    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

                         EXPLORING ALLEGED ETHICAL AND

                            LEGAL VIOLATIONS AT THE

                           U.S. DEPARTMENT OF HOUSING

                             AND URBAN DEVELOPMENT

    =======================================================================

                                    HEARING

                                   BEFORE THE

                           SUBCOMMITTEE ON OVERSIGHT
                               AND INVESTIGATIONS

                                     OF THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                FEBRUARY 4, 2015

                                   __________

           Printed for the use of the Committee on Financial Services

                                Serial No. 114-2

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                        JEB HENSARLING, Texas, Chairman

    PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking
        Vice Chairman                        Member
    PETER T. KING, New York              CAROLYN B. MALONEY, New York
    EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
    FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
    SCOTT GARRETT, New Jersey            GREGORY W. MEEKS, New York
    RANDY NEUGEBAUER, Texas              MICHAEL E. CAPUANO, Massachusetts
    STEVAN PEARCE, New Mexico            RUBEN HINOJOSA, Texas
    BILL POSEY, Florida                  WM. LACY CLAY, Missouri
    MICHAEL G. FITZPATRICK,              STEPHEN F. LYNCH, Massachusetts
        Pennsylvania                     DAVID SCOTT, Georgia
    LYNN A. WESTMORELAND, Georgia        AL GREEN, Texas
    BLAINE LUETKEMEYER, Missouri         EMANUEL CLEAVER, Missouri
    BILL HUIZENGA, Michigan              GWEN MOORE, Wisconsin
    SEAN P. DUFFY, Wisconsin             KEITH ELLISON, Minnesota
    ROBERT HURT, Virginia                ED PERLMUTTER, Colorado
    STEVE STIVERS, Ohio                  JAMES A. HIMES, Connecticut
    STEPHEN LEE FINCHER, Tennessee       JOHN C. CARNEY, Jr., Delaware
    MARLIN A. STUTZMAN, Indiana          TERRI A. SEWELL, Alabama
    MICK MULVANEY, South Carolina        BILL FOSTER, Illinois
    RANDY HULTGREN, Illinois             DANIEL T. KILDEE, Michigan
    DENNIS A. ROSS, Florida              PATRICK MURPHY, Florida
    ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
    ANN WAGNER, Missouri                 KYRSTEN SINEMA, Arizona
    ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio
    KEITH J. ROTHFUS, Pennsylvania       DENNY HECK, Washington
    LUKE MESSER, Indiana                 JUAN VARGAS, California
    DAVID SCHWEIKERT, Arizona
    ROBERT DOLD, Illinois
    FRANK GUINTA, New Hampshire
    SCOTT TIPTON, Colorado
    ROGER WILLIAMS, Texas
    BRUCE POLIQUIN, Maine
    MIA LOVE, Utah
    FRENCH HILL, Arkansas

                         Shannon McGahn, Staff Director
                        James H. Clinger, Chief Counsel

                  Subcommittee on Oversight and Investigations

                       SEAN P. DUFFY, Wisconsin, Chairman

    MICHAEL G. FITZPATRICK,              AL GREEN, Texas, Ranking Member
        Pennsylvania, Vice Chairman      MICHAEL E. CAPUANO, Massachusetts
    PETER T. KING, New York              EMANUEL CLEAVER, Missouri
    PATRICK T. McHENRY, North Carolina   KEITH ELLISON, Minnesota
    ROBERT HURT, Virginia                JOHN K. DELANEY, Maryland
    STEPHEN LEE FINCHER, Tennessee       JOYCE BEATTY, Ohio
    MICK MULVANEY, South Carolina        DENNY HECK, Washington
    RANDY HULTGREN, Illinois             KYRSTEN SINEMA, Arizona
    ANN WAGNER, Missouri                 JUAN VARGAS, California
    SCOTT TIPTON, Colorado
    BRUCE POLIQUIN, Maine
    FRENCH HILL, Arkansas
                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        February 4, 2015.............................................     1
    Appendix:
        February 4, 2015.............................................    35

                                   WITNESSES
                          Wednesday, February 4, 2015

    Montoya, Hon. David A., Inspector General, Office of Inspector
      General, U.S. Department of Housing and Urban Development......     5
    Perez, Edda Emmanuelli, Managing Associate General Counsel,
      Office of General Counsel, U.S. Government Accountability
      Office.........................................................     7

                                    APPENDIX

    Prepared statements:
        Montoya, Hon. David A........................................    36
        Perez, Edda Emmanuelli.......................................    48

                  Additional Material Submitted for the Record

    Ellison, Hon. Keith:
        Insert from the Federal Register dated January 6, 2015, on
          Proposed Rules.............................................    63
        Responses to questions for the record submitted to Hon. David
          A. Montoya.................................................    77

                         EXPLORING ALLEGED ETHICAL AND

                            LEGAL VIOLATIONS AT THE

                           U.S. DEPARTMENT OF HOUSING

                             AND URBAN DEVELOPMENT

                                  ----------

                          Wednesday, February 4, 2015

                 U.S. House of Representatives,
                              Subcommittee on Oversight
                                    and Investigations,
                               Committee on Financial Services,
                                                       Washington, D.C.
        The subcommittee met, pursuant to notice, at 10:06 a.m., in
    room 2167, Rayburn House Office Building, Hon. Sean Duffy
    [chairman of the subcommittee] presiding.
        Members present: Representatives Duffy, Fitzpatrick,
    McHenry, Hurt, Fincher, Mulvaney, Hultgren, Tipton, Poliquin,
    Hill; Green, Cleaver, Delaney, Sinema, Beatty, Vargas, Ellison,
    Heck, and Capuano.
        Chairman Duffy. The Subcommittee on Oversight and
    Investigations will come to order. The title of today's
    subcommittee hearing is, ``Exploring Alleged Ethical and Legal
    Violations at the U.S. Department of Housing and Urban
    Development.''
        Without objection, the Chair is authorized to declare a
    recess of the subcommittee at any time.
        The Chair now recognizes himself for 3 minutes for an
    opening statement. I first want to thank everyone for being
    here today, including our witnesses.
        Our witnesses are here to discuss two reports. The first is
    the Inspector General's report on allegations of improper
    lobbying and obstruction at the Department of Housing and Urban
    Development.
        For those returning members to the committee, you will
    remember that we first discussed this report almost a year ago,
    in February, when Mr. Montoya was here. At that time, Mr.
    Montoya and I talked about the whitewash mentality at HUD. At
    the time, I found those revelations troubling, but I hoped that
    we could chalk it up to just a few bad apples at HUD.
        But we are back here again today to discuss what happened
    with those bad apples because of other completely unrelated
    allegations that have surfaced. In fact, I think we are going
    to hear many stories of the waste, fraud, and abuse that is now
    taking place at HUD.
        The second report our witnesses have been asked to discuss
    concerns the questionable hiring practices at the Department
    that might have created a glaring conflict of interest. And
    that is within the Office of Public and Indian Housing. I want
    to make clear to committee members that these are very
    different allegations against different employees in different
    departments and divisions responsible for very different tasks.
        But they seem to display the same cavalier attitude that
    shows these employees do not believe in following the rules.
    And they do not care about getting caught, and when they are
    caught they don't care about obstructing an investigation or
    Congress. Their purpose is to protect themselves and each
    other. And sadly, what we find is that they get away with it.
    And sometimes, they even get rewarded during periods of bad
    behavior. It is an attitude that I think Americans are learning
    is prevalent throughout this Administration and it is an
    attitude of which we are all quickly getting very tired.
        I want to make clear that we are not here to debate the
    importance of HUD, the importance of its mission, or the work
    that they do. Millions of Americans who have fallen on hard
    times--veterans, single mothers, their children--all rely on
    HUD's programs, and we should all recognize and applaud their
    efforts.
        In fact, it is because of the hard work of many HUD
    employees that we are here today. It is because they are the
    ones who have come forward and reported these allegations. They
    already work with limited resources that should not be diverted
    to illegal lobbying efforts or overpaying a lobbyist.
        So I look forward to hearing from our witnesses today to
    learn what sort of reprimands HUD has taken against these
    employees and what steps they continue to take to ensure that
    this attitude of disregard for accountability does not entrench
    itself within the Department permanently. And I hope my friends
    on the other side of the aisle will work with me in this
    committee to get to the bottom of these allegations and ensure
    that these bad acts stop now.
        And with that, I yield to my good friend, the ranking
    member of our Oversight and Investigations Subcommittee,
    Representative Green from Texas.
        Mr. Green. Thank you, Mr. Chairman. Let me acknowledge that
    this is your first hearing as the official Chair. While you
    have occupied the seat before, this is your first time as
    Chair, and I commend you and want to thank you for the
    conversations that you and I have had prior to this hearing.
    While they were personal to us, I will indicate that they have
    been positive and productive. Again, I thank you.
        I would also like to thank our staffs for the outstanding
    jobs that they have done in preparing us for today's hearing. I
    sincerely believe that without the staffs' aid and assistance,
    we would not be nearly as effective as we are. So again, thank
    you staff.
        Mr. Chairman, I am pleased that we are taking an interest
    in how to improve the Federal agency principally responsible
    for providing housing to low-income Americans. Today's hearing
    will cover HUD Inspector General (IG) investigations into
    alleged wrongdoing at the U.S. Department of Housing and Urban
    Development.
        The first report concerns lobbying actions taken by HUD
    that this subcommittee held a hearing on nearly a year ago. The
    IG's report for this incident concluded that HUD had not
    violated the Anti-Lobbying Act. However, individuals at HUD had
    violated HUD's internal policies related to lobbying Congress
    on pending legislation.
        HUD has since taken action to clarify lobbying rules for
    its employees and acted to respond to the concerns raised
    during last year's hearing. More recently, the U.S. Government
    Accountability Office (GAO) determined that the actions taken
    by individuals at HUD violated the Antideficiency Act related
    to the proper use of appropriated funds. As such, I fully
    expect HUD to comply appropriately and to take the necessary
    actions to address this.
        The other topic of today's hearing is related to an IG
    investigation into alleged improper activities of an individual
    at HUD brought on through an agreement permitted under the
    Intergovernmental Personnel Act.
        While these agreements are designed to provide Federal
    agencies the ability to employ subject matter experts on a
    temporary basis, I believe it is our responsibility to ensure
    that it is being done properly. The HUD IG investigation raises
    a number of concerns about the actions taken by individuals at
    HUD and whether there was proper consideration given to
    potential conflicts of interest. I want to be clear,
    perspicuously so, Mr. Chairman. I believe, as do you, that it
    is our subcommittee's responsibility to fully investigate what
    has occurred at HUD. And if wrongdoing is uncovered, it should
    be dealt with appropriately.
        However, like you, Mr. Chairman, I contend that this
    subcommittee's ultimate goal must be improving HUD. HUD's
    mission is critical to the success of this Nation. By and
    large, HUD continues to provide support for affordable housing
    for millions of Americans, including over 14,000 veterans. And
    56 percent of HUD's tenants supported by HUD are elderly or
    disabled.
        HUD currently employs over 9,000 people around the United
    States. While it would appear that the IG's findings suggest
    that former HUD employees may have acted improperly, we should
    not conclude that their actions suggest a larger, more systemic
    problem at HUD.
        I will reiterate that HUD should act appropriately, and it
    appears that HUD is addressing concerns raised by the IG. One
    of the things that I will introduce into evidence at some
    point, Mr. Chairman, is a joint communique signed by the
    Secretary of HUD and the IG indicating a willingness to work
    together to bring resolution to the concerns that have been
    raised. We should not allow this debate to metamorphose into
    anything more than trying to improve HUD.
        Mr. Chairman, I agree with you. And, in fact, it is my hope
    that once the agency has addressed our concerns, this
    subcommittee will turn its attention to more pressing national
    matters, including the struggles of our country's smallest
    banks and the state of our public housing in America.
        Mr. Chairman, nearly every member of this committee has
    heard from small banks about the struggles that they are facing
    in balancing their consumer protections with the regulatory
    burdens with which they struggle. Over 6,000 of our Nation's
    banks, which is more than 90 percent of all banks in this
    country, are under $1 billion in assets. And I believe that we
    must do more to help them lest we wish to stand idly by as the
    industry continues to consolidate.
        While I look forward to this hearing and hearing from our
    witnesses, Mr. Chairman, I do want to work to improve HUD, and
    I am eager to tackle the many other issues that demand our
    attention.
        I yield back.
        Chairman Duffy. The Chair now recognizes the vice chairman
    of our Oversight and Investigations Subcommittee, Mr.
    Fitzpatrick from Pennsylvania, for 2 minutes.
        Mr. Fitzpatrick. I thank the chairman for holding this
    important hearing.
        Today, this subcommittee is going to hear testimony from
    yet another Federal agency about an investigation into improper
    behavior. This week, it is the United States Department of
    Housing and Urban Development, whose own Inspector General
    found evidence that senior employees may have circumvented the
    hiring process to appoint politically connected lobbyists to
    high-level positions.
        Furthermore, this subcommittee will be following up on the
    Government Accountability Office and HUD OIG reports that
    officials violated Federal law by asking employees to contact
    United States Senators to ask for their support on pending
    legislation.
        Last Congress, it was the IRS, the Department of Justice,
    and most tragically, the Veterans Administration. In every
    case, the American people saw high-ranking officials within
    these agencies destroy evidence, skirt the law for their own
    benefit, and adhere to a personal agenda. Over the course of
    the testimony, I hope this committee is able to determine if
    this type of behavior is an isolated incident of just a few bad
    actors, or if it stretches across the entire senior leadership.
    But what concerns me more is that my constituents have come to
    expect this type of behavior from the Administration.
        Finally, this is not a hearing about the good work HUD does
    for struggling families across the United States, including in
    my district back home in Pennsylvania. And for the great number
    of HUD employees who work hard and who serve, I thank them for
    that.
        In fact, this is a hearing about behavior that has occurred
    at previously-mentioned Federal agencies which tarnishes the
    good work that many Federal employees, including those at HUD,
    are doing for the taxpayers. So, Mr. Chairman, I look forward
    to the important work of this subcommittee in the 114th
    Congress to hold accountable Federal agencies and Federal
    employees.
        And I yield back.
        Chairman Duffy. The vice chairman yields back.
        The subcommittee now welcomes our witnesses. Thank you both
    for being here today.
        First, we welcome the Honorable David Montoya. He is the
    Inspector General of the United States Department of Housing
    and Urban Development. Before Mr. Montoya was sworn in as HUD's
    Inspector General in December 2011, he served in senior-level
    positions for the Office of the Inspector General at the U.S.
    Postal Service and the U.S. Department of the Interior, and as
    the Deputy Director of the EPA's Criminal Investigation
    Division. Mr. Montoya is a native of El Paso, Texas, and a
    graduate of the University of Texas at El Paso.
        We also welcome Ms. Edda Perez. She is the Managing
    Associate General Counsel in the Office of General Counsel at
    the United States Government Accountability Office. Ms. Perez
    serves as Associate General Counsel for appropriations law,
    budget issues and financial management, and assurance teams
    within GAO's Office of General Counsel, and she has been with
    the GAO in several different capacities since 1987. Ms. Perez
    received her law degree from Georgetown University and her
    undergraduate degree from InterAmerican University of Puerto
    Rico.
        The witnesses will be recognized for 5 minutes to give an
    oral presentation of their testimony. Without objection, the
    witnesses' written testimony will be made a part of the record.
    Once the witnesses have finished presenting their testimony,
    each member of the subcommittee will have 5 minutes in which to
    ask questions of the witnesses.
        I want to remind the witnesses verbally that while you may
    not be placed under oath today, your testimony is subject to 18
    U.S.C. Section 1001, which makes it a crime to knowingly give
    false statements in proceedings such as this one. You are
    specifically advised that knowingly providing false statements
    to this subcommittee or knowingly concealing material
    information from this subcommittee is a crime.
        On your table, you will see that you have three lights:
    green means go; yellow means you are running out of time; and
    red means stop. The microphones are oftentimes very sensitive,
    so make sure you are speaking directly into it.
        And with that, Mr. Montoya, you are recognized for 5
    minutes.

    STATEMENT OF THE HONORABLE DAVID A. MONTOYA, INSPECTOR GENERAL,
      OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF HOUSING AND
                           URBAN DEVELOPMENT

        Mr. Montoya. Thank you, Chairman Duffy, Ranking Member
    Green, and members of the subcommittee. I am David Montoya, the
    Inspector General of the Department of Housing and Urban
    Development. I want to thank you for the opportunity to testify
    today regarding our investigative and audit work of legal and
    ethical issues at the Department, including lobbying
    activities, its improper use of agreements under the
    Intergovernmental Personnel Act, and other investigations of
    HUD employees' misconduct. My written testimony outlines a
    number of our concerns.
        While we are encouraged by the positive involvement of
    Secretary Castro and Deputy Secretary Coloretti, our work does
    continue. On February 26th of last year, I testified before
    this subcommittee regarding our investigation of HUD lobbying
    activities. I recounted the series of events and lapses in
    judgment that resulted in HUD engaging in grassroots lobbying
    activities.
        While our investigation did not result in criminal
    prosecution, it demonstrated an institutional failure to follow
    HUD's own existing internal policies. This led to placing the
    Department and its second highest-ranking official, the former
    Deputy Secretary, into a comprising situation, one that leaves
    an impression of lapses in judgment and unethical decision-
    making by high-ranking officials.
        In that matter, officials attempted to impede our
    investigation by withholding information and threatening my
    investigating agents. In response to our report of
    investigation, HUD took no formal disciplinary action.
        I am here today to state that unfortunately, we have
    encountered another example of senior officials bending the
    rules and engaging in what I consider misconduct. Over the last
    5 months, we have issued two reports concerning HUD's
    appointment of the Deputy Director of the Council of Large
    Public Housing Authorities, known as CLPHA, to HUD's Office of
    Public and Indian Housing's (PIH's) policymaking division that
    was responsible for developing the regulations applicable to
    the entities CLPHA represents.
        In essence, HUD appointed someone who represented the
    regulated to be in charge of developing the regulations. We
    believe the former Assistant Secretary and former Deputy
    General Assistant Secretary for PIH may have committed
    prohibitive personnel practices and created an inherent
    conflict of interest in doing so. More troubling is that once
    inside HUD, CLPHA's Deputy Director attempted to deregulate
    public housing agency reporting requirements and loosen
    oversight of public--or PIH programs to align with the agenda
    set forth by CLPHA and other similar industry groups.
        These two events alone illustrate what can happen when
    senior officials veer from the course of ethical decision-
    making, skirt the edges, and act in a manner that is not in the
    government's best interest.
        The inappropriate and sometimes illegal actions by a small
    group of HUD employees detract from what my experience has
    shown me to be the norm, which is that the vast majority of HUD
    employees are hard-working, dedicated civil servants. In fact,
    many of these cases have come to us by conscientious employees
    who are frustrated that their managers have not addressed these
    issues and allegations.
        In some of these cases, we see a failure to adhere to
    existing policies and procedures, or we see a breakdown in
    responsibility. Particularly troubling to me is when
    information is withheld from my office or employees demonstrate
    a lack of candor with, or even threaten, OIG agents and yet HUD
    takes no action.
        It is a fact that poor actions and behavior are human in
    nature and will occur throughout any industry or entity,
    private or government. HUD is not alone. But what I believe is
    important is what an organization does after such behavior is
    detected to discipline, and create an ethical culture in the
    workplace. It is my opinion that HUD has failed in both.
        One cannot ignore the fact that for the past several years
    HUD has consistently ranked near the bottom in annual surveys
    of the most desirable Federal agency to work for. Misconduct
    and unethical behavior, particularly by high-ranking officials,
    does not, in my view, serve to enhance this unfavorable image.
    Employee morale also suffers when employees observe that
    misconduct is not dealt with and the offending employees are
    allowed to remain in their positions virtually unpunished.
        It is in HUD's best interest that they address misconduct.
    Because according to a 2013 national business ethics survey
    conducted by the Ethics Resource Center, when employees observe
    misconduct on the job, their engagement drops by nearly 30
    percent.
        I do want to express my appreciation for Secretary Castro's
    effort to encourage HUD employees to cooperate with my office.
    Indeed, he issued a jointly-signed letter with me to all HUD
    employees outlining his expectations. I look forward to working
    with the Department and the Congress to ensure that HUD
    programs and personnel operate in a legal and ethical manner.
        Thank you for the opportunity to speak today, and I am
    happy to answer your questions.
        [The prepared statement of Inspector General Montoya can be
    found on page 36 of the appendix.]
        Chairman Duffy. Thank you, Mr. Montoya.
        The Chair now recognizes Ms. Perez for 5 minutes.

    STATEMENT OF EDDA EMMANUELLI PEREZ, MANAGING ASSOCIATE GENERAL
          COUNSEL, OFFICE OF GENERAL COUNSEL, U.S. GOVERNMENT
                         ACCOUNTABILITY OFFICE

        Ms. Perez. Good morning, Chairman Duffy, Vice Chairman
    Fitzpatrick, Ranking Member Green, and members of the
    subcommittee. Thank you for the opportunity to discuss our
    legal opinion concerning the Department of Housing and Urban
    Development's use of appropriations to prepare and transmit an
    email to the public.
        GAO concluded that HUD violated the anti-lobbying provision
    of its Appropriations Act and the Antideficiency Act. The legal
    opinion was requested by this subcommittee's previous chairman.
    Representative McHenry asked GAO whether HUD violated anti-
    lobbying provisions when the Deputy Secretary prepared and
    transmitted an email on July 31, 2013.
        That email encouraged recipients to contact specific
    Senators regarding pending legislation. We relied upon facts
    determined from the investigation done by HUD's Office of
    Inspector General and information that HUD provided to the
    subcommittee. We also asked HUD to provide us with additional
    facts and its legal views. HUD did not provide any additional
    facts or legal views to GAO.
        The provision applicable in this case is Section 716 of
    HUD's 2012 Appropriations Act, which was carried forward by the
    2013 Appropriations Act. Section 716 is commonly referred to as
    an anti-lobbying provision. It prohibits the use of
    appropriated funds for indirect or grassroots lobbying in
    support of or in opposition to pending legislation.
        Grassroots lobbying occurs when an agency makes clear
    appeals to the public to contact Members of Congress regarding
    pending legislation. The email transmitted by the Deputy
    Secretary requested that recipients contact 17 named Senators
    in support of the Senate's version of HUD's 2014 appropriations
    bill, which was pending in the Senate at that time. The email
    emphatically urged recipients to encourage the Senators to take
    various actions: to vote in favor of procedural motions to
    advance consideration of the bill; to oppose specific
    amendments HUD considered harmful to the bill; and to vote in
    support of the bill itself.
        Among the over 1,000 recipients of the Deputy Secretary's
    email were members of the public. GAO concluded that HUD
    violated Section 716 by preparing and transmitting the email.
    The provision is violated when there is evidence of a clear
    appeal by an agency to the public to contact Members of
    Congress in support of or in opposition to pending legislation.
        Here, the Deputy Secretary's email, on its face, made
    several clear appeals to the public to contact Members of
    Congress regarding HUD's pending appropriations bill. HUD did
    not deny that it engaged in grassroots lobbying. Rather, HUD
    emphasized that the email was sent by its Deputy Secretary, who
    is a Presidentially-appointed and Senate-confirmed official.
        HUD noted that the Department of Justice has opined that a
    similar anti-lobbying provision which is enforced by Justice
    does not restrict the activities of certain Executive Branch
    officials such as Presidential appointees. Notably, however, in
    interpreting that provision in Section 1913 of Title 18,
    Justice does caution against such officials engaging in the
    sort of lobbying activity that section was intended to prevent.
        GAO's opinion did not analyze whether HUD violated Section
    1913, a provision enforced by the Department of Justice, not
    GAO. GAO analyzed HUD's compliance with the appropriations
    provision found in Section 716.
        GAO does not agree with HUD's view that the Deputy
    Secretary is exempt from the appropriations provision. Section
    716 would not prevent the Deputy Secretary from engaging in
    normal executive legislative relationships. It does however
    establish a brightline rule prohibiting a clear agency appeal
    to the public to contact Members of Congress in support of or
    in opposition to pending legislation. And in this case, there
    is evidence of such an appeal to the public, and GAO concluded
    that HUD violated the anti-lobbying restriction of Section 716.
    By using its appropriated funds in violation of this
    prohibition, HUD also violated the Antideficiency Act.
        The Antideficiency Act is a cornerstone of fiscal laws by
    which Congress enforces its constitutional power of the purse.
    It is also a funds-control statute that is designed to
    implement agency fiscal discipline.
        Under the Act, officials of the government may not make or
    authorize an obligation or expenditure exceeding the amounts of
    available appropriation. In other words, agencies may not spend
    more than Congress provides. The legal effect of Section 716 is
    to make no funds--that is, zero--available to HUD for indirect
    or grassroots lobbying. By using funds to prepare and transmit
    the email in question, HUD spent funds in excess of the amount
    available. And because no funds were available for grassroots
    lobbying, HUD violated the Antideficiency Act.
        Consequently, HUD must report an Antideficiency Act
    violation to the President and Congress, and transmit copies of
    the report to GAO in accordance with the law. As of this date,
    GAO has not received a report from HUD for this Antideficiency
    Act violation. Thank you, Chairman Duffy, Vice Chairman
    Fitzpatrick, and Ranking Member Green.
        This concludes my statement, and I would be pleased to
    answer any questions you may have.
        [The prepared statement of Ms. Perez can be found on page
    48 of the appendix.]
        Chairman Duffy. Thank you, Ms. Perez.
        The Chair now recognizes himself for 5 minutes. Mr.
    Montoya, maybe just a brief recap. After last year's hearing,
    after the information came to light with regard to the lobbying
    effort within HUD, what happened to Mr. Jones, Mr. Mincberg,
    and Mr. Constantine in regard to disciplinary action, and where
    are they today?
        Mr. Montoya. Thank you for that question, Mr. Chairman. Mr.
    Mincberg has left the organization. Nothing--no personnel
    action, if you will, took place against him prior to his
    leaving, but he has left the organization.
        Chairman Duffy. So he wasn't removed for his actions? He
    left on his own volition?
        Mr. Montoya. Left on his own. He resigned, yes, sir. With
    regards to the Deputy Secretary, he left and took another
    position with the State. Nothing happened with him, although
    our investigation did not suggest that he had any real direct
    involvement in the email, and may have been unknown with
    regards to the email contact list.
        Chairman Duffy. Is it fair to say Mr. Jones was, in your
    opinion, relying on the advice given to him by others?
        Mr. Montoya. Yes, sir. I think last time I testified, I
    classified it as ``ill-advised.'' He was ill-advised by his
    attorneys who should have kept him from this situation.
        Chairman Duffy. Okay.
        Mr. Montoya. And with regards to Mr. Constantine, I believe
    he may have been issued a reprimand or an oral counseling,
    which we would not consider a personnel action--oral
    counseling.
        Chairman Duffy. But he has been removed from HUD, yes?
        Mr. Montoya. No, no.
        Chairman Duffy. No?
        Mr. Montoya. He is still the ethics official for HUD.
        Chairman Duffy. He is the ethics official for HUD?
        Mr. Montoya. Yes, sir.
        Chairman Duffy. Was Mr. Constantine misguided, do you
    think, like Mr. Jones?
        Mr. Montoya. The evidence suggested that Mr. Mincberg had
    several conversations within his hallway about this more
    aggressive lobbying. I did fault Mr. Constantine for not taking
    more of an aggressive approach himself in asking the question,
    what is it you are talking about? Especially because it dealt
    with the Secretary and the Deputy Secretary.
        Chairman Duffy. Did Mr. Constantine cooperate with your
    investigation?
        Mr. Montoya. We had to interview him 3 times. So to the
    extent that he was willing to be interviewed--
        Chairman Duffy. Is that standard practice that you would
    interview someone 3 times? Or usually, if someone is
    cooperative, does it take only one time?
        Mr. Montoya. It is not unheard of that we interview
    somebody several times if we need to go back for additional
    information. In his case we, quite frankly, didn't feel that
    the story was straight. So that is why we interviewed him 3
    times.
        Chairman Duffy. Do you think he was fully forthright with
    you in the first interviews that you did with him?
        Mr. Montoya. No. And quite frankly, although he didn't say
    it, I believe he was a little fearful of retaliation of
    speaking up.
        Chairman Duffy. But he has not been removed. He is in the
    Ethics Division.
        Mr. Montoya. That is correct, sir.
        Chairman Duffy. Okay. Has there been any promotion or
    increase in pay?
        Mr. Montoya. I am not aware that there would be for him.
        Chairman Duffy. Okay. I want to switch gears and go to the
    more recent investigation with regard to Ms. Gross being hired
    by HUD. Listen, it is not uncommon, and I think many Americans
    might not like this, but sometimes lobbyists will come to work
    for the government and sometimes government employees will
    leave and go work for lobby firms. It is referred to as the
    ``revolving door.'' That is not uncommon, or that is not
    illegal, is it? No.
        Mr. Montoya. No. It would depend on the circumstances.
        Chairman Duffy. But with Ms. Gross, however, she was
    brought into HUD in her governmental personnel agreement. Did
    she resign her position from CLPHA?
        Mr. Montoya. No, she did not. She maintained her position
    as the Deputy Director and was, quite frankly, being paid by
    CLPHA with HUD reimbursing payments. So in essence, she was
    still a full-fledged paid employee of CLPHA while employed in
    Federal service.
        Chairman Duffy. In these IPA agreements between agencies
    and outside organizations, is that uncommon that they would
    keep their position at the outside organization?
        Mr. Montoya. I don't believe it is uncommon. I think what
    was uncommon here is, she was put in a very key, high-ranking
    role--she wasn't there as an advisor, per se--to sort of inform
    HUD of what the industry was dealing with when it came to
    regulations. There is nothing wrong with that sort of advisory
    role, but she was in a key, policymaking position.
        Chairman Duffy. And that is where the difference is, that
    she was not there in an advisory role, which is the traditional
    position of an IPA individual. Instead, she was in a policy-
    making position and still kept her position the CLPHA, which is
    a lobbying organization and has a certain view and perspective
    of what HUD should be doing with regard to reforms. Is that
    correct?
        Mr. Montoya. Yes, sir, that is correct.
        Chairman Duffy. Do you have an opinion as to whether--was
    she loyal to HUD, was she loyal to CLPHA, was she loyal to
    herself? How did she navigate her role in HUD?
        Mr. Montoya. Quite frankly, everything suggests to me and
    to us that she was loyal to CLPHA and to the industry, not only
    with regards to the fact that she wanted to maintain the higher
    salary that CLPHA was giving her as opposed to the salary she
    would have made as a Federal employee, but quite frankly, in
    trying to deregulate some of the regulations that had
    established HUD in a better position, especially with regards
    to improper payments.
        Chairman Duffy. Thank you. And my time has expired.
        The Chair now recognizes the ranking member, Mr. Green from
    Texas, for 5 minutes.
        Mr. Green. Thank you, Mr. Chairman. Thank you again to the
    witnesses.
        Let me start with you, Ms. Perez. And thank you for
    appearing today. With reference to the report that you are to
    receive from HUD and that Congress is to receive as well, you
    have indicated that you have not received it. But would you go
    on and indicate at this time that this is not unusual given the
    length of time that has lapsed? And that sometimes it can take
    months to get these reports to the appropriate parties?
        Ms. Perez. Yes, sir, it can take several months for us to
    get reports from agencies when we have indicated that they have
    violated the Antideficiency Act. Some agencies have done it in
    a matter of weeks, others have taken several months and even
    years.
        Mr. Green. And just for the record, to make it very clear,
    you are not contending that anything untoward has occurred by
    virtue of the report not having reached your office to date.
        Ms. Perez. No, sir. The main concern and purpose of that
    report would be for the agency to be able to identify what
    actions it has taken to correct these violations, as well as to
    take actions to prevent violations in the future. So we really
    view it as forward-looking because that is part of what the
    statute requires, to impose additional safeguards.
        Mr. Green. Thank you. And with reference to the anti-
    lobbying, you do concede that if the wording in that letter had
    been appropriate to indicate that the Administration opposes a
    certain piece of legislation, or this is the Administration's
    position on a piece of legislation, that it would have been
    perfectly appropriate and would not have been a breach. Is that
    a fair statement?
        Ms. Perez. Yes, sir. What our case law recognizes is that
    it is fine for agencies and Administrations to make their views
    known to the public, including their views on pending
    legislation. But--
        Mr. Green. Thank you. I am going to have to intercede for
    just a moment and move to Mr. Montoya because there are a
    couple of things I have to get into with him.
        Ms. Perez. Sure.
        Mr. Green. Sir, thank you. It appears that two Texans have
    joined together to issue a joint communique, you and the
    Secretary. And I would like to ask a couple of questions about
    this. Is that something that is commonplace for a Secretary, to
    sign a communique with an IG?
        Mr. Montoya. No, sir. I have to say no, and I am not sure I
    know of any other situation like this.
        Mr. Green. And if you had to characterize it as either
    unique or commonplace, you would lean more toward unique than
    commonplace, would you not?
        Mr. Montoya. Yes, sir, I would agree with that.
        Mr. Green. And in this communique, you indicate that you
    are working together to eliminate waste and mismanagement. And
    you go on to indicate that you believe that you can prevent
    these inefficiencies and that we can work together to make HUD
    a more effective and efficient organization. Is that a fair
    statement?
        Mr. Montoya. Yes, sir. That, in fact, is the mission of the
    IG.
        Mr. Green. And have you found the new Director, Director
    Castro, to be someone that you can work with to date? And do
    you find him moving in the right direction?
        Mr. Montoya. With my initial conversations, and the fact
    that he would sign this joint letter in response to many of the
    concerns that I have raised, or the subject of this testimony,
    yes, I am encouraged by that. And I look forward to him making
    those changes.
        Mr. Green. The organization itself, HUD, you have indicated
    that the infractions should not be perceived as pervasive, that
    these are things that occur in large organizations the size of
    HUD--9,000-plus employees--and you have been very clear on
    this. But I think for the record it is important to reiterate
    this. Is this true?
        Mr. Montoya. Yes, sir, that is correct.
        Mr. Green. And it is also true that what has been done is
    something that is correctable with a reasonable amount of
    effort and time. And you are eager to work with the new
    Secretary to make these corrections.
        Mr. Montoya. Yes, sir, and that is key, what an
    organization will do when it comes across misconduct.
        Mr. Green. Yes, sir. And you agree that the new Secretary,
    given his initial expression to you, should be given an
    opportunity to make the necessary corrections so that we can
    move forward with HUD.
        Mr. Montoya. Yes, sir, absolutely.
        Mr. Green. And finally this. The people who have been
    involved in these infractions, for the most part, are all no
    longer with HUD. I do understand that they left under
    circumstances that are sometimes questionable in the minds of
    some, but they are no longer there. Is that a fair statement?
        Mr. Montoya. It depends on which example of which we are
    speaking. There are a fair amount who are still there.
        Mr. Green. Yes, but the--Mr. Jones is no longer there.
        Mr. Montoya. No, sir, he is no longer there.
        Mr. Green. Ms. Gross is no longer there.
        Mr. Montoya. That is correct; she is no longer there.
        Mr. Green. So for the most part, we can say that HUD has
    been--whether they have left, and that is a good thing, their
    leaving.
        Mr. Montoya. I would say--well, I don't know about Deputy
    Secretary Jones. I actually thought he was trying to do a lot
    to change the culture with regard to some of this conduct. With
    regards to Ms. Gross, yes, it is a good thing she has left.
        Mr. Green. Okay. And HUD is putting those behind them--
        Chairman Duffy. The gentleman's time has expired.
        Mr. Green. Thank you very much, Mr. Chairman.
        Chairman Duffy. The gentleman yields back.
        The Chair now recognizes the former chairman of this
    subcommittee. And we appreciate all the good work he has done
    on the subcommittee as chairman and the good work he has done
    on this issue. He is also the Majority Deputy Whip and the vice
    chairman of the full Financial Services Committee. The Chair
    now recognizes Mr. McHenry from North Carolina for 5 minutes.
        Mr. McHenry. I thank my friend from Wisconsin. And I hope
    you will enjoy the same working relationship I had with the
    ranking member during my time. And congratulations on your new
    chairmanship, Sean. We are happy you have taken over, and I am
    sure the staff is much happier to work with you.
        So, Mr. Montoya, thank you for being here, and Ms. Perez,
    thank you for being here, as well. I appreciate the work that
    you all do on a daily basis for the taxpayers and for the
    American people. It is important work.
        Mr. Montoya, in your report you outline several other cases
    of employee misconduct in the Department of Housing and Urban
    Development. In your opinion, were the administrative remedies
    that the Department put in place sufficient?
        Mr. Montoya. No, sir, I don't believe they are. And quite
    frankly, when they do issue some personnel action it seems to
    amount mostly to counseling sessions, verbal oral counseling.
    Which, quite frankly, don't amount to penalties even under
    their own code of conduct. A minimum penalty would be a
    reprimand, and that is in written form that generally stays in
    an employee's personnel file for 2 years. So when HUD tells us
    that they have handled it and they have issued corrective
    action, oral counseling to us does not--
        Mr. McHenry. So, why? Why does that matter?
        Mr. Montoya. I think, again, that is what I said earlier. I
    think in order to establish that ethical culture in a workplace
    your have to discipline as appropriate when the circumstances
    arise. And I think in many of the examples we give you, it
    would suggest that there should have been a stronger reprimand
    or at least a stronger way of addressing--
        Mr. McHenry. So you work with the Department of Justice on
    these investigations, and you turn over--you have criminal
    referrals, at times, you turn over to the Department of
    Justice. Have they prosecuted in these cases?
        Mr. Montoya. No. And often, they will defer to us and to
    the Department because they feel that the administrative
    actions available to the Department are sufficient enough to
    address the issue, some of these being, obviously, reprimand up
    to removal--
        Mr. McHenry. So HUD--most HUD employees are in the union.
    Is that correct?
        Mr. Montoya. That is correct, sir.
        Mr. McHenry. Okay. So how has the union involvement been in
    terms of taking action against people who have done wrong--
    broken the law, broken ethical standards? Have they helped?
        Mr. Montoya. No. Quite frankly, I think the union will come
    to the aid of the employee irrespective of what he has done. In
    one of the examples I gave, with a gentleman who was running a
    business for over 6 years in the Department--working 2 to 3
    hours a day on that business, by his own testimony--I think the
    initial recommendation was to remove him. And it was the union
    who helped retain him for--retain him by only having to suffer
    through a 30-day-without-pay penalty. The problem with that,
    though, is he was awarded twice in that same year with a
    monetary award.
        And he was promoted, if you will, with regards to his
    performance rating. He went from an ``exceeds,'' which he had
    historically been, to an ``outstanding'' that year.
        Mr. McHenry. Isn't that a deeper issue when some guy is
    spending basically 40 percent of his time on a daily basis
    doing something else, and yet he is given high marks for
    exceeding his job? Perhaps maybe he should be doing more work
    or have more responsibility to maybe fill up his day if he can
    actually spend about half of his time working for the taxpayer
    but collecting full pay. Isn't that a deeper cultural problem?
        Mr. Montoya. Yes, sir. In fact, I plan to look into it. As
    we were preparing for this testimony, it came to our attention
    that not only he, but another employee who was running a
    business was also given several monetary performance awards. It
    is my suspicion that they were given these awards in order to
    offset the loss in pay. And so I do plan to look into it and
    ask the question--
        Mr. McHenry. Sir, look, these are important programs. You
    have Public and Indian Housing, you had a loan officer who
    embezzled over $800,000 from the taxpayers--and he was hired
    despite the fact that--as you outline in your report--he had a
    10-year criminal history. First of all, how did he slip through
    the cracks? And second of all, has he paid us back yet? Has he
    paid my constituents back and the American taxpayers back for
    the money he embezzled?
        Mr. Montoya. I don't believe he has done that yet.
        Mr. McHenry. But how did he slip through the cracks with a
    10-year criminal record?
        Mr. Montoya. Well, here is the irony. HUD, I believe, knew
    of that, of some of that. They also had a systemic concern with
    how they were really looking into employee backgrounds. We
    actually issued a report on what they did wrong in that
    particular case--actually, it was in a prior case--and what we
    thought they could do better.
        Mr. McHenry. And have they corrected this?
        Mr. Montoya. When we initially submitted that, what we call
    a ``systemic implication report,'' it was 5 or 6 months before
    this gentleman was hired. So they obviously didn't do it in
    that 5- or 6-month period because then they hired this one with
    the large criminal history. My staff is actually now going back
    to ask those questions: whatever happened to that; and did you
    implement that? I don't have an answer for you now.
        Mr. McHenry. Thank you.
        Thank you, Mr. Chairman.
        Chairman Duffy. The gentleman yields back.
        The Chair now recognizes the gentleman from Minnesota, Mr.
    Ellison, for 5 minutes.
        Mr. Ellison. Thank you, Mr. Chairman, and Mr. Ranking
    Member.
        Mr. Montoya, do you argue that when someone has worked for
    a membership association of a public housing agency and has
    that background, they should be prohibited from serving in
    leadership at HUD on public housing issues?
        Mr. Montoya. Well, it depends. Absolutely not if they come
    in as a full-fledged government employee. They are responding
    to a vacancy announcement, they are selected. They come in as a
    full-fledged government employee. I do have a concern when they
    come in while still working for those associations. So, it is
    kind of a dual answer there.
        Mr. Ellison. Yes. You are well aware that there are people
    who come, do government service, who have been in the private
    sector but then come work at the FDIC, the OCC, the Consumer
    Financial Protection Bureau, things like that.
        Mr. Montoya. Absolutely.
        Mr. Ellison. It happens all the time. And then in the
    public housing space, would you say it is somehow unique from
    those other examples I gave?
        Mr. Montoya. No. And quite frankly, she could have come in
    as a GS-15 government employee having left CLPHA. But she
    absolutely could have done that. The irony there is that then
    she could have tried to deregulate in her government role
    which, obviously, still would have been a concern for us.
        Mr. Ellison. Thank you. And let me also mention that I just
    think that it is important--and I wonder if you agree with
    this--that experts in affordable housing and development and
    management who work for nonprofits or government should be able
    to work in public policy positions. As a general principle, it
    sounds like you agree with that.
        Mr. Montoya. I do. And I actually don't disagree with the
    fact that they can come into a Department under an IPA in an
    advisory role, right? But not in key positions doing what Ms.
    Gross did.
        Mr. Ellison. Okay. How would you describe how HUD is
    providing appropriate oversight of the IPA process so that IPA
    experts are provided with the guidance to meet all the
    requirements at the beginning of their service rather than
    later on down the line?
        Mr. Montoya. Oh, I would say their oversight was poor to
    nonexistent when these started. It is my understanding now that
    the Office of General Counsel is actually reviewing every IPA
    for ethical considerations, these sorts of things. But I am
    looking at everyone they have--I think they have 16 IPAs so I
    have launched a review of all 16 to find out if we have any
    more circumstances like we did with Ms. Gross.
        Mr. Ellison. Okay. Well, I just want to say that I am
    personally appalled by how poorly Congress has funded public
    housing. At this time--there has been a study that said that
    the maintenance budget for public housing--to get public
    housing back up to snuff at acceptable standards would be
    upwards of $26 billion. And yet in the last 10, 12 years we
    haven't come anywhere close to that. I am concerned about that.
        You have people with inadequate lighting, elevators that
    aren't working, mold, all at the same time when low-income
    people all over this country really need housing. So this is
    something that continues to be a concern of mine. And, we are
    going to continue to watch this issue closely.
        Mr. Montoya. Well, sir, you would be interested to know
    that one of the sections of the PIH requirements that Deb Gross
    tried to deregulate was the requirement for quality standard
    reviews every year. She wanted to push that out to every 2 or 3
    years, which would have added more to the very maintenance
    problems you are talking about. To not require these public
    housing authorities to look at this every year so that these
    people have a clean, safe home is a concern for us. And that is
    one of those things she tried to change.
        Mr. Ellison. Thanks for your service.
        Mr. Montoya. Thank you, sir.
        Mr. Ellison. And I will yield back.
        Mr. Montoya. Thank you, sir.
        Chairman Duffy. The gentleman yields back.
        The Chair now recognizes the vice chairman of the
    subcommittee, the gentleman from Pennsylvania, Mr. Fitzpatrick,
    for 5 minutes.
        Mr. Fitzpatrick. I thank the chairman. And as I said in my
    opening statement, this hearing is not about the important work
    that HUD does, or the need to provide adequate resources to
    HUD. I think we can all agree that is important. This hearing
    is about waste, fraud, and abuse within the agency which,
    hopefully, we all agree we need to get after. And, Mr. Montoya,
    I want to thank you for what I would describe as your great
    work within the agency.
        Mr. Montoya. Thank you, sir.
        Mr. Fitzpatrick. The investigations you do--we have met in
    my office, we have met here in public forums and hearings, and
    I have always found you to be very direct and very prepared. I
    want to go back to the issue of the Council for Large Public
    Housing Agencies. Was this organization ever a registered
    lobbying organization with the Federal Government, the Council
    itself?
        Mr. Montoya. Yes, sir, it was.
        Mr. Fitzpatrick. What was the timeframe?
        Mr. Montoya. I believe they relinquished their registration
    as a lobbyist in 2009. There was a law change there so I think
    it was a 2009 timeframe.
        Mr. Fitzpatrick. So they were registered Federal lobbyists
    up until 2009, then they terminated that registration?
        Mr. Montoya. They did, but they didn't end the practices
    that they had done as a lobbyist. They continued those. In
    fact, Ms. Gross and the male employee she hired from CLPHA,
    both in our interviews, attested to the fact that their roles
    and responsibilities didn't change. They did the very same
    thing.
        Mr. Fitzpatrick. So you are saying that they either
    terminated their registration or they let it lapse and didn't
    renew it. Nevertheless, the individuals within the Council for
    Large PHAs continued with the same course of conduct. Would
    that be communicating with HUD and attempting to influence
    their policy?
        Mr. Montoya. Yes, sir.
        Mr. Fitzpatrick. Would that be acting as a lobbyist without
    being a federally-registered lobbyist?
        Mr. Montoya. I am not an attorney, but that would be my
    impression and interpretation, yes, sir.
        Mr. Fitzpatrick. So effectively, you are saying that the
    Council is continuing to act as a lobbyist today.
        Mr. Montoya. That would be my opinion, yes, sir.
        Mr. Fitzpatrick. Was Ms. Gross herself ever a federally-
    registered lobbyist?
        Mr. Montoya. Yes, sir. She was, as well as the male
    employee that she hired from CLPHA to work directly for her at
    HUD.
        Mr. Fitzpatrick. The President's Executive Order 13490 bars
    individuals who have been federally-registered lobbyists within
    the past 2 years from working in Federal agencies in the
    specific areas in which they lobbied. Is that correct? Is that
    your understanding of that--
        Mr. Montoya. Yes, sir, that is correct.
        Mr. Fitzpatrick. --Executive Order? If appears as though
    Ms. Henriquez and Ms. Hernandez violated this Executive Order
    when they hired Ms. Gross then. Is that correct?
        Mr. Montoya. Yes, sir, that is my opinion. It is correct.
        Mr. Fitzpatrick. Now, Ms. Gross was--how would you describe
    that relationship? Like a contracted employee? Not a direct
    employee of HUD, correct?
        Mr. Montoya. Correct. It is sort of a quasi-contractual
    type employment.
        Mr. Fitzpatrick. Was she qualified to hold that position if
    she had applied as any American would apply to HUD for a
    position--as a job description, with requirements and
    qualifications? If she had applied directly, was she qualified
    to hold that position?
        Mr. Montoya. That is a great question, Mr. Fitzpatrick.
    What I would tell you is that there was a vacancy announcement
    for that position for which she applied. She originally was
    disqualified for not having the right criteria. Then she was
    placed on the list after some finagling, if you will, by the
    Assistant Secretary. And then ironically, the Assistant
    Secretary voided the announcement, saying that no one on the
    list, including Ms. Gross, was qualified. And out of a five-
    point scale she rated them all as two, right? And then goes and
    hires her under this IPA agreement at $40,000 more than she
    would have been making if she had simply become a Federal
    employee.
        Mr. Fitzpatrick. So it would appear to an inquiring
    independent investigator that something was up here. We would
    call that a clue.
        Mr. Montoya. Yes, sir, absolutely.
        Mr. Fitzpatrick. On the issue of compensation, as a
    contracted employee was she actually compensated more than the
    direct position would have paid?
        Mr. Montoya. Yes, sir, she was. And she also received
    salary increases and bonuses during a period of time that
    Federal Government employees did not.
        Mr. Fitzpatrick. As a contracted employee, was she required
    to file financial disclosures with the Federal Government?
        Mr. Montoya. Under the IPA agreement, we believe yes, that
    she was required to.
        Mr. Fitzpatrick. And did she do that?
        Mr. Montoya. She did not. HUD doesn't feel that she should
    have.
        Mr. Fitzpatrick. So you are saying that HUD hired a
    position for Deputy Assistant Secretary--
        Mr. Montoya. Yes, sir.
        Mr. Fitzpatrick. --hired a person who wasn't qualified,
    paid her more than the position otherwise would have paid, and
    then she failed to file financial disclosure forms. Was anybody
    disciplined within the organization for this course of conduct?
        Mr. Montoya. No. In fact, the Office of General Counsel
    parsed words and definitions with us over whether she should or
    shouldn't have filed a financial disclosure form because of
    her--but it is my belief that because of her position and the
    sheer salary alone she should have.
        Mr. Fitzpatrick. My time is up.
        Chairman Duffy. The gentleman's time has expired.
        The Chair now recognizes the gentleman from Maryland, Mr.
    Delaney, for 5 minutes.
        Mr. Delaney. Thank you, Mr. Chairman. And I want to thank
    the witnesses for their testimony, which is obviously very
    concerning. It is concerning on an absolute basis in terms of
    actually what happened and what you are reporting. But it is
    also concerning because, like most of my colleagues, I believe
    HUD does extraordinarily important work. And as my friend from
    Pennsylvania had pointed out, this is not a hearing about HUD.
    But HUD does do extraordinarily important work. And the
    overwhelming majority of the employees at HUD are dedicated
    public servants working hard in an honest and ethical manner
    for the good of the taxpayers.
        But this kind of situation tends to put them and the whole
    organization in a negative light, which is unfortunate for the
    taxpayers, for the organization, and for the people. And so
    when thinking about--kind of lifting up a little bit and
    thinking about some of your observations about things in terms
    of how they are run at HUD and how these things can happen, and
    just thinking about my own experience in the private sector
    running a public company that was subject to lots of
    regulations and lots of compliance, we kind of had four pillars
    that we tried to build upon in terms of making sure we had an
    organization that ran to the highest standards of ethical and
    compliance behavior.
        The first was making sure we had really good training so
    that people understood what the rules are. Second, we made sure
    we had the infrastructure in place for ongoing monitoring and
    compliance. Third, we made sure we had a culture of
    accountability so if people actually broke the rules there were
    real consequences and people saw that there were consequences.
    And then finally, it was really important to set the right tone
    at the top. In other words, making sure that senior management,
    when they are talking about mission and execution, they are
    also talking about culture and behavior. And I was pleased
    about the joint letter that you sent with the Secretary, and I
    think the Secretary is doing a terrific job at the organization
    and is really bringing fresh energy in general.
        But I am interested, Mr. Montoya, in your observations on
    how HUD operates as it relates against those four--at least in
    my words--pillars: training; compliance infrastructure; a
    culture of accountability; and setting the right tone at the
    top that actually this stuff is really important.
        Mr. Montoya. Thank you for the question, sir. And I will
    tell you, it is music to my ears. Because what you are really
    talking about is building an ethical culture in an
    organization. Unfortunately, the government, unlike the private
    sector, doesn't always do such a great job at that. And I would
    agree with you, a lot of it has to do with the tone at the top,
    the very beginning. And I believe that is why the Secretary
    signed that joint letter and why I am so encouraged.
        Certainly, the supervisory enforcement--that their ethical
    conduct is beyond reproach, and the training to be better
    supervisors when it comes to dealing with misconduct. And then,
    of course, you need the peer commitment, where you have
    individuals supporting each other to come forward. And we see a
    lot of that in these cases that we have where they are coming
    forward on this.
        It is hard for me to put a finger on exactly what the
    culture is or what the attitude is, except to say that I think
    when nothing is done, nothing substantive is done with
    misconduct, people sort of lose their oomph, their desire to
    really do anything.
        Mr. Delaney. It is disrespectful to them in a way, right?
        Mr. Montoya. Yes, it is.
        Mr. Delaney. Because they are doing their job, correct?
        Mr. Montoya. And again, the government does not do a good
    job of this. I would agree that every government organization
    should publicize, maybe not using the names, but publicize it.
    ``Unfortunately, we had an employee who did this. This is the
    penalty they received.'' So that everybody knows that, one,
    they take this stuff seriously; and two, there are consequences
    for misconduct. And then what that misconduct was. It goes to
    building that ethical culture. HUD does not do that, and I
    don't know of many agencies who do that, quite frankly, in the
    government.
        Mr. Delaney. What about the training as it relates to
    really what the limitations are? How do you feel that is done?
        Mr. Montoya. In some of the employees who come to us, and
    we ask them why are you coming to us, I am not your first-line
    supervisor, many times their answer is, ``My manager is
    incompetent, they need training, they don't know how to handle
    this, they won't handle it.'' So I think HUD would do better at
    getting their managers trained. But, unfortunately, the
    examples we are talking about today are at the highest levels
    of the organization. The Assistant Secretary is a political
    appointee, Mr. Mincberg was a schedule C, Ms. Gross was in the
    GS-15 position. Those are high-ranking positions. Those are not
    rank-and-file positions.
        Mr. Delaney. Right.
        Mr. Montoya. So that is a larger concern for me.
        Mr. Delaney. Right. Again, I am really gratified that the
    Secretary is working with you in sending out those messages.
    Because that is exactly the kind of tone at the top I think we
    need. And it sounds like there is a lot to build on that, so--
        Mr. Montoya. Absolutely.
        Mr. Delaney. But, again, I appreciate both of your
    testimonies.
        Mr. Montoya. Thank you--
        Mr. Delaney. And I thank you.
        Chairman Duffy. The gentleman yields back.
        The Chair now recognizes the gentleman from Maine, Mr.
    Poliquin, for 5 minutes.
        Mr. Poliquin. Thank you, Mr. Chairman. And thank you very
    much, Mr. Montoya and Ms. Perez, for being here today. We
    really appreciate you being here and being forthright with us.
        Mr. Montoya, Deborah Hernandez and Sandra Henriquez--am I
    correct in assuming they were senior personnel at HUD or are
    senior personnel at HUD?
        Mr. Montoya. Ms. Henriquez was the Assistant Secretary, and
    that is a politically-appointed position. She is no longer with
    the organization.
        Mr. Poliquin. Right. Is that a senior position at HUD, sir?
        Mr. Montoya. Absolutely, sir.
        Mr. Poliquin. Okay. And how did they both meet Debra Gross?
        Mr. Montoya. I think Deb Gross came to their attention,
    quite frankly, by somebody in, at the time, an appropriations
    committee who was forwarding her name to HUD to hire.
        Mr. Poliquin. Okay. And Debra Gross was a lobbyist
    advocating for the funding of taxpayer dollars for affordable
    housing. And so, that might have been how they got to know Ms.
    Hernandez and Ms. Henriquez, who had senior positions at HUD.
    Is that correct?
        Mr. Montoya. That is correct. And our indication is that
    they actually have a personal relationship outside the
    workplace.
        Mr. Poliquin. They did, or they do not?
        Mr. Montoya. That they did at the time, and I believe they
    still do at this--
        Mr. Poliquin. And am I correct in assuming that Ms. Gross
    was paid more than the normal Federal employee at that grade
    level?
        Mr. Montoya. Yes, sir, that is correct.
        Mr. Poliquin. Okay. And she was hired by Ms. Hernandez and
    Ms. Henriquez. Is that correct?
        Mr. Montoya. That is correct.
        Mr. Poliquin. Okay. Am I correct in assuming that Ms.
    Gross, when she was at HUD but still a lobbyist for funds
    dispersed by HUD for programs she was lobbying for, also hired
    two other employees who were former lobbyists to come and work
    with her at HUD?
        Mr. Montoya. One of them was a former lobbyist. The female
    she hired I don't believe was a lobbyist.
        Mr. Poliquin. Yes.
        Mr. Montoya. But I don't--I would have to go back and check
    my records.
        Mr. Poliquin. Do you find that odd?
        Mr. Montoya. I don't find it odd that you would bring
    people into an organization that you had worked with if they
    were good. I do find it odd that she was bringing them in for
    the purposes of helping her deregulate--
        Mr. Poliquin. Sure. And part of that work, I believe, Mr.
    Montoya, was Ms. Gross--who is a former lobbyist now--working
    at the organization that she used to lobby for.
        Mr. Montoya. Correct.
        Mr. Poliquin. Okay? She was attempting to weaken the income
    verification system such that taxpayers who were funding
    affordable housing would have less of an opportunity to verify
    that those taxpayer funds were going to the right people in the
    right amount. She attempted to weaken that system. Is that
    correct, sir?
        Mr. Montoya. Yes, sir. A system that, at one point, was
    costing the Department $3 billion.
        Mr. Poliquin. Okay, and in 2000--
        Mr. Montoya. They brought it down to $1 billion.
        Mr. Poliquin. Okay. In 2013, I believe, there were $1.2
    billion of improper payments--
        Mr. Montoya. Correct.
        Mr. Poliquin. --made by HUD, who shouldn't receive those
    payments, or they received too much. Is that correct?
        Mr. Montoya. That sounds about right, yes, sir.
        Mr. Poliquin. Okay. And Ms. Gross--who is the former
    lobbyist, now working at HUD--was attempting to weaken that
    system with two other people that she hired from the outside.
    Is that correct?
        Mr. Montoya. That is correct, sir.
        Mr. Poliquin. Do you think it is normal practice here in
    Washington, sir--I am a freshman Congressman--for these large
    agencies that are responsible for disbursing taxpayer dollars
    for good causes to hire people who used to lobby them? Isn't
    that sort of like hiring the fox to guard the chicken coop?
        Mr. Montoya. It depends on what position you put them in.
    In this case--
        Mr. Poliquin. Yes, but these are senior officials at HUD.
    Is that correct, sir?
        Mr. Montoya. Yes, sir.
        Mr. Poliquin. Okay. Am I correct in assuming that former
    Deputy Secretary Maurice Jones, Jennifer Jabroski, Francey
    Youngberg, Jonathan Horowitz, and Elliot Mincberg sent out an
    email to 1,000 individuals, including 47 of their HUD staffers,
    lobbying, or asking them to lobby, 17 U.S. Senators to pass
    legislation favorable to HUD where they worked? Is that
    correct, sir?
        Mr. Montoya. That is correct, sir.
        Mr. Poliquin. Yes. Is that against the law?
        Mr. Montoya. That would be a determination by DOJ.
        Mr. Poliquin. And what have they determined?
        Mr. Montoya. They didn't accept the case from us as a
    referral. They referred it back to HUD for administrative
    action.
        Mr. Poliquin. Okay. So they did not--Justice decided not to
    determine if this was illegal or not.
        Mr. Montoya. Correct.
        Mr. Poliquin. Do you think it was illegal, sir?
        Mr. Montoya. Sir, I am not in a position to be able to
    answer that.
        Mr. Poliquin. Do you think it broke the spirit of what we
    are trying to do here in government?
        Mr. Montoya. Absolutely, it broke the spirit.
        Mr. Poliquin. Okay. Am I also correct that one of these
    individuals, Elliot Mincberg, tried to impede or did, in fact,
    impede your investigation regarding the lobbying of 17 Senators
    to pass legislation favorable to HUD? And he did that by
    intimidating staffers, and by also trying to influence
    testimony of other witnesses? Am I correct, sir?
        Mr. Montoya. That is correct.
        Mr. Poliquin. Okay. Does the new HUD Secretary, Julian
    Castro, have any experience in dealing with affordable housing
    issues?
        Mr. Montoya. Sir, I believe when he was the mayor in San
    Antonio, he--
        Mr. Poliquin. Does he have any experience in dealing the
    affordable housing issues, sir?
        Mr. Montoya. I don't know that I could answer that.
        Mr. Poliquin. Okay. One last question, if I may, Mr.
    Chairman. I am going to ask you if these individuals are still
    working at HUD? And if not, what are they doing? Former Deputy
    Secretary Maurice Jones is no longer at HUD. Is that correct?
        Mr. Montoya. That is correct.
        Mr. Poliquin. Okay. Deborah Hernandez, where is she?
        Mr. Montoya. She is now in the--
        Mr. Poliquin. Is she at HUD, sir?
        Mr. Montoya. She is at Ginnie Mae. She is still--
        Mr. Poliquin. Okay, she is still at HUD, and still being
    paid by taxpayer dollars, even though she has been involved in
    this mess.
        Mr. Montoya. That is correct.
        Mr. Poliquin. Okay.
        Chairman Duffy. The gentleman's time has expired.
        Mr. Poliquin. May I have another minute, sir? I am a
    freshman. I think you would--that is a request that is fair.
        Chairman Duffy. The gentleman will be recognized for 1 more
    minute. And we will offer a 6-minute questioning to--
        Mr. Green. If you would, Mr. Chairman, I will claim that
    additional minute. Thank you.
        Chairman Duffy. Very well. The gentleman is recognized for
    an additional minute.
        Mr. Poliquin. Thank you, Mr. Chairman. And thank you, Mr.
    Green, for that consideration. I appreciate it.
        Mr. Montoya, are you surprised that hardworking American
    taxpayers have lost their trust in government? When you have
    huge agencies like HUD that are responsible for doing good
    things for the American people, but abuse and misuse taxpayer
    dollars, hire lobbyists who used to be pulling for funding and
    now are advocating on the inside for their former
    organizations, that hire individuals without interviewing them
    and pay them more than they should, and then when they are
    caught they try to impede your investigation by intimidating
    staffers and trying to influence the testimony of others, do
    you think there is any reason why the American people have lost
    their faith in government, sir?
        Mr. Montoya. I would want to categorize the career Federal
    employee versus what we have here. In many of the examples,
    these were not career Federal employees. They were in the
    Department for a very short period of time--
        Mr. Poliquin. So you think this is all--do you think--
        Chairman Duffy. The gentleman's time has expired.
        Mr. Poliquin. Thank you very much, sir. I appreciate it.
        Chairman Duffy. Thank you, Mr. Poliquin.
        The Chair now recognizes the gentleman from Missouri, Mr.
    Cleaver, for 5 minutes.
        Mr. Cleaver. Thank you, Mr. Chairman, and thank you to
    Ranking Member Green.
        Not to be argumentative, but the Secretary was mayor of San
    Antonio, the second-largest city in Texas. I was mayor of the
    largest city in the State of Missouri. And it is virtually
    impossible for a mayor of one of the major cities not to deal
    with affordable housing almost on a daily basis. And it would
    be rare, maybe nonexistent, that a mayor of one of, say, the
    top 50 cities in the country would not--maybe top 75--deal with
    affordable housing, including probably some of the smaller
    cities.
        But my question goes to the disagreement, Mr. Montoya,
    between the IG's office and HUD's, not in terms of the overall
    reported wrongdoing, but rather, I think, on some key points
    that I would like to get into a little deeper. Your report
    suggests that HUD paid the IPA a full salary and that is a
    violation, whereas HUD says that there is no mandate by OPM
    that there should be cost-sharing. OPM does not demand or
    require cost-sharing. Is that correct?
        Mr. Montoya. I am not sure that I said it was a violation.
    It does not demand cost-sharing, but I think it does raise the
    question as to why.
        Mr. Cleaver. I want to go in this direction. Do you think
    that there is a need for greater clarity in what happens when
    we have this transfer of personnel to another Department as to
    the payment of the salary? Does your report at least imply that
    there should be clarity, or are you saying there is clarity?
        Mr. Montoya. No, there should be more clarity. For example,
    OPM says that there is no restriction for these IPAs to hire
    people, right? OPM, I think, says though that the spirit of it
    suggests that they shouldn't be in hiring positions, they
    should be more in advisory. So that has to be cleared up. And I
    think, yes, the pay issue needs to be cleared up, as well.
        Mr. Cleaver. And I think that may be something that this
    committee needs to deal with. And my second and final point
    that deals with some disagreement is the fact that HUD suggests
    that based on the advice of the General Counsel, Ms. Gross was
    not required to submit disclosures or attend the ethics
    training. Is that correct?
        Mr. Montoya. Yes, sir, that is their position. We
    wholeheartedly disagree. We recommend that they go to the
    Office of Government Ethics to get an opinion from them. I
    don't believe they have done that at this point, though.
        Mr. Cleaver. Do you disagree that the General Counsel said
    that this was not required?
        Mr. Montoya. No, I agree. They said it was not required. I
    disagree with their opinion and their position. I believe it is
    required. I believe it should be required.
        Mr. Cleaver. So, there is a disagreement between the
    General Counsel and the IG?
        Mr. Montoya. Correct, sir.
        Mr. Cleaver. Okay. So the point I am trying to make, and
    perhaps poorly, is that there seems to be a number of points
    that are not clear. And so the agency is now getting tagged
    with being--having major ethical lapses on some issues that are
    not clear. Now, I am not defending anything, any wrongdoing.
    But I am saying that it might not be in the best interest of
    the Federal Government, at a time when there are folks who are
    preaching and pushing distrust in the government of their own
    country. And so, do you agree that we need to clear up at least
    these two points?
        Mr. Montoya. I don't know just how much clarity one needs.
    I think that, one, HUD is looking at these things. And there
    were a number of people who felt that this issue was an
    appearance issue. I will give credit to CLPHA. Even their
    Executive Director, before she let her Deputy Director go to
    HUD, raised the concerns that she thought this was a conflict,
    correct? There were several employees within the Department who
    raised concerns that it was a conflict. They were retaliated
    against and reassigned to other locations.
        So I don't know how much clarity you need if appearances
    tell you.
        Mr. Cleaver. I agree, that was wrong. We cannot ever
    support wrongdoing. That was wrong. But if the General Counsel
    says that it is not required to submit disclosures--and I am
    getting ready to deal with the IPA--what do I do?
        I didn't go to law school and--thank you, Mr. Chairman.
        Chairman Duffy. The gentleman yields back.
        The Chair now recognizes the gentleman from Arkansas, Mr.
    Hill, for 5 minutes.
        Mr. Hill. I appreciate the opportunity. Thank you,
    witnesses, for being with us today. I want to associate myself
    with the remarks of Mr. Delaney from Maryland on those of us
    who come to Congress from the private sector who spend hours
    and hours of personnel time trying to comply with a myriad of
    government regulations and duties and responsibilities. And I
    thought he summarized that quite well.
        Mr. Montoya, is there a whistleblower program at HUD?
        Mr. Montoya. I don't know that HUD itself has one, but we
    have one in the OIG's office.
        Mr. Hill. Is each cabinet agency required, under OPM
    requirements, to have an independent whistleblower process
    connected to their Departmental IG, for example?
        Mr. Montoya. Yes, sir.
        Mr. Hill. And how long have you been at HUD? Remind me.
        Mr. Montoya. I have been there for 3 years now, sir.
        Mr. Hill. Have you been at another cabinet agency before
    that?
        Mr. Montoya. Several others, yes, sir.
        Mr. Hill. So how does the whistleblower activity at HUD
    compare to previous places you have been? Are there more
    complaints?
        Mr. Montoya. I don't know that I have enough background to
    answer that question except to say that even with regards to
    the Gross case, we still see retaliation of employees when they
    bring up issues like questioning the propriety of bringing in a
    lobbyist and their being reassigned. So that does raise
    concerns for me.
        Mr. Hill. Yes, because the private sector--since Sarbanes-
    Oxley, of course--all have the public companies all have
    responsibility under whistleblower statutes. So I am not sure
    the government would be very accommodating or thoughtful in a
    response like that if it were a private sector player. Who is
    the executive officer at HUD responsible for H.R. policy?
        Mr. Montoya. I don't know off the top of my head who that
    current person is. I think it was Mr. Anderson, but I think he
    is leaving, so I am not sure who is in the acting role at this
    point.
        Mr. Hill. It is surprising to me that you don't know that,
    as a part of this investigation. Wouldn't the Assistant
    Secretary or Undersecretary for Administration responsible for
    the Department's H.R. practices be somebody you would have
    questioned in your investigation?
        Mr. Montoya. Well, not necessarily. It just depended on the
    circumstances. I don't believe we had to interview him in this
    particular case. Because it was an IPA process that didn't
    necessarily go--and HUD is very stovepiped, right? So when this
    was happening in a PIH, that is who primarily was dealing with
    it. It wasn't necessarily the overall human resources manager
    at HUD.
        Mr. Hill. So do you think that is a weakness, a management
    weakness, in the Department that they don't have an overall
    personnel person who oversees this in all their independent--
    quasi-independent Departments or agencies?
        Mr. Montoya. We testified on a number of occasions that we
    think the Department is too stovepiped on a number of issues,
    including their IT systems, that there is not this enterprise-
    wide view of a lot of these things: H.R.; legal; and in some
    cases, their IT system. There are a number of areas that have
    caused us concerns.
        Mr. Hill. Do you think the idea of an IPA as a concept has
    been taken advantage of here in this particular instance? And
    do you think that this merits a more systematic overview by
    Congress in the use of the IPAs by Executive Branch agencies?
        Mr. Montoya. We have seen in HUD's situation that it looks
    like they have misused it on a couple of occasions. And we are
    looking at the other 16. That would draw a question for me as
    to what the rest of the government is doing with these IPAs.
        Mr. Hill. Does the Office of Personnel Management have some
    responsibility in setting the best practices for use of IPAs
    across cabinet agencies?
        Mr. Montoya. Yes, sir. They are the ones who set the
    standards and the guidelines for that.
        Mr. Hill. Were the actions at HUD reported to OPM, and did
    they take any action in the process of reviewing this
    particular matter?
        Mr. Montoya. I believe we did refer it to OPM. I couldn't
    tell you off the top of my head, sir, what response we received
    from them on that. I would have to get back to you on that.
        Mr. Hill. I would appreciate it if you would sort of
    respond to my line of questioning on IPAs, what the best
    practice policy is from OPM on that. And then I would be very
    interested in the results of your review of the other 16 at
    HUD.
        Mr. Montoya. Yes, sir.
        Mr. Hill. Thank you for your service to your country.
        And I yield back, Mr. Chairman.
        Mr. Montoya. Thank you, sir.
        Chairman Duffy. The gentleman yields back.
        The Chair now recognizes the gentlelady from Ohio, Mrs.
    Beatty.
        Mrs. Beatty. Thank you so much, Mr. Chairman, and Mr.
    Ranking Member. And thank you also to our witnesses today.
        Let me just first say that I certainly join my colleagues
    in wanting to be on the record for saying how concerned I am
    about the instances of impartiality, the conflict of interest
    that you both have outlined in your testimony. And also, the
    improprieties with HUD's use of the IPA funds.
        Second, let me just say how appreciative I am for the joint
    letter. And especially in paragraph one, when you both talk
    about if, together, we can take care of the mismanagement and
    the waste, we can do what our real mission is, and that is to
    expand the opportunities for all.
        And that ties into my third statement, as I go into my
    question, is several of my colleagues have said it is not about
    HUD and the programs. I want to be on the record saying that I
    somewhat disagree with that. Because every time you come into a
    hearing and we talk about the wrongdoings, the rogue employees,
    it frequently, down the road, leads to the culture of the
    entity and the organization and how we put dollars in it.
        I am very much a proponent of HUD and the services that
    they provide. With that said, when I go to your testimony you
    stated that HUD cannot know whether the policy decisions
    enacted during the Deputy Director's tenure were
    inappropriately influenced or in the best interest of HUD and
    all of it's stakeholders.
        Can you place explain this finding, and how HUD can
    mitigate or eliminate the IPA mobility program improprieties?
    And especially since you talked about the clues that you saw.
        Mr. Montoya. Yes, ma'am. Thank you for the question. There
    is only so much we can get from witnesses and what they tell
    us, and sort of the spirit as to what was going on. We
    obviously weren't privy to a lot of the conversations that Ms.
    Gross and Ms. Henriquez and Ms. Hernandez may have had with the
    regulated industry.
        So we are putting it back on HUD to sort of dig a little
    deeper with their staff to feel them out, and figure out
    whether, in fact, there were things that were changed that
    maybe shouldn't have been or that they should call into
    question.
        My larger concern with making that statement was that Ms.
    Gross at one point had inquired as to how to avoid going
    through the Departmental clearance process, having to go
    through the OIG. She was actually trying to find a way to keep
    us from seeing and hearing, through that clearance process,
    what she was doing.
        So because of that, I do have some concerns that maybe
    something slipped by us. And so we are putting it back on HUD
    to review themselves the policies before, during, and after she
    left to ensure that nothing got by any of us.
        Mrs. Beatty. Do you think that we should be looking at
    putting more human and financial resources into different,
    better or more training on accountability, management or the
    rules and regulations? Because these things, earlier you said
    these are very clear rules and regulations of what a person
    could do, whether hiring or bringing someone in at the
    appropriate salaries for the GS-13s or GS-15s. But yet I heard
    a figure of $40,000 more given to this person, being given
    bonuses when Federal employees did not get--
        Mr. Montoya. Well, ma'am, I guess my answer to that would
    be that I don't think there are enough rules, regulations,
    policies, procedures or training that are going to influence a
    person's conduct. I think ultimately it boils down to how that
    person is going to conduct themselves in the workplace,
    especially as Federal employees. We have this stewardship
    responsibility that we are entrusted to care for these very
    sensitive positions that we hold on behalf of the taxpayers. So
    I think it boils down to the person.
        I just don't believe--I am not a proponent of more and more
    rules, rules, rules, regulations, much like the two gentlemen
    testified or commented about in the regulated industries. It
    really boils down to how people are going to behave. And I
    think that is more of a conduct ethical issue with the
    individuals.
        Mrs. Beatty. You just mentioned how people behave. Do you
    believe that the vast majority of the HUD employees are doing
    the fair due diligence, or can you compare it to saying that
    maybe what we are hearing today; are these just a few bad
    actors?
        Mr. Montoya. All I can say to you is that a vast majority
    of the employees at HUD are really hardworking, conscientious
    civil servants. They have an honorable mission, one that I
    thoroughly enjoy myself.
        And, quite frankly, there are a number of them--a number of
    conscientious employees who were the ones who called us on
    these issues. They saw the wrongdoing, they saw these
    misconducts. They are the ones who are calling us. And I think
    that is fantastic that employees feel good enough to call us.
    And hopefully, today they are hearing that my office will, in
    fact, do something about that when they do call.
        Mrs. Beatty. Thank you.
        Chairman Duffy. The gentlelady yields back.
        The Chair now recognizes the gentleman from Virginia, Mr.
    Hurt, for 5 minutes.
        Mr. Hurt. I thank the chairman for holding this hearing.
    This is my first appearance on this Oversight Subcommittee, and
    I can tell you I represent Virginia's 5th District. And I think
    that my constituents, if they were hearing what we are hearing
    today, would be bewildered. Perhaps not surprised,
    unfortunately, but bewildered by what we are hearing. And I
    guess a couple of quick questions for Mr. Montoya.
        Where is Ms. Hernandez now?
        Mr. Montoya. She is now with Ginnie Mae in--
        Mr. Hurt. And Ms. Henriquez?
        Mr. Montoya. Ms. Henriquez left. She is with another
    housing-type association. I couldn't tell you off the top of my
    head--
        Mr. Hurt. A lobbying association, like--
        Mr. Montoya. I don't know if it lobbies or not, sir, to be
    honest with you.
        Mr. Hurt. What about Ms. Gross? Where is she?
        Mr. Montoya. She has gone back to CLPHA in the role that
    she held the whole time, the Deputy--
        Mr. Hurt. Let's talk about CLPHA. It is actually called the
    Council for Large Public Housing Authorities, right?
        Mr. Montoya. Correct.
        Mr. Hurt. What is its purpose?
        Mr. Montoya. To engage not only Congress, but the
    Department.
        Mr. Hurt. Who does it represent?
        Mr. Montoya. They represent the housing authorities, the
    large--
        Mr. Hurt. And so the employees of this organization, they
    advocate for policies that are favorable to these authorities.
        Mr. Montoya. Yes, sir.
        Mr. Hurt. Also called ``lobbying,'' in the--
        Mr. Montoya. Yes, sir.
        Mr. Hurt. So how long had Ms. Gross worked for this
    lobbying outfit prior to being engaged at HUD?
        Mr. Montoya. I don't have an exact date in front of me. For
    a number of years.
        Mr. Hurt. What was she being paid when she was hired?
        Mr. Montoya. I couldn't tell you the exact salary. I know
    the GS-15 salary is at about $155,000, so she was making just
    under $200,000--
        Mr. Hurt. Working for the Council.
        Mr. Montoya. For the Council, correct, sir.
        Mr. Hurt. And so I guess my question is, is when they went
    through the process and she was denied initially, it sounds
    like that was voided, and then she was sort of hired on the
    side through this IPA. Is that right?
        Mr. Montoya. Yes, sir. And we have emails to the effect
    that they, in fact--
        Mr. Hurt. Why was she hired? Why do you think that she was
    hired?
        Mr. Montoya. According to--
        Mr. Hurt. Share that with us?
        Mr. Montoya. According to Ms. Henriquez--and I will quote
    her--``She wanted to shake it up.''
        Mr. Hurt. What does that mean? What do you think it means?
        Mr. Montoya. I think, quite frankly, it meant that she
    wanted to shake it up so they could deregulate. Because that is
    in the--that is in--
        Mr. Hurt. That was the--in the interest of the--
        Mr. Montoya. Of the regulated.
        Mr. Hurt. --of the--and in the interest of those who pay to
    be members of this authority's--
        Mr. Montoya. Correct.
        Mr. Hurt. --Council, correct?
        Mr. Montoya. That is correct, sir.
        Mr. Hurt. So that was why she was brought in?
        Mr. Montoya. That is what it looks like.
        Mr. Hurt. And she was denied, based on that fact alone,
    from the ordinary hiring process?
        Mr. Montoya. I don't know--
        Mr. Hurt. Is that how I understand it?
        Mr. Montoya. I don't know why she was denied, except that
    she--
        Mr. Hurt. You said that she was disqualified, or I saw on
    your report that you said she was disqualified.
        Mr. Montoya. Right.
        Mr. Hurt. Disqualified.
        Mr. Montoya. The email communication suggests was wanted to
    hire her under the IPA so she could make more money, so she
    could maintain her salary.
        Mr. Hurt. And so the concerns--what is it that dictates the
    concerns that the rules or the statutes in the subject--is it a
    conflict of interest? Is that the concern for why somebody
    would not be hired as an ordinary employee?
        Mr. Montoya. Yes. Not only does--
        Mr. Hurt. A conflict of interest?
        Mr. Montoya. Yes, sir. An inherent conflict of interest.
        Mr. Hurt. Okay, so why is it that she could be hired as
    an--under this intergovernmental personnel agreement without
    concern for conflict of interest, but she couldn't if she was
    being hired as an ordinary employee?
        Mr. Montoya. I don't think that she couldn't. I think maybe
    her qualifications would have been satisfactory. I don't think
    it had to do with that. I think they disqualified her so that
    they could then hire her under the IPA. And therein lies the
    little conspiracy, if you will.
        Mr. Hurt. So when your office confronted Ms. Henriquez and
    Ms. Hernandez, did they tell you the truth? Did they tell you
    the truth about whether or not they had communicated with her
    in advance?
        Mr. Montoya. Yes, Ms. Henriquez was very quick to tell us,
    yes, that is what I did. It was Ms. Gross and the two employees
    that she hired who were less than forthcoming.
        Mr. Hurt. Okay, so what does that mean? Did they lie to
    impede the investigation?
        Mr. Montoya. I guess if you want to go down that road, yes.
    That--we like to call it--because we don't really know, in some
    cases, exactly where that fine line was. But yes, they were
    absolutely less than truthful with us.
        Mr. Hurt. Really quickly--my time is running out--but Ms.
    Perez, following up on Mr. Hills' question, I would love to get
    your thoughts on the differences between the hiring practices
    for an ordinary employee, Federal employee, versus under this
    intergovernmental personnel agreement. Why on earth would the
    concerns relating to conflicts of interest be different?
        And my time has expired, so--
        Ms. Perez. Sir, actually we haven't done any work in that
    area.
        Mr. Hurt. Okay.
        Ms. Perez. We are aware generally of the Act, but haven't
    worked on that area.
        Mr. Hurt. Thank you.
        Ms. Perez. Thank you.
        Chairman Duffy. The gentleman's time has expired.
        The Chair now recognizes the gentleman from Massachusetts,
    Mr. Capuano, for 5 minutes.
        Mr. Capuano. Thank you, Mr. Chairman. I want to thank you
    two for testifying today, and I apologize for not having been
    here but you know how it is. We are between two committee
    hearings. So I didn't hear it all, so some of the stuff I might
    have to ask or say might be repetitive. And for that I
    apologize, but that is what we do here.
        I guess I want to put things in perspective. As I
    understand it, there are about 9,000 HUD employees. Is that a
    reasonable estimate?
        Mr. Montoya. Actually about 8,000, sir.
        Mr. Capuano. So, about 8,000 employees, and looking at a
    list--give or take a dozen names, 15 names here, of people who
    have committed acts that are questionable, ranging from the
    terrible, horrendous crime of nepotism, trying to help a family
    member--which I know is against the rules, I get that--but I
    don't think any of us want to send anybody to Sing-Sing for
    that. We want to make sure it doesn't happen to the best of our
    ability, but there are worse--two other people who stole large
    sums of money, and maybe some other things.
        That means roughly--my calculations--0.1 percent of the
    employees have committed significant enough issues for you to
    get involved in. Not that that forgives the individual actions
    at all, but I just don't want anybody to walk away with the
    idea that somehow HUD or any other agency that I am aware of is
    full of people, all of whom want to commit nefarious, terrible
    actions.
        I know that is not your intention, but sometimes when we
    sit here and only talk about the bad actors that is what some
    people hear at home: that the world is full of bad actors. And
    for me, I am a former mayor, as are some of my other
    colleagues. A lot of our time is spent dealing with people who
    do things they shouldn't be doing.
        We don't spend our time and effort, as you don't spend much
    of your time, with people who have done the good things.
    Because that is not what you are there for. You are there to
    police it and to do all those things. And that is the right
    thing. And from everything I have heard, you have done a great
    job, and the IG's office is an area that we all expect and we
    all support and appreciate. But I don't want anybody listening
    to this to think that somehow everybody at HUD is scheming to
    try to deal around the edges.
        I know that for me, one of my biggest problems was my
    police officers. Because, again, they only dealt with people,
    every day, who had committed some action that was wrong, either
    speeding or 10 times worse. And sometimes they might forget
    that 99.9 percent of us are good, law-abiding citizens.
    Actually, that is my problem right now, my NSA problem, but
    that is a different issue.
        So I just wanted to be clear about that. To me, I think
    that is important. And I really do think that--I guess the
    other thing I heard is that there was some concern about
    unions. I want to be really clear. In my--I have negotiated
    with unions, and unions are there.
        You never--unions don't have to come defend their 99.9
    percent good members. They only step up when there is a
    wrongdoing to defend their members to make sure that they get
    proper treatment. So I--again, that is their job. It is like a
    lawyer. They have a responsibility to their membership to make
    sure that their membership really did do a bad act that was not
    overly punished.
        And to be perfectly honest, the only thing I found
    problematic about your written testimony is the fair amount of
    time spent on differences of opinion on category or degree of
    punishment. You think that some people should have been
    punished more severely than they might have been.
        I guess that is fair. But I also don't think that is
    really--I don't think that is a measure of whether you have
    been successful or whether HUD is a good agency. That is a
    reasonable difference of opinion. I personally think that, for
    instance, most of the people on Wall Street who did bad things
    all got off. They all got off. Nobody from Wall Street has paid
    an ounce of contrition for the actions they took in 2006, 2007,
    and 2008.
        So I understand the problems, but I don't want to lose
    focus as to what we are here for. We are here to make sure that
    HUD employees--and that is your job--toe the line. And when
    there is a wrongdoing, that the HUD administration helps you
    and others correct that situation.
        And from what I have seen and what I have read on you, most
    of that has happened. Is that a wrong impression? Is that a
    wrong conclusion, from your report?
        Mr. Montoya. To be clear, sir, the report gives you only a
    small smattering of examples. Unfortunately, there are more.
    But I would say it is not like there is a rampant misconduct
    issue in HUD. I think my major concern is how HUD is dealing or
    not dealing with misconduct when they do come across it. And I
    think with regards to my written testimony, that is where I do
    the parsing. Not so much about what they did or could have been
    more, but how they are handling what they are doing to create
    an ethical culture.
        Mr. Capuano. And do you feel that the current
    Administration is doing--I am getting--not necessarily
    everything you are going to want, but are they--grade them on a
    scale of one to 10; 10 being perfect, being you being the guy
    making the decision, one being, I don't know, the most
    unethical person in the world making the decision. What would
    you give them as a grade?
        Mr. Montoya. Both the new Secretary and the Deputy
    Secretary have only been there maybe 6 or 7 months, the Deputy
    Secretary even less. I will give him a 10 with regards to the
    Secretary signing that joint letter. Because I think that
    speaks volumes to the tone at the top. I could give him higher
    than a 10 because I think that is the best thing he could have
    done to establish his game plan for how he is going to run the
    organization. And I look forward to working with him with that.
        Clearly, these things we are talking about were not under
    his tenure. And so, I do look forward to how he and the Deputy
    Secretary are going to handle these going forward.
        Mr. Capuano. I just want to point out for the record that
    no one has ever given me a ``10'' on anything. So, that is
    pretty good.
        Thank you. Thank you, Mr. Chairman.
        Chairman Duffy. The Chair would agree. The gentleman's time
    has expired.
        The Chair now recognizes the gentleman from Colorado, Mr.
    Tipton, for 5 minutes.
        Mr. Tipton. Thank you, Mr. Chairman. And I would like to
    thank our witnesses for taking the time to be here today. We
    have covered a lot of ground, and I really don't want to rehash
    a lot of that. But I really wanted to question you, Mr.
    Montoya. In your opening statement, you brought up that you had
    been threatened in the OIG when you are doing some of these
    investigations. I find that pretty curious. How are they
    threatening you?
        Mr. Montoya. In the case of Mr. Mincberg, he threatened to
    hold my agents accountable. He never really clarified what that
    meant. But the fact that he would even threaten the agents to
    hold them accountable in some way, shape or form, to me, is
    just inappropriate and not something that I would want to start
    seeing more of at HUD.
        Mr. Tipton. Now, the OIG--obviously, through other
    Departments--is this just isolated to HUD? Or do you have this
    type of reaction as you are doing other investigations?
        Mr. Montoya. I don't know that we have had anybody--and so
    just to be clear, he was at a very high-ranking position. He
    was a schedule C, he was a political. So for him to do it, that
    certainly doesn't go well. We don't get that sort of
    disrespect, if you will, from rank and file. I think most of
    them are very willing to cooperate with us. And, again, these
    are good employees just trying to do their job every day.
        Mr. Tipton. So you haven't experienced it from other
    appointed officials? This is just something that was isolated
    to HUD, where you had threats that were coming back--
        Mr. Montoya. This one was isolated to the circumstances.
    But I spoke very loudly about it so that everybody got the
    message it was not something I was going to allow or put up
    with, quite frankly.
        Mr. Tipton. Okay, thank you. I did want to follow up on Mr.
    McHenry's question, as well. You had indicated that you have
    the systemic implementation report that is coming out. And I
    think there is frustration on both sides of the aisle when we
    are talking about $843,000, American taxpayer dollars, which
    are being lost through fraud coming out. When is that report--
    is that finalized?
        Mr. Montoya. Are you referring to the IPA review that we
    are--
        Mr. Tipton. I believe so. I think--I am just quoting you.
    You referred to the systemic implementation report.
        Mr. Montoya. Oh, that had to do with how HUD was not
    appropriately handling personnel background investigations or
    review before they hired them. So we had a situation where they
    hired an individual that they clearly should have done a little
    bit more of a background on before hiring. And so we went in to
    view why this happened. So we don't just look at what happened,
    we look at why it happened. We issued this report to say we
    think you could do this better, that better, you can create
    some policies that will help you avoid that. That report went
    to them 5 or 6 months before they then hired the individual
    with a long criminal history who was able to steal almost
    $800,000.
        Mr. Tipton. So do you feel your report was ignored?
        Mr. Montoya. I don't know. I have my staff following up
    with the Department to figure out did you do anything in that 6
    months or did you ignore us, or is it just taking you that much
    longer to get this thing in place? I don't--I can't answer
    that--
        Mr. Tipton. Just by way of timeframe, when did you issue
    that and the follow-ups, and how long has it been since HUD has
    responded to you?
        Mr. Montoya. I don't know that I have an exact date off the
    top of my head for you on the implication report. I can
    certainly get that back to you. Generally, HUD won't respond on
    when they finish it. We just sort of expect that they do. And
    so that is why I have my agents going back to--
        Mr. Tipton. Has this been a year, 2 years?
        Mr. Montoya. I don't know if I could give you an exact
    date, sir. I would have to get back to you on that.
        Mr. Tipton. So we have absolutely no idea, and there is no
    enforcement. They aren't indicating that--do they feel an
    obligation to get back to you?
        Mr. Montoya. In certain situations we do require them to
    get back to us in a sort of 90-day period. I don't know if we
    did on this implication report or not.
        Mr. Tipton. Do you think that would be a good idea? In
    Washington, $843,00 is not a lot of money. But I will tell you,
    in my hometown, it is.
        Mr. Montoya. Oh, absolutely, sir. And yes, absolutely, it
    would be a good idea.
        Mr. Tipton. And was it--in that recommendation or that
    report, also, a look-back? Because you just cited that after
    you had put out this report this person slipped through the
    crack. So was there also a recommendation to be able to have a
    look-back on employees who were hired in that interim period of
    time?
        Mr. Montoya. Yes, and that prompted us to go back to look
    at what is going to go on. And we will put that back to HUD,
    they will go back to review the employees they hired within
    that timeframe.
        Mr. Tipton. Okay, great.
        Ms. Perez, I don't want you to feel completely left out.
    And Mr. Montoya, you might want to speak to this, as well. I am
    concerned about the lobbying issue, as well, going over. And as
    I understand, under Section 716 on the Anti-Lobbying Act, the
    Deputy Secretary is a Presidential appointee. Were any rank and
    file employees involved in terms of doing the letter or issuing
    the letter for that lobbying?
        Ms. Perez. Yes, sir, there were a number of employees
    involved in preparing the email that the Deputy Secretary
    transmitted. Our focus in the legal opinion was looking at
    whether the Department had violated the anti-lobbying provision
    of Section--
        Mr. Tipton. And that was at his direction. So it was an
    abuse of power.
        Chairman Duffy. The gentleman's time has expired.
        Mr. Tipton. Thank you.
        Chairman Duffy. In the interest of equal time, the Chair
    now recognizes for 1 minute the gentleman from Texas, the
    ranking member, Mr. Green.
        Mr. Green. Thank you, Mr. Chairman. And I may give you some
    time back. I want to thank the witnesses for appearing today. I
    am especially pleased to hear you say that you would give the
    new Secretary, Secretary Castro, a 10, which is an indication
    to me that you are looking forward to good things from him.
        I look forward to working with you, and I believe that HUD
    is going to move in the right direction. There are some things
    that have to be corrected. I think they are taking corrective
    actions. But we are moving in the right direction. And we all
    agree that HUD is a necessary agency and that it does good
    things.
        Thank you very much.
        Mr. Montoya. Thank you, sir.
        Chairman Duffy. Thank you, Mr. Green.
        The subcommittee thanks both Ms. Perez and Mr. Montoya for
    your work, your service, and your testimony today. We
    appreciate it.
        The Chair notes that some Members may have additional
    questions for this panel, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 5 legislative days for Members to submit written questions
    to these witnesses and to place their responses in the record.
    Also, without objection, Members will have 5 legislative days
    to submit extraneous materials to the Chair for inclusion in
    the record.
        Without objection, this hearing is adjourned.
        [Whereupon, at 11:40 p.m., the hearing was adjourned.]
                                A P P E N D I X

                                February 4, 2015

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