[Congressional Record Volume 140, Number 134 (Thursday, September 22, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: September 22, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                      STOP FRAUD IN PUBLIC HOUSING

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentlewoman from Maryland [Mrs. Bentley] is recognized for 5 minutes.
  Mrs. BENTLEY. Mr. Speaker, the glaring headline in today's editions 
of the Baltimore Sun, reads, ``HUD Finds City Misuse of Housing 
Funds.'' The story details a Federal audit that found a $25 million no-
bid repair program run by Baltimore's housing authority has spent more 
than twice the going rate to fix apartments for the poor, paid for work 
never done, and gave millions to firms run by relatives of managers.
  My concern about federally funded housing programs that do not work 
has intensified with these latest revelations. How much longer are 
taxpayers expected to standby and watch their dollars misused?
  I have attempted to offer positive suggestions for dramatically 
altering the Federal Government's failed housing policies. What better 
time than now to make the changes necessary that will both stop the 
fraud and stop pouring Federal dollars into the pockets of greedy 
landlords, while at the same time, start turning neighborhoods around.
  HUD's subsidized rent programs, including the new Moving To 
Opportunity, are repressive. Money now given to landlords to house the 
working poor forever should be used for rebuilding boarded up houses--
some 7,000 to 10,000 in Baltimore City alone--so the working poor can 
become proud homeowners instead.
  Think what such a program would do to turn around the sad plight and 
blighted appearance of our urban cities, such as Baltimore. It would 
provide employment for honest construction firms and their employees, 
turn blocks of houses from being shuttered and dismal into thriving 
blocks of lived-in homes, and give the residents something they could 
own and work hard to maintain--and pay the mortgages for themselves 
knowing that their property is their own.
  At the same time we could help develop jobs into these homeowner 
areas.
  Let's do that rather than just pouring dollars down the drain.
  HUD also needs to put a stop to portable section 8 certificates. 
Jurisdictions should be responsible for taking care of their residents. 
Additionally, caps on subsidies should be realistic. As the Sun pointed 
out, one problem with the HUD Program is that the housing authority 
spent more than twice the going rate to make repairs. To spend more 
than the going rate for rents is outrageous.
  Again, I repeat that if HUD is sincere in its desire to provide 
housing for the poor, then, instead of turning its back on the Nation's 
cities, Federal housing programs should work toward turning over vacant 
urban homes to current section 8 recipients, and use the millions spent 
on rent to help these new homeowners rehabilitate their homes. 
Homeownership, and the pride that goes along with it, is the only real 
way to improve neighborhoods.

                [From the Baltimore Sun, Sept. 22, 1994]

  HUD Finds City Misuse of Housing Funds--Housing Authority's No-Bid 
                        Program Blasted in Audit

       A $25 million no-bid repair program run by the city's 
     Housing Authority spent more than twice the going rate to fix 
     apartments for the poor, paid contractors for work that was 
     never done, and gave millions to firms run by relatives of 
     managers, according to a federal audit.
       The audit, a draft copy of which was obtained by The Sun, 
     cites problems in almost every area of the authority's 
     operations. It provides fresh details about a program in 
     which employees apparently inflated cost estimates for 
     repairs to coincide with proposals by the no-bid contractors, 
     and then failed to check to see if the work was ever done.
       Authority managers purchased Chevy Blazers for their 
     personal use, the audit says. They paid for stoves and 
     refrigerators that were never installed. They bought doors 
     and windows that were never hung. They purchased electrical 
     wiring for outlets and switches that never existed.
       Federal inspectors also found that the authority knowingly 
     exposed families to dangerous levels of lead paint and dust. 
     In one apartment, contamination levels were nearly 19 times 
     higher than federal standards, the audit says.
       In the end, the no-bid repair program--the focus of a 
     federal grand jury probe--failed to meet the authority's 
     basic mission: renovating buildings and increasing apartment 
     space in the poorest sections of Baltimore, according to the 
     audit.
       Last night, the nation's top housing official, Henry G. 
     Cisneros, issued a statement saying the authority's practices 
     were intolerable. ``The findings raised in this report are 
     serious,'' he said. ``Misuse of federal funds--particularly 
     with respect to funds that are intended to help the poorest 
     of families--cannot be tolerated.''
       Mr. Cisneros, who heads the U.S. Department of Housing and 
     Urban Development, pledged to work with the city's mayor and 
     housing officials to ensure that the audit findings will be 
     ``fully and promptly addressed.''
       The audit was compiled after a seven-month probe by HUD's 
     regional Inspector General. Investigators started to examine 
     the authority in December after contractors called a federal 
     hot line to complain they had been frozen out of the no-bid 
     program.
       A final copy of the audit is expected to be released 
     tomorrow.
       Executive Director Daniel P. Henson III criticized the 
     draft report yesterday. He said it misinterpreted 
     regulations, and misstated or ignored relevant facts. He said 
     some of the findings would be modified in the final report.
       Mr. Henson provided The Sun with his 39-page response to 
     the draft report. He accused the auditors of ``simplistic 
     second-guessing'' of the no-bid program. ``This is a cheap 
     shot,'' he said. ``This is very sloppily done.''
       Funded by federal subsidies and monthly rents, the Housing 
     Authority is responsible for managing 18,000 publicly owned 
     apartments and single-family homes in Baltimore.
       The draft report portrays the Housing Authority as an 
     agency run amok. It could not account for more than $700,000 
     in lost inventory. Its reserve fund fell to dangerously low 
     levels. It hired maintenance workers with no skills. It 
     signed a contract with a security firm that employed felons. 
     It spent more than $370,000 on a security system that didn't 
     work.
       One of the few positive audit findings for the authority: 
     It collected rent on time.


                             no-bid program

       Much of the 45-page report focuses on the no-bid repair 
     program. Mr. Henson started the no-bid program last year, 
     shortly after Mayor Kurt L. Schmoke appointed him to head the 
     Housing Authority. Mr. Henson claimed there were 2,400 
     vacant, rundown apartments that needed quick repairs to 
     create housing for the poor.
       To speed up the repairs, Mr. Henson declared a housing 
     emergency in the city--a move that he said allowed him to 
     bypass federal rules and award contracts without competitive 
     bids. He said the no-bid program would shorten the list of 
     18,000 families waiting for places to live.
       But the auditors said the authority failed to get approval 
     from HUD, and never explained why the work couldn't have been 
     performed with competitive bids.
       In all, the authority renovated 1,136 apartments under the 
     no-bid program. When it was over, Mr. Henson failed to 
     accomplish his goal--creating more public housing for the 
     poor, the audit says.
       The auditors found that the program was flawed from the 
     start. It began as a small, $1 million project that was 
     supposed to spend $10,000 on repairs for each apartment. But 
     it quickly grew into a $25 million program that spent as much 
     as $95,000 for one unit.
       The average sale price of a single-family home in Baltimore 
     is $75,319.


                             twice the rate

       Auditors said the no-bid contractors charged more than 
     twice the amount as contractors who performed work for the 
     authority under competitive bids. The auditors said that the 
     authority also apparently inflated its own cost estimates to 
     coincide with the higher proposals submitted by the no-bid 
     contractors.
       ``Work was overpriced and incomplete,'' the audit says.
       Auditors sampled 65 apartments with contracts worth $2.6 
     million. They found that the authority paid contractors at 
     least $900,827 for unneeded materials, overpriced supplies 
     and work that was never performed.
       Contractors charged the authority for tile they never laid, 
     paint they never used and drywall they never installed. they 
     also charged the authority double the going rate for stoves 
     and refrigerators--and then never installed them.
       ``It appears authority inspectors may not actually inspect 
     work at all,'' the auditor says.
       Housing Authority managers also used money from the non-bid 
     program to buy eight, 4-wheel drive Chevy Blazers for 
     $150,000, according to the audit and interviews. ``The 
     vehicles were for take-home use by management,'' the audit 
     says. ``There is no known basis for an emergency purchase of 
     vehicles for management staff.''
       In a section of the audit titled ``Conflicts of interest,'' 
     federal investigators criticized the authority for handing 
     out millions in no-bid repair contacts to relatives of a 
     Housing Authority manager and a board member.
       Together, relatives and friends of authority managers and 
     of Mayor Schmoke received more than $5 million in no-bid 
     contracts--accounting for nearly 20 percent of the entire no-
     bid repair program, according to auditors, corporate records 
     and interviews.
       The contractors include:
       Senior authority analyst Anita Chavis' relative, Sedrick 
     Chavis, who received about $3.5 million.
       Authority board member Larry Jennings Jr.'s parents--Larry 
     Sr. and Vergie, and his sister, Georgia M. Page, who received 
     about $1.2 million.
       Mayor Schmoke's brother-in-law, John A. Palmer, who 
     received about $327,000.
       Mr. Henson's childhood friend, Westley Johnson, who 
     received about $300,000.
       The authority's conflict of interest rules prohibit agency 
     employees from benefiting from projects involving themselves 
     or their immediate family. The rules do not cover board 
     members, such as Mr. Jennings.
       Still, the auditors recommended that authority employees 
     disclose conflicts and potential conflicts of interest in the 
     future, and keep the disclosures on file with the housing 
     agency.


                          reserve fund drained

       Auditors also found that the no-bid repair program and 
     other fiscal problems drained the authority's reserve fund. 
     By May of this year, the reserve fund could only pay for less 
     than one day's worth of operating expenses.
       The no-bid program is now the focus of a federal grand jury 
     investigation. Two authority managers have pleaded guilty to 
     corruption charges, admitting in federal court that they took 
     cash, trips and gifts in return for steering work to 
     contractors.
       In a potentially damaging discovery, auditors found that 
     children were exposed to high levels of lead paint and dust 
     in public apartments. In one case, the authority knew 
     children were being exposed to dangerous levels but didn't 
     notify parents for six months, the auditors said.
       Lead poisoning can cause blindness, paralysis, brain 
     damage, even death.
       Auditors found that the authority placed residents in more 
     than 200 renovated apartments before testing for lead. At one 
     apartment on Cator Avenue, a 3-year-old child lived in an 
     apartment that later registered lead levels 19 times higher 
     than federal standards.
       Auditors also pointed out that a year earlier, the 
     authority tested 57 apartments at Claremont Homes in East 
     Baltimore, finding 96 percent were contaminated. But the 
     authority didn't tell the residents until six months later--
     when parents started to complain that children had elevated 
     lead levels in their blood, the auditors said.
       The Housing Authority said it didn't knowingly house 
     children in contaminated apartments. Instead, authority 
     managers blamed HUD, claiming the federal government never 
     told them how to notify residents of the test results.
       Said the auditors: ``The authority has neglected its 
     responsibility to ensure the safety of the residents and, as 
     a result, has placed residents at risk for contracting lead 
     paint contamination.''


                           security contracts

       Auditors also questioned a pair of contracts the agency 
     signed to provide security services for the housing 
     developments.
       The authority awarded a $4.6 million contract to a company 
     run by the Nation of Islam to patrol the developments, even 
     though the group's bid was the highest. At the time, 
     Executive Director Henson defended the contract, claiming NOI 
     Security was the only contractor that ``understood the needs 
     of public housing,'' the audit says.
       Auditors said that wasn't quite the case.
       ``Interviews with employees of [NOI Security] noted that 
     the guards did not have any special training or understanding 
     of public housing needs,'' the audit says.
       They found that NOI Security hired nine guards from another 
     security firm that had been turned down for the contract. The 
     firm also placed 29 guards on the payroll who had been 
     convicted of felonies--close to half the guards hired to 
     handle the contract, the auditors said.
       The auditors also said the authority squandered $373,787 
     when it purchased a security turnstile system for 18 high-
     rise apartment buildings. The authority bought the system 
     without bids.
       With little planning and testing, the turnstiles were 
     installed and removed after the authority discovered 
     residents despised them and they were easily vandalized. The 
     Housing Authority sold the system to Washington for a 
     fraction of the purchase price: $60,000

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