Alleged Theft Probed at L.A. Agency

Los Angeles Housing Authority officials said Thursday that they have given federal prosecutors evidence that more than $281,000 in government money was embezzled by a former employee and members of elected resident boards, but they insisted that those problems did not implicate higher-ups at the agency.

Agency Executive Director Donald Smith said there was “nothing sustainable” in allegations by some former workers and a contractor. Among the charges they leveled include claims that city managers accepted cash meant for poor residents, manipulated bids on contracts, tolerated double-billing by a consultant, and took away contracts from those who complained.

Instead, Smith said the evidence points to a low-level employee and four elected leaders of tenant boards that help to manage Los Angeles public housing projects.

Though expressing confidence that a probe initiated last year by the Department of Housing and Urban Development will not tarnish managers at his agency, Smith complained about the conduct of the investigation. He said HUD auditors had harassed and mistreated some of his employees.

Smith provided The Times with 250 of the 2,000 pages of documents that have been submitted to the U.S. attorney’s office, including records indicating that money meant to help the poor in Los Angeles actually went for unauthorized stipends, clothes, dental bills, travel and cars for former employees and former members of an elected tenant board at the Jordan Downs Housing Project.

“We have turned over to the U.S. attorney’s office summaries of the money taken as well as canceled checks and ledgers to support these dollars,” said Martha A. Shen-Urquidez, an attorney for the Housing Authority. “This is money that should have gone to each of the housing developments.”

The agency provided federal funds to a Jordan Downs Residents Management Council that was made up of tenant leaders elected from the housing development to oversee security, janitorial and moving contracts providing work to residents of the development.

Shen-Urquidez said some of the money was used by five members of the council from 1996 through 1999 for unauthorized stipends of up to $5,000 per month, when the council rules limited that pay to $50 per council meeting for a maximum of four meetings per month.

One residents council member, who also was a Housing Authority employee, allegedly bought a pickup truck, went on trips to Boston and other cities, and paid $3,000 for dental work with council funds. Another allegedly used funds for beauty salon bills and car expenses.

“It is the Housing Authority’s understanding that the current investigation involves these circumstances,” Smith said in a letter to the board released Thursday. The Housing Authority learned about the alleged misuse of funds in 1999 and turned the evidence over to the U.S. attorney’s office in January of this year.

In response, the board members of the residents council said in depositions provided to federal investigators that the stipends actually were bonuses paid by a for-profit corporation they formed to provide the security, janitorial and moving services. Those bonuses, they said, were recommended by a consultant with close ties to agency managers.

In the course of investigating those and other allegations, HUD interviewed Housing Authority managers and scoured their files. Smith and other agency managers said Thursday that they filed written complaints with HUD alleging that auditors acted inappropriately, harassing city employees and seeking frivolous subpoenas for personnel files not relevant to the investigation.

“They were unprofessional, yelling and screaming,” Smith said. “And they were browbeating employees.”

The Housing Authority went so far as to file legal papers to quash subpoenas for all personnel records of authority employees, arguing that the inspector general’s audit has displayed “a casual disregard for the integrity of the records and files it reviews” and failed to provide the Housing Authority with proper notice.

A judge ordered some records released, but with a protective order to keep personnel records from public dissemination.

Michael Zerega, a spokesman for the inspector general’s office of HUD, said the agency had no comment on the complaints by city officials.

In his letter to the Housing Authority board, Smith said the agency is providing investigators any assistance they need.

“We will continue to cooperate with the federal government; however, we expect the inspector general to provide us an appropriate draft of its findings so that we have something other to respond to than hearsay,” Smith wrote.