Federal Housing Agency Money Spent On High-Rolling Lifestyle
MONTGOMERY, Ala. (AP) _ For three years, federal housing officials in Alabama lost track of $2 million in government money. It was supposed to help middle-income home buyers, but records indicate it went instead for a $50,000 Mercedes, an $18,000 speed boat, jewelry, furs and video equipment.
Documents obtained from the Department of Housing and Urban Development by The Associated Press allege that Montgomery real estate broker Cy Walker hid the money with the help of blank forms that he apparently got from an unwitting First Alabama Bank employee.
Walker, who handled sales of HUD’s foreclosed homes in the Montgomery area, put agency money from the sales closings into a First Alabama account that he alone controlled, according to HUD documents. Those records and AP interviews indicate that Walker appeared to underwrite a high-rolling lifestyle.
The documents also depict a federal agency without adequate controls over its multimillion-dollar Alabama operation. Such controls, according to a HUD memo, finally were put in place on Nov. 9, 1987. That same day, Walker closed out the First Alabama account, withdrawing the last $136.54.
By then, after three years, slightly more than $2 million in HUD money had been deposited in the account but not sent to the federal agency, the records indicate. Some of it appears to have been spent on HUD-related expenses, such as maintenance on foreclosed homes and attorney’s closing fees. But HUD records, including canceled checks, also show it was used by Walker in part for the following purchases:
- A $50,000 sports car. Laurens Pierce III, spokesman for Jack Ingram Motors in Montgomery, said salesmen recall that Walker bought a Mercedes 560 SL convertible. In all, a HUD audit listed nearly $180,000 in checks written by Walker to car dealers, including Cobb Pontiac Cadillac, which received $14,185 on one occasion, $27,153 on another, and $12,595 on a third.
- An $18,870 speed boat from Kowaliga Marina. The office manager at the marina said it was a Stingray - ″the Cadillac of speed boats,″ she said.
- More than $31,000 worth of electronics and appliances from The Record Shop. Some of the purchases, such as stoves, could have gone to HUD houses that needed fixing. However, expensive video equipment was delivered directly to Walker’s home.
- $5,246 worth of jewelry from Yan Neen International.
- $8,255 worth of furs from Henig Furs of Montgomery.
- $9,571 worth of travel in payments to Fair Winds and Rainbow travel agencies.
- $2,200 for a saltwater aquarium and accessories from Wet Pets.
- $21,000 was paid to High School Video Memories, a business enterprise in which Walker hoped to sell video yearbooks to all high school graduates in Alabama.
Walker did not return a phone call made to the recording device on his beeper telephone. The number listed for his residence phone has been disconnected, and Walker has moved from the apartment listed in the 1989 phone book.
Montgomery Real Estate Commission records show that he still has a valid real estate license, but it is listed as ″inactive status″ since he has not been associated with a real estate firm since Nov. 14, 1988.
HUD officials declined to comment on the case because it is a matter under investigation.
The FBI has turned its investigative file over to the U.S. attorney for possible prosecution. U.S. Attorney Jim Wilson said he will meet with HUD officials this month to discuss possible criminal indictments.
HUD, which completed its audit in September 1988, is trying to recover the money through administrative procedures.
Walker won the HUD contract to handle sales of HUD’s single-family dwellings in the Montgomery area through competitive bidding. In 1984, he handled the HUD work while he was an associate broker for Rick’s Lind-Davis Real Estate Inc. The firm was sold in 1986 to Johnny M. Portis, who folded the business last year when the HUD trouble surfaced. His attorney said Portis was not aware of what Walker was doing with the HUD money.
Dave Gordon, a First Alabama executive familiar with the HUD case, said he could not comment on any specific allegations. But he said it appears that ″from all the indications from HUD, from a regulation standpoint, First Alabama has done nothing wrong, nothing out of the ordinary.″
A Nov. 9, 1987, memo from Robert E. Lunsford, at the time the acting manager of HUD’s Birmingham office, told the regional administrator that a bank employee gave Walker ″a blank stack of the wire transfer authorization forms″ so that Walker ″could have them typed prior to his visit and thus save the bank employee some work.″
″This is a closely controlled form of the bank and it is our understanding that the Security Department of the bank is very upset over this action,″ the memo said.
It said the wire transfer authorization forms sent to HUD from Walker’s sales closings were all drawn on First Alabama and ″appear to be signed by a non-existent bank employee.″
According to the memo, the forms led HUD’s Birmingham office to believe that the bank had wired the money properly to the Office of Finance and Accounting in the agency’s central office. At the time, the agency had no procedure in place to check whether it had received the money or not.
Such a procedure, according to Lunsford’s memo, was adopted when the problems with the Montgomery account were uncovered in October 1987.
Before uncovering the Montgomery problems, wrote Lunsford, ″we felt very secure in following normal operating procedures which to some degree assumes that you are dealing with honest people.″