U.S. Expands Fraud Case Against L.A. Developer

The Department of Housing and Urban Development announced Wednesday that it has expanded a civil fraud case against Los Angeles businessman Bruce Rozet, alleging that the Brentwood real estate developer organized a network of kickback schemes at 90 low-income housing projects in 25 states across the country.

Calling the case the largest ever brought by the department, HUD Secretary Andrew Cuomo charged that between 1990 and 1997, the housing projects generated $7.5 million in kickbacks for Rozet and business associates. The federal government will seek return of the $7.5 million, plus penalty and damage payments of more than $20 million, he said.

Among the Rozet-owned properties involved in the complaint are Section 8 housing projects in Palmdale (the 58-unit Palmdale Park), Rialto (the 94-unit Casa Rialto) and Colton (the 129-unit Rancho and Mill properties).

Rozet, long a target of legal and rhetorical assaults by HUD officials, is the nation’s largest owner of Section 8 housing projects, which are privately owned and operated apartment buildings in which low-income residents can use federal vouchers to subsidize their rent.

The complaint charges that investment companies operated by Rozet arranged with a management company to be overcharged for rental housing management services. The management company would allegedly pay the overcharge amount to another company affiliated with Rozet, which in turn would pass on the fee to Rozet and his associates.

The alleged result is that HUD’s $9-billion-per-year Section 8 program was routinely overcharged by Rozet’s companies. HUD also has charged that many of Rozet’s properties were poorly maintained and that many tenants lived in abysmal conditions.

One management company allegedly involved in the scheme, Insignia Financial Group of Greenville, S.C., is cooperating with investigators building a case against Rozet. Insignia has reached a settlement that requires the company to return $7.4 million to the federal government.

The complaint alleges that Rozet conducted a similar kickback scheme with insurers of his properties.

Rozet, reached by Associated Press on Wednesday, strongly denied the charges.

“There’s not a shred of evidence to support any of the charges they have made,” he said. “We are doing . . . an exemplary job in overseeing the housing projects that we are involved with. We have not been involved in any kickback schemes whatsoever and they have no evidence to support such charges.”