U.S. Launches Criminal Probe of L.A. Housing Authority’s Finances

The U.S. attorney’s office has opened a criminal investigation into the finances of the Los Angeles Housing Authority after federal auditors and tenant leaders raised alarms about how some of the authority’s money was being spent, officials and others said Tuesday.

Joan Hobbs, the regional inspector general for the U.S. Department of Housing and Urban Development, said findings of an unreleased audit of Housing Authority finances have been turned over to federal prosecutors for review.

“Some issues are under investigation,” Hobbs said, declining to discuss details, including the identity of any city officials targeted.

The Times reported last year that HUD had initiated an audit after receiving allegations from tenant leaders and a contractor that city managers accepted cash meant for poor residents, manipulated bids on contracts, tolerated excessive and double-billing by consultants and took away contracts from those who complained to authorities. Officials have not disclosed the findings of that audit, but Housing Authority leaders deny wrongdoing by the staff.

Former tenant leaders and contractor Barron Gardner said Tuesday that they have been interviewed in recent weeks by federal prosecutors about their allegations of financial improprieties at the Housing Authority.

“They are actively looking at it,” said Gardner, a Van Nuys moving company owner who has alleged that Housing Authority officials took away business and withheld payments to him after he rebuffed an authority consultant who wanted a 10% payment to help him get a $300,000 moving contract.

Billy Childs, a former leader of the Jordan Downs Resident Management Council, said he too has been interviewed by prosecutors. Childs accused the Housing Authority of allowing contractors to engage in double-billing and said officials from the authority improperly received public money.

Many of the allegations center on funds provided by the agency to resident councils elected at each of the 20 city-run housing projects. Some tenant leaders alleged that, while they were given that money to get janitorial, security and moving contracts, they were pressured by agency managers to award contracts to people close to those officials.

Sandra Obando, president of the San Fernando Gardens Residents Management Council, was among those who called last year for a criminal investigation into the agency’s handling of its money.

“I think somebody will be going to jail,” said Lenton Aikins, a Long Beach attorney who has represented several former Housing Authority employees in successful “whistle-blower” lawsuits against the agency.

Aikins said he has provided federal authorities with boxes full of documents, including canceled checks, to support allegations of wrongdoing within the agency.

One of his clients, former Jordan Downs manager Margaret Gardenhire, was awarded $1.3 million in a lawsuit against the Housing Authority in which she alleged that she was retaliated against for reporting double-billing and other improper activity by agency contractors.

Another Aikins client, former Housing Authority contracting director George Marioneaux, was awarded $572,000 in damages by a jury after he sued, claiming he was retaliated against by agency officials for his “refusal to violate the law and engage in fraudulent and excessive invoicing of the federal government” related to repairs for Northridge earthquake damage.

HUD officials said in February 2002 that they were conducting an audit to determine whether the Housing Authority misspent some of the more than $25 million in federal funds provided to house poor people in Los Angeles.

Thom Mrozek, a spokesman for the U.S. attorney’s office, declined to comment Tuesday on the existence of a criminal investigation into Housing Authority activities.

Donald J. Smith, executive director of the Housing Authority, did not return calls seeking comment Tuesday, but spokesman Hugo Garcia said the agency was unaware of a probe.

“We are in the dark about it,” Garcia said.