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AIMD-95-218R 1 (1995-07-28)

handle is hein.gao/gaobackws0001 and id is 1 raw text is: (3 United States GAf General Accounting Office Washington, D.C. 20548 Accounting and Information Management Division B-261685 July 28, 1995 The Honorable Henry G. Cisneros The Secretary of Housing and Urban Development Dear Mr. Secretary: On May 31, 1995, we briefed your staff on our review, made pursuant to your request, of allegations by a former employee of the Department of Housing and Urban Development (HUD) Office of Inspector General (OIG). The former OIG employee, who was assigned to the OIG Fort Worth Regional Office, made allegations related to whether undue influence within HUD caused it to enter into a settlement agreement with the J&B Management Company (J&B) that was not in the best interest of the government. The OIG Fort Worth Regional Office staff started an audit of J&B in January 1990 in response to a charge that J&B was commingling funds from various HUD projects. J&B had managed 86 projects with $203 million of HUD insured mortgages. These projects included 10,758 rental units in 11 states. In a September 1990 interim report, the OIG disclosed serious deficiencies in J&B's management of the HUD projects. In October 1990, based on the findings of the interim report, HUD suspended J&B from further participation in federal programs. HUD personnel, including attorneys in the Office of the General Counsel, then negotiated and subsequently executed a settlement agreement with J&B in April 1991. The settlement agreement was executed by HUD and J&B to avoid litigation and resolve matters relating to J&B's suspension and the OIG audit. As part of the settlement agreement, J&B agreed to assign its management contracts to another agent acceptable to HUD, be removed indefinitely from the management of any multifamily projects under any HUD program, post a letter of credit and a promissory note totaling $1 million as security for completing the corrective actions stipulated in the agreement, and address various other matters related to the OIG audit. GAO/AIMD-95-218R HUD OIG

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