HUD waiting for audits before taking action against PHA

John F. Street, chairman of the PHA board, has rejected HUD's request that he resign.
John F. Street, chairman of the PHA board, has rejected HUD's request that he resign.
Posted: March 02, 2011

WASHINGTON - The U.S. Department of Housing and Urban Development expects to take action against the Philadelphia Housing Authority's board once it receives information from three audits now under way, HUD Secretary Shaun Donovan said Tuesday.

Donovan did not spell out HUD's options. But the investigations, he said, "will tell us what specifics we have that will allow us to take action against the board."

The secretary made his remarks after testifying at a HUD budget hearing before the House Financial Services Committee. He told reporters he was "disappointed" that PHA's five-member board had rejected HUD's request that all of the commissioners resign.

HUD officials have been working behind the scenes to persuade the PHA chairman - former Mayor John F. Street - to resign with other commissioners. But Street has refused, and last Friday, HUD Deputy Secretary Ron Sims took the unusual action of publicly calling for the board's removal.

The HUD inspector general is completing an audit of spending on outside legal services by PHA - $38.3 million since 2007.

The office also is reviewing PHA's inventory of scattered housing sites. Separately, the global consulting firm of KPMG has started a six-month forensic audit of PHA's operations.

When asked about the focus of the forensic audit, Donovan said he was "not prepared to discuss that." Once the inspector general reports and forensic audit are completed, he said, "there will be plenty of time to dissect what happened at the housing authority."

"Our concern and the primary reason we asked the board to step down," he added, "is we want to focus on the future and not the past."

Last September, former executive director Carl R. Greene was fired after revelations that PHA had secretly settled for $648,000 three sexual-harassment complaints against him and was in negotiations to settle a fourth complaint.

HUD has the power to remove the PHA board because it provides most of the agency's funding, $371 million this year. The last time HUD acted to remove a board was in 2007 against the housing authority of Miami-Dade County.

Rep. Michael Fitzpatrick, a Republican member of the House Financial Services Committee who represents parts of Philadelphia and Bucks County, called the problems at PHA "systemic." He told Donovan that since Greene was fired last year, there have been additional disclosures about federal money being used to pay for belly dancers and thousands spent on legal fees.

"Why were the problems not caught sooner by HUD?" Fitzpatrick asked the secretary.

Donovan responded that "clearly there are things we can do to step up the focus on troubled housing authorities."

With Philadelphia in particular, he said the department has "cut off excessive spending on outside legal counsel," brought in an experienced housing expert - Michael P. Kelly - to take over running the authority and called on the board to step down.

"We'll be working with the inspector general and forensic auditor to make sure we get to the bottom of this," Donovan said.

To catch problems before they happen, Donovan said, the department has enhanced its data-collection system, which would allow HUD to react sooner.

Besides Street, the PHA board includes City Councilwoman Jannie Blackwell, who was appointed by the mayor; Debra L. Brady, wife of Rep. Bob Brady (D., Phila.) and AFL-CIO official Patrick Eiding, both appointed by City Controller Alan Butkovitz; and tenant leader Nellie Reynolds.

Butkovitz said Tuesday that he would not ask his two appointees to resign, asserting that the PHA board had not impeded the federal effort to intercede at the troubled agency.

Noting that one criticism of the board under Greene was that it had been too hands-off, Butkovitz said PHA would benefit from an involved board, not from its outright removal.

"The lesson I got was, you wanted an adversarial board on the case," he said.

Butkovitz said federal officials needed to go public with details of their criticisms of the Philadelphia housing agency.

"I'd like to see the facts on the table," he said. "This is something that has risen to the level of a national scandal, certainly a national embarrassment."


Contact staff writer Jennifer Lin at 215-854-5659 or jlin@phillynews.com.

Staff writer Craig R. McCoy contributed to this article.

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