REAL ESTATE SETTLEMENT OFFICER AND ATTORNEY IN BALTIMORE CONVICTED IN CONSPIRACY TO MISUSE AS MUCH AS $350,000 IN HUD FUNDS

WASHINGTON - A settlement officer and a former attorney with ties to the John Baumgarten Co. home improvement firm in Baltimore have been successfully prosecuted for participation in a conspiracy to misuse as much as $350,000 in Department of Housing and Urban Development funds.

"HUD has zero tolerance for waste, fraud, and abuse," Secretary Andrew Cuomo said. "We are moving aggressively against anyone who tries to improperly collect HUD funds."

The two people convicted in the case, which was prosecuted by the U.S. Attorney's Office in Baltimore, are:

• Lori Askins Baumgarten, daughter-in-law of John Baumgarten. Ms. Baumgarten conducted six real estate settlements for members of the Baumgarten organization without the knowledge of the law firm of Deutsch and Towarnicky, where she worked as a real estate settlement officer. She was also accused of using the Silver Spring, MD law firm's funds to cover the fact that some of her homebuyers lacked the money to cover their settlement costs. She has been sentenced to one year in prison and two years probation.

• Warren Rollman, a former attorney for John Baumgarten. Rollman and his wife, Shawn Mahn, pleaded guilty to making false statements and filing a false tax return. Both are awaiting sentencing.

Many of Lori Askins Baumgarten's clients received funds through HUD's 203(k) home rehabilitation program, which makes loans to finance the purchase and repair of older homes. However, instead of making repairs, some of Ms. Baumgarten's buyers actually used the money to purchase other homes. The loss to the Deutsch and Towarnicky law firm is estimated at over $200,000, and the loss to HUD is estimated at a potential $350,000.

Ms. Baumgarten allegedly assisted Rollman in processing loans for 14 different properties he purchased under HUD's 203(k) program. He put the properties in his wife's name using false information to qualify for the loans.

The investigation, conducted by HUD's Office of Inspector General, the FBI, Drug Enforcement Administration, and the Internal Revenue Service, was conducted as 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.