HUD ACTS TO BAR 27 PEOPLE & 6 FIRMS CONVICTED IN TEXAS FRAUD FROM DOING BUSINESS WITH FEDERAL GOVERNMENT

The debarments strike a powerful financial blow against individuals and businesses, by denying them all federal contracts for periods of two to five years. Such contracts are a major source of income for many individuals and businesses, and loss of contracts can cost some individuals their jobs and force some businesses to close.

The action is part of the sweeping crackdown on waste, fraud and abuse that Cuomo launched in March to eliminate misuse of taxpayer dollars in HUD programs. Actions taken so far by HUD under the "Get Tough" crackdown include: a 500 percent increase from 1996 in the number of regulatory enforcement actions against bad landlords; collecting over $11 million in fines and awards from bad landlords; a doubling in the number of enforcement actions taken against officials responsible for administering programs in public housing; and protecting senior citizens from reverse mortgage scams.

"HUD's days as a mugging victim are over," Cuomo said. "Anyone who tries to rip off this Department will be caught and punished to the full extent the law allows."

The 27 people Cuomo announced action against today were all convicted of criminal fraud charges in federal court in Midland, TX in a conspiracy to defraud a HUD-insured program involving the sale and financing of mobile homes. Twenty-five are from Texas, one is from Arkansas and one is from New Mexico.

Twenty-six of those HUD acted against were sales people, managers and owners of A-1 Mobile Homes -- a company that sold new, used, and repossessed mobile homes in the Texas cities of Waco, Nacogdoches and Bryan, and in parts of New Mexico. The 27th was in charge of mobile home loans at several lending institutions.

Cuomo announced that HUD has finalized the debarments of four of the people and begun debarment action against 23. The proposed debarments will take effect in 30 days, unless the individuals appeal to HUD for an administrative review. All 23 were suspended from doing business with the federal government while their debarments are pending.

HUD also proposed debarment for five years against six retail mobile home sales dealerships in Texas that were franchisees of A-1: HaLoCo, Inc.; CoHalo, Inc.; CoLoCo, Inc.; CoHala, Inc.; Bijama, Inc; and Whitecotton, Inc.

The conspiracy involved falsifying documents that were submitted to lenders for buyers who were applying for loans through a HUD-insured program to purchase homes from A-1 Mobile Homes. It was discovered that applications were made for about 43 loans with such fake documents. Here's how the scam worked:

• Employees at the mobile home dealerships filled out loan applications for people buying the mobile homes. When mobile home buyers didn't have incomes or credit worthiness high enough to qualify for needed loans, the dealer employees lied on their credit applications, saying the buyers had higher incomes or assets. This enabled dealers to earn money by making more sales.

• The loans were made by Home Savings Association, Banc Home Savings Association, and HSA Mortgage Company, Inc., all located in the Midland-Odessa area of Texas. Max Cain, who was in charge of approving mobile home loans for the banks, was convicted of approving the falsified loans applications as part of the conspiracy. The loans were insured by the Federal Housing Administration, which is part of HUD.

• Because their income and assets had been falsely inflated to qualify for loans that were too big, some of the homebuyers were at risk of defaulting on the loans. In the event of defaults, HUD would have to pay off the FHA-insured loans.

The conspiracy to defraud the government was uncovered through an investigation involving HUD, HUD's Office of Inspector General and the U.S. Attorney's Office.

List of Debarment Actions Against Individuals