UNITED STATES SUES PRIVATE OWNERS OF THREE HUD-SUBSIDIZED APARTMENT COMPLEXES IN MISSISSIPPI FOR $15 MILLION

U.S. Attorney General Janet Reno, U.S. Housing and Urban Development Secretary Andrew Cuomo and the U.S. Attorney for Southern Mississippi Brad Pigott announced the filing today in U.S. District Court in Jackson and Biloxi, Mississippi, of three different False Claims Act lawsuits seeking $15 million damages and penalties against private owners of three apartment complexes that receive rental assistance subsidies from HUD.

The owners, who receive assistance under HUD's Section 8 rental assistance subsidy program, are accused of making false monthly certifications, in the course of claiming monthly rental payments from HUD, that their apartment units satisfied minimum federal housing requirements for "safe, decent and sanitary" living conditions for tenants.

All three lawsuits were filed under the False Claims Act, which enables the U.S. Justice Department to recover three times (or "treble") the amount of money paid out by any United States Government agency as a consequence of false statements or records knowingly made to the agency. The same Act also provides for, and all three lawsuits seek, civil penalties of up to $10,000 for each of the false statements or claims presented monthly to HUD.

The apartment complexes involved in the three lawsuits are the Metro Manor Apartments on Jackson West Blvd. in Jackson, Mississippi; the Jackson Apartments on West Maple Street in Jackson, Mississippi; and the former Americana Apartments on 8th Avenue in Gulfport, Mississippi.

Attorney General Reno said: "Landlords who receive federal funds must realize that if they don't play by the rules, they will lose out in the end."

Secretary Cuomo said: "HUD is not in the business of making private landlords wealthy so they can live in luxury while they let their tenants live in slums. Landlords who get assistance from HUD have a legal obligation to do what it takes to provide safe, decent, and sanitary housing opportunities to some of the poorest and most vulnerable Americans. If they refuse, we will continue to take tough action against them."

U.S. Attorney Brad Pigott, whose Southern District of Mississippi office prepared and filed the three lawsuits, added that: "We hope these suits signal the end of the days when private landlords believed they could take millions from the public treasury, and give back only lies about what rotten housing conditions they were providing to vulnerable families who often had no other realistic choice about where they could live."

Like other private sector owners of such project-based Section 8 HUD-subsidized properties, the owners of the three Mississippi apartments complexes involved in the three false claims suits filed today received, according to the court filings, "very substantial financial benefits through HUD rental payments, HUD mortgage insurance (and resulting mortgage interest savings), HUD grants, HUD tenant referrals, income tax benefits, transaction fees, and management fees."

The owners or their management companies in each instance submitted to HUD officials monthly signed certifications that the apartment units for which rental payments were sought monthly from HUD met HUD's legal standard requiring the provision of "safe, decent, and sanitary" housing conditions in exchange for such federal rental benefits to such private owners. Federal law defines "safe, decent, and sanitary" so as to prohibit serious roach or rat infestation, and to require adequate cooling and heating facilities, a firm roof structure, adequate physical security, smoke detectors, safe walkways, and other basic housing needs.

According to the three lawsuits, the owners and their management companies knew from "physical inspection reports and other inspection documentation and information" that their apartment units did not meet HUD's minimum housing standards at the times they certified each month that such standards were met.

"While many such private landlords live up to their end of the bargain by providing housing as decent and safe as their words claim, too many other landlords have rested comfortably in a corporate culture of dependence on the public treasury, and seem to have forgotten what their end of the bargain is," added Pigott. "These landlords' relationship with the federal treasury is not a free ride, something-for-nothing deal. When such landlords keep paying themselves but stop telling the truth about providing decent and safe housing, the tenants are cheated out of a decent place to live, the surrounding neighborhoods are subjected to spiraling increases in crime, and the taxpayers are ripped off."

As to Metro manor apartments in Jackson, the United States has sued J. Steven Nail of Jackson and Nail-owned Intervest Corporation for $9,812,090 in damages and penalties, asserting that their certifications that they were providing "safe, decent, and sanitary" conditions at Metro Manor were false beginning in January of 1994 and continuing through May of 1998.

As to the Jackson Apartments in Jackson, suit was filed against co-owners W. Thad McLaurin, Charles C. Taylor, Jr., and Arthur W. Doty, all of Jackson, and against Southland Management Corporation, seeking a total of $2,785,069 in damages and penalties, and asserting that such certifications submitted by them, beginning in July of 1995 and concluding in January of 1997, were false.

As to Americana Apartments in Gulfport, the U.S. sued L. H. Haraway, Jr. of Nashville, Tennessee, and his Hardaway Management Co., Inc., seeking $2,398,855 in damages and penalties, and asserting that such certifications were falsely made beginning in August of 1994 and concluding in December of 1996.

The owners of both Jackson Apartments and Americana Apartments earlier defaulted on other contractual obligation to HUD under the Section 8 program, resulting in foreclosure proceedings by HUD.

Secretary Cuomo and Attorney General Reno launched a "Get Tough" initiative to crack down on waste, fraud and abuse in HUD programs in March 1997.