Baltimore housing program assailed

Former director Henson accused of violating rules

November 12, 2003|By Walter F. Roche Jr. | Walter F. Roche Jr.,SUN STAFF

A federal audit agency has issued a blistering report on Baltimore's HOPE VI public housing program, concluding that the city's former housing chief, Daniel P. Henson III, routinely violated program rules, engaged in conflicts of interest and misled federal officials.

The report by the inspector general in the U.S. Department of Housing and Urban Development recommends that city officials take administrative action against Henson, now a private developer, and that the city return nearly $3 million to the federal government.

The report concludes that because of actions by Henson and his staff, the costs for the city's first two HOPE VI projects, Pleasant View Gardens and Lexington Terrace, exceeded allowable HUD cost guidelines by $28.5 million.

Henson, in a five-page written response issued late yesterday, called the assertions in the report "completely false" and said the audit was an attempt to "tarnish my good name and the good reputation of the HOPE VI program."

He said that the report deliberately failed to mention the many successes of the city's HOPE VI efforts and that auditors deliberately ignored readily available evidence that would have refuted the charges. He also said the auditors failed to interview current and former officials who could have rebutted HUD's conclusions.

According to the HUD report, a company owned by Henson's sister, Joy Owens, was a subcontractor on one HOPE VI project. And the report said that Henson's former employer, Struever Bros., Eccles and Rouse, was awarded a major HOPE VI contract. Both actions were in apparent violation of HUD rules.

At the time the Struever contract was awarded, according to HUD, Henson had continuing financial ties to the company and its officers, including an unpaid loan.

The report also said Henson did not establish proper internal controls, limited competition, "provided misleading information to HUD and did not fully disclose other information related to development activities."

It was only because of that "misinformation" and lack of details, the HUD auditors concluded, that HUD "granted waivers to exceed development standards and award contracts."

The auditors found that "despite an exhaustive search by current managers," the agency was unable to locate many documents relating to the projects. Among the missing items were evaluation sheets showing how members of a key selection committee justified their selection of HOPE VI contractors.

"We recommend that administrative action be taken against the former director because of the deficiencies noted in our audit," the report states. It did not specify what action HUD might take.

"We found the authority did not operate its HOPE VI program in an effective, efficient and economical manner in accordance with applicable requirements," wrote Daniel G. Temme, HUD's regional inspector general for audits, in a Sept. 4 letter to the HUD official overseeing HOPE VI programs.

Henson, who headed the housing agency for more than six years ending in late 1999, yesterday criticized the audit report, calling it "poorly researched, politically motivated, thinly documented and thoroughly unprofessional."

Lyle Schumann, deputy executive director of the Housing Authority of Baltimore City, said most of the issues addressed in the 58-page report have been resolved. "They are not telling us anything we didn't know about. Some of it is anticlimactic," he said, noting the audit has been in process for nearly three years. "On balance," he added, "I think it's fair."

But in its written response, HABC officials strongly disputed the recommendation that the authority repay the nearly $3 million. They also noted that all of the $28.5 million in increased project costs had been approved by HUD.

"The HABC made the expenditures necessary to meet the real-world requirements of redeveloping the distressed urban sites that were Lafayette and Lexington, and did so with HUD authorization," wrote Paul T. Graziano, the current executive director of the city agency.

The audit comes as Congress is considering whether to continue funding for HOPE VI, the decade-old program that has led to the demolition of dozens of high-rise public housing projects and their replacement with mixed-income developments available to renters and homeowners. The Bush administration has proposed the suspension and possible elimination of the program, while House and Senate versions of the HUD budget restore partial funding for one year.

Baltimore, as the audit report notes, has been one of the top recipients of HOPE VI funding, garnering some $166.5 million for six projects.

Henson questioned yesterday whether the release of the audit was intended to "justify the administration's ongoing effort to terminate the HOPE VI program."

The auditors focused much of their attention on Pleasant View Gardens, Baltimore's first HOPE VI project and the replacement for Lafayette Courts, a high-rise complex.

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