The Fraud Squad Inquiry turns up misuse of HUD program for officers

The Fraud Squad
Inquiry turns up misuse of HUD program for officers
By TONI HEINZL
Star-Telegram Staff Writer

FORT WORTH - A federal housing program launched by the Clinton Administration in 1997 envisioned police officers moving into low-income and high-crime neighborhoods as anchors of the community.

Their presence was meant to improve relations between police and residents, help reduce crime and stabilize distressed communities.

The Department of Housing and Urban Development was to sell officers homes at half price through the Officer Next Door program, on the condition that the officer live in the home at least three years.

But instead of stabilizing neighborhoods, the program created an environment that allowed some law enforcement officers to defraud the government and encouraged others to move into neighborhoods that were far from crime-ridden.

A recent three-year investigation resulted in indictments of about 30 officers nationwide - six from North Texas.

A 12-year Fort Worth police veteran with a distinguished career became the first of the six North Texas officers to be charged with housing fraud. All six were convicted.

Max Eamiguel, assistant special agent in charge of the Housing Fraud Initiative Task Force under HUD's inspector general office, helped oversee the investigation here.

The Arlington-based task force, one of six nationwide, focused on officers who appeared to own several homes. Investigators looked at the 200 participating officers in North Texas and examined the 38 who owned more than one house, Eamiguel said.

On the advice of the U.S. Attorney's Office, the task force pursued criminal charges in cases in which the restitution amount, equivalent to the 50 percent home discount, exceeded $25,000, Eamiguel said. It would be a waste of resources to take smaller cases to court, he said.

In cases where investigators find rule violations but where the evidence is not strong enough for a criminal trial, the task force is considering civil lawsuits to recoup the home discounts, Eamiguel said.

"The biggest benefit was the deterrence effect," Eamiguel said about the investigation. "With all the publicity, we had officers call us, asking if they were doing everything by the book."

The housing fraud prosecutor with the North Texas task force said the basic rules of the program have always been clear.

"Look, this is not complex stuff," Special Assistant U.S. Attorney Robert Kemins said. "The officers signed a statement on the closing date saying that they would make the HUD home their primary residence for three years. That's all they have to do."

Instead of patrolling the streets of Fort Worth and earning more than $50,000 a year with overtime, David Auther works for a pest control company in Los Angeles, barely making enough to pay the government $58,000 in restitution at the rate of $350 per month. He lives with his father.

Auther, 39, had a strong start on the force. He was voted president of the 1988 recruiting class. Later he was recognized for his work in the gang unit and was nominated for the department's Peace Officer of the Year award in 1998.

"It's safe to say that purchasing that HUD house led to my demise," Auther said.

His career ended in 2000 when he pleaded guilty to conspiracy to defraud the government. Investigators found that Auther never lived in the HUD home he had bought on Crestview Drive in south Arlington. He and his wife, Muriel, purchased the home for $58,000, half the market value, in February 1998.

Prosecutors said the couple remained at their Crowley home and leased out the four-bedroom Arlington house for 2 ½ years for $1,325 a month, approximately three times the mortgage payment.

The lease ran through Feb. 4, 2001, just one day before Auther's three-year obligation to live in the home ended, according to the plea agreement signed by Auther.

In May 1999, shortly after they failed to obtain a construction loan to build a new house, the Authers refinanced the HUD home, taking an $87,000 mortgage on the property.

"The plan was for the renters to live at the HUD house on a month-to-month basis until we were able to sell our house in Crowley," Auther said. "The federal agents put extreme pressure on me. They said they would put me and my wife in jail. My service to country and city meant nothing to them."

Assistant U.S. Attorney Nancy Larson pushed for a prison term of eight to 14 months under federal sentencing guidelines, saying that police officers must be held to a higher standard.

But U.S. District Judge John McBryde opted to sentence Auther to five years probation, citing his spotless police record and years of military service.

"His record identifies him to me as a model police officer and citizen," McBryde said at the sentencing.

Auther's felony conviction also cost him his military pension for 18 years of service with the Army National Guard and Air Force, most of it on reserve duty. The strain of the case led to the breakup of his marriage, he said.

Jorge Ramirez, a former officer with the Dallas Area Rapid Transit Police Department, was sentenced to 18 months in prison last June and ordered to pay $45,000 in restitution.

Ramirez, 28, lived rent-free in a Dallas apartment complex where he moonlighted as a security officer and rented his HUD house to his brother, according to court records.

Ramirez served more than half a year at a federal prison in Lompoc, Calif., and recently returned to Hutchins to complete the rest of his sentence at a halfway house.

When contacted, Ramirez declined to talk about his case, saying he was worried that it might affect his appeal to clear his name.

The location of the affordable HUD homes was one reason for the program's popularity.

Auther's HUD home was located on a quiet street in the Villages of Fairfield subdivision. The list price was $116,000.

It's in a neighborhood where new SUVs, full-size trucks, even a Jaguar can be spotted in the driveways of homes that are priced at about $110,000 and up.

"This is a nice middle-class neighborhood with many young families with kids," said Matt Waight, a nurse who lives two blocks from Auther's former home. "I feel very safe here. This area is not distressed at all."

But the Officer Next Door homes are supposed to be in so-called "revitalization areas," economically distressed neighborhoods with predominantly low-income families, many vacant HUD properties and often high crime rates.

The homes become available after homeowners default on mortgages insured by the Federal Housing Administration and lose the home to foreclosure. Officers bid for the homes in a lottery.

Before August 2000, revitalization areas were generally defined by ZIP codes, areas so broad that they often included HUD homes in neighborhoods that were not economically distressed, HUD audits found. The rules were tightened to define revitalization areas by census tracts or designated street or geographical boundaries.{MY words here: What a crock}

With the new rules, HUD Assistant District Inspector General Windell Durant expects that fewer officers will apply for a HUD home. About 6,000 officers nationwide have purchased HUD homes.

"Revitalization areas defined by ZIP code included some very nice neighborhoods with nice homes," Durant said. "Now that the program has been restricted to low-income, strictly revitalization areas, it appears the numbers of officers applying are going down."

Prompted by criticial audit reports, HUD Secretary Mel Martinez suspended the program for 120 days last year.

For example, an audit report issued June 29 showed that between 18 percent and 24 percent of participating officers randomly selected in four cities violated the program rules. The cities were Miami, Fla.; Memphis, Tenn.; Manassas, Va.; and Springfield, Mass.

In some cases, officers remained in previously purchased homes and leased their HUD homes. Some officers left the HUD homes vacant, planning to sell them after the three-year period, and others sold the HUD homes before the three-year period ended.

The program appeared to be "at high risk for noncompliance and abuse by homebuyers," Nancy Cooper, HUD's district inspector general for audit in Atlanta, concluded in an earlier audit memo dated Feb. 14, 2001.

When the program reopened Aug. 1, Martinez announced a list of sweeping reforms. Above all, participating officers were required to sign a second mortgage and note for the discounted amount. No interest or payments on this "silent second" are necessary, if the officer lives in the home for three years.

If the officer violates the three-year rule, HUD can enforce payment on the second mortgage to reclaim the 50 percent discount.

"I'm glad there are new measures in place to prevent future abuse," said Grand Prairie Police Chief Glen Hill, who has lived in a HUD home since 1998. "That should eliminate some of the temptations."

James Pasco, executive director of the Fraternal Order of Police, which represents 293,000 officers nationwide, said the new rules will strengthen the program.

"One of the premises is that officers are part of the communities which they serve," Pasco said. "It's critically important that the Officer Next Door program is run above reproach."

The people at HUD are ordered to make this program work. It want work if the homes are only offered in bad areas. So they strech the areas until they can get some officers and teachers to buy. No officer or teacher will buy in areas where the program is designed to work.

The homes in the areas where they are suppost to buy them only sell for for about $30,000 and they get at half that price.

Andrew/Mario, No difference.

Andrew's a lot worse.

Mario was a bloviating liberal bag of gas.

His son is a Clintonesque criminal.

It would be difficult if not impossible to determine which Federal agency is the dumbest, but HUD would have to rank right up at the very top.

Why Is $59 Billion Missing From HUD?

Clintoon did this to buy votes. As a former cop, and current realtor whose company handles ALL the HUD foreclosed homes in the area it was a TOTAL SCAM.

A cop will not put his family into a ghetto, a cop will not become involved in his neighborhood, to protect his family, he doesn't want any bad guys to know where he lives, and where his (or her) family might be.

A cop getting involved in a "neighborhood" squabble is in danger of losing his/her job. In the area I work, the cops with their overtime make in excess of $100,000 per year. They can pay for their homes like the rest of the people. Same with the teachers, they can do like the rest of us do. They have job security (tenure) and can't be fired. Do you give a half priced home to a university professor? After all, "they're teachers" too. What a pile of poop.

Mario was a bloviating liberal bag of gas. His son is a Clintonesque criminal.

And Pataki is an amiable dunce who goes along with whatever the (liberal) political winds in NY tell him. Can't New York even find a decent MODERATE Republican?

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