May 9, 2012

Via Electronic Transmission

The Honorable Shaun Donovan

Secretary

U.S. Department of Housing and Urban Development

451 7th Street S.W.

Washington, DC 20410

Dear Secretary Donovan:

Last fall, I wrote to the Department of Housing and Urban Development (HUD)

regarding concerns raised about bonuses and spending habits at the Harris County Housing

Authority in Texas (HCHA). I have included a copy of the response HUD received from the

HCHA (Attachment 1).

In the 5-page letter, then-Chairman of the HCHA Board Casey Wallace lauded Executive

Director Guy Rankin for his exceptional leadership. Mr. Wallace also provided a detailed

description of the amazing accomplishments and “extraordinary heights” reached by a housing

authority (HCHA) with a “reputation for excellence.” At the time, Mr. Wallace was driving a

$46,000 Chevy Avalanche paid for by the HCHA.

According to the Houston Chronicle1, after Mr. Rankin’s contract buy out was finalized,

HUD officials went to the HCHA administrative office to recover nearly $4 million in misspent

funds. Instead, they found that the HCHA operating funds had disappeared. HCHA didn’t have

the funds available to reimburse HUD. In fact, the interim HCHA executive director issued a

memo stating the housing authority could not even cover the check for $137,000 to buy out Mr.

Rankin’s contract (Attachment 2).

Media reports also show that the HCHA interim CEO has found millions in unexplained

spending that only came to light since Mr. Rankin was replaced. Spending included:

$6 million in money owed to the authority with no one to collect from;

$1 million in improvements made to an office building the authority is no longer

leasing; and

1 Mike Morris; “Housing Authority short on cash, delays Rankin severance”; Houston Chronicle;

http://www.chron.com/default/article/Housing-Authority-short-on-cash-delays-Rankin-3442466.php

The Honorable Shaun Donovan

May 9, 2012

Page 2 of 3

$6 million on a Hurricane Ike damage survey that no one asked for and that

FEMA won’t reimburse the HCHA.

Yet year after year, HUD rated the HCHA as a high performer, “due to its operations and

management.” HUD even stated that, “HCHA practices are some of the best throughout our

region,” during the Consolidated On-Site Review performed by the HUD regional office.

Equally disturbing, the HUD regional office, located right in Houston, apparently never saw any

of the warning signs.

According to the Houston Chronicle2, HUD field office director, Dan Rodriguez stated,

"We didn't expect that anything was actually going on here of concern." He further stated, "We

in the field office here have always had the privilege of having one of the highest-performing

housing authorities in the country. We do not easily get swayed from our position based on our

experiences, based on what's being published in the media. Subsequent to that, the very first

thing we have found is the financial condition of the housing authority is very serious."

Public housing authorities that have some of the worst financial and management

problems are nevertheless awarded high performer status by HUD. It strongly appears that

HUD’s oversight programs are not designed to actually detect financial and administrative

mismanagement. Therefore, please answer the following questions:

1. What specific changes have been and will be made to the housing authority

assessment program that will address the many deficiencies in the current self-

assessment program? When will these changes be fully implemented?

2. Currently, the housing authorities financial and management audits are paid for by

the housing authorities themselves, which may result in a conflict of interest.

What alternatives to auditor contracting awards and payments are being

considered by HUD in order to ensure that the auditors are serving the taxpayers

instead of housing authority management?

3. It is my understanding that HUD has conducted no oversight of the millions in

Disaster Housing Assistance Program (DHAP) funding granted to HCHA. Please

explain why this has not been done and, given the recent financial problems at

HCHA, when might we expect an audit to be conducted?

4. It is my understanding that one of the recipients of at least $10 million in DHAP

funding is owned, in part, by the former HCHA Board Chairman who resigned

from the position a month before his company received the contract. Please

provide the conflict of interest waiver provided by HUD for Mr. Odysseus Lanier

and his company, McConnell Jones Lanier & Murphy LLP.

2 Mike Morris; “HUD subpoenas Harris County housing authority records”; Houston Chronicle;

http://www.chron.com/default/article/HUD-subpoenas-Harris-County-housing-authority-3493084.php

The Honorable Shaun Donovan

May 9, 2012

Page 3 of 3

5. FEMA recently refused to pay HCHA $7 million for an unrequested Hurricane

Ike damage survey. Please provide a copy of the contract, the name of the

contractor (s) and any subcontractors (s), a detailed explanation of their survey

work, the time frame of the work, and the amount of funding each received for the

survey work they did.

Please provide responses by no later than May 23, 2012. If you have any questions

regarding this letter, please have your respective staff members contact Brian Downey or Janet

Drew at (202) 224-5225.

Sincerely,

Charles E. Grassley

Ranking Member

cc: The Honorable David A. Montoya

Inspector General

Office of the Inspector General

U.S. Department of Housing and Urban Development

The Honorable Robert S. Mueller, III

Director

Federal Bureau of Investigation

U.S. Department of Justice

Attachments

Attachment 1

Attachment 2