Report: Violent crimes linked to welfare fraud

Report: Violent crimes linked to welfare fraud

Report: Violent crimes linked to welfare fraud
Updated: Monday, 13 Jun 2011, 8:57 AM EDT
Published : Monday, 13 Jun 2011, 7:42 AM EDT

By: Troy Kehoe
INDIANAPOLIS (WISH) - The Indianapolis Housing Agency says it has uncovered links between violent crime and widespread cases of federally assisted housing and mortgage fraud across the city. The cases are detailed in a massive 172 page report released early Monday morning.

The report is the result of a four-year investigation stemming from a federal Targeting Violent Crime Initiative grant, and involved the U.S. Department of Justice, the U.S. Housing and Urban Development Office of the Inspector General, the Marion County Prosecutor’s Office, the Indianapolis Metropolitan Police Department, and the IHA Office of Special Investigations.

Operation Clean Sweep

In late 2004, IHA Executive Director Rufus “Bud” Myers asked HUD administrators in Washington for assistance in reducing violent crime trends within IHA units. The agency was awarded the $1.3 million TVCI grant in September 2007, based—in part—on a 2006 IHA analysis of crime data that showed nearly 80 percent of Marion County’s criminal homicides were linked to what the agency calls “fraudulent assistance, occurring in either the public housing program or the Section 8 program administered by the agency.”

According to information provided by IHA, HUD provides millions of dollars to grant recipients each year, intended to both improve the quality of life and expand housing opportunities in cities across the country. HUD grant recipients are obligated to use federal grant funds properly and for the purpose for which the grant was provided. Misuse of federal grant funds is considered fraud, and can result in felony prosecution.

After nearly four years of investigation, the agencies involved in what IHA termed Operation Clean Sweep generated a massive 172 page report detailing its findings.

Uncovering Fraud

According to an IHA spokesman who spoke with 24 Hour News 8’s Troy Kehoe early Monday, the initiative focused first and foremost on detecting violations of what’s known as HUD’s “one strike rule,” enacted in 1996. Under that law, households found to be involved in any criminal activity or arrest can have their federal housing assistance taken away. In some cases, this can also include prosecution.

Other violations uncovered by the IHA investigation revealed unreported “live-ins,” or people staying in public housing without the government's knowledge.

Since 2007, the joint task force has conducted 129 different "raids,” executing search warrants on IHA properties. It’s resulted in what the agency says is now the largest public housing fraud crackdown in the U.S.

Among the highlights cited by the IHA report:

367 criminal arrests between December 2007 and March 2011
132 sex offenders found to be living illegally in federally assisted housing
449 households recommended for termination of federal housing assistance due to violent criminal activity
131 households given one-strike warning notices due to violent criminal activity
$1.3 million in collections on judgments in excess of $2 million from federal housing assistance payments found to be fraudulent
In addition, IHA says it has identified $22.4 million in federal funding that could be put to what it calls “better use” for eligible recipients currently waiting for housing assistance in Indianapolis. The agency also says it has measured a 73 percent reduction in criminal homicides linked to federal housing assistance programs since the implementation of Operation Clean Sweep.

The report also lists five “major violent criminal enterprises” that were disrupted during the investigation. They include:

A property manager for a neighborhood community development corporation who allegedly embezzled nearly $150,000 by submitting false statements to the government
An attorney who allegedly operated a law practice from a Section 8 home for eight years, providing shelter to unauthorized occupants who were linked to 10 homicides, 431 police calls and 394 criminal arrests during that time period
A nationwide criminal motorcycle gang operating out of a Section 8 home
“Destroying Neighborhoods”

The operation also uncovered what the IHA calls "mortgage cartels."

According to a news release provided by IHA, five of the worst offenders in those categories were responsible for 568 defaulted home loans between 2004 and 2007. That included 55 homes under HUD Section 8 contracts. Those offenders have been convicted in Marion County court of obtaining more than $37 million in illegal federal mortgage loans and $283,628 in illegal HUD Section 8 payments by lying on applications. That includes German financial giant Deutsche Bank, which the agency says was "one of two primary engines that systematically destroyed neighborhood after neighborhood in select zip codes in the City of Indianapolis due to unsound loan underwriting and management practices."

It’s all resulted in a total of more than 600 arrests so far on charges of

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