New Orleans Workers' Center for Racial Justice

September 6, 2009
HANO audits point to a still-troubled agency
by Katy Reckdahl, The Times-Picayune 

In 2001, a series of scathing audits roundly criticized the Housing Authority of New Orleans.

The audits found that HANO management changed frequently without noticeable improvement, awarded contracts based on favoritism, paid contractors for work that wasn’t performed, didn’t maintain its buildings, couldn’t account for money it spent and overlooked the fact that employees in its Section 8 department were assigning themselves vouchers to pay their own rent.

In 2002, Alphonso Jackson, who was then deputy secretary of the U.S. Department of Housing and Urban Development, announced that the department was ready to seize control of the New Orleans agency and install an administrative receiver to oversee its day-to-day operations.

“In the case of HANO . . . (HUD’s) direct participation is vital to the success of any attempt to finally rid the agency of its management deficiencies, ” said Jackson, who later became HUD secretary but resigned amid allegations that he used the post to steer contracts to friends’ firms.

New Orleans Mayor Marc Morial went to court to try to block the federal takeover, arguing that it would “not do anything whatsoever to fix or cure the problems at HANO.” He and Louisiana’s congressional delegation argued, unsuccessfully, for a judicial receivership, under which the agency’s progress — or lack thereof — would be monitored by a judge, who they said would be in a better position to “hold HANO’s and HUD’s feet to the fire.”

Eight years later, that 2001 snapshot of HANO seems eerily familiar.

In May of this year, the housing authority, still under the direct control of HUD, placed three employees on administrative leave after colleagues in the accounting department discovered a ruse that siphoned hundreds of thousands of dollars to one employee’s former boyfriend and son.

Last month, Dwayne Muhammad, the well-paid head of HANO’s Section 8 department, was found to be renting a Gentilly apartment with a voucher intended for someone living in poverty.

Less than a week later, Elias Castellanos, a Florida contractor who acted as HANO’s chief financial officer for three years until leaving in June, was indicted on charges of stealing $900,000 from a contract he monitored himself.

During the past year, the agency has also bungled the phase-out of the post-Katrina Disaster Housing Assistance Program, causing thousands of households and landlords to wait months for contracts and payments.

It canceled a summer camp for children at Iberville, one of its most beleaguered complexes, and then reinstated it under fire.

At a time when low-income families are struggling to pay steep post-Katrina rents, hundreds of public-housing apartments have sat empty because of delays in updating HANO’s waiting list. Meanwhile, thousands of Section 8 vouchers have gone unused for nearly a year instead of being issued to the working, disabled and elderly heads of households eligible for them.

Last month, an audit by the Greater New Orleans Fair Housing Action Centerconcluded that one of the main reasons Section 8 voucher holders in Orleans Parish experience a high rate of discrimination when trying to rent apartments is the voucher program’s “dysfunctional administration” by HANO. Landlords shy away from renting to voucher holders because of the program’s history of slow and unpaid rents, and its “hard-to-reach, discourteous, slow and unhelpful” staff, the audit said.

Landrieu steps in

Last year, U.S. Sens. Mary Landrieu, D-La., and Chris Dodd, D-Conn., asked HUD’s inspector general to conduct a series of three performance audits of HANO.

The first two audits found rat-infested public housing buildings, a virtually unusable Section 8 waiting list with nearly 10,000 names, financial statements that improperly supported or reported at least $7.2 million in voucher and public-housing expenses, and an accounting consultant — Castellanos — who overpaid himself by $97,000 but still was kept on HANO’s payroll.

The last of the three audits, intended to determine whether HANO’s performance had improved under HUD control, found what Landrieu called “substandard housing, bad financial practices” and inadequate monitoring of HANO by HUD.

These revelations are just the latest installment in HANO’s sorry history, which each year seems to add at least a few new scandals involving theft, favoritism, inefficiency and a general unwillingness to serve the needs of residents.

Last month, a few days before he visited New Orleans, President Barack Obama’s HUD secretary, Shaun Donovan, said he was interested in seeing HANO return to local management at some point, but not yet, because of what he called “malfeasance.”

HUD’s press office in Washington, D.C., declined comment for this story. But in light of recent events, many observers say that, after seven years, federal oversight has done little to improve HANO.

“If it’s a work in progress, I wonder when the progress is coming, ” said Lillie Walker-Woodfork, the president of HANO’s citywide residents council, which has called for a return to local control.

But Landrieu took a different cue from recent events. “The recent arrests and indictments show that HUD is on the right track and is working hard to root out fraud and corruption, ” she said in an e-mail message last week. She said she will continue working with Donovan “to give New Orleans what it deserves: a housing authority that works.”

‘Troubled’ since 1979

HANO was first described as a “troubled” agency in 1979, the year that HUD began making such ratings of local housing authorities nationwide. It has maintained the label for all but one year since then.

In 1996, after HUD threatened to take over the agency’s operations, Morial entered into an unprecedented cooperative endeavor agreement with HUD to avert the takeover.

But in June 2001, a congressional subcommittee held a hearing in New Orleans after HUD’s inspector general found that the latest incarnation of HANO had failed to rehabilitate even one of its 10 traditional housing complexes despite having spent $139 million of the $243 million it had received for such modernization.

HUD’s regional inspector general, Michael Beard, testifying at the 2001 hearing, urged the feds to seize “immediate” control of the agency. “If HANO were a Section 8 landlord, its properties would flunk the Section 8 inspections and HUD would remove HANO as landlord, ” he said. “If HANO were a Section 8 landlord, HUD could prosecute it for failing to provide housing that meets contract standards.”

HUD took control of the agency eight months later. Since then, HANO has been run by a pair of continually changing federal officials.

When Diane Johnson took over in May 2008 as HANO’s one-woman board, responsible for policies, procedures and contracts, she became the fourth board chair in seven years. Karen Cato-Turner, the administrative receiver, has overseen day-to-day operations at HANO since November 2007, when she was named as the eighth person to serve in that position.

Leadership change sought

Landrieu has been calling for a change in the agency’s leadership since April, but the two officials have remained in place, although having to deal with more federal visitors than during the administration of President George W. Bush.

When HANO angered its resident leaders in April by unveiling a plan that allocated nearly all of its $34.6 million in federal stimulus money toward new construction, HUD sent in an official who mediated a seven-hour meeting at which the housing authority agreed to repair dilapidated existing apartments instead of building new ones.

In July, during the transition from the Disaster Housing Assistance Program, when it became clear that a contracting backlog at HANO had left thousands of low-income households and their landlords with unpaid rent, HUD flew in 10 employees from Washington, D.C., to try to straighten out the mess.

In February, HANO, overseeing the local DHAP office, had been charged with moving more than 10,000 households in New Orleans from disaster rental assistance to either self-sufficiency — meaning they would pay their own rent, a little bit more each month — or to more permanent Section 8 housing assistance.

Donovan had proclaimed more than once that he was closely bird-dogging the six-month transition in New Orleans, but it was common knowledge well before July that the transition was going badly. It is unclear whether Donovan was getting inaccurate reports from New Orleans or whether he simply had more faith in HANO than the landlords and tenants who, on the rare occasions when they could reach someone by phone, were told, “You just have to wait.”

Outside contractor hired

After Muhammad left his job at the head of HANO’s Section 8 department late last month, HANO handed over the reins of its Section 8 department and the 15,000 households it serves to contractor Mir Fox Rodriguez. Employees of the department were told they should reapply to the contractor for their jobs. Last week, employees said that Mir Fox Rodriguez staff was at HANO headquarters, interviewing them.

Late last week, HANO officials still offered little information about the decision to bring in an outside contractor except to say it is an interim measure and the details are still in negotiations. The contract wasn’t discussed or approved at a HANO board meeting, partly because the meetings of the one-member board have been canceled for two months running.

To some longtime residents, it seems like that’s par for the course.

“We’ve got contractors for days, ” Walker-Woodfork said, describing the long list of big-dollar contracts she’s seen awarded to consultants. But over the past few years, when the residents council has asked the housing authority to repair rundown properties, beef up its thin array of tenant social services or hire public housing residents to handle jobs like cutting grass or picking up trash, it has been told that HANO doesn’t have the money, she said.

“I guess they didn’t have the money. Because it’s all been stolen, ” Walker-Woodfork said, pointing to the indictment of Castellanos, who is alleged to have used HANO money to purchase a mansion and several luxury cars.

‘It’s fixable’

Tamar McFarland, an organizer for STAND, a grass-roots citizens group that’s part of the Workers’ Center for Racial Justice, led a protest this summer asking HANO to issue its cache of unused Section 8 vouchers.

She said she began e-mailing Johnson, HANO’s one-woman board, the day that Muhammad, the Section 8 director, left, asking what the agency planned to do with the voucher program.

Her messages have gone unanswered, she said. Her public-information requests, dating back to July, also have gone unfulfilled, she said.

So during Donovan’s recent visit, she and 25 other STAND members sneaked into a dinner he was having with 10 other high-ranking HUD officials at Dooky Chase’s restaurant. At that time, she said, he committed to holding a town hall-style meeting to discuss what McFarland called “corrective actions to address HUD’s receivership failure.”

“It’s fixable, ” McFarland said of HANO’s apparently continuing history of mismanagement. But until it’s fixed, she said, low-income families in New Orleans won’t be able to get the decent, safe and affordable housing they desperately need.

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Katy Reckdahl can be reached at kreckdahl@timespicayune.com or 504.826.3396.

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