A struggle to get Housing in order

When Rudolf Montiel came from El Paso three years ago to clean up the Housing Authority of the City of Los Angeles, he didn’t know enough to be daunted.

It didn’t take long, however, for him to get a sense of the challenges ahead.

Precious vouchers for the poor and disabled seemed to be for sale on the black market, allowing hundreds of newly arrived immigrants to jump to the top of a 10-year waiting list for housing subsidies. A consultant looking into the problem found “a virtual feeding frenzy in which corruption, manipulation and fraud is strongly evident.”

That was hardly the only disturbing discovery:

Employees in one department appeared to be stealing, issuing themselves checks and then erasing the evidence.

Millions of dollars set aside for rehabilitating a Watts housing project seemed to be missing.

Parts of some housing projects had been commandeered by gangs to sell drugs, run brothels and hold dogfights.

Fresh from success building a nationally recognized housing authority in his hometown of El Paso, Montiel felt as though he’d entered a mysterious foreign culture, “like I was in the Kremlin, and I wasn’t Russian.”

Three years later, he still is struggling to bring order and ethics to an agency in which bad management and corruption have been endemic for at least 30 years.

Yet, even as he has trumpeted his reform efforts, new controversies have emerged on his watch.

In interviews, Montiel, 46, laid bare details of many agency woes for the first time, at times wishing aloud for an exorcist and comparing his job to fighting a multiheaded hydra.

To date, Montiel said, he’s spent $7 million on private eyes, auditors and lawyers -- mostly lawyers. He’s referred some staff for prosecution, sued some for damages and outsourced the work of a whole department.

There have been setbacks. Earlier this year, a Times review of internal documents showed that a former manager had directed nearly $800,000 in contracts to his brothers and politically connected firms without competitive bidding or after rigged contests. He allegedly overpaid for the work as well, doling out nearly $2,500 apiece to install toilets in housing projects. The manager, who was fired, has denied wrongdoing and a criminal investigation is ongoing.

Not long afterward, Montiel fired his chief investigator, the very person he had appointed to get to the bottom of such misdeeds. In a lawsuit, his administration accused the sleuth of engaging in a delusional witch hunt.

The agency has been racked by interpersonal and racial tension, absenteeism and resentment over Montiel’s aggressive management style.

Employees have complained of a jarring transition and a “rush to justice,” saying that Montiel and his deputies “seem bent on getting rid of people,” according to a 2007 consultant’s report.

Given the troubles he inherited, some advocates for the poor, as well as city and federal officials, applaud Montiel for making remarkable strides. Donna White, a spokeswoman at the federal Housing and Urban Development department, said the director has put an agency that was on the brink of a federal takeover on solid ground.

Even so, the ongoing turmoil is a distraction from the agency’s already formidable mission -- providing for the housing needs of more than 120,000 of Los Angeles’ poor and disabled.

Because of funding limitations, five times as many people qualify for help as can be accommodated. Tens of thousands such as Eleanor Colon have been waiting years for subsidies to help them get off the streets or out of homeless shelters.

“I don’t see why they have to take so long to get people off the waiting list,” said Colon, a 28-year-old single mother who applied nine years ago for subsidized housing. Now her “kids are half grown.”

“When I needed it most, why wasn’t it there?”

Some officials said they find it appalling that this critical agency was allowed to fall into such disrepair.

“It’s horrifying,” Councilwoman Janice Hahn said of the agency’s troubles. “These [clients] are residents of the city of Los Angeles, and they deserve a lot better.”

An orphan agency

For a bureaucracy of its size and reach, the Housing Authority in Los Angeles has historically received relatively little attention, from the public or the government.

It is the largest housing authority west of the Mississippi, with 8,000 public housing units extending from San Pedro to the San Fernando Valley. It also manages 44,500 Section 8 vouchers, federal subsidies paid to private landlords to cover rent for the poor.

Run by a commission appointed by Los Angeles’ mayor, the agency receives the vast majority of its $850 million annual budget from the federal government.

But it is more or less an orphan: Most city officials have not involved themselves deeply in its operations, and U.S. officials have offered only sporadic scrutiny. Problems date back decades. Three of the last four executive directors left after inquiries involving alleged misappropriation of funds or improper contracting.

Montiel arrived after the top leader and his second in command departed in quick succession.

Director Don Smith took early retirement in 2004 after the agency gave out thousands more housing subsidies than it was authorized to provide. After HUD refused to cover the extra subsidies, the agency told 1,500 poor people they couldn’t use their vouchers after all. An audit later found that the authority had $30 million on hand that would have been more than enough to cover the vouchers.

After Smith left, his second in command, Lucille Loyce, was fired. A federal audit had found that public-housing tenant organizations, which she oversaw, paid more than $2.1 million in no-bid contracts to a consultant, Duane Williams, who was her longtime friend. He performed ineffectually, the audit said.

In a pending lawsuit against the pair, the authority makes other startling allegations, including that Williams insisted that members of tenant boards undergo expensive dental work at agency expense, then he and Loyce blackmailed them into keeping quiet about other misconduct.

Loyce has said she did nothing wrong and that she was fired because of race and sex discrimination, according to court papers. Williams did not respond to repeated requests for comment.

HUD referred the matter to the U.S. attorney’s office, which declined to prosecute after investigators found no evidence that Williams paid Loyce kickbacks.

Then-Mayor James K. Hahn’s office brokered a deal with federal officials to hire Montiel, who had their confidence, averting the embarrassment of federal receivership.

Suspicions are raised

Although perennially late for appointments, Montiel has polished manners, reflecting an Old World courtliness and charm. He is a practicing Catholic who prays before meals, frequently refers to himself as “blessed” and ends conversations with the sign-off “Peace.” He said he came to Los Angeles feeling “honored and humbled.”

He also brought an unshakable confidence in his abilities and a national profile as a housing leader, carefully nurtured during frequent trips to Washington, D.C., and other cities.

Almost immediately, Montiel, who makes $225,000 a year, sensed trouble. Simple requests for information about, for example, the number of people receiving Section 8 vouchers, took days. And the answers he did get were incomplete.

His suspicions were heightened when he and federal officials noticed that a large group of newly arrived immigrants -- ineligible by U.S. law for housing subsidies -- had vaulted to the top of the Section 8 waiting list and had been issued vouchers in what appeared to be an organized scheme. The situation remains under investigation, he said.

Montiel said he began receiving anonymous letters, warning that he was looking into things he shouldn’t and that he ought not go to housing projects alone. “You never know what might happen to you,” he recalled one missive saying.

Montiel tends toward dark humor when describing the threats, but they clearly shook him. Even three years later, he won’t say where he lives with his wife and son.

Nevertheless, he said, he was not deterred. Nor has he hesitated to cast himself as the public face of the agency: The lobby of its headquarters is decorated with 10 large photographs of Montiel with Mayor Antonio Villaraigosa, other public officials and smiling children.

He has drawn praise from some quarters for his perseverance in trying to smoke out problems. What Montiel discovered “flabbergasted” and “appalled” the commissioners who oversee the agency, recalled Eleanor Williams, a former board president.

“I couldn’t believe that this very important agency helping the neediest people in our city was having so many problems,” she said.

Montiel, too, was initially taken aback by what he found.

In the agency’s information technology department, some employees had been cutting themselves checks, but there was no way to tell how many. Evidence had been purged from office computers.

There were signs, however, that it was not a small problem: One high-level staffer resigned under pressure after allegedly cutting himself a check for $7,600. At the end of 2005, the post office returned hundreds of 1099 income tax forms as undeliverable, suggesting that hundreds of thousands of dollars may have been diverted to staffers using false names, Montiel said.

At the Jordan Downs housing project in Watts, paperwork was such a mess that it was impossible to say where millions in rehabilitation funds went, whether they were lost to incompetence or misappropriated.

In the Section 8 department, Montiel said he discovered that more than 50 employees had a potential conflict of interest: They owned dwellings approved for subsidies, and thus were collecting rent money from the program their department oversaw.

Meanwhile, the waiting list for Section 8 subsidies stood at about 90,000 families.

Implementing new rules

Montiel dug in, confident he could turn the agency around.

As instructed by HUD, he halted the distribution of vouchers for two years until the legitimacy of the Section 8 waiting list could be verified.

He pushed through new rules prohibiting employees from owning property in the Section 8 program or doing business with the authority.

Private investigators were dispatched to follow suspect staffers. Forensic auditors were hired to pore over paperwork.

Then, this summer, Montiel fired his own chief investigator, Abel Ruiz. Ruiz told reporters he was targeted because he was pushing too hard in the investigation of alleged bid-rigging that had been spotlighted by The Times.

Not so, agency officials shot back in a lawsuit, which stated that Ruiz was fired because he had inappropriately started investigating Montiel’s distant relatives and a sitting councilman.

In this charged atmosphere, some staffers say morale suffered.

One employee, who spoke on condition of anonymity, saying he feared retaliation, dismissed Montiel as a bad leader who “came in like a whirlwind” and made people “scared for their jobs.”

In claims to the federal government’s Equal Employment Opportunity Commission -- some of which, officials said, have been dismissed for lack of evidence -- African American staffers have alleged discrimination.

A consultant’s report refers to a staffer’s concern that Montiel’s administration represents a “Latino mafia.” Montiel adamantly denies the allegations, noting that 40% of the agency’s managers are African American.

For all the staff unrest, housing advocates say it is the city’s poor who stand to suffer most for the agency’s dysfunction.

Last winter, citing agency mistakes and mismanagement that in most cases preceded Montiel’s tenure, the federal government pulled $13 million in grants that city officials and nonprofit agencies had been counting on to house the homeless.

The city and the housing authority found other funds to make up for the loss, but some homeless advocates remain incensed.

The needy pay a price

On a recent Thursday, hundreds of poor women and children, seniors and disabled people poured into the Los Angeles Convention Center -- a vivid demonstration of the demand for subsidized housing in the city.

The crowd was seeking the Section 8 vouchers that had finally been unfrozen after more than two years.

Among them was Colon, the 28-year-old single mother who first applied for Section 8 nine years ago, when she was pregnant with twins.

For much of the last decade, while she has been on the waiting list, she lived with her twins and younger daughter in a crowded studio apartment in Highland Park, she said. They moved a year ago but were recently evicted. The family was briefly homeless before Colon found a one-bedroom apartment in Lancaster.

“It’s terrible out there,” she said.

Patrice Candy Hill, 28, and her family no longer need to stand in such lines. Earlier this year, she and her two children moved into a subsidized apartment.

But the 10-year wait, she said, came at a steep emotional price.In 2004, when her oldest daughter was 2, she was promised a voucher -- only to have it revoked amid the scandal involving the former director.

Hill and her children wound up in a single-room occupancy hotel downtown, where they stayed for almost three years. It took agency officials that long to get her another voucher.

Though relieved to have a home now, she still cries when recalling the time on skid row.

“A lot of things went on down there that women, little children should not see,” she said. “People dying. People committing suicide. And my kids were there with me.”

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jessica.garrison@latimes.com

ted.rohrlich@latimes.com

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(BEGIN TEXT OF INFOBOX)

A formidable mission

The Housing Authority of the City of Los Angeles is a state-chartered public agency that provides affordable housing for the poor.

Key activities

Owns and operates 8,000 units of public housing.

Manages 44,500 Section 8 vouchers, which require tenants to pay 30% of their income to private landlords while the government pays the rest of the rent.

Annual budget

$850 million, primarily from the U.S. Department of Housing and Urban Development.

The process

As of March 2006, a family of four could earn no more than $34,650 annually to be eligible for a Section 8 subsidy, and no more than $55,450 to be eligible for public housing. The public housing waiting list was at 27,000, with an annual turnover of fewer than 400 units per year. The Section 8 wait list was at 90,000.

Long-term goal

Increase the stock of affordable housing and improve the quality of life in public housing projects by rebuilding them as denser, more attractive mixed-income developments.

Source: Housing Authority of the City of Los Angeles and Times reporting