CUOMO CONTINUES CRACKDOWN ON WASTE, FRAUD AND ABUSE IN ACTION AGAINST COUPLE IN TRENTON, NJ

WASHINGTON - Housing and Urban Development Secretary Andrew Cuomo today announced that HUD has blocked a husband and wife who owned a convalescent center in Trenton, NJ from doing business with the federal government, as part of HUD's continuing crackdown on waste, fraud and abuse.

Cuomo said HUD has begun debarment action against Michael G. LaMelza and his wife, Judith A. LaMelza, who are both accused of HUD contract violations. Mr. LaMelza is president, treasurer, and owner of Water's Edge of New Jersey, Inc., and Mrs. LaMelza is secretary and owner of the company. The company owned Water's Edge Convalescent Center, a HUD-insured property in Trenton.

The debarment action would strike a financial blow against the LaMelzas and deprive them of all federal contracts for five years. Such contracts are a major source of income for many businesses.

"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."

A HUD investigation concluded that the owners made $1.9 million in unauthorized withdrawals from convalescent center funds after HUD had declared the convalescent center in default. In addition, it is alleged that the owners used $41,075 of project funds to pay a personal loan to the City of Trenton.

When HUD-insured projects are in default, HUD must give permission before project funds are withdrawn. If a HUD-insured loan goes into default, HUD may have to pay for the financial loss to the lender. Since HUD takes the risk of a possible loss when it insures a loan, project owners must remain in compliance with HUD's rules.

Cuomo launched the Get Tough Initiative to crack down of waste, fraud, and abuse in HUD programs a year ago in partnership the Justice Department.

A recent report on HUD's Get Tough Initiative found that:

• HUD dramatically increased the number of debarment actions against bad landlords to 122 in 1997 - an increase of over 300 percent from 1996, when just 30 landlords were subject to debarment action that stopped them from doing business with federal agencies for varying numbers of years.

• HUD and the Justice Department worked with the HUD Inspector General's Office, the Treasury Department and state and local governments to nearly double the number of civil case settlements resulting in recoveries against landlords of HUD-assisted housing last year. The number of such cases grew to 46 in 1997 - up from 24 in 1996.

• HUD and the Justice Department recovered nearly $25 million in money owed to HUD by landlords as a result of the above actions in 1997 - up from about $18 million the year before.