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House Questions Misuse OF HUD funds

October 22, 1991

WASHINGTON (AP) _ Millions of federal housing dollars are being misspent, with a gambling operation, a professional hockey team and a funeral home among the recipients, a House panel was told Monday.

Rep. Tom Lantos, D-Calif., hearing officials from Washington, D.C., California and New York explain why almost $2 million in funds from the Department of Housing and Urban Development were used to support such enterprises, said the misuse of funds was ″a nationwide scandal.″

In one of the alleged abuses, officials said almost $1 million in federal money was buried in a funeral home project in the nation’s capital that may never be built.

Charles Countee, director for the District of Columbia’s Office of Business and Economic Development, told the Government Operations’ subcommittee on employment and housing that a lot where the mortuary was to be built remains vacant four years after the government loan and the business owner has yet to provide any private financing.

James Vann, the business owner, blamed former Mayor Marion Barry’s administration for stonewalling the project and losing documentation showing that Vann had contributed $250,000 out of his own pocket.

But subcommittee chairman Lantos questioned Vann’s own record keeping and his promise that moving the business to a slightly larger building would allow him to increase employment from 6 to 37.

″This is an economic absurdity, and the city should have caught it,″ he said. ″This project never should have been approved.″

At issue is a $3.2 billion program that allows local governments to distribute federal Community Development Block Grant funds to projects that stimulate economic and housing development in low-income areas.

HUD Inspector General Paul Adams testified that the federal government has allowed local governments to approve many dubious projects under the program.

″The rules need to be tightened up,″ Adams said.

The panel also questioned a $404,000 grant to help the Cabazon Band, a Southern California Indian tribe, to expand their lucrative gambling operations.

The tribe’s fewer than 30 members were each earning roughly $250,000 annually when the loans were approved last August, according to tribe Chairman John James. But he said restrictions on tribe land made it impossible for the tribe to secure regular financing.

Jonathan Littman, a reporter for The San Francisco Chronicle, said HUD ignored the tribe’s affluence and repeated statements by local and state authorities linking the tribe to organized crime.

Lantos questioned why the city of Troy, N.Y., approved HUD funds for the Capitol District Islanders professional hockey team.

Troy first allocated $1 million to pay a nearby team for territorial rights. After HUD investigated, the loan was repaid. But this summer, Troy made a second loan of $650,000 to the team to cover its operating losses, Lantos said.

″This is the Department of Housing and Urban Development,″ Lantos said. ″This is not the department to encourage professional sports teams.″

City officials defended the loans as necessary to lure the 24 fulltime jobs the team was expected to bring.

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