Discount Home Program Beset by Fraud

A federal program that allows police officers and teachers to buy half-priced homes in troubled neighborhoods is plagued by widespread fraud and lax oversight, government investigators say.

So far, nine police officers have been convicted of defrauding the Department of Housing and Urban Development and 72 more are under investigation, they said.

The biggest problem is that participants buy a discounted home through the Officer Next Door/Teacher Next Door program and agree to live there for three years, but rent, sell or leave it vacant before then, investigators said in a report obtained by Associated Press.

“Our interim results indicate that a high proportion of home buyers abused and defrauded the OND/TND program,” the HUD inspector general’s office reported. Taxpayer money was not at risk in the alleged fraud, the agency says.

For instance, former Fort Worth officer David Auther pleaded guilty last year to a federal felony. He bought a half-price house for $58,000 and rented it out for the final two years of his three-year term, prosecutors said.

Spot checks of 29 officers who bought homes in the Miami area found seven who broke the rules, the report said. Four were renting the homes, one had sold and two had left them vacant.

HUD now estimates that one in four participants has misused the program, the report said. Since the program was created in 1997 to help blighted neighborhoods, 4,732 police officers and 805 teachers have bought half-price homes.

The program “appears to be at high risk for noncompliance and abuse by home buyers,” auditor Nancy Cooper wrote in the preliminary report last month.

Department spokesman Lemar Wooley said HUD officials have not decided what action to take.

“We are reviewing the program to make sure whatever improvements are needed are made,” Wooley said. Taxpayers did not lose any money, he said, because the program is run by the Federal Housing Administration, which is self-supporting.

Cooper noted the government does not have a way to ensure that officers in the program are living in their homes, and has not enforced a requirement that participants pay the full home price if they break the rules.

Participants can buy homes that HUD took over because of mortgage foreclosures. Officers and teachers can pick from homes in more than 700 “revitalization areas.”

“HUD must do a better job of protecting federal assets,” said Sen. Fred Thompson (R-Tenn.), chairman of the Senate Governmental Affairs Committee. “These homes could be a boon to neighborhoods in need. If HUD doesn’t pay attention, they’ll continue to give them away.”

Lawrence D. Walker, a former vice detective with the District of Columbia’s police department, was among the first to be convicted.

In March 1998, Walker bought a two-story row house about two miles northeast of the Capitol for $25,000. Three months later, he refinanced the mortgage, cashing out $27,000 in equity, prosecutors said.

Walker began renting the house to tenants in April 1999, charging about $750 a month. All the while, Walker continued to live in a Maryland suburb, court records show.

He was caught last year, lost his police job and pleaded guilty to a felony charge of lying to the federal government. The charge carries a maximum penalty of five years in prison and a $250,000 fine.

Walker has not been sentenced. His plea agreement calls for him to help authorities investigating other mortgage frauds.

Walker did not return repeated messages seeking comment. Richard Shaw, who lives four doors down from the home Walker bought, said he wishes an officer had moved into the home.

“It would be very comfortable to have an officer staying in the area,” said Shaw, 67, a retired carpenter.

Other officers who have faced criminal charges:

* Former New Orleans police officer Rodney McWilliams, who is serving a one-year term. McWilliams bought a house for $38,150, then rented it to a fellow officer.

* Christopher Jenks, a lieutenant in the Dallas school district police, and Jorge Ramirez, a member of the Dallas Area Rapid Transit Authority police, who were indicted last month. The indictment says the two officers were living for free at an apartment complex in exchange for off-duty security work instead of living in their HUD homes.

* Former Dallas officer Nancy Midyette Kozlowski, who was indicted last month on charges she rented her HUD home for six months and then sold it.