O.C. Settles Housing Lawsuit

Orange County has quietly settled a federal lawsuit involving a housing rehabilitation scandal and may have to spend as much as $3 million to repair shoddy work on hundreds of homes, officials confirmed Tuesday.

The suit, filed in April 1998, involved more than 200 claimants, most of them homeowners who enrolled in a county-sponsored program to rehabilitate low-income housing. They alleged that contractors did poor work, such as incorrectly installing water heaters, gas lines and electric wiring.

“The county left many of us victims because of the substandard conditions of the contractors’ work,” said litigant Anita Marcario, whose roof leaked after repairs were made. “I can tell you right now, fortunes were made on the backs of poor people.”

“It looks like a settlement,” she said, “but it’s a get-out-of-jail-free card for those contractors who are still on the county’s approved list for work.”

U.S. District Judge Gary L. Taylor dismissed the lawsuit Dec. 21 after the county and lawyers for the homeowners reached an agreement.

Theodore Albert, a Costa Mesa attorney who represented 15 of the plaintiffs, said Tuesday, “This potentially could mean hundreds of thousands of dollars if not more in rehabilitation costs because the settlement calls for the victims to contact estimators, then have contractors make repairs which the county must pay for.”

The county also has agreed to pay claims for losses other than property, including relocation expenses.

“Some people had to move out because the repairs actually left their homes unsafe and uninhabitable,” Albert said.

The case arose from the county’s Housing Rehabilitation Program, which provides about $1 million a year in federal grants to low-income residents for home improvements. The program, which began in 1978, was suspended in 1997 amid allegations of substandard work. A Sheriff’s Department probe resulted in criminal charges that a homeowner and a contractor secured payment for work never completed.

The investigation eventually involved more than 230 rehabilitation projects before the program was reinstated in 1998. The probe found that half of all contracts awarded during a two-year period were given to only four contractors. Also, much of the work was done without permits and in violation of state law, the probe found.

County Supervisor Todd Spitzer said Tuesday that estimates for repairs now are as high as $3 million. As he has in the past, he faulted county CEO Janice Mittermeier and the rest of the board for failing to take action when housing problems first surfaced.

“I went out and saw these homes, and these contractors in many cases were given preferential treatment and did dangerous work,” Spitzer said, adding that a sheriff’s memo to Mittermeier dated Aug. 6, 1996, told of a lack of oversight “that exposes the county to unnecessary liability.”

Neither Mittermeier nor the county’s counsel could be reached for comment Tuesday.

More than 6,000 homes in older neighborhoods have been refurbished through the program, and the county had lent more than $26 million for the work. About 150 families a year applied for funding from the federal Department of Housing and Urban Development.