Preet Bharara's financial fraud and lead probe add to NYCHA's woes over class action mold abatement case


The compound investigation by the U.S. Attorney’s Office into each of possible false financial claims made by New York City Housing Authority officials and possible lead poisoning of some housing authority tenants may create a new legal headache for U.S. District Court Judge William Pauley, who is now overseeing class action mold abatement litigation stemming from long-term inaction by NYCHA to address critical violations of its physical condition standards.

Whereas revelations from Wednesday’s filing of a motion to compel by the U.S. Attorney’s Office for New York’s southern district revealed that Federal prosecutors were focusing on possible financial misconduct and the health risks of, and the legal need for disclosure of, lead poisoning, the Federal prosecutors’ motion was filed before a different judge, U.S. District Court Judge Deborah Batts.

U.S. District Court Judge Batts had previously overseen a Medicaid fraud action initiated by the U.S. Attorney’s Office, but it is not known if U.S. District Court Judge Pauley would allow her to keep jurisdiction over a separate action also related to physical condition standards at NYCHA. Typically, U.S. District Court justices prefer to consolidate related cases if they are about a common question of law or fact, unless the union of cases would present a conflict. See Fed. R. Civ. P. 42.

It is also not known how, if U.S. District Court Judge Pauley does not seek jurisdiction over the physical condition standards aspect of the U.S. Attorney’s Office's new probe, the U.S. District Court would procedurally manage two separate legal actions relating to NYCHA with two different U.S. District Court justices possibly creating competing priorities for NYCHA. It is also not known how U.S. District Court Judge Pauley will react, once he realises that the the physical condition standards violations by NYCHA may be worse than just the prevalence of mold. As recently as December, U.S. District Court Judge Pauley denied a motion for sanctions against NYCHA, which had been requested by residents, over the housing authority’s violation of court orders. At the time of his ruling, U.S. District Court Judge Pauley found that the record before the court did not rise to the level of willful misconduct or bad faith. It’s not known if the seriousness of neglected cases of lead poisoning would indicate willful misconduct or bad faith. However, as consequence of a recent order issued by U.S. District Court Judge Pauley, a special master has been appointed to oversee NYCHA's compliance with mold abatement and related repairs. For this report, the chambers of U.S. District Court Judge Pauley did not answer a request for an interview.

Similarly, it is not known how NYCHA will be able to juggle simultaneously answering to two different U.S. District Court justices issuing expensive orders to repair physical conditions that the housing authority may not be able to afford to make. Officials with the municipal housing authority did not answer a request made by Progress Queens for an interview for this report.

Because the U.S. Attorney’s Office has a policy of not commenting about on-going investigations, a spokesperson would not answer questions presented by Progress Queens for this report.

Based on past actions by the U.S. Attorney’s Office to reform municipal agencies beset by corruption or violations of civil rights, Federal prosecutors have a pattern of collecting information about violations, making a determination, and then seeking the authority of the courts to institute reforms, as it effected at Rikers Island. Therefore, as of now, it is not known if the U.S. Attorney’s Office plans to ultimately join the class action mold abatement case as an intervenor. An intervenor is an interested or similarly situated party that was not named in an underlying lawsuit or proceeding but is allowed to apply to a court or trier of fact for permission to join as a party after an action commences.

Because the U.S. Attorney’s Office selected U.S. District Court Judge Batts to apply for its motion to compel, Federal prosecutors may be placing emphasis, at least initially, on the possible false financial claims they may be alleging that were made by NYCHA officials, given that U.S. District Court Judge Batts had already ruled on the false Medicaid claims action. Because of the U.S. Attorney’s Office’s no-comment policy, there is no clarification around its legal strategy.

What is clear, based on the facts, is that Robert Yalen, Monica Folch, and Talia Kraemer, the Federal prosecutors who signed the motion to compel, have initiated a third major action pertaining to possible developer or landlord discrimination or physical conditions violations where no municipal oversight agency or municipal prosecutor had found cause to take action, possibly portraying municipal officials as inept. In February, the office of U.S. Attorney Preet Bharara filed a Federal lawsuit against 421-a apartment building developer Glenwood Management Corporation over violations of Fair Housing Act accessibility standards ; that lawsuit cited parallel legal authority under local law, yet no local prosecutor had acted to challenge the fair housing violations by Glenwood. In December, Lara Eshkenazi and Jeannette Vargas, Federal prosecutors with the U.S. Attorney's Office, sent a warning letter to the de Blasio administration, pointing out the findings of an investigation of the lack of compliance by the New York City school system with the Americans with Disabilities Act.

The press office for City Hall has yet to answer a request made on Thursday by Progress Queens for comment about the Federal investigation into NYCHA.

Other reaction was hopeful that the hard-charging, corruption-busting Federal prosecutor heading the U.S. Attorney’s Office would lead to reforms at the city’s housing authority.

“Preet Bharara has a track record of holding public officials accountable, and making people pay for their corruption and abuse of power. It makes sense that he'd turn his attention on NYCHA,” said the Rev. David K. Brawley, co-chair of Metro IAF and East Brooklyn Congregations, in a statement provided to Progress Queens.  An affiliate of Metro IAF is a plaintiff in the class action mold abatement lawsuit.

“I find the investigation alarming. It is well-know that NYCHA has a questionable track record of managing its own properties, and in particular managing environmental hazards. The most egregious example that comes to mind is mold. What NYCHA desperately needs is a fundamental transformation at the level of day-to-day operations,” said New York City Councilmember Ritchie Torres (D-The Bronx), chair of the New York City Council’s committee on public housing, in a statement provided to Progress Queens.

In early March, Councilmember Torres issued a joint report with State Sen. Jeffrey Klein (D-The Bronx) that surveyed 230 NYCHA residents, finding on-going “abysmal living conditions” and proposing, in part, that in exchange for the City of New York providing upzonings to real estate developers, the benefiting real estate developers should make capital repairs to NYCHA.

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