FRAUD IN HUDASSISTED HOUSING

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FRAUD IN HUD-ASSISTED HOUSING

• June 7, 2006

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Chicago HUD-OIG Representatives

• Brad Geary, Assistant Special Agent in Charge
  312/8868-4100, X2476
• Ray Espinosa, Assistant Special Agent in Charge
  312/886-4100, X2636
• HUD OIG 77 W. Jackson, Chicago, IL 22nd Floor,
  60604

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Goals of Presentation

• To introduce you to the HUD OIG
• To examine the most common frauds and fraud
  schemes
• To introduce you to criminal/civil measures
• To review specific case examples
• To review the Fugitive Felon Initiative
• To discuss EIV

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HUD Programs are to assist eligible families

• In obtaining decent, safe and sanitary housing.

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Goals of HUD OIG

• OIG Strategic Plan
• Mission Prevent fraud, waste, and abuse
• Promote integrity, efficiency and effectiveness
  in HUD programs
• Seek administrative sanctions, civil, and/or
  criminal prosecution
• Align directly and support HUDs plan
• Assist in HUDs Major Management Challenges
• Reducing Rent Subsidy Overpayments
• Reducing Fraud in Single Family Lending

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Rental Housing Integrity Improvements Program RHIP

• In 1998, HUD estimated 617 million in
  unwarranted (underreported) rent subsidies.
• In 2002, that total increased to 978 million.
• In 2003, HUD OIG reported to Congress these
  figures.
• Following input from PHAs country-wide, the IGs
  efforts were re-focused.

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RHIP Initiative, Continued

• HUD mandated to reduce errors by 50 in 2005
• GAO designated HUDs rental housing assistance as
  one of 22 High Risk programs
• Focus on PHAs for joint proactive fraud
  initiatives
• 498 PHAs80 of HUD Funding

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Scope of Rental Assistance

• 1.8 million HCV units
• 890,000 public housing units
• 14 billion in assistance
• 1.1 million multi-family rental asst. units
• 4.7 billion in rental assistance on behalf of
  multi-family units

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Common Frauds Schemes

• Under-Reporting of Income
• False Allowances
• Double Up
• Home Ownership
• Landlord Violations
• Gang Influence
• Fraud on the Part of PHA Employees

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Under Reporting of Income

• Failing to report income
• Using a false SSN other than at H. A. to hide
  employment
• Failing to report income and presence of spouse,
  boyfriend, girlfriend

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False Allowances

• Creating dependents or children in the household
  (False Birth Certificates and Social Security
  Numbers)
• Reporting kids who dont reside in household
• Fraudulent expenses, i.e.. child care, day care,
  etc.

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Double Up

• Reside in Public Housing and/or Section 8 as well
  as privately owned Section 8
• Rent out second unit to family member
• Rent out second unit to impartial third party and
  collect market rate rent(sublease)

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Homeownership

• Own FHA/Conventional property and rent a unit as
  a public housing/Section 8 tenant
• Own the property and simultaneously lease the
  unit
• False Deeds
• Straw Owner
• False Submission on Part of Owner

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Landlord Violations

• Side Payments
• Sublease Kickback
• Move in with tenant
• Rent out a vacant unit
• Collect rent from a unit that landlord does not
  own

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Landlord/Gangs/Narcotics
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Fraud on the Part of PHA Employees

• Embezzlements
• Double Billing
• Credit Card Misuse
• Altered Payees
• Contracting
• Bid Rigging/Structuring
• Kickbacks
• Ghost Payroll

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Measures to address these issues

• 18 USC 1001
• 18 USC 1010
• 18 USC 641
• 18 USC 1341
• 18 USC 1343
• Forgery/Illinois
• Theft/Illinois

• Civil Complaints
• False Claims Act-False Claims
• Payment by Mistake
• Unjust Enrichment

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Landlord and Tenant Prosecution Fraud Schemes

• Newest schemes in the Chicago metropolitan area

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Recent Case Examples in the Chicago metropolitan
area

• Muhammad Abdullah
• Tenille Davis
• Antoine Reed
• Urena Woods
• Savaya Chalmers
• Johnnie Mae Smith
• 810 W. Grace

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Muhammad Abdullah

• Muhammad Abdullah, 54, of 111 S. Laflin, Apt.
  1208, Chicago indicted on three counts of making
  false statements, allegedly claiming that no
  member of his household was employed or received
  income when, in fact, he was employed by the
  Chicago Public Schools and earned in excess of
  50,000 a year from 2000 to 2002 total loss
  alleged 34,188.

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Tenille Davis

• Tennille Davis, 28, of 5200 W. Quincy, Chicago
  indicted on one count of making false statements,
  allegedly claiming that she would be using the
  subsidized housing as her principle residence
  when, in fact, she resided in a second home in
  Mazomanie, Wis. total loss alleged 32,310.

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Antoine Reed

• Antoine G. Reed, 38, of Matteson, charged with
  misdemeanor theft of government funds in
  single-count information, allegedly defrauded HCV
  program of a total of 18,691.

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Urena Woods

• Urena Woods, 28, of 11557 S. Yale, Chicago
  indicted on one count of theft of government
  funds, allegedly concealed her ownership of 1506
  E. 84th Pl., Chicago, where she lived while
  receiving HCV benefits from 2000 to 2002 total
  loss alleged 19,131.

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Sovaya Chalmers

• Sovaya Chalmers, 42, of 7758 S. Maryland,
  Chicago indicted on one count of theft of
  government funds, allegedly claiming that she was
  not employed and had no earnings when, in fact,
  she was employed and earned an annual salary
  between 10,667 and 41,339 from 2000 to 2003
  total loss alleged 37,168.

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Johnnie Mae Smith

• Johnnie Mae Smith, 37, of 4331 W. Monroe, 2nd
  fl., Chicago, indicted on six counts of making
  false statements, allegedly understated her
  income as a Cook County employee from 2000-2002,
  falsely claimed in 2002 that she was living at
  Long Grove House, located at 2001 S. Michigan,
  and failed to disclose that she owned a home with
  another individual in 2002 and 2003 total loss
  alleged 43,987.

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810 W. Grace

• HUD subsidized complex on near north side
• Over a dozen individuals indicted on numerous
  counts of state benefits fraud and forgery in
  November 2004.
• Those activities included failure to report
  accurate income, bank accounts, taxi medallions,
  real estate, self-employed business.

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Press Articles

• U.S. DOJ December 8, 2004
• Chicago Sun-Times December 9, 2004
• Southtown December 9, 2004
• Chicago Sun-Times December 9, 2004
• Chicago Tribune December 9, 2004

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U.S. DOJ December 8, 2004

• U.S. CHARGES 14 DEFENDANTS IN SEPARATE FEDERAL
  CASES ALLEGING A TOTAL OF MORE THAN 400,000 IN
  HOUSING SUBSIDY FRAUD.

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Chicago Sun-Times December 9, 2004
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Southtown December 9, 2004
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Southtown December 9, 2004
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Chicago Sun-Times December 9, 2004
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Chicago Tribune December 9, 2004
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Role of the Housing Provider

• Refer promptly and communicate prior to any
  repayment arrangements
• Be able to locate and maintain the file
• Preserve integrity of the file
• Have a custodian of records
• Be a resource for agents and potentially
  prosecutors.
• Be prepared to testify as to the file and the
  programs requirements

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Role of the HUD OIG

• Receive initial allegation and make preliminary
  inquiries
• Insuring the allegations have some validity
• Obtaining the file
• Reviewing its contents
• Open an investigation
• Conduct multiple interviews

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Role of the OIG, Continued

• Obtain employment records
• Check public access records, bankruptcy,
  recorders office
• Prepare a report and present for prosecution
• Testify
• Charge
• Plea/Trial/Sentencing

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Red Flags

• Address different on drivers license/state
  identification documents
• Address different on checks/money orders
• Unexplained change in lifestyle without
  corresponding income change
• Zero income for multiple consecutive years

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Red Flags Continued

• Irreconcilable income discrepancies
• Increased foot and vehicle traffic in PHA unit
• Increased complaints concerns from neighbors,
  other tenants, staff

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Recommendations

• Occupancy Contingency document
• Real Estate ownership clause
• Require a deed and follow-up at recorder if
  necessary
• When applicable/possible, witness signature of
  tenant
• Complete routine self audits

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Recommendations Continued

• Apply same rules for all recipients
• DOCUMENT file consistently, uniformly, not
  arbitrarily
• DOCUMENT potential fraud indicators, who, what,
  where, when, why?
• KNOW your employees and your tenants

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Fugitive Felon Initiative (FFI)

• Welfare Reform act (PL104-93)
• ..Shall be Cause for Immediate Termination of
  Tenancyif Such Tenantis Fleeing to Avoid
  Prosecution or Custody
• 2002 GAO Study revealed USDA, SSA and HHS had
  implemented provision to prohibit fugitive felon
  benefits

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FFI, Continued

• HUD enters program shortly thereafter
• Currently using U.S. Marshals Service data and
  NCIC data matched against PIC and TRACS data
• National initiative with USMS. In the Chicago
  metropolitan area alone, over 500 arrests have
  been made in last 3 years

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Enterprise Income Verification

• Warnings
• Be aware of false social security number
• Transposed number or stolen identity
• Be aware of multiple jobs in different parts of
  the state for tenant
• Computer error
• Cant account for residency, ownership, or
  multiple residences

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Proactive Matching Agreements

• US Marshals
• Immigration Customs Enforcements
• Office of Personnel Mgmt.
• US Postal Service
• Department of Justice
• National Center for Missing Exploited Children

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HUD OIG Partners

• Illinois Department of Public Aid
• U. S. Dept. of Agriculture
• Social Security Administration
• Local, County and State Police

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Internet Web Sites

• General information
• www.hud.gov
• Office of the Inspector General
• www.hud.gov/offices/oig/
• Semi-Annual Reports to the Congress
• www.hud.gov/offices/oig/reports/congress.cfm

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Who to call
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Summary

• Introduction to the OIG
• Common Frauds Schemes
• Criminal Civil Measures
• Case Examples and Their Impact
• Role of the HUD OIG/Role of the PHA
• Red Flags Recommendations
• Fugitive Felon
• EIV
• Contacts

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QUESTIONS

• CALL US!!!!!!!!