New information about law enforcement interest in financial fraud at NYCHA
By LOUIS FLORES
A court filing made Wednesday provides clarification about law enforcement interest in the finances of the city's housing authority.
The law enforcement interest in the financial transactions over capital expenditures at the New York City Housing Authority relate to the housing authority’s compliance with physical condition standards for public housing receiving assistance from the U.S. Department of Housing and Urban Development.
This new information was documented in a motion to compel filed with U.S. District Court in Manhattan by Federal prosecutors from the U.S. Attorney’s Office. The U.S. Attorney's Office is headed by U.S. Attorney Preet Bharara, the nation's top Federal prosecutor in New York's southern district.
The revelation that there was law enforcement interest in possible fraud committed at the housing authority was noted in a report published Wednesday afternoon by Progress Queens, although the full extent of law enforcement interest in fraud was not yet known.
The motion to compel noted that Federal prosecutors, who represent the Federal Government in legal matters, were acting in connection to a probe.
“The United States is currently investigating the health and safety conditions at NYCHA public housing, as well as potentially false claims that NYCHA has made to the United States related to such conditions in possible violation of the False Claims Act,” Federal prosecutors wrote in their legal filing. Under Federal law, public housing authorities that receive assistance from the U.S. Department of Housing and Urban Development must comply with regulations governing physical conditions, and these regulations include requirements for the disclosure of known use of lead paint and lead paint hazards.
In a report filed by Erin Durkin on Thursday for The New York Daily News, Mayor Bill de Blasio (D-New York City) said that he only learned of the U.S. Attorney’s Office on Wednesday. However, according to the motion to compel filed with the court, the U.S. Attorney’s Office first issued a document demand on 9 November 2015. Progress Queens has asked the press office for City Hall to explain the four month discrepancy. However, the press office has not responded to Progress Queens’ request for comment.
The motion to compel represented an escalation of legal actions by Federal prosecutors after they had issued a document request for “information about individuals with elevated blood-lead levels in NYCHA public housing and documents reflecting complaints of unsafe, unsanitary, or unhealthy conditions in NYCHA public housing.” After municipal officials resisted releasing medical records of children in the city’s blood lead registry, Federal prosecutors reached an agreement with municipal health officials that the medical records would be released, provided, however, that there was an order entered by a court.
Because the physical conditions of many public housing developments are compromised by leaks, water damage, and mold, NYCHA residents filed a class action lawsuit seeking immediate repairs, including mold abatement. NYCHA has been slow to respond to a court-supervised settlement setting the conditions for mold abatement. Consequently, a Federal judge ordered the appointment of a special master to supervise NYCHA’s compliance with the court-supervised mold abatement agreement. As a result of known habitability problems at public housing, the city may be in violation of Federal regulations over physical conditions and lead paint disclosure requirements. For the report Progress Queens published on Wednesday, officials with NYCHA would not coöperate with a request made by Progress Queens for an interview about information Progress Queens had about law enforcement interest in a corruption probe.
As has been widely reported, NYCHA faces a well-publicized deficit in its capital improvement budget. The de Blasio administration has been proposing limited capital improvement initiatives pending receipt of a $3 billion allocation from the Federal Emergency Management Agency, but that funding can only be used for Hurricane Sandy-related repairs. A one-time allocation of $100 million from New York State in last year’s fiscal budget, which had been initially intended for capital repairs, was diverted for other uses. Despite a proposal by Comptroller Scott Stringer (D-New York City) to create a dedicated funding stream from the excess funding from the Battery Park City Authority, Mayor de Blasio has rejected that proposal. By keeping NYCHA deprived of capital funding, Mayor de Blasio has argued that the only way to raise capital funds for NYCHA would be to press forward with his controversial decision to lease open spaces in public housing developments, known as its infill plan, and to use lease payments to shore up the agency’s finances, so that NYCHA could, in turn, fund building maintenance and repairs. But Progress Queens has questioned whether the financial assumptions of the infill plan could sufficiently fund NYCHA to fund capital improvements.
Questions also remain unanswered after Progress Queens reported about a controversial 2014 sale by NYCHA of a portfolio of project-based, Section 8 apartment buildings to a consortium of politically-connected real estate developers with close ties to the de Blasio administration. That sale was transacted with no public input and was not subjected to requirements under the City Charter. Furthermore, the sale did not net NYCHA any new cash. To finance the transaction, NYCHA issued bonds worth $250 million, the proceeds of which were then provided to the consortium in the form of a further loan, with which, in turn, the consortium used to buy its interests in the properties from NYCHA. Moreover, a cash-strapped NYCHA was reported to have made capital improvements to some of the buildings prior to the sale, contradicting assertions that NYCHA was too cash-poor to retain ownership of the dilapidated Section 8 buildings. Despite legal questions about the sale transaction, municipal investigative authorities have kept silent for a year.