Agency Reformed Rules After Funds Went For Cars, Boat, Jewelry, Furs
MONTGOMERY, Ala. (AP) _ Prosecutors are considering possible criminal action in the loss of $2 million of federal housing funds in Alabama that apparently were used to buy luxury items such as a Mercedes, a speedboat, jewelry and furs.
Department of Housing and Urban Development documents obtained by The Associated Press allege that Montgomery real estate broker Cy Walker spent the money over a three-year period by using a stack of blank wire transfer authorization forms.
HUD’s Birmingham office, without a system to double-check on the receipt of funds from HUD closings, thought the $2 million from 63 sales closings went to its central office account, according to agency records. In fact, the money was in a First Alabama Bank account controlled solely by Walker, according to a HUD audit.
Housing officials in Alabama tightened controls over HUD money on Nov. 9, 1987, after they discovered the money was missing. That same day Walker closed out the First Alabama account, withdrawing the last $136.54.
The FBI has turned its investigative file over to the U.S. attorney for possible prosecution. U.S. Attorney Jim Wilson said he plans to meet with HUD officials this month to discuss possible criminal cases.
Officials with HUD and First Alabama Bank in Montgomery declined comment on specific allegations in the case. However, bank official Dave Gordon said it appeared that First Alabama ″has done nothing wrong, nothing out of the ordinary.″
AP interviews and HUD records, including canceled checks, show some of the money was spent by Walker for the following purchases:
-A $50,000 Mercedes. Laurens Pierce III, spokesman for Jack Ingram Motors in Montgomery, said salesmen recall that Walker bought a Mercedes 560 SL convertible. The HUD audit listed nearly $180,000 in checks written by Walker to car dealers.
-An $18,870 speedboat from Kowaliga Marina. The office manager at the marina said Walker bought a Stingray - ″the Cadillac of speedboats,″ she said.
-$21,000 was paid to High School Video Memories, a business enterprise in which Walker hoped to sell video yearbooks to high school pupils across Alabama. The venture apparently folded.
Also, he is accused of spending $5,246 on jewelry, $8,255 on furs, $9,571 on travel and $2,200 for a saltwater aquarium and accessories.
HUD is trying to recover the money through administrative procedures.
A HUD audit covering August 1984 to November 1987 indicated some of the money in Walker’s account also was spent on HUD-related expenses such as grass-cutting and maintenance on foreclosed homes, as well as attorney’s closing fees.
The wire transfer forms were provided by an apparently unwitting bank employee, according to documents.
A memo written by Robert E. Lunsford, acting manager of the Birmingham HUD office in November 1987, said the forms led the office to believe the bank had wired the money properly to 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.
Walker handled sales of HUD’s foreclosed homes in the Montgomery area 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 closed business operations last year. His attorney said Portis was not aware of what Walker was doing with the HUD money.
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 current phone book.
Montgomery Real Estate Commission records show that he still has a valid real estate license, but it is listed as ″inactive status″ because he has not been associated with a real estate firm since Nov. 14, 1988.