City Controller Releases Scathing Audit Of Housing Authority

LOS ANGELES (CBS) — City Controller Wendy Gruel released a sharply critical audit Tuesday of the city's low-income housing authority and its "reckless" spending of taxpayer money.

The audit of the Housing Authority of the City of Los Angeles found deep flaws in the agency's travel policies, Greuel said. Commissioners and other staff used agency money to pay for the travel of non-staff members and repeatedly spent far above allowed amounts on meals without documenting what was consumed and who was present at the lunches, the audit found.

Greuel, who is an announced candidate for mayor, said former Housing Authority CEO Rudolf Montiel, who was fired in March, was directly to blame for the abuses. However, she said Mayor Antonio Villaraigosa also shares responsibility since he appointed the commissioners who oversee the agency.

"The mayor's office appoints the commissioners and has oversight over those commissioners, and clearly they needed to be minding the store better," Greuel said. "This was an agency that felt no one was watching."

Teddy Davis, a press aide to Villaraigosa, said he may have a comment later Tuesday. Villaraigosa is currently on a 10-day trade mission to Asia.

Villaraigosa did replace four of the seven commissioners after allegations were originally raised earlier this year.

According to Gruel's report, employees were found to have "double-dipped," paying for expenses with agency purchase cards and later being reimbursed for those same costs.

In one case, a public safety official at the agency was approved to drive to a conference in San Diego. Instead, the official used Housing Authority funds to pay for airfare without prior approval. Butler also left the conference early to fly to Chicago, charging the Housing Authority for a hotel night that was not used.

In total, Greuel found the agency spent about $300,000 per year on travel during 2009 and 2010, a 300 percent increase over travel expenses in 2006.

Councilman Dennis Zine, who is running for city controller, said the audit showed that illegal actions may have taken place and that some agency employees should be singled out for investigation and terminated.

The District Attorney's Office has launched an investigation of the situation.

Greuel began her audit in March after KCET-TV Channel 28's "SoCal Connected" and CBS2's David Goldstein  reported on the large travel expenses.

Greuel called the audit alarming, saying that it was "the tip of the iceberg."

A seven-month follow-up investigation by KCET, which aired two weeks ago, found that Housing Authority employees also spent thousands of dollars on posh lunches, work meetings and incentives such as clothes and electronics. The
Los Angeles Times also reported that Montiel was awarded a $1.2 million severance and settlement package.

The reports spurred Greuel to announce plans for an expanded top-to-bottom audit of the Housing Authority.

The scandals also caused interim CEO Kenneth Simmons to resign his position with a request to return to his number two position with the authority.

In a letter to commissioners dated Dec. 12, Mayor Antonio Villaraigosa asked the board to consider the head of the city's Housing Department, Douglas Guthrie, to be the next interim chief executive officer.

The Housing Authority oversees and places residents in about 75,000 federally subsidized affordable housing units and the city's federally funded Section 8 housing program. The Los Angeles Housing Department is funded by the city's budget and is focused on housing code enforcement, renter and landlord complaints, and the city's rent stabilization program.

The Housing Authority board is scheduled to vote to fill the interim chief executive officer position later today.

City Council members grilled the agency's recently resigned interim CEO Ken Simmons about the audit's findings.

Responding to an angry Councilman Bill Rosendahl, Simmons responded, "It wasn't my initiative, sir. I don't approve of it. I don't agree with it."

Simmons said the spending detailed in the audit did not include any federal funding that goes to subsidize rentals for residents or to build new housing. Instead the money came from close to 20 nonprofits that aid in the Housing Authority's work.

Council members agreed the council should have more authority and oversight of the agency. Council members Jan Perry and Eric Garcetti introduced a motion asking the federal government to change regulations or pass necessary
legislation to give the city direct authority over the Housing Authority.

Newly appointed commission chair Mitchell Kamin agreed the city should have more oversight of the agency and called for commissioners to be subject to investigation by the city Ethics Commission.