Cal-Vet Property Deals Spark Legislation

State employees, their relatives and business associates would be prohibited from buying property from the state under legislation introduced Tuesday by Assemblyman Richard E. Floyd (D-Hawthorne).

The measure was prompted by a report in The Times last week that in at least seven cases during the last three years, employees of the Cal-Vet loan program or their relatives have bought homes repossessed from veterans by their agency.

“We’ve got a situation where people in the office are watching people lose their homes and deciding which ones they want first,” Floyd said. “This is not a perk that comes with a state job.”

‘Very Serious Matter’

Meanwhile, Assembly Veterans Affairs Committee Chairman Steve Clute (D-Riverside) called the purchases “a very, very serious matter” and said he has asked Veterans Affairs Director Jesse Ugalde to appear before the committee and explain the transactions.

According to one employee who asked to remain anonymous, some Cal-Vet workers and their relatives bought repossessed homes by relying on advance information about when the property would be available.

In the seven cases identified by The Times, only one of the purchasers was a veteran--even though the Cal-Vet program is designed solely to aid Californians who served in the armed forces.

Spokesmen for the Department of Veterans Affairs, which operates the Cal-Vet loan program, said the seven purchases did not break any state law or policy.

Floyd, however, said he has asked Legislative Counsel Bion Gregory to determine whether any of the seven purchases could have violated conflict-of-interest laws.

Probe of Procedures Asked

Clute said he has asked state Auditor General Thomas W. Hayes to examine Cal-Vet’s procedures for selling repossessed property.

“I certainly have reason to believe they (the sales) are not proper,” Clute said. “It may not be illegal, but it sure seems like it is unethical or immoral.”

Floyd’s bill, an urgency measure, would make it a felony for state employees or their relatives and business partners to purchase any property from the state.

He likened his legislation to a provision of the lottery initiative that prohibits California lottery employees and their parents, children and siblings from buying lottery tickets.

Under the Cal-Vet program, veterans can borrow up to $75,000 at an interest rate of 8%. The only way a non-veteran can obtain a Cal-Vet loan is by buying a repossessed house, in which case the interest goes up to 10%.