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KATRINA: U.S. Raids New Orleans Agency in Scandal Over a Housing Cleanup Program

by ADAM NOSSITERThe New York Times
August 11th, 2008

NEW ORLEANS — Federal investigators on Monday raided the downtown offices of a city-chartered nonprofit agency accused of abusing a federally financed program that was created to clean up houses damaged by Hurricane Katrina.

Files were removed by the cartload on Monday from the offices of the New Orleans Affordable Homeownership Corporation.

The agents carted large boxes of files away from the agency, which had been hired by the city to run the $3.6 million program.

The program was intended to help elderly and poor New Orleans residents gut and board up their storm-damaged houses, and to mow their lawns.

Instead, as a series of news reports by WWL-TV and the New Orleans daily, The Times-Picayune, have revealed, money appears to have gone to politically connected contractors who did little or no work on the houses. In some instances, the contractors were paid even when it was volunteers who did the gutting work, according to the reports.

The scandal has dominated headlines and television news reports here for weeks. Mayor C. Ray Nagin at first angrily denied that there were problems at the nonprofit agency, the New Orleans Affordable Homeownership Corporation, created in 1989 and known as NOAH. Last Thursday, however, Mr. Nagin, summoned to appear before the City Council, acknowledged for the first time that there were “discrepancies” in the agency’s records and said some houses supposedly worked on had in fact not been.

The next day, the United States attorney here, Jim Letten, said a federal investigation into NOAH was under way. It was an unusual statement for a federal prosecutor. Mr. Letten made it, he said in a brief interview Monday, because he thought it would have “value in terms of public confidence,” a remark underscoring the weakened level of public trust in municipal undertakings here.

On Monday, agents of the Federal Bureau of Investigation and the Department of Housing and Urban Development appeared at an office building opposite City Hall to seize the agency’s records. Robert W. Brown, a member of NOAH’s part-time oversight board, said in an interview that he had been subpoenaed for additional documents and to appear before a federal grand jury on Aug. 21. Mr. Brown added, however, that he had had no involvement with the housing remediation program.

City Attorney Penya Moses-Fields said in a statement last week, “The city’s position has always been to be fully cooperative with any investigative body, and we are continuing to do so as it relates to NOAH.” But Ms. Moses-Fields said it would be inappropriate to comment on any subpoenas. Russ M. Herman, the City Council’s lawyer, was quoted by The Associated Press as saying on Monday that he believed all seven members of the Council had been subpoenaed.

Stacy S. Head, a councilwoman who first uncovered problems at the agency, said the management lapses were “horrible.”

“Unfortunately,” Ms. Head said, “it appears the city gives money to agencies without much oversight.”

In the case of NOAH, she said, “it appears that, one, contractors who had close connections to people in decision-making positions received contracts they wouldn’t have gotten otherwise, and two, they got money for work that wasn’t done.”

One contractor was Mr. Nagin’s brother-in-law. The mayor has said he was not aware of his brother-in-law’s being hired.

According to Ms. Head’s initial research, based on a list of the houses on NOAH’s remediation list, a large number were owned not by the elderly or the poor but by limited liability corporations. Many others were not even owner-occupied, she said. When she presented that information to city officials, she said, they “basically rebuked my inquiry.”

Several housing activists, however, undertook their own research, uncovering many more houses where no work had been done. Two activists, Karen Gadbois and Sarah Lewis, shared their findings with a television reporter, and the scandal grew.

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