[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
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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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