HUD probing PHA over money paid to lawyers, contractors
Federal auditors are focusing on whether lawyers and other contractors bilked the Philadelphia Housing Authority and whether anyone "misappropriated assets for personal gain" under Carl R. Greene's stewardship of the agency, according to a newly released document.
Federal auditors are focusing on whether lawyers and other contractors bilked the Philadelphia Housing Authority and whether anyone "misappropriated assets for personal gain" under Carl R. Greene's stewardship of the agency, according to a newly released document.
PHA's board fired Greene Sept. 23 after the disclosure that the agency secretly paid three women $648,000 to settle complaints. The former executive director has sued the board for firing him, and denies allegations of harassment.
The new details of the investigation by the Department of Housing and Urban Development are contained in a request for bids the agency circulated to accounting firms that would augment its own auditing team, which has been at work since fall.
The document, obtained by The Inquirer Wednesday under the Freedom of Information Act, also confirms that the HUD audit is one of several "parallel investigations" of PHA. The others, it says, are being conducted by HUD's Office of Inspector General, the FBI, and the Justice Department.
The U.S. Attorney's Office here has subpoenaed the records of two nonprofits affiliated with PHA: Tenant Support Services Inc., run by Asia Coney, a public-housing resident leader and an ally of Greene's, and the Philadelphia Asset & Property Management Corp., which manages 1,600 public-housing units financed via private and public sources.
HUD spokesman Jereon M. Brown said he expected that the contract would be granted in February and would involve a "very large" national accounting firm "with a high level of expertise."
The HUD document says the department is focusing on several areas of PHA operations, including:
"Fraud, waste, and abuse," and whether anyone "misappropriated assets for personal gain."
Overcharging in operations, including legal work and tenant services.
Deviations from PHA's established policies and procedures that may have harmed the agency.
Compliance with legal and accounting standards for any group involved with PHA, including "nonfederal entities."
Brown said the federal agency had not conducted a full forensic audit of a housing authority since 2007, when it took over the Miami-Dade County agency.
'This is unusual'
"This is unusual," Brown said. "It is more in-depth than anything you would normally see."
After newspaper disclosures about abuses in the Florida agency, HUD auditors determined that the county had failed to provide proper oversight of the program. Several developers were charged with stealing government money though a variety of schemes.
Miami-Dade County regained oversight of the agency after tightening financial controls. The county was ordered to repay HUD $3.6 million.
In Philadelphia, HUD said, it will review PHA's use of funding from HOPE VI grants and mixed private and public financing, the Moving to Work program, and Housing Choice Vouchers for rent subsidies. In addition, the forensic audit will examine "managerial, financial, and operational transactions" between PHA and related entities.
Most of the HUD audit will focus on activity from April 1, 2005, to March 31, 2010.
In related action, U.S. Sen. Charles E. Grassley of Iowa, the ranking Republican on the Senate Finance Committee, is scrutinizing PHA's hiring of outside lawyers. From 2007 to 2010, the authority paid more than $33 million to Philadelphia law firms.
Response to Grassley
In a letter Tuesday to Grassley, interim PHA Director Michael P. Kelly vowed to cooperate with the senator, who has asked for records from 20 law firms.
Kelly said PHA had asked the firms to release to the finance committee nonprivileged legal information, including billing amounts, names of lawyers performing work for PHA, and descriptions of that work.
But he added that some information that Grassley sought was privileged communication with attorneys, the release of which "would jeopardize PHA's ability to protect its federal funds from frivolous claims in the future."
Kelly said PHA had taken "significant steps" to strike an "appropriate balance" between using in-house counsel and hired lawyers. After reviewing all matters assigned to outside counsel, the authority has discontinued some work not deemed necessary or cost-effective, he said.
PHA, Kelly added, has reduced its legal expenses by about 15 percent from a year ago.
Kelly also said the PHA board would consider a resolution at its meeting Thursday to hire more in-house lawyers and create an Office of General Counsel that would report to commissioners and the executive director.
In a statement Wednesday, Kelly said one of his goals in beefing up his in-house team of attorneys would be to ensure that the PHA board "has full access to all of the legal advice being provided to the agency."
"I will continue to review PHA operations and make necessary changes to help the agency become more transparent and accountable at all levels," the statement said.
PHA's legal staff was dismantled under Greene, with critical legal work given to private firms. HUD raised questions in 2002, but the practice continued.
Representatives of several firms listed in the letter said they would provide Grassley's office the information that Kelly outlined. All said they had done quality work for the agency.
"We will follow the guidance of our client, PHA, as I would expect any other law firm will," Arthur Makadon, chairman of the Ballard Spahr firm, wrote in an e-mail Wednesday. Ballard earned $9 million in fees from PHA between 2007 and early 2010, more than any other firm.
Greene's lawyer, Clifford E. Haines, said he would not provide information to Grassley - although his firm was one of the 20 listed in the letter.
"He's going to have to have subpoena power over me and my client, or he's not going to get anything," Haines said, stressing that he represented Greene personally.
Haines said his firm had not been paid by PHA, although the authority's insurance carrier is paying for Greene's defense in some civil lawsuits involving the former executive director.