing 05/31/2005 08/31/2005 05/10/2006\n Authority, Nonprofit Development\n Activities, Canton, OH\n2005-PH-1012 The Lycoming County Housing 06/06/2005 07/12/2005 06/01/2006\n Authority Risked HUD Assets\n for the Benefit of Its Affiliated\n Nonfederal Entity,\n Williamsport, PA\n2005-AT-1010 The Chattanooga Housing 06/09/2005 10/06/2005 06/30/2006\n Authority Did Not Ensure\n Section 8 Assisted Units Were\n Decent, Safe, and Sanitary,\n Chattanooga, TN\n2005-AT-1011 The Housing Authority of 06/27/2005 10/24/2005 06/27/2006\n High Point Did Not Properly\n Procure Goods and Services,\n High Point, NC\n2005-AT-1012 Crossville Housing Authority 07/06/2005 10/31/2005 10/31/2008\n Improperly Used Public Housing\n Funds for Other Activities,\n Crossville, TN\n2005-LA-1005 Housing Authority of the City 07/11/2005 09/09/2005 05/31/2006\n of Inglewood, CA\n2005-FW-1012 The Housing Authority of the 07/20/2005 10/05/2005 05/31/2006\n City of Houston Did Not Follow\n Its Section 8 Abatement and\n Termination Policies and\n Procedures, Houston, TX\n2005-LA-1006 Maricopa Home Consortium 07/28/2005 11/22/2005 08/31/2007\n Home Program, Mesa, AZ\n2005-BO-1004 Housing Choice Voucher and 03/09/2005 06/29/2005 12/31/2010\n Low-Income Public Housing\n Program Deficiencies at the\n Bridgeport Housing Authority\n Resulted in $3.8 Million in\n Questioned Costs, Bridgeport, CT\n\nTables 141\n\x0c Report Report Title Issue Decision Final\n Number Date Date Action\n\n 2005-PH-1013 Review of the Commonwealth 07/29/2005 11/22/2005 11/21/2006\n of Pennsylvania\xe2\x80\x99s HOME\n Investment Partnership Program,\n Harrisburg, PA\n 2005-PH-1014 Review of the McKeesport 07/29/2005 11/21/2005 11/01/2006\n Housing Authority\xe2\x80\x99s Section 8\n and Public Housing Programs,\n McKeesport, PA\n 2005-CH-1012 Savanna Trace Apartments, 08/04/2005 12/28/2005 12/28/2006\n Multifamily Equity Skimming,\n Kalamazoo, MI\n 2005-CH-1013 Ivan Woods Senior Apartments, 08/05/2005 12/28/2005 12/28/2006\n Multifamily Equity Skimming,\n Lansing, MI\n 2005-CH-1014 Kankakee County Housing 08/05/2005 12/28/2005 04/30/2006\n Authority\xe2\x80\x99s Low-Rent Unit\n Conditions, Kankakee, IL\n 2005-NY-1006 Syracuse Housing Authority, 08/10/2005 09/20/2005 05/31/2006\n Section 8 Housing Choice\n Voucher Program, Syracuse, NY\n 2005-LA-1007 KB Home Mortgage Company, 08/12/2005 12/09/2005 12/31/2006\n Las Vegas, NV\n 2005-BO-1005 Inappropriate Use of Federal 08/31/2005 12/29/2005 07/30/2006\n Funds Led to $3.5 Million\n Deficit in HUD Programs\n Administered by Fall River\n Housing Authority, Fall River, MA\n 2005-BO-1006 The Hartford Housing Authority 09/06/2005 01/03/2005 06/30/2006\n Improperly Used $3.7 Million\n in Public Housing Operating\n Subsidies for Its State and Other\n Federal Programs, Hartford, CT\n 2005-LA-1009 Housing Authority of the City 09/07/2005 11/29/2005 07/01/2006\n of Inglewood, Housing Quality\n Standards, Inglewood, CA\n 2005-LA-0001 Single-Family Preforeclosure 09/13/2005 01/10/2005 09/30/2006\n Sale Program\n 2005-AT-1013 Corporacion Para el Fomento 09/15/2005 01/11/2005 11/30/2006\n Economico de la Ciudad Capital\n Did Not Administer Its Independent\n Capital Fund in Accordance with\n HUD Requirements, San Juan, PR\n\n\n\n\n142 Tables\n\x0cReport Report Title Issue Decision Final\nNumber Date Date Action\n\n2005-AT-1014 National City Mortgage 09/15/2005 11/14/2005 10/31/2006\n Company Did Not Comply\n with FHA Requirements,\n Miamisburg, OH\n2005-DE-1005 The Housing Authority of the 09/16/2005 11/22/2005 12/31/2006\n County of Salt Lake Adequately\n Controlled Occupancy Functions\n but Inappropriately Loaned\n Funds, Salt Lake, UT\n2005-NY-1007 Security Atlantic Mortgage 09/16/2005 01/13/2006 01/31/2007\n Company, Inc. Did Not Always\n Comply with HUD/FHA Loan\n Origination Requirements,\n Edison, NJ\n2005-SE-1007 City Bank, Puyallup, WA 09/16/2005 12/20/2005 06/30/2006\n2005-SE-1008 Idaho Housing and Finance 09/16/2005 12/13/2005 Note 3\n Association, Boise, ID\n2005-FW-1017 Allied Home Mortgage 09/22/2005 01/05/2006 06/30/2006\n Corporation Did Not Follow\n HUD Requirements When\n Processing Four Loans,\n Houston, TX\n2005-CH-1017 Flint Housing Commission, 09/23/2005 01/20/2006 01/20/2016\n Section 8 Housing Program,\n Flint, MI\n2005-LA-1010 First Magnus Financial 09/23/2005 01/19/2006 09/23/2006\n Corporation, Las Vegas, NV\n2005-BO-1007 Fairfield Financial Mortgage 09/26/2005 01/20/2006 09/30/2006\n Group, Inc., Did Not Always\n Comply with FHA Requirements,\n Danbury, CT\n2005-LA-1011 KB Home Mortgage Company 09/26/2005 01/23/2006 01/15/2007\n Did Not Follow HUD\n Requirements When Originating\n Insured Loans, Phoenix, AZ\n2005-FW-1018 The Housing Authority of the 09/27/2005 01/24/2006 09/15/2006\n City of Houston Violated HUD\n Regulations Concerning Section 8\n Housing Choice Voucher Tenants\n and Units, Houston, TX\n2005-FW-1019 Wells Fargo Did Not Follow 09/28/2005 01/05/2006 06/30/2006\n HUD Requirements When\n Processing 10 Loans,\n Des Moines, IA\n\n\nTables 143\n\x0c Report Report Title Issue Decision Final\n Number Date Date Action\n\n 2005-NY-1009 Golden First Mortgage 09/28/2005 01/20/2006 10/15/2006\n Corporation, Nonsupervised\n Direct Endorsement Lender,\n Great Neck, NY\n 2005-AT-1015 The Municipality of San Juan 09/29/2005 01/12/2006 12/29/2006\n Housing Authority Did Not\n Properly Administer Its Section 8\n Housing Choice Voucher Program,\n San Juan, PR\n 2005-CH-1020 Housing Authority of the City 09/29/2005 01/25/1006 12/31/2052\n of Gary, Section 8 Housing\n Program, Gary, IN\n 2005-BO-0002 HUD Did Not Conduct a 09/30/2005 12/20/2005 10/01/2006\n Front-End Risk Assessment\n and, Therefore, Fully Implement\n Controls for the Public Housing\n Mortgages and Security Interest\n Program\n 2005-KC-1009 Washington Mutual Bank Did 09/30/2005 01/11/2006 09/30/2006\n Not Follow HUD Regulations\n When Underwriting Six Loans,\n Seattle, WA\n\n\n\n REPORTS EXCLUDED FROM TABLE: NOTES:\n 28 audits under repayment plans 1 Management did not meet the\n target date. Target date is over\n 32 where HUD management cannot\n complete final action since recommended 1 year old.\n action is pending formal judicial review, 2 Management did not meet the\n investigation, or legislative solution\n target date. Target date is\n under 1 year old.\n 3 No Management decision.\n\n\n\n\n144 Tables\n\x0c Table C\n Inspector General Issued Report with Questioned and\n Unsupported Costs at March 31, 2006\n (Thousands)\nReport s Number of Questioned Unsupported\n Audit Reports Costs Costs\n\nA1 For which no management 41 52,969 16,871\n decision had been made by the\n commencement of the reporting\n period\nA2 For which litigation, legislation, 10 18,568 8,135\n or investigation was pending at\n the commencement of the\n reporting period\nA3 For which additional costs were - 1,485 0\n added to reports in beginning\n inventory\nA4 For which costs were added to 2 111 0\n noncost reports\nB1 Which were issued during the 53 50,627 17,365\n reporting period\nB2 Which were reopened during the 0 0 0\n reporting period\n\n Subtotals (A + B) 106 123,760 42,371\n\nC For which a management 571 58,627 16,022\n decision was made during the\n reporting period\n (1) Dollar value of disallowed costs\n Due HUD 292 11,810 2,428\n Due program participants 30 27,675 11,402\n (2) Dollar value of costs not 153 19,142 2,192\n disallowed\nD For which management decision 10 19,113 9,667\n had been made not to determine\n costs until completion of litigation,\n legislation, or investigation\nE For which no management 39 46,020 16,682\n decision had been made by <113>4 <46,012>4 <16,682>4\n the end of the reporting period\n\n1\n 36 audit reports also contain recommendations with funds to be put to better use.\n2\n 4 audit reports also contain recommendations with funds due program participants.\n3\n 13 audit reports also contain recommendations with funds agreed to by management.\n4\n The figures in brackets represent data at the recommendation level as compared to the report level.\n See Explanations of Tables C and D.\n\n\n\n\nTables 145\n\x0c Table D\n Inspector General Issued Report with Recommendations That Funds Be\n Put to Better Use at March 31, 2006\n (Thousands)\n Report s Number of Dollar Value\n Audit Reports\n\n A1 For which no management decision had been 41 184,495\n made by the commencement of the reporting\n period\n A2 For which litigation, legislation, or investigation 5 15,102\n was pending at the commencement of the\n reporting period\n A3 For which additional costs were added to reports - 73,025\n in beginning inventory\n A4 For which costs were added to noncost reports 0 0\n B1 Which were issued during the reporting period 49 553,315\n B2 Which were reopened during the reporting period 0 0\n\n Subtotals (A + B) 95 825,937\n\n C For which a management decision was made 52 1 549,804\n during the reporting period\n (1) Dollar value of recommendations that were\n agreed to by management\n Due HUD 20 401,982\n Due program participants 26 125,484\n (2) Dollar value of recommendations that were 142 22,338\n not agreed to by management\n D For which management decision had been made 7 105,692\n not to determine costs until completion of\n litigation, legislation, or investigation\n E For which no management decision had been 36 170,441\n made by the end of the reporting period <65>3 <168,413>3\n\n 1\n 36 audit reports also contain recommendations with questioned costs.\n 2\n 8 audit reports also contain recommendations with funds due program participants.\n 3\n The figures in brackets represent data at the recommendation level as compared to the report level.\n See Explanations of Tables C and D.\n\n\n\n\n146 Tables\n\x0cExplanations of Tables C and D\n The Inspector General Act Amendments of 1988 require Inspectors General and agency\nheads to report cost data on management decisions and final actions on audit reports. The\ncurrent method of reporting at the \xe2\x80\x9creport\xe2\x80\x9d level rather than at the individual audit\n\xe2\x80\x9crecommendation\xe2\x80\x9d level results in misleading reporting of cost data. Under the Act, an\naudit \xe2\x80\x9creport\xe2\x80\x9d does not have a management decision or final action until all questioned\ncost items or other recommendations have a management decision or final action. Under\nthese circumstances, the use of the \xe2\x80\x9creport\xe2\x80\x9d based rather than the \xe2\x80\x9crecommendation\xe2\x80\x9d\nbased method of reporting distorts the actual agency efforts to resolve and complete action\non audit recommendations. For example, certain cost items or recommendations could\nhave a management decision and repayment (final action) in a short period of time. Other\ncost items or nonmonetary recommendation issues in the same audit report may be more\ncomplex, requiring a longer period of time for management\xe2\x80\x99s decision or final action.\nAlthough management may have taken timely action on all but one of many\nrecommendations in an audit report, the current \xe2\x80\x9call or nothing\xe2\x80\x9d reporting format does\nnot take recognition of their efforts.\n\n The closing inventory for items with no management decision on Tables C and D\n(Line E) reflects figures at the report level as well as the recommendation level.\n\n\n\n\nTables 147\n\x0c\x0cHUD OIG Operations\n Telephone Listing\n\x0c Office of Audit\n Headquarters Office of Audit, Washington, DC 202-708-0364\n Region 1 Boston, MA 617-994-8380\n Hartford, CT 860-240-4800\n Region2 New York, NY 212-264-4174\n Albany, NY 518-464-4200\n Buffalo, NY 716-551-5755\n Newark, NJ 973-622-7900\n Region 3 Philadelphia, PA 215-656-3401\n Baltimore, MD 410-962-2520\n Pittsburgh, PA 412-644-6372\n Richmond, VA 804-771-2100\n Region 4 Atlanta, GA 404-331-3369\n Miami, FL 305-536-5387\n Greensboro, NC 336-547-4001\n Jacksonville, FL 904-232-1226\n Knoxville, TN 865-545-4369\n San Juan, PR 787-766-5202\n Region 5 Chicago, IL 312-353-7832\n Columbus, OH 614-469-5745\n Detroit, MI 313-226-6190\n Region 6 Fort Worth, TX 817-978-9309\n Houston, TX 713-718-3199\n Oklahoma City, OK 405-609-8606\n San Antonio, TX 210-475-6895\n Regions 7/8 Kansas City, KS 913-551-5870\n St. Louis, MO 314-539-6339\n Denver, CO 303-672-5452\n Regions 9/10 Los Angeles, CA 312-894-8016\n Phoenix, AZ 602-379-7243\n San Francisco, CA 415-489-6400\n Seattle, WA 206-220-5360\n Hurricane Recovery Oversight 504-589-7267\n\n\n\n\n150 HUD OIG Operations Telephone Listing\n\x0cOffice of Investigation\nHeadquarters Office of Investigation, Washington, DC 202-708-0390\nRegion 1 Boston, MA 617-994-8450\n Hartford, CT 860-240-4800\n Manchester, NH 603-666-7988\nRegion 2 New York, NY 212-264-8062\n Buffalo, NY 716-551-5755\n Newark, NJ 973-622-7900\nRegion 3 Philadelphia, PA 215-656-3410\n Baltimore, MD 410-962-4502\n Pittsburgh, PA 412-644-6598\n Richmond, VA 804-771-2100\nRegion 4 Atlanta, GA 404-331-3359\n Miami, FL 305-536-3087\n Greensboro, NC 336-547-4000\n Nashville, TN 615-736-7000\n San Juan, PR 787-766-5868\n Tampa, FL 813-228-2026\nRegion 5 Chicago, IL 312-353-4196\n Cleveland, OH 216-522-4421\n Columbus, OH 614-469-6677\n Detroit, MI 313-226-6280\n Indianapolis, IN 317-226-5427\n Minneapolis-St. Paul, MN 612-370-3130\nRegion 6 Arlington, TX 817-652-6980\n Houston, TX 713-718-3197\n Little Rock, AR 501-324-5409\n Oklahoma City, OK 405-609-8601\n San Antonio, TX 210-475-6822\nRegion 7/8 Kansas City, KS 913-551-5866\n St. Louis, MO 314-539-6559\n Denver, CO 303-672-5350\n Billings, MT 406-247-4080\n Salt Lake City, UT 801-524-6090\nRegion 9/10 Los Angeles, CA 213-894-0219\n San Francisco, CA 415-489-6683\n Phoenix, AZ 602-379-7251\n Sacramento, CA 916-930-5693\n Las Vegas, NV 702-366-2144\n Seattle, WA 206-220-5380\nHurricane Recovery Oversight 202-708-0390\n\n\n\n\nHUD OIG Operations Telephone Listing 151\n\x0c\x0cReport fraud, waste, and mismanagement\n in HUD programs and operations by:\n\n\n Calling the OIG Hotline: 1-800-347-3735\n\n Faxing the OIG Hotline: 202-708-4829\n\n Sending written information to:\n Department of Housing and Urban Development\n Inspector General Hotline (GFI)\n 451 7th Street, SW\n Washington, DC 20410\n\n Emailing the OIG Hotline: hotline@hudoig.gov\n\n Internet:\n http://www.hud.gov/complaints/fraud_waste.cfm\n\n\n\n All information is confidential,\n and you may remain anonymous.\n\x0cSemiannual Report to Congress\nOcober 1, 2005 through March 31, 2006\n\nwww.hud.gov/offices/oig\n\n\n\n\nNo. 55 HUD-2006-03-OIG\n\x0c'