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Who Is Guarding the HUD Guards
Saturday, 02 July 2005

Who Is Guarding The HUD Guards?
March 3, 2003
By Martin Edwin Andersen

Is HUD Secretary Mel Martinez 
 unprotected by IG´s Secret Service ´detail´?

The question is as old as Ancient Rome: Quis custodiet ipsos custodes? (Who will guard the guards?) It was a question raised yet again when media attention focused on pistol-packing Inspector General Janet Rehnquist at the Department of Health and Human Services (HHS) and allegations of document shredding in her office, long considered a model by internal investigators at other agencies. But the epicenter of complaints of wrongdoing by those in charge of policing key government functions may be the Office of the Inspector General (IG) at the Department of Housing and Urban Development (HUD). 

Insiders tell Insight that investigative-staff morale has plummeted at HUD in the face of growing allegations of wrongdoing involving senior officials in the internal-affairs office. According to an internal memorandum obtained by Insight, in just 21 months at least 56 agents, nearly 25 percent of the total investigative workforce, voluntarily have left the IG's employment, an attrition rate critics say is 10 times the average.

In place of senior and seasoned investigators, critics complain, a group of retired Secret Service officials, many unskilled in the kind of white-collar fraud investigations required at HUD, have been appointed to what one IG watcher complained is a growing "good-old-boy" network reflecting senior management's background in the presidential-protection service. While investigative talent has leached out of HUD, critics contend, management has compensated by lowering the bar on investigatory targets -- going after what one agent called "low-hanging fruit" -- and systematically giving Congress misleading information about the scope and success of those inquiries it conducts.

An Insight investigation into the inner workings of the HUD IG office has revealed a complex web of alleged abuses of investigative power. Waste and mismanagement of monies appropriated to crack down on the hundreds of millions of dollars' worth of fraud in federal housing programs is common, and allegations of disregard for civil-service hiring rules and a penchant for political cronyism appear to reach into the highest ranks of the investigations office. Scores of documents examined by this magazine, made available by congressional critics of HUD, suggest that within the very office meant to audit, investigate and evaluate the spending by HUD of billions in taxpayer dollars are senior officials who have engaged in chronic wrongdoing.

In a confidential letter prepared for delivery to Congress and obtained by Insight nearly one-dozen current and former IG officials, including winners of that office's highest awards, say current leadership at the HUD IG office "cannot be trusted to address the abuses of investigative power, waste of federal funds, mismanagement, political cronyism and disregard for merit principles within its own office." The IG managers, they charge, engage in cover-ups, "abuse their office to remain in power, ruthlessly crush all dissent and resist any external accountability."

For example, the former San Francisco-based Western regional director of HUD, Richard Mallory, was appointed by President George W. Bush and is a career housing expert. Last year Mallory used his post aggressively to advocate that strong monitoring and enforcement actions should be taken against that city's troubled federal housing programs. His concerns included the city of
San Francisco's misuse of HUD community-development funds to sell a property to a convicted felon, a friend of Mayor Willie Brown, who deeded the property to the Nation of Islam for use as a religious institution.

In response, Mallory was warned by one of his superiors that HUD Deputy Secretary Alphonso Jackson, the country's No. 2 housing official, is a close friend of Brown and that Mallory should not anger either Brown or the San Francisco Housing Authority (SFHA). Mallory's predecessor in the post already had been demoted for complaining about long-standing corruption and mismanagement at SFHA, which also had been accused by the HUD IG office of widespread mismanagement.

Feb. 20, 2002, Jackson fired Mallory without giving a reason. In a letter a week later former California governor Pete Wilson, a Republican and former U.S. senator, sent the White House a letter charging that Mallory had been fired at Brown's request after having exposed internal corruption at HUD. "As I mentioned in our conversation today," Wilson wrote to White House Counsel Al Gonzalez, "Mallory's firing was requested by the mayor in a phone call to the deputy secretary. Also [HUD manager] Lily Lee has arrived in [San Francisco] to be the acting regional director."

Wilson added: "Don't hesitate to call if I can be of any assistance. The president and [HUD] Secretary [Mel] Martinez deserve to be protected."

In response to his removal, Mallory contacted the former regional HUD IG, Daniel Pifer, requesting an investigation of his discharge, which he believed to be the result of reta
liation. According to local press reports -- confirmed by the confidential letter prepared for Congress -- Jackson and Lee (who reportedly had been removed earlier under a cloud as head of the Santa Ana [Calif.] Homeownership Center) were close friends, and the SFHA was about to be forgiven some $1.8 million in debt it owed to HUD.

As Pifer prepared to investigate Mallory's charges, he was informed by HUD headquarters in Washington that the unfolding San Francisco situation was considered to be "a very big deal" and that then-IG-designate Kenneth Donohue had been briefed on the matter. A day later, sources say, an acting deputy IG for investigations placed Pifer on one week's administrative leave. When he returned, according to insiders, the assistant IG for investigations ordered him to "stand down on the Mallory issue" and to "initiate no action at this time." The matter was allowed to drop.

Sources at the HUD IG office complain that a climate of orchestrated witch-hunts and the creation of scapegoats pervades the current management structure, adding to the attrition rate and skills drain. They point to the case of Jeffrey Finn, a former special agent in charge of the IG's Denver-based Rocky Mountain district office. Finn did not contest his removal from federal employment in January 2001 after being the target of numerous accusations of misconduct and administrative violations. According to court documents and the testimony of current and former IG employees, however, IG efforts to "destroy" Finn with trumped-up criminal charges also were used to wreck the careers of a number of employees with whom he had a relationship.

An affidavit offered by a senior IG official claiming, under penalty of perjury, that case documents had been shredded in accordance with existing policy cited a policy that does not exist. A senior IG official appeared to perjure himself when he claimed that his decision to remove two employees from their posts could not have had anything to do with their testimony in support of Finn because he knew nothing about it -- yet throughout the court proceedings he had prepared e-mail updates to colleagues around the country. Negative information about two members of the IG team investigating Finn that cast doubt on their credibility never was disclosed to the defense as required.

In throwing out four of the charges against Finn, U.S. District Judge Walker D. Miller found that the HUD IG office not only had engaged in the illegal shredding of potentially exculpatory evidence but also had waged a campaign of "outrageous, improper intimidation" and coercion against Rocky Mountain district agents and administrative employees. Finn was found not guilty of having misused $200 in funds, and Miller has not yet ruled on the other charge -- that Finn ordered a subordinate to change the receipt for these funds from "fence damage" to "storage costs."

IG sources tell Insight that at least half-a-million dollars in federal funds were used to prosecute Finn. The IG investigation of the Rocky Mountain field office found only $18.80 in missing funds out of $1,450,177 in expenditures made by the office during a 33-month period.

Allegations of intimidation did not stop there, IG sources say. They extended to the Fort Worth, Texas, office where two highly regarded IG managers, special agent in charge (SAC) Larry Chapman and assistant SAC James Malloy, one of two American Indian agents in the IG office, were forced into retirement after refusing to support the credibility of the Denver investigation by taking punitive actions in Texas. At issue: their alleged failure to reta
liate against former Denver employees who had testified in favor of Finn.

Angry IG staff also have complained that Donohue and Deputy IG Michael P. Stephens, both retired Secret Service agents, have converted the office into "an employment agency" for their retired Secret Service friends. "These retired Secret Service agents, largely white males, have inundated the Inspector General's office at high-graded GS 14/15 positions," according to one source. Retired Secret Service agents "who are now the favored elite" in the office, say insiders, include a deputy assistant IG for investigations, a senior Special Investigation Division (SID) agent, the special agent in charge for the Southeast/ Caribbean region and at least five SID senior agents.

One of the former Secret Service agents selected for a senior HUD IG post later was sued successfully by an IG special agent for sexual harassment; this after the man's estranged wife, saying she feared for her safety, had turned in his weapon to the Anaheim, Calif., police department after he allegedly assaulted her.

IG agents are preparing to take their concerns to a Republican senator who is the chair of a powerful committee. They say they will bypass referral of their complaints to the President's Council on Integrity and Efficiency (PCIE) for investigation because, although the PCIE is within the Office of Management and Budget, "it is controlled by the IG community and therefore not independent. In the unlikely event that the council found cause to discipline one of its own, the result would be no more than a 'slap on the wrist,' given that the council has no statutory authority to take independent corrective action."

Martin Edwin Andersen is a reporter for Insight magazine.
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