REAL ESTATE FIRM PRESIDENT PLEADS GUILTY IN $1.4 MILLION FRAUD CASE INVOLVING DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

WASHINGTON - Housing and Urban Development Secretary Andrew Cuomo today said the former president of a Tacoma, WA real estate investment company has pleaded guilty to federal mail and tax fraud charges in connection with a scheme to fraudulently obtain more than $1.4 million in HUD-insured property improvement loans.

As part of the plea agreement, Rusty Fields - former president of Optimum Investments, Inc. - admitted that between December 1992 and December 1995 he falsified numerous HUD home improvement loans, lease agreements, contractor bids, and appraisals. He also admitted preparing a false tax return for one of his many strawbuyers. He is scheduled to be sentenced later this month and faces a maximum of 8 years in prison, $500,000 in fines, and restitution to HUD.

"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. We have zero tolerance for waste, fraud, and abuse."

This investigation, was conducted by HUD's Office of Inspector General, the Internal Revenue Service Criminal Investigation Division, and the U.S. Attorney's Office. It was part of the white collar crime focus of the Operation Safe Home initiative that was created in 1994 to attack crime in public and assisted housing.

In addition to combating fraud in publicly funded housing, Safe Home has been responsible for executing more than 1,900 search warrants and making more than 15,600 arrests. Operation Safe Home has seized more than $29 million worth of illegal drugs, more than 2,100 weapons, and over $4.6 million in drug money.

Under this initiative HUD works along with the Justice Department, Treasury Department and the Office of National Drug Control Policy in cooperation with state and local law enforcement agencies and public housing authorities.

In addition, Cuomo launched a "Get Tough" initiative to crack down on waste, fraud, and abuse in HUD programs in March 1997 in partnership with 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 cases and 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.