REPORT SHOWS CRACKDOWN ON WASTE, FRAUD & ABUSE AT HUD SUCCEEDS AS FOUR ASST. U.S. ATTORNEYS JOIN HUD ENFORCEMENT CENTER

WASHINGTON – Housing and Urban Development Secretary Andrew Cuomo today released a new report documenting the success of a crackdown by HUD and the Justice Department on waste, fraud and abuse in HUD programs and joined Attorney General Janet Reno in announcing that four Assistant U.S. Attorneys are being assigned to HUD to strengthen the crackdown.

The report – titled HUD’s Get Tough Initiative – details achievements of the partnership that Cuomo and Reno launched last March to act against landlords who are accused of abusing federal housing programs to enrich themselves while failing to provide safe and decent low-income housing. The achievements of the crackdown include an increase of over 300 percent in actions against landlords accused of wrongdoing.

Cuomo and Reno said HUD’s new Enforcement Center will be strengthened by the assignment of four Assistant U.S. Attorneys to work in the Center for one year. The Assistant U.S. Attorneys are: Mack Cauley of Tampa; John Gant of Beaumont, TX; Debrah Carnahan of St. Louis; and Jamie Mittet of Seattle. The Enforcement Center – which was created to lead HUD’s crackdown on waste, fraud and abuse – is headed by FBI Special Agent Edward J. Kraus, who is also on detail to HUD.

The 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. Debarments, which prohibit individuals and companies from doing business with federal agencies for varying numbers of years, can exact a heavy financial toll on businesses and individuals dependent on federal contracts for their income.

• 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. 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.

"Last March, Attorney General Reno and I promised our departments would work together to crack down on waste, fraud and abuse in HUD programs," Cuomo said. "Our message today is simple: we have kept our promise by backing up our words with action. We have saved American taxpayers millions of dollars, and we are continuing to carry out our zero-tolerance policy against landlords who try to rip-off Uncle Sam."

"Broken windows and graffiti-stained walls are a welcome mat for criminals," Reno said. "By cracking down on landlords who pocket federal funds intended for repairs, we can save taxpayer dollars and also help cut crime in the process."

About 4.3 million people with low and moderate incomes – many of them elderly and disabled – live in about 2.5 million privately owned HUD-assisted apartment units.

When landlords pocket HUD assistance that should be used to properly maintain apartments, poor tenants suffer. Buildings can deteriorate badly – as broken windows, leaking plumbing and broken heating systems go unrepaired. This lack of maintenance eventually causes vacancies and crime to increase in the HUD-assisted apartments, and often leads landlords to default on their mortgages. Since the mortgages of HUD-assisted housing are insured by HUD, the Department gets stuck with the bill for the defaulted mortgages and for building repairs. If no enforcement action is taken, the landlord can walk away with big profits, abandoning responsibility for the project.

"We know that most landlords of HUD-assisted housing are responsible and provide affordable housing as required under law," Cuomo said. "Our job is to identify and stop the minority who are abusing our programs."

Cuomo and Reno spoke to a conference of U.S. Attorneys and other law enforcement officials from 13 cities who are part of a joint effort by HUD, the Justice Department and public housing authorities to reduce crime in public and HUD-assisted housing. The cities are: Atlanta, Boston, Chicago, Detroit, Washington, Greensboro (NC), Gary (IN), Kansas City (MO), Memphis, Newark (NJ), New Orleans, Philadelphia and San Francisco.

Cuomo, Reno and U.S. Attorney Zachary W. Carter announced the latest action in the crackdown on bad landlords today – the indictment by a grand jury in New York City of five people accused of fraudulently diverting some of the $52 million in HUD rental assistance that went to Blackstone Realty Management Co. for eight low-income apartment developments in five states. (SEE SEPARATE RELEASE).

In addition to the crackdown on landlords who abuse HUD programs, the Get Tough report noted HUD progress against waste, fraud and abuse in other areas in 1997, including:

• Cutting inflated subsidies to assisted housing under the Section 8 program, saving taxpayers $562 million this year and about $1.6 billion over five years. At the same time, HUD worked successfully to get Congress to approve funding to renew all expiring Section 8 subsidy contracts.

• Ending a reverse mortgage scam that swindled senior citizens around the country out of thousands of dollars each.

• Protecting homeowners from unscrupulous contractors who overcharge for shoddy home repairs.

• Preventing homebuyers from being overcharged by mortgage brokers.

• Notifying consumers of millions of dollars in uncollected refund payments on their mortgages insured by the Federal Housing Administration.

• Cracking down on housing discrimination — including a request in the 1999 HUD budget for a 73 percent increase in funds to reduce this discrimination.