Case in Point

Bringing Down the House

 


Extra Effort Found Roots of Federal Housing Funds Fraud  

Executives at a large housing management firm stole thousands of federal dollars from low-income, rural rental housing projects. An extensive fraud examination found more than the initial investigation.

“I'm not the only crook at that firm!”

Now my interest was piqued. The voice at the other end of the telephone didn't say, “That's not true,” but rather, “I'm not the only one.” The voice was that of the recently discharged executive director of a large apartment management firm, Low Income Housing Management Inc. (LIHM), which managed more than $140 million in rural rental housing projects in two southern states, Texas and Louisiana , financed by the U.S. Department of Agriculture (USDA). That conversation and a little extra effort excavated more fraud damages than we had anticipated at the beginning of the investigation of irregularities at LIHM.

am an auditor with the USDA's Southwest Regional Office of the Inspector General. Auditing USDA contractors is my business. My recent experience had been auditing management companies that managed USDA's portfolio of low-income, rural rental housing projects.

In March of 1998, I was preparing to assist another USDA-OIG region with a nationwide audit of management companies whose managed USDA properties were in poor repair, unhealthy, and unsafe for the tenants of those properties. A prior survey of similar properties indicated that the management firms were skimming equity from those properties especially when there were “identities of interest” (professional and/or business relationships) among the owners, management companies, and/or vendors to those properties. While we didn't initially find any serious health and safety concerns in the LIHM-managed properties, we did discover “prima fascia” evidence of equity skimming in two executive memos.


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