HUD investigation funds cleared in negotiations Congressional panel OKs $9 million to target fraud

October 03, 1998|By John B. O'Donnell | John B. O'Donnell,SUN STAFF

Congressional budget negotiators have approved $9 million more for an investigation of housing fraud that once targeted Baltimore -- and may do so again.

The action brings to $18 million the amount earmarked for the inquiries and signals the intent of Congress to have Susan Gaffney, the inspector general for the Department of Housing and Urban Development, move ahead with simultaneous investigations in several places around the country.

"I am hopeful that we'll be making an announcement soon," Gaffney said yesterday. She refused to say where investigations will be conducted or how many there will be.

Meeting late Thursday on Capitol Hill, negotiators also agreed to set aside $20 million for replacement of the Hollander Ridge public housing project on Baltimore's east side.

Proposed by Sen. Barbara A. Mikulski, the provision is an attempt to preserve HUD funds awarded to Baltimore in 1996. Gaffney recommended cancellation of the grant award because the city failed to meet the requirements of the law.

According to aides, the Maryland Democrat's measure says that if HUD follows Gaffney's recommendation to withdraw the grant, the $20 million will be set aside to be awarded to Baltimore next year. To obtain the funds, the city would have to apply anew and meet the basic criteria, but it would not have to compete with other cities for the funds.

"I think that's good," Gaffney said of Mikulski's solution.

The action came as negotiators completed work on a $93.5 billion appropriation bill for veterans, housing, environmental and space programs for the fiscal year that began Thursday. The measure they crafted requires approval by the House and Senate and the signature of President Clinton.

In the meantime, the government is operating on a temporary spending bill that expires Friday.

Prodded by Rep. Jerry Lewis, chairman of the subcommittee that controls HUD's purse strings, the House had included $9 million for the Gaffney investigations in its version of the bill, but the Senate had not. The California Republican persuaded the Senate to go along with the House version.

At Lewis' request, $9 million was appropriated last year for "a comprehensive and in-depth review of selected cities to identify and prosecute fraud affecting HUD programs and funds." This year, his subcommittee said the money was "for an initiative to investigate possible fraud in all of HUD's programs."

Officials said that HUD programs run by housing authorities and local governments, as well as those entirely in the private sector, would be investigated.

Initially, Gaffney planned investigations in Baltimore, New Orleans and San Francisco. Mayor Kurt L. Schmoke said Gaffney told him in April that 20 to 30 investigators would spend three years in Baltimore.

After that meeting, Schmoke charged that the selection of the three cities -- each with an African-American mayor and African-American housing chief -- was "tainted by issues of race and politics." Schmoke claimed that objective criteria had not been used to choose the cities.

His comments were picked up by other mayors and Gaffney critics, prompting her to angrily deny that she is racist.

HUD Secretary Andrew M. Cuomo seemed to support the mayor, saying at one point that "many people in this nation are outraged at the possibility that taxpayer funds would be used for racially motivated or politically motivated hits."

Facing a groundswell of opposition, Gaffney put the investigations on hold and agreed to redo the criteria used to choose the cities. Washington sources said they expected the list of target cities to expand.

Then, in late June, an official of the FBI, which is working with Gaffney on the investigations, wrote to Lewis that "no city is considered to be selected for this initiative" until the criteria are 00 completed.

"We're well along the way" to finalizing them, Gaffney said yesterday.

Mikulski included the Hollander Ridge provision in the appropriation bill after Gaffney told Congress last month that "legislative action would be required to legitimately allow the Hollander Ridge plan to move forward."

Last year, Gaffney said the the $20 million grant, awarded in 1996, should be rescinded because Baltimore's plan did not meet the requirements of the law.

Later the city changed its plan, proposing demolition of the 1,000-unit project and its replacement with housing for the elderly.

HUD has said it would consider overriding Gaffney's recommendation if the city met several conditions. Among other things, it would have to obtain approval from the federal judge overseeing a settlement of a 1996 suit that accused the city and HUD of illegally segregating public housing tenants for decades, a charge they denied.

A hearing on the city's request for court approval of the Hollander Ridge redevelopment has been set for late this month. The American Civil Liberties Union, which filed the initial suit, is opposing the move.

Pub Date: 10/03/98

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