Money to Aid Poor Misused, Auditors Say

A $13-million program to provide work experience for poor residents of government housing in Los Angeles helped few tenants and was plagued by mismanagement and conflicts of interest that led to more than $1.7 million in overbilling, improper spending and unsubstantiated costs, according to a federal audit released Friday.

The Department of Housing and Urban Development investigation of the Los Angeles Housing Authority found significant deficiencies, including $4.6 million in contracts awarded to tenant corporations for moving and extermination services, even though they “did not have the capability to carry out the services required.”

Much of the money, $2.1 million, went to a consultant with “a long-term personal and business relationship” with the No. 2 administrator of the Housing Authority, which federal auditors said was a conflict of interest.

In documents attached to the audit, the Housing Authority identified the agency official as Lucille Loyce and the consultant as Dwayne E. Williams.

Loyce was fired in April after an internal city investigation questioned more than $1 million in spending at the agency. She sued the city this month, alleging discrimination and wrongful termination.

The audit does not identify what the personal and business relationships were between Loyce and Williams. Bill Hanagami, an attorney for Loyce, denied Friday that she had any such relationship with Williams.

Hanagami said Williams alerted Loyce to misspending by the tenant groups, and she reported it to her superiors.

“She acted appropriately and she acted promptly,” he said.

Williams also denied any business or personal relationship with Loyce and said any double billings were caused by clerical errors.

He disputed the auditors’ contention that too much of the money went to him instead of the tenants. “I felt like I earned it. I went beyond earning it,”’ Williams said.

The audit is being reviewed by City Atty. Rocky Delgadillo and the U.S. attorney’s office for possible criminal or civil actions to recover the money.

Delgadillo “is absolutely outraged that public employees in a position of trust have violated the public trust and used it for their own personal gain and benefit,” said Chief Deputy City Atty. Terree A. Bowers. “We are going to pursue all available civil remedies.”

HUD officials said they would meet with the Housing Authority managers to determine what needed to be repaid.

The Los Angeles Housing Authority is largely funded by the federal government and provides 20,000 low-income people with low-cost apartments in 60 developments throughout the city.

Federal officials launched the audit after receiving complaints about unfair bidding practices, kickbacks and other misconduct. The complaints centered on a program begun in the 1990s to provide jobs and training for housing project residents.

Resident management corporations were formed at housing developments, including Pueblo Del Rio and Jordan Downs, and the agencies were given contracts to provide moving, janitorial, extermination and security services to help tenants in their housing development.

The Housing Authority paid Williams to help set up and operate the tenant corporations.

The audit found the program did not work as intended.

“The $13 million in contracts awarded to the [resident corporations] did not significantly benefit the authority’s residents, as few of them were hired under the contracts and, after seven years, none of the [corporations] we reviewed were capable of managing their business affairs,” the audit said.

“It appears the primary beneficiary of the authority’s contracting activity with its [corporations] was the consultant, who received more than $2.1 million to unsuccessfully train and mentor the [corporation] staff and board members,” the audit said.

The audit looked at the Jordan Downs and Pueblo Del Rio corporations from 1995 through 2001 and found:

* At least $397,960 was overpaid on the contracts, including duplicate bills Williams turned in for the same services.

* An additional $451,000 was billed for ineligible costs, including bonuses and loans to corporation members.

* An additional $844,750 in billings were not supported by documentation.

In some cases, tenants denied getting training billed at $140 per hour by Williams, the audit said.

It said Williams billed the corporations at his hourly rate while making bank deposits, shopping for a vehicle, shopping for turkeys, searching for a van windshield, going to a music store, attending a march and picking up checks from the authority.

“The above services either were not necessary or were routine services, which could have been handled through the mail or by someone who was not charging $140 per hour,” the audit said.

It singled out one case in which Williams billed $840 to attend a tenant council’s Christmas party.

In other cases, Williams double- and triple-billed the corporations for the same services, the audit said.

It said there was no documentation to support $600,000 of the consultant charges and it appears Williams received preferential treatment.

Lax management resulted in $6,000 in “inappropriate”’ cash bonuses being paid to board members, with $2,780 in personal loans made to board members and Williams, auditors said.

Then there were the huge markups.

The Housing Authority paid the Pueblo corporation more than $425,000 on a moving contract, and the corporation farmed the work out to a subcontractor for $195,000.

“Thus Pueblo was paid approximately $230,000 to administer a $195,000 contract,” the audit said. Auditors said most of the administrative costs went to the consultant.

Rudolf C. Montiel, who was hired as the authority’s executive director Nov. 15, said he has begun overhauling the purchasing process to avoid similar problems.

“We have begun implementing stronger institutional controls, including starting an internal control department,” Montiel said Friday.