WASHINGTON -- Housing and Urban Development Secretary Andrew Cuomo today launched a HUD investigation of allegations of widespread housing discrimination by a Southern California property management company and owners of nine Orange County apartment complexes with over 1,300 units.

"Illegal actions alleged at these apartments involve discrimination with a smile," Cuomo said in remarks from Washington to a news conference in Los Angeles. "Instead of telling people to their faces that minorities were unwelcome in an apartment complex, rental agents allegedly told some of them politely - and falsely - that no apartments were available or none would be available for several weeks. When this type of discrimination occurs, people don't even realize they've been victimized."

"Today, discrimination with a smile is more common than blatant housing discrimination," Cuomo said. "Both types of discrimination are equally illegal and intolerable. No smile can hide the ugly face of discrimination."

The rarely-used Secretary-initiated investigation of Yoder Shrader Management Company of Orange County and the owners of nine apartment complexes managed by the firm was sparked by complaints filed this week by the Fair Housing Council of Orange County with HUD, alleging discrimination against blacks, Hispanics and families with children who tried to rent apartments at the complexes.

As a result of the Secretary-initiated investigation, HUD can file housing discrimination complaints on behalf of all alleged victims of discrimination taking place at the apartment complexes, if the Department finds charges are warranted. If people are found to have been victims of housing discrimination, they could receive compensation without filing their own complaints with HUD or filing their own lawsuits.

"Today, on the date of Dr. Martin Luther King's birthday, HUD honors this great man's memory by reaffirming our commitment to the crackdown on housing discrimination that we began in September at President Clinton's direction," Cuomo said. "We are committed to thoroughly investigating allegations of housing discrimination, and to filing civil charges under the Fair Housing Act where warranted."

Cuomo said he was announcing the investigation to alert people who may have been victims of housing discrimination at the apartment complexes managed by Yoder Shrader. He urged anyone who sought an apartment but failed to get it at one of the complexes being investigated to call HUD at 1-800-347-3739 to assist in the probe.

A finding by an administrative law judge that the Fair Housing Act has been violated carries a top penalty of $11,000 in civil penalties for the first offense and $55,000 for later offenses; monetary compensation to victims for actual damages, humiliation, mental distress, and loss of their housing opportunities; and attorney fees and court costs. A finding by a federal court of a Fair Housing Act violation may include an assessment of punitive damages, as well as compensation for victims.

Under a change in HUD regulations initiated by Cuomo last year, each act of discrimination will count as a separate violation - creating the potential for higher civil penalties in cases of widespread housing discrimination, as is alleged in Orange County.

The Fair Housing Act was amended in 1988 to allow the Secretary of HUD to initiate investigations and complaints in cases where widespread housing discrimination is alleged. Since that time, this has been done only 17 times.

The Fair Housing Council of Orange County said in its complaint to HUD that it documented its charges of discrimination by conducting over 20 tests at the apartment complexes using black, white and Hispanic testers posing as prospective tenants.

The Council said white testers were shown the most apartments and were told about specific upcoming vacancies. The group said black and Hispanic testers were often shown fewer apartments, were not told about upcoming vacancies, or were sometimes told falsely that no apartments were available. Tests took place within minutes of each other and testers said they had similar incomes and credit histories, the Council said.

Elizabeth Martin, Director of Litigation for the Fair Housing Council, said: "We appreciate Secretary Cuomo taking these complaints seriously enough to directly launch an investigation. We had a choice between filing a federal lawsuit or seeking relief through the HUD administrative process but felt it was in the best interest of fair housing and advancing our agency's mission to go with HUD's new pro-active and visible process, rather than through the slow, less visible and more expensive, litigation process."

The Fair Housing Council of Orange County complaints accuse Yoder Shrader and the owners of the following apartment complexes of acting illegally to limit the number of tenants who were minorities and/or families with children: the Nutwood, Moonraker, Boondocker, The Pines, Idylwood, Sturbridge Village, Kashmir, and El Dorado, all in Fullerton; and Elmwood in Buena Park.

In addition, housing council testers said they were told that some apartment units were segregated based on whether or not people had children. One woman, who posed as the mother of a six-year-old, said she was told nothing was available for her family because the only open unit was on the third floor and families with children were restricted to the ground floor.

Two former employees of Yoder Shrader said they witnessed their supervisors discriminating and are cooperating in the investigation. The former employees said they were told to discourage blacks, Hispanics, people from India and Middle Easterners as tenants.

"I was shocked when I was told by my supervisor to try to avoid renting to blacks, Hispanics, other minorities and families with children," said one of the former employees, who asked not to be identified publicly to avoid hurting her chances of employment elsewhere in the real estate industry. "The management didn't try to keep minorities out entirely - that would have been obvious discrimination. But it seems to me they were limiting the number of minorities so there weren't too many."

The Fair Housing Act bars housing discrimination on account of race, color, religion, sex, disability, family status and national origin. The Act covers the sale, rental, financing and advertising of almost all housing in the nation. Fair housing investigations are conducted by HUD investigators, state and city agencies working with HUD, and private fair housing groups that receive HUD funds.

If an investigation shows that illegal housing practices have occurred and the parties are not able to settle, HUD issues charges of discrimination alleging violation of the Fair Housing Act and legal action is taken.

HUD operates a toll-free national hotline to take housing discrimination complaints, in both English and Spanish, at 1-800-669-9777.

During President Clinton's first term, HUD reached out-of-court settlements on 6,517 housing discrimination cases. The Department took enforcement actions on 1,085 cases, in which HUD issued housing discrimination charges or referred cases to the Department of Justice. HUD obtained $17.8 million in compensation for housing discrimination victims during the President's first term.

• Statement by Former Employee of Yoder Shrader
• HUD Announces Investigation of Allegations of Housing Discrimination at California Apartments
• Apartment Complexes Under Investigation by HUD
• The Fair Housing Act