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THE HARVARD DATA DUMP -  HUD'S MISSING $59 BILLION

For the last annual reporting period, Harvard Endowment announced an increase of $4 billion while HUD appears to be missing $59 billion. Given the relationships between the two organizations, how come Harvard folks do so well for themselves and yet so poorly for the taxpayers?


TABLE OF CONTENTS

1. Click. FEBRUARY 1995 GAO PUTS HUD ON HIGH RISK LIST WHERE IT HAS STAYED TO DATE.

2. Click. MARCH 19, 1996 GAO PUTS DOJ AND TREASURY ASSET FORFEITURE ON HIGH RISK LIST.

3. Click. MARCH 1996 DYNCORP AWARDED JUSTICE CONSOLIDATED OFFICE NETWORK.

3.5 Click. AUGUST 1997 HUD AUTOMATES SUBSIDY SUBMISSIONS THROUGH TRACS SYSTEMS MANAGED BY LOCKHEED-MARTIN (ALSO LEAD CONTRACTOR ON HUD NETWORK WITH DYNCORP AS SUB).

4. Click. JANUARY 1999 ARTICLE ON CUOMO'S PAST INVOLVEMENT WITH FINANCIAL FRAUD IS IN AMERICAN SPECTATOR; 1998 AP STORY.

5. Click. MARCH 1999 GAO AFFIRMS HUD ON THE HIGH RISK LIST.

6. Click. JUNE 15, 1999 GAO REPORTS THAT LOAN SALES WERE POSITIVE FOR COMMUNITIES.

7. Click. JULY 19, 1999 GAO REPORT CONFIRMS $2.2 BILLION OF SAVINGS ON LOAN SALES PROGRAM BEFORE CUOMO CANCELLED IN OCTOBER 1997.

8. Click. MARCH 17, 2000 DYNCORP PRESS RELEASE ANNOUNCING 10 YEAR CONTRACT BY HUD OIG TO DYNCORP (ALREADY IS SUBCONTRACTOR TO LOCKHEED MARTIN ON HUD SYSTEMS; PRIME CONTRACTOR ON DOJ ASSET FORFEITURE FUND AND MANAGER OF DOJ JUSTICE AUTOMATION NETWORK AS WELL AS DOJ LITIGATION SUPPORT AND CASE MANAGEMENT CONTRACTS).

9. Click. MARCH 22, 2000 GAFFNEY TESTIFIES RE MISSING $59 BILLION.

10. Click. APRIL 3, 2000 GOVERNMENT EXECUTIVE MAGAZINE REPORTS THAT GOVERNMENT FAILS AUDIT; HUD DROPPED TO "F".

11. Click. MAY 3, 2000 HUD LOAN SALE QUI TAM LAWSUIT UNSEALED AFTER FOUR YEARS.

11. 5. Click. MAY 10, 2000 HARVARD ENDOWMENT & CAPRICORN SELL LARGEST HUD MULTIFAMILY MORTGAGE BROKER.

12. Click. MAY 18, 2000 MISSING MONEY AT DEPARTMENT OF DEFENSE FROM SAM SMITH'S PROGRESSIVE REVIEW.

13. Click. JUNE 21, 2000 HOUSE VOTE ON HUD APPROPRIATIONS.

14. Click. JUNE 22, 2000 FITTS FAMILY AND SOLARI EMPLOYEES SEND LETTERS TO CONGRESS RE HUD'S REFUSAL TO PAY OUTSTANDING DEBTS TO HAMILTON.

15. Click. JUNE 29, 2000 ASSOCIATED PRESS REPORTS ON RECENT SENATE GOVERNMENT REFORM HEARINGS RE GROWING DEFAULTED PORTFOLIO (NO LOAN SALES).

16. Click. SEPTEMBER 2, 2000 "BUSHWHACKED" IS LEAD STORY ON MEDIA BY PASS AND CONSPIRACY DIGEST WEBSITES, PICKED UP BY NETSCAPE, SIGHTINGS AND DAVID ICKES MAGAZINE.

17. Click. SEPTEMBER 2, 2000 FBI INVESTIGATING HUD OIG IN BOSTON, FORT WORTH AND DC, STAFF SUSPENDED ASSOCIATED PRESS.

18. Click. SEPTEMBER 5, 2000 FROM THE WILDERNESS DISCLOSES POSSIBLE HUD AND PROMIS CONNECTIONS.

19. Click. SEPTEMBER 6-8, 2000 NEWSMAKINGNEWS PUBLISHES ITS HARVARD SERIES, INCLUDING INFORMATION ON HARVARD INVESTMENTS IN HUD AND HARKEN AND RUSSIA AND PUG WINOKUR'S INVOLVEMENT WITH DYNCORP, PROMIS AND PLAN COLUMBIA.

20. Click. SEPTEMBER/OCTOBER, 2000 AL MARTIN’S THE CONSPIRATORS REVEALS HUD-IRAN CONTRA FRAUD, SAYING THAT OLIVER NORTH REFERRED TO HUD AS FOLLOWS "HUD IS THE CANDY STORE OF COVERT OPERATIONS."

21. Click. SEPTEMBER 27, 2000 NEWSMAKINGNEWS STORY UPDATING HARVARD SERIES FOR ANNOUNCEMENT OF HARVARD ENDOWMENT GAINS; HARVARD ENDOWMENT'S ASSETS HAVE NOW GROWN FROM $5 BILLION TO 19 BILLION IN A DECADE.

22. Click. SEPTEMBER 27, 2000 GAO ISSUES REPORT ON ABSENCE OF INFO-SOVEREIGNTY AT US TREASURY (DYNCORP IS ONE OF THE CONTRACTORS PROVIDING SERVICES ALONG WITH FEDERAL RESERVE AND GROUP OF UNNAMED PRIVATE CONTRACTORS).

23. Click. OCTOBER 5, 2000 FROM THE WILDERNESS "PROMIS" REPORTS ALLEGATIONS THAT HUD IS DYNCORP TEST SITE FOR NEW WORLD ORDER "NAGASAKI SYNDROME".

24. Click. OCTOBER 3, 2000 HUD FOIA WILL NOT RELEASE DYNCORP CONTRACTS DUE TO CONTRACTOR REFUSAL TO RESPOND.

25. Click. WEEK OF OCTOBER 12, 2000 HUD REPORTED TO PAY ERVIN $2MM.

26. Click. OCTOBER 12, 2000 SENATE PASS HUD APPROPRIATIONS (HOUSE PASSED IN JUNE).

27. Click. OCTOBER 13, 2000 (RELEASED ON INTERNET), WHY IS $59 BILLION MISSING FROM HUD? NOVEMBER 6 INSIGHT MAGAZINE.

28. Click. OCTOBER 19, 2000 HUD IG FILES HARASSMENT COMPLAINT AGAINST CUOMO AND HUD OFFICIALS ASSOCIATED PRESS.

29. Click. NOVEMBER 5, 2000 FBI RAIDS HUD OFFICE IN DENVER ROCKY MOUNTAIN NEWS.

30. Click. WEEK OF OCTOBER 25, 2000, FOX NEWS SERIES ON MISSING MONEY.

31. Click. WEEK OF NOVEMBER 1, 2000, DENVER TV REPORTS PHIL WINN BEING INVESTIGATED.

32. Click. NOVEMBER 5, 2000 CBS 60 MINUTES REPORTS ON INSURANCE FRAUD MENTIONING ANDREW AND MARIO CUOMO & NEW YORK MOB.

33. Click. NOVEMBER 8, 2000 AL MARTIN ALLEGES BUSH AND CUOMO FAMILIES INVOLVED WITH NY MOB IN HUD AND INSURANCE FRAUD.

34. Click. NOVEMBER 21, 2000 CLINTON PARDONS FELON IN HUD IRAN CONTRA FRAUD.

35. Click.  DAVID SCHIPPER'S BOOK ON THE IMPEACHMENT ILLUMINATES EFFORTS BY CISNEROS/HUD TO ASSIST GORE WITH USE OF INS TO CREATE DEMOCRATIC VOTES IN 1996 CAMPAIGN; FOCUS INCLUDES LA; INVOLVEMENT OF ELAINE KAMARK AND OFFICE OF REENGINEERING GOVERNMENT IN PUSHING INS TO CREATE NEW CITIZENS; WERE HUD'S TRACS DATABASE AND VIOLATIONS OF THE PRIVACY ACT INVOLVED?


1. FEBRUARY 1995 GAO PUTS HUD ON HIGH RISK LIST WHERE IS HAS STAYED TO DATE. 

From http://www.gao.gov

High Risk Series: Department of Housing and Urban Development (Letter Report, 02/95, GAO/HR-95-11).

In 1990, GAO began a special effort to identify federal programs at high risk of waste, fraud, abuse, and mismanagement. GA issued a series of reports in December 1992 on the fundamental causes of the problems in the high-risk areas. This report on the Department9===siasm and momentum generated thus far and to successfully transform HUD into a well-managed federal agency.


2. MARCH 19, 1996 GAO PUTS DOJ AND TREASURY ASSET FORFEITURE ON HIGH RISK LIST (DYNCORP IS DOJ ASSET FORFEITURE

KNOWLEDGE MANAGER. APPOINTED EARLY 1990's WITH 5 YEAR CONTRACT, REAPPOINTED AROUND 1996 TIME FRAME)

From http://www.gao.gov

Asset Forfeiture: Historical Perspective on Asset Forfeiture Issues

(Testimony, 03/19/96, GAO/T-GGD-96-40).

GAO discussed the Departments of Justice's and Treasury's asset forfeiture programs. GAO noted that: (1) the asset forfeiture programs present a high risk for abuse and fraud because of program mismanagement and internal control weaknesses; (2) Marshals Service mismanagement, ineffective oversight, slow disposition, and poor recordkeeping of seized property has resulted in excessive costs and millions of dollars in lost revenue; (3) the Justice asset forfeiture program lacks closing procedures to ensure the proper recording of all seized property in its property management system; (4) the Customs asset forfeiture program lacks adequate safeguards over seized property and has incomplete and inaccurate accounting and reporting of seized property; (5) the agencies have made many improvements to their asset forfeiture programs, agencies need to additionally enhance their tracking systems and to develop and implement policies and procedures to ensure proper accountability for and stewardship over seized property; and (6) although consolidating the management and disposition of seized assets could reduce administrative costs and duplicative efforts, the agencies cite legislative acts and federal reporting requirements as barriers to developing a joint plan for consolidation.


3. MARCH 1996 DYNCORP AWARDED JUSTICE CONSOLIDATED OFFICE NETWORK.

From: http://www.dyncorp.com

(NOTE: During the 1995-1996 period DynCorp also won a second five year renewal of its five year contract to serve as the knowledge manager for the DOJ Asset Forfeiture Fund)

An extension of the seven-year Justice Consolidated Office Network (JCON) contract, initially awarded in March 1996. The U.S. Department of Justice (DOJ) has exercised the fourth option year of the contract with DynCorp Information Systems. The program, a single-vendor indefinite delivery, indefinite quantity contract, allows DOJ organizations to acquire a common set of office automation hardware and software. Offerings available through the program include network design and installation; Windows-based document processing, scheduling and electronic mail; and installation, training and system support.

Contact: Doug Cheek ) (703) 818-4139


3.5 AUGUST 1997 HUD AUTOMATES SUBSIDY SUBMISSIONS THROUGH TRACS SYSTEMS MANAGED BY LOCKHEED-MARTIN (ALSO LEAD CONTRACTOR ON HUD NETWORK WITH DYNCORP AS SUB)

(Lockheed and the TRACS staff blocked access/made access difficult for Hamilton in 1996 and 1997 despite HUD’s orders that Hamilton access; Hamilton was removed from access to the HUD network in the summer of 1997; the network was run by Lockheed)(From http://www.hud.gov ; found on search on November 26, 2000)

U.S. Department of Housing and Urban Development Washington, D.C. 20410-8000

OFFICE OF THE ASSISTANT SECRETARY AUG 2 6 1997

FOR HOUSING-FEDERAL HOUSING COMMISSIONER

Dear Project Owner/Management Agent:

This letter is a follow-up to a previous letter from Assistant Secretary Nicolas Retsinas, dated June 27, 1997, sent to Project Owners/Management Agents concerning the electronic submission of subsidy billings as required under 24 CFR Part 208, published in the Federal Register November 19, 1993, and August 24, 1994 (also known as the TRACS Automation Rule). HUD will soon be making subsidy payments based on the required electronic billing. Processing of subsidy payments through the TRACS Automated Payments System will begin on September 1, 1997 for all Rent Supplement, RAP, Section 8 HAP, PAC and PRAC contracts, with the exception of HAP contracts administered by a contract administrator under an Annual Contributions Contract (ACC). Contracts under the Section 8 Certificate, Rental Assistance Voucher, and Moderate Rehabilitation programs are not in TRACS and are not affected.

Paper copies of Form HUD-52670 and all supporting documentation are still required and should be sent to the Field Accounting Division (FAD) and to the appropriate field office or the Kansas City Voucher Processing Hub. As of September 1, 1997 all electronic vouchers processed through TRACS need the paper versions of the forms to be stamped or marked with "Copy of Electronic Submission" before sending them to the FAD and field office or Hub.

Since some covered projects may not be submitting payment requests to TRACS by the September lst Automated Payments implementation date, HUD will continue to make subsidy payments from the paper vouchers for a period of time for projects not yet submitting electronic vouchers.

However, payments from paper vouchers after September lst may be delayed. Owners/agents are strongly encouraged to begin electronic voucher submissions as soon as possible. HUD will discontinue payments from paper vouchers on December 31, 1997 for all HAP contracts in TRACS not administered under an ACC. (This does not mean that your requirement to submit paper vouchers ends on December 31st, however. You should continue to submit the paper vouchers indefinitely, i.e., until HUD notifies you to do otherwise.)

Please be advised that HUD field offices are issuing specific special claims ID numbers with special claim approvals. Including the Field-issued ID number in your electronic HAP payment request will assure prompt verification of special claim amounts.

For those project owners/agents not currently reporting to TRACS who plan to have a service bureau submit their electronic vouchers, verify that the selected bureau is using software that is compliant with Automated Payments. It is the project owner/agents' responsibility to see that the bureau is supplied with the following information which, if incorrect, will delay processing of payments:

Project and contract numbers

Claim IDs for approved special claims

Voucher ID (if submitting a correction or delete voucher)

For those project owners/agents not currently reporting to TRACS who plan to purchase software, verify that the software is compliant with Automated Payments. Additionally, to help you in converting to electronic vouchering, you should pay particular attention to the following list of items that will delay processing of payments if they are entered incorrectly. These are the major items that will cause your submission to fail MAT format edits, and will require resubmission of your electronic voucher:

Missing or more than one Transmission header record (MATHR) and/or End of Transmission record

(MATND) - Record counts in header records that do not equal the MAT calculated counts and/or the Record

Number sequence field is not in sequence.

_ Invalid project and contract numbers, or the project and contract numbers are not a valid combination.

_ Claim ID submitted in an invalid format and/or without an approved special claim

_ Incorrect Voucher ID (if submitting a correction or delete voucher).

For all project owners/agents submitting directly to TRACS, to assure that your project will receive subsidy funds on time, you must successfully transmit MAT information. Most projects should be submitting both tenant information and voucher information, which are contained in separate TRACS files. With very few exceptions (e.g., certain preservation projects or elderly group homes), failure to submit timely and accurate tenant information can result in suspension of subsidy payments On successful transmissions, the TRACS system will return information to you. To be sure that TRACS processed your data, you must receive information back from TRACS that notifies you of the status of the information you transmitted. For voucher summary transmissions, the information consists of:

A record showing that the voucher file was processed;

A text message on the status of your payment request (example shown below);

Different software programs translate messages returning from TRACS in different ways, so the messages may vary. Please check your software manual or call your vendor to determine exactly how the return messages are translated.

Do not confuse the messages referenced above with the message that Sprintmail has received your transmission. Presence of a Sprintmail "RECEIVED" message does not mean that the file has been processed by TRACS. To be sure that TRACS processed your file(s), you must also receive the information listed above. One or two days after you transmit the voucher summary file to TRACS, look for a TRACS message similar to the one below:

Posted: Mon, May 12, 1997 7:36 PM EDT Msg: GMJH_1631_7432

From: TRACS.MMCOUT

To: TRACS99999

Subj: HUD CFS TRACS DATA 970512 480615

@*@ TRACS99999TRACS99998

Transmission Date/Time: 1997-05-12/13:40:49

Project Name : EXAMPLE APARTMENTS

Project No. : 12345678

Contract No. : VT30LOO1009

Voucher (yr-mo) : 1997-06

THE GENERATED VOUCHER ID FOR (yr-mo) is: 9706123456

VOUCHER AMOUNT SUBMITTED FOR PAYMENT: 00015190

Since different software programs translate messages returning from TRACS in different ways, the message may not be identical. Look for the phrases such as "The generated voucher ID for (yr-mo)" and "The voucher amount submitted for payment," as in the example above. If you do not receive a message back from TRACS containing status phrases within a few days of your original submission,

you may have to retransmit your voucher file. Please read your software manual or call your vendor to determine exactly what to do to retransmit the file.

Complete technical submission instructions can be found in the TRACS Monthly Activity Transmission (MAT) User's Guide. This document can be downloaded from the TRACS Home page of HUD's Internet web site (http://www.hud.gov/fha/mfh/trx/html/trxsum.html ) Additional assistance

concerning MAT transmissions is available by contacting the TRACS Hotline at 1-800-767-7588 (HUD apologizes that the phone number printed in the previous correspondence was incorrect).

If you need to contact a third-party service bureau or a software vendor, a list can be obtained from the National Leased Housing Association (NLHA), 1300 19th Street, NW, Suite 410, Washington, DC 20038 (202)785-8888. HUD does not provide information on software vendors, service bureaus, or management companies with service centers nor is responsible in any way for information you receive from NLHA, other trade organizations or other industry members.
Sincerely,

Marc Harris, Acting Director

Program Support Division
Office of Multifamily Housing
Asset Management and Disposition


4. JANUARY 1999 ARTICLE ON CUOMO'S PAST INVOLVEMENT WITH FINANCIAL FRAUD IS IN AMERICAN SPECTATOR; 1998 AP STORY

Banking On Andy Cuomo
HUD Secretary and rising Democratic star Andrew Cuomo wants to go places--assuming he can leave some baggage behind.

SAM DEALEY & JAMES RING ADAMS © 1999
Copyright 1999 © The American Spectator

It couldn't have been more straightforward. The Senate Banking, Housing, and Urban Affairs Committee had a form. The form was entitled "Statement for Completion by Presidential Nominees." The nominee was President Clinton's choice for housing secretary, 41-year-old Andrew Cuomo, who was to complete the questionnaire and return it before his confirmation hearing in January 1997. Simple, no?

Evidently not. One question read: "Give the full details of any civil or criminal proceeding in which you were a defendant, or any inquiry or investigation by a Federal, State, or local agency in which you were the subject of an inquiry or investigation."

One of the cases he listed, Smith v. Cuomo, et al., had been brought against him and others by the owner of a south-Florida savings and loan, alleging an illegal takeover attempt. But Cuomo failed to disclose a later suit, brought by the S&L itself, and settled only two months before his hearing.Why? Perhaps because Oceanmark v. Cuomo, et al. revealed that in 1988, federal banking regulators investigated Cuomo and fellow investors for possible change-in-control violations. The nominee should have listed that investigation, too, in answer to the second part of the question. He did not.

How serious is this? Reagan White House aide Edwin Meese was investigated by an independent counsel for incomplete personal financial disclosures. Several Reagan administration officials were prosecuted in the Iran-contra matter for withholding information from Congress. Interior Secretary Bruce Babbitt has his own special prosecutor, probing the question of false statements to Congress. And then there's Cuomo's predecessor at HUD, Henry Cisneros, who resigned in the face of an independent counsel investigation.

 The allegation? Making false statements to the FBI about pay-offs to a blackmailing mistress during a routine background check. The Justice Department apparently has not investigated Cuomo's responses. But it has looked at him for another reason. The issue: Did Cuomo retaliate against Oceanmark by pressuring the federal agency charged with thrift oversight to close the S&L?

After a preliminary investigation, Attorney General Janet Reno concluded that the standard for appointing an independent counsel had not been met. Yet Reno's inquiry was narrowly tailored. Abroader review of Cuomo's involvements with Oceanmark reveals serious questions of bank_regulation skirting. Some of Cuomo's fellow investors in Oceanmark are also prominent figures in an array of political and financial scandals. And the secretary clearly grows anxious when asked about his past business associates and their affairs. HUD lawyers even threatened a lawsuit when TAS submitted detailed questions.

Most notable among Cuomo's past associates is Michael Blutrich, head of the law firm which Cuomo joined as a $150,000-a-year partner in 1985. Blutrich recently pled guilty to looting an insurance company in Florida of some $237 million, some of which went into a business controlled by the Gambino crime family. Andrew Cuomo would like to play down his close relationship with Blutrich and dismiss it as a thing of the distant past, but financial disclosure documents show a relationship lasting practically to the day of Cuomo's Senate confirmation hearing as HUD secretary in 1997.

THE SON ALSO RISES

As the eldest son of Democratic lion Mario Cuomo, Andrew had one of the best educations in hands-on politics. He got into the game at 16, helping in his father's first state-wide race. He took part in Mario's losing bid for mayor of the Big Apple in 1977, and in his successful run for lieutenant governor a year later. But Andrew's real start came in 1982 when, at 24, he ran his father's winning gubernatorial campaign. In a primary against the formidable New York City Mayor Ed Koch, Andrew led the campaign from 37 points down to a victory margin of four. In the general run-off against the vastly better financed Republican Lew Lehrman, Andrew again prevailed. The uphill victories testified to Andrew's burgeoning campaign and management skills.

During his father's years in the governor's mansion, young Cuomo refined his political touch. He campaigned hard for Walter Mondale's presidential bid, bringing in savvy media consultants. And he was largely responsible for staging one of his father's most memorable moments, the carefully crafted speech at the 1984 Democratic National Convention.

Young Cuomo also got an education in hard-nosed politics. In 1983, the New York State Investigation Commission (SIC) concluded that Cuomo and two other aides--including current NBC News star Tim Russert--bullied members of the allied Liberal Party to support a Cuomo-favored candidate to head the party. According to the SIC report, the three men "intervened in the internal affairs of the Liberal Party in order to obtain a resolution of the factional dispute." Party members testified that the governor's aides threatened them with the loss of lucrative state jobs and patronage if the party's fight was not resolved in a way "acceptable" to the governor.

After this brush with notoriety, Andrew left Albany in 1984 for Manhattan to join the staff of New York District Attorney Robert Morgenthau. In 1985 he became a partner in the Park Avenue law firm of Blutrich Falcone & Miller, a haven for his dad's financial boosters. One partner, Lucille Falcone, was Mario's chief fundraiser and, according to reports, Andrew's girlfriend. In his memoirs the governor even wrote he would likely join the firm when he left public service. (It ceased to exist before he could do so.)

Also in 1985, Andrew took a leaf from the playbook of his future brother-in-law Joseph Kennedy, who had started his career by founding a non-profit corporation to provide low-cost heating fuel to the poor. Andrew's variant was a non-profit called Housing Enterprise for the Less Privileged (HELP), which provides transitional homes and services to the homeless. In 1988 he quit his law practice to work full-time as president of HELP, a post he manned until joining HUD as assistant secretary for community planning and development in 1993.

Cuomo's zeal for philanthropy turned not-so-neighborly, however, when community legislators questioned the location and size of HELP projects, and when they attempted to slow what they saw as the non-deliberative, willy-nilly speed with which those project proposals were approved. One of these communities was Westchester County, a largely affluent New York suburb whose liberal denizens were shocked at the prospect of a housing project in their backyards.

Paul Feiner, then a county legislator who was skeptical toward HELP, says Cuomo interrupted a telephone conversation one night in 1988 with an emergency breakthrough by an operator. Cuomo's call was a tongue-lashing for Feiner's position on HELP. "There was a tremendous amount of pressure," recalls Feiner.

At the time he told a reporter that Cuomo had threatened him, saying, "I'll ruin your career. I'll break every bone in your body," unless Feiner supported the project. Cuomo dismissed these allegations. "It's sad that [Feiner's] mind would work in such a way," he said. "I think it's even ethnically disparaging."

Now the Democratic supervisor of a Westchester town who holds a seat on HELP's advisory board, Feiner hardly seems out to get Cuomo. In fact, he calls HELP a "total success" and says that "perhaps without the pressure it would have been impossible to get the complex built.... But I would have preferred a little more compromising with the community. It was a bad taste of government where things were being rammed through."

THE OCEANMARK BOG

Notwithstanding such unpleasantness in the non-profit sector, it's one of Andrew's for-profit ventures that has now come back to haunt him. As a corporate lawyer in the Blutrich firm, he represented a group that in 1986 decided to invest in a family-owned, federally chartered savings and loan in North Miami Beach called Oceanmark. Andrew himself was also one of the investors. The original owners of the thrift, the Fenster family, had lived in Florida for generations, and they soon concluded that they were losing control of the bank to outsiders who wanted to plunder its assets and discard the shell.

Their suspicions were aroused by the accidental discovery that what they called Cuomo's "New York Group," supposedly five major investors, consisted of at least 22, who among them controlled more than half of Oceanmark's stock. Concealed takeover groups are a major no-no in financial regulation, and Cuomo's group had filed none of the required change_in_control papers. So the Fensters' lawyers hit them with the first of what has become a series of lawsuits.

A constant theme in this convoluted legal history is the political well-being of Andrew Cuomo. The New York Group offered to settle this first suit in 1990, just an hour before the Fensters' legal team was set to take a deposition from Andrew. (Several months before, Cuomo had backed out of another scheduled deposition, submitting an affidavit that he was sick with nausea, diarrhea, and headaches. The next day the New York Post had run a picture of Cuomo, wearing black tie at a party the previous night, over the caption, "He's one sick puppy.")

As part of the deal, Lynn Fenster and her family signed off on a press release apologizing to Andrew for "statements made in the heat of the moment." "I regret any personal hardship this purely business dispute may have caused Mr. Andrew Cuomo," read the release. "I have always considered him an outstanding professional and count him as a friend."

The 1990 deal looked like a total victory for the Fensters. The New York investors agreed to put their stock in trust for five years and then give Oceanmark first dibs on buying it back.

What the Fensters didn't know, however, was that the Federal Home Loan Bank Board (FHLBB) had separately investigated the New York Group and entered into a secret supervisory agreement on June 17, 1988. The agreement noted that "the FHLBB believes there is an issue as to whether there has been a violation of" control laws, but "is willing to forebear from the initiation of proceedings." The terms were that Cuomo and the other group members had to dispose of their Oceanmark stock within a year. If any remained in their hands, stated the agreement, the stock "shall be donated to Oceanmark." By acceding to the agreement's stern language, Cuomo and his fellow investors avoided any fault-based action by the FHLBB.11 Cuomo and the other signatories may have misled regulators in order to close the deal. According to the agreement, these stockholders, "consistent with their desire to no longer be involved with Oceanmark, have already entered into an agreement for the sale of their stock." But that's exactly what the group did not do.

Despite its clear interest in knowing about the agreement, Oceanmark only learned about it by chance in early 1991. For the next three years, the thrift tried without success to get a copy from the Office of Thrift Supervision (OTS), the new federal regulator set up after the savings-and-loan debacle. Finally, in 1994, the Fensters took Cuomo and his group to state court in Florida, charging them with "an illegal conspiracy to commit fraud" by failing to abide by the supervisory agreement.

The suit dragged on until 1996, when suddenly an armistice was reached. Oceanmark received a copy of the federal order, and the New York Group agreed to exchange their stock for a largely worthless class of non-voting shares. The bank withdrew its suit. But what astounded Lynn Fenster was the speed with which the settlement was approved. "It went through like a rocket," she says.

The Fensters were especially impressed when Cuomo assured them he could clear up a residual problem with the OTS office in Atlanta, which supervises Florida thrifts. "One of the things that Andrew said," recalls Ms. Fenster, "was, 'Don't worry about a thing. I know people in Atlanta and I can take care of this.'"

AN INDEPENDENT COUSEL ALL HIS OWN

Why did the settlement come so quickly? To the Fensters it seemed that members of the New York Group, even those no longer active in the case, had suddenly decided to smooth the path for Andrew's career. Indeed, just three weeks later Cuomo was nominated to replace Henry Cisneros as HUDsecretary. But the Fensters were less inclined to throw rose petals on his progress. The result was a nasty face-off that led to the Justice inquiry.

As part of the 1996 settlement, Cuomo asked for another public apology. This time the Fensters refused. Explains their lawyer William Friedlander, "If Oceanmark said publicly that their claim had no merit, then everything we had negotiated for--which was the right to bring it again, to dismiss it without prejudice--would have gone out the flue."

According to the Fensters, Cuomo took "no" very badly, threatened reprisal, and retaliated by pushing the OTS into an extended examination aimed at closing Oceanmark down. "Within a month after we refused to do what Andrew demanded," says Friedlander, "the OTS was back on this bank like white on rice.And they ate us for lunch."

When Oceanmark began receiving what its auditors saw as unusual demands concerning recapitalization requirements from OTS regulators, the Fensters appealed to the agency's ombudsman. In a letter of March 4, 1997, Oceanmark noted that the acting head of the OTS at the time, Nicholas Retsinas, was simultaneously HUD's assistant secretary for housing and the federal housing commissioner, and hence subordinate to Secretary Cuomo. The thrift alleged that Cuomo had used his authority to punish the Fensters and force a sale of Oceanmark, which, says Friedlander, would have incidentally produced a payoff on the non-voting stock held by the New York Group.

The ombudsman considered the charge against Cuomo a political hot potato and passed it on to the Treasury Department's inspector general. The FBI launched its own investigation. In late July 1998, even as FBI agents were still conducting interviews, the ombudsman revisited the complaint and concluded that OTS personnel might have been "plain_spoken," but they "did not act in a retaliatory manner." He found "no information" showing Cuomo's influence.

In early September 1998, the Fensters filed yet another suit, charging Cuomo, Retsinas, and current OTS Deputy Director Richard Riccobono with a "conspiracy" to ruin Oceanmark. Cuomo, they said, had used his political power to pressure the others into harassing Oceanmark. But the real news was buried deep inside the lawsuit. The Fensters said they had been interviewed by the FBI, and that the bureau appeared to be conducting its own investigation of Cuomo and his associates.

In fact, Justice did conduct a preliminary investigation of Cuomo--the kind of inquiry that can lead to the appointment of an independent counsel. Reno confirmed this on September 8, 1998, when she announced her determination that "there were no reasonable grounds to believe that further investigation [by a court-appointed special prosecutor] was warranted." Then she went a step further, announcing that Justice lawyers would defend Cuomo, Retsinas, and Riccobono in the latest Oceanmark suit.

Cuomo's spokesmen now cite Reno's statement in rebutting the Oceanmark charges. In a letter to TAS, "HUD staff" wrote: The real question...is will you allow your publication to be used as a mouthpiece for the bogus and self-serving allegations made by Oceanmark Bank. You are now on notice that the allegations...are false. You are also on notice that these allegations are ten years old, previously published, and now proven baseless by the Department of Justice, FBI, and Republican Senate. The publication of these statements which you now know to be false and slanderous is actionable. Your publication has a history of printing false material regarding Mr. Cuomo. The Secretary intends to pursue all legal avenues regarding this matter.

 The current allegations are, of course, not ten years old, but arise from the Fensters' 1996 refusal to sign a statement similar to their 1988 apology to Cuomo. Cuomo's problems with the thrift were "previously published" in the October 1994 TAS, in connection with Oceanmark's efforts to obtain the secret supervisory agreement. The "false material" in question, HUD staff has specified, was an item on Secretary Cuomo's press conferences. (See On the Prowl, TAS, December 1997, and Correspondence, TAS, January 1998.)

A similar letter to TAS from Cuomo's private lawyers states, "We intend to protect his interests and will not tolerate any purported reporting, based on smear tactics, to enhance anyone's private business agenda or to increase circulation."

OTS recently withdrew its examiners from Oceanmark, and the Fensters' latest suit alleging an elaborate "Cuomo Conspiracy" seems strained at best. But there do appear to have been violations of the supervisory agreement, which federal regulators have failed to pursue--specifically the divestiture of the investors' stock. The case also puts a spotlight on some people who Cuomo perhaps wishes would remain in the dark.

THE NEW YORK GROUP

Heading up the New York Group was Sheldon Goldstein. Originally from Brooklyn, Goldstein moved to nearby Rockland County in the mid_fifties, where he set up shop as a real-estate developer and businessman. By the 1980's he was a millionaire several times over and had a long list of corporations to his name.

Goldstein could also be a generous political benefactor. According to an analysis by Newsday, Goldstein, his family, and associates donated over $102,000 to Mario Cuomo's gubernatorial campaigns from 1982 to 1989. In the 1982 campaign alone, the Goldstein machine contributed more than $49,000. Shortly after Cuomo was first elected, Goldstein was appointed chairman of the State University Construction Fund, a lucrative patronage title.

In addition to Oceanmark, Goldstein, Cuomo, and others in the New York Group shared extensive interests in two other financial institutions, Hudson United and the Savings Bank of Rockland County. Oceanmark's Lynn Fenster recalls how the New York Group operated: "Shelley Goldstein would put out a call for money, and you would go. And if you didn't go--you almost didn't have a choice. You didn't have a say. The first time you didn't bring your money--he told me this--you didn't get to go again. And the first time you ever got worried about your money or didn't want to stay there, he would literally write you a check and you would never get called again." This seems to be borne out in an April 16, 1987 memo Oceanmark obtained from Cuomo's files. "It is imperative that you and I sit down together and discuss the whole Venture deal and on Monday I will put out the call for $500,000," Goldstein wrote to Cuomo. "What Ed Wachtel [a New York Group investor] and I decided to do is call for all monies, put it in the Savings Bank of Rockland County and draw the money as we need it but to have it in the bank." Jeffrey Fenster, Lynn's brother and partner, paints a similar portrait: "Shelley would gin up an investment and he would put out a call for money. And Shelley had a thing that no one would ever lose money. He always gave them their money back if they lost money."

Goldstein was also a chief client of Cuomo--and Blutrich and Falcone--at their law firm. Other aspects of the cozy Goldstein-Cuomo relationship frequently cropped up in New York papers during the mid-1980's, including:

• In 1984 Arco Management won a state contract to manage the Bridgeand Jackie Robinson housing projects in New York City. It later turned out that the Division of Housing and Community Renewal, the state agency that awarded the contract, had done so under a non-competitive bid. The following day the agency director claimed that the unorthodox move was in response to an emergency. The director also told the New York Times that Arco was "recommended to me but by whom I don't remember." Arco was owned by Goldstein and managed by one of his two sons, both of whom belonged to the New York Group. John O'Connell, another New York Group investor, was also a member of Arco. Andrew was his dad's right-hand man in Albany at the time, and Goldstein, as chairman of the State University Construction Fund, was a state official.

Arco is currently a "prime contractor" for HUD property management in Minnesota, D.C., Puerto Rico, the Virgin Islands, and every state east of the Mississippi River. Upon becoming HUD secretary, Cuomo recused himself from decisions directly involving Arco.

• In 1987 Goldstein and Cuomo were wrapped up in a criminal andcivil case and a State Investigation Committee (SIC) inquiry into a campaign quid pro quo. The allegations were that after Goldstein was denied part-ownership in a Manhattan building rented to the state, he influenced the governor's office to cancel part of the lease. Afew years earlier, while a special assistant to his father, Andrew had amended the lease. According to the Times, Goldstein told the SIC, "I threatened to ruin [the building owner] in the state of New York as a window contractor." Soon after, Goldstein resigned as chairman of the State University Construction Fund for "personal reasons," according to a state spokesman, but presumably under pressure to do so after his embarrassing admissions. Cuomo testified to the committee that he had acted in the state's best interests at the time, not Goldstein's.

• In 1988, plans for a proposed thruway exit near Sterling Forest,the largest timberland tract in the New York City area, were scotched for economic and environmental reasons. The project had been pushed by Governor Cuomo. A report by the state comptroller noted that, "over the years, this project has been repeatedly rejected by past state governors and the New York State Thruway Authority as unwarranted based on the area's traffic needs and as simply a boon for private land developers."

Goldstein, according to the New York Times, had extensive property interests in the area and, in 1986, attempted to purchase the 30-square-mile forest. Andrew Cuomo was his attorney in the deal.

When questioned about his ties to Goldstein, Cuomo has distanced himself. "I am one of 10, 15, 20 lawyers who represent him," he told the New York Times in December 1987. But the April memo from earlier that year suggests a closer relationship.

"I really don't know what you did on your taxes," Goldstein wrote Andrew. "I called and found out you filed for an extension. Please, please let's put it together or some day it will come back and bite us."

THE WITNESS FORMERLY KNOWN AS BLUTRICH

Another New York investor in Oceanmark was Michael Blutrich, a name partner in Cuomo's firm. In 1996 Blutrich was exposed as a target in one of the largest-ever FBI fraud probes, and in November 1998 was convicted on 22 counts of racketeering, fraud, and money_laundering. In that scam, Blutrich and others plotted with the then_chairman of the Orlando, Florida-based National Heritage Life Insurance Company to loot some $237 million from the company through inside loans and sham real-estate deals.

In 1990 the Blutrich group approached Heritage and offered to invest $4 million. There was just one problem: They only had a million. So the investors illegally "borrowed" the rest from an escrow account at Blutrich's firm. Soon after, a $3-million advance for "future commissions" was drawn from the insurance company by the Blutrich group and deposited into the firm's escrow account. The investors bought land near the Catskills in New York, then billed Heritage for millions more than they had paid.

Another sham loan involved a Bronx land parcel owned by 4305 Associates, a two-person corporation formed in 1988 and named for the parcel's street address. Blutrich was vice-president and 50-percent shareholder; Lucille Falcone, president and equal shareholder. Blutrich persuaded a cohort to pose as a real_estate appraiser, who valued the property at $2,346,000. It was actually worth only $700,000. Heritage made a $1.5 million loan, a large chunk of which found its way into Blutrich's pockets.

Predictably, Heritage soon found itself in financial straits, and its directors became uneasy for their shareholders, 26,000 (75 percent) of whom were elderly. Two years later, the insurance company collapsed, a $440-million debacle. The Blutrich group, meanwhile, had walked away with $93 million in laundered money, and sunk over two and a half times that much in bad deals.

By July 1996, Heritage's chairman pled guilty to the scam and received eight years in prison in exchange for his cooperation. Blutrich, along with several associates, was indicted the following month and has since begun to cooperate with the FBI. One of the loans that federal agents are investigating was a piddling $300,000 to underwrite Scores, a New York strip club which the Feds charge became a racket for the Gambino crime family.

In exchange for testifying and helping the FBI, Blutrich recently entered the federal Witness Protection Program--and a substantially discounted lifestyle. In court documents, one of Blutrich's former associates, Shalom Weiss, charges that during the heyday of the scam Blutrich dropped $50,000 per week "supporting a lavish lifestyle and expensive habits." The lavishness included a Porsche, a yacht, and a $12,000 wristwatch, all of which he gave up as part of his plea agreement.

Blutrich's expensive tastes included a passion for boys' basketball. According to Weiss, "much of Blutrich's ill-gotten gains were spent supporting or covering up" pedophilia. "He exploited the young boys he raped and molested. He beguiled the parents of the boys whose basketball teams he coached so he could meet his prurient need." In 1994, after a two-year sting, Blutrich was charged with multiple counts of sexual assault on a minor (to which he secured a sweetheart plea-bargain), and a story in the December 1998 Penthouse quotes an anonymous partner in Blutrich's law firm saying, "Everyone knew what Michael was doing with these young boys. On more than one occasion a mother of one of these boys would come up to the office screaming and complaining about what Blutrich was doing." According to the story, several sources "close to the situation" said Cuomo left the firm in 1988 in part because of Blutrich's behavior. A former partner of Cuomo's disputes this, however. "That's a total lie. No one had knowledge that [Blutrich] was involved in any of this s__t," says the source, who wishes to remain anonymous.

Cuomo downplays his relationship with Blutrich. In a letter to TAS,  the secretary's Fort Lauderdale attorneys wrote, "Many years ago, Secretary Cuomo practiced in a law firm with Mr. Blutrich and participated with many investors, including Mr. Blutrich, in a tax-credit syndication." In fact, along with Blutrich and Lucille Falcone, Cuomo was one of three general partners in L&M Associates, a tax-sheltered oil and gas investment. And although the partnership began many years ago (September 17, 1986), it was not until January 21, 1997--the day before his Senate confirmation hearing to become housing secretary--that Cuomo quit doing business with Blutrich and sold his interest in L&M at a loss. A monthly disbursement check to Cuomo from the venture, a copy of which TAS has obtained, bears Blutrich's signature, and an accompanying letter shows that it was mailed in 1995 to Cuomo's HUD address, with "best personal regards."

Cuomo did not have to sell his stake in L&M to become secretary; he need only have recused himself from decisions involving the partnership (which he had done two weeks earlier). That he ultimately did sell seems to suggest he was troubled by doing business with an accused criminal. Yet Blutrich's fraud case had been widely reported months earlier, and Cuomo's former business associates had known about it almost immediately. "After...the firm was raided by the FBI...a former employee called me," says Cuomo's former partner. "I think that call, I'm sure, went out all over the city. And that's when I became aware that the FBI was investigating Michael in connection with Scores and the Mob." Presumably, it was only the prospect of public scrutiny that prompted Cuomo to finally withdraw his investment.

BETTER LEFT UNSAID

Less than a month after the ink dried on the second Oceanmark settlement in November 1996, Andrew Cuomo was nominated for HUD secretary. A month later, accompanied by his wife Kerry Kennedy (whom he had married in 1990), one of their two daughters, his mother Matilda, sister Maria, and mother-in-law Ethel Kennedy, Cuomo sailed through an adulatory confirmation hearing notable only for what was not brought up: Oceanmark Federal Savings and Loan.

The chairman of the Senate committee charged with confirming Andrew was Alfonse D'Amato, whose hearty dislike for the Cuomos was well known--and generously reciprocated--after many years' rivalry in New York politics. D'Amato might have been expected to turn the hearing into a blood bath, given the ample press coverage Oceanmark had received in the preceding decade. What's more, Florida's Connie Mack also sat on the committee. AHUD lawyer confirms that a Florida GOP official sent committee members a package alerting them to the Oceanmark imbroglio. Amazingly, however, the thrift never came up. Senate Banking sources say the oversight had more to do with D'Amato protecting his own chairmanship than Andrew Cuomo's well-being. There was speculation at the time that Cuomo might challenge the New York senator in his 1998 campaign, and that he posed a significant threat. (A Mason-Dixon poll conducted at the time showed Cuomo edging out D'Amato 41_38 percent.)

According to these sources, it was understood that if D'Amato could protect his seat by sequestering Cuomo on HUD's top floor, so much the better. "Generally a lot of people felt there were understandings that obviously they were going to try to stay out of each other's way," says a senior committee aide. Another reason that Cuomo's involvement with Oceanmark wasn't mentioned at the hearing may be that D'Amato had his own not-so-kosher connections to the New York Group. During the 1980's D'Amato was embroiled in a nasty HUD scandal of alleged favoritism, back-scratching, and campaign donor quid pro quos. Goldstein, a heavy D'Amato donor, and seven members of the New York Group realized a $170-million windfall from a juicy HUD package patched together by a senior HUD official, Joseph Monticciolo, and pushed through by D'Amato. Upon leaving HUD, Monticciolo became the titular head of a Goldstein investment group that included these New York Group members.

Congressional and Justice probes were launched. Ultimately Monticciolo rolled and said D'Amato asked him to cover for the senator, but the case could not be made. These eight investors at one time owned nearly half of the New York Group's shares in Oceanmark, according to documents from Cuomo's files. If D'Amato wasn't going to bring up Oceanmark, neither was Cuomo--even if it meant a material omission on his nomination form. Cuomo will not explain why he did not list the Oceanmark suit among the court cases in which he had been a defendant.

His HUD lawyers wrote TAS that "The FBI, Department of Justice, and U.S. Senate (Republican controlled) have all stated that all nomination forms and procedures were correctly complied with by Mr. Cuomo." But there is no public record of any such statements. What's more, according to the Office of Government Ethics, only the Senate Banking committee would have evaluated Cuomo's questionnaire. Asked why Cuomo did not divulge that he was investigated by federal banking regulators, HUD lawyers reply with word games. "Mr. Cuomo was merely a witness in connection with an FHLBB examination of Oceanmark," they claim, and consequently not directly the subject of the inquiry.

Young Cuomo is considered one of the Democratic Party's fastest-rising stars. He has indicated he'd like to play a major role in Al Gore's New York campaign machine in 2000, and Washington rumor holds that he's a strong contender for the second spot on a Gore ticket. More recent speculation predicts a possible run for retiring Senator Daniel Patrick Moynihan's seat in 2000. The GOP opponent in that race could turn out to be none other than Alfonse D'Amato. If that's the case, you can bet the bank on one mud ball that neither candidate will be throwing.

Sam Dealey is TAS's assistant managing editor. James Ring Adams is an investigative writer for TAS.


Justice To Represent Cuomo in Suit

WASHINGTON (AP)  After investigating allegations surrounding Housing and Urban Development Secretary Andrew Cuomo's involvement with a South Florida bank, Attorney General Janet Reno had decided against seeking an independent counsel, according to court papers filed Tuesday.

The Justice Department, instead, has decided to represent the housing secretary and other officials named as defendants in a lawsuit brought by the bank, Oceanmark Bank, F.S.B. of North Miami Beach.

The lawsuit alleges that Cuomo, deputy director of the Office of Thrift Supervision, Richard Riccobono, OTS executive Nicolas Retsinas and others were involved in a conspiracy to take over the bank or ruin it financially.

``The Justice Department reviewed the matter, found the accusations to be without merit, and now is representing the secretary against the lawsuit. There is no stronger endorsement than that,'' said HUD spokesperson Karen Hinton.

The bank alleged that Cuomo and others were the subject of a criminal investigation and that a special prosecutor could be appointed to investigate the housing secretary. But the Justice Department said these claims were false, adding that there is no current investigation under way and that the attorney general had determined there were no grounds for appointing an independent counsel.

After reviewing the bank's complaints, the Justice Department decided to represent Cuomo, Retsinas and Riccobono ``in regard to allegations of constitutional violations and official wrongdoing,'' said department spokesman Bert Brandenbrug.

The Justice Department has not yet filed a response to the bank's civil suit.


5. MARCH 1999, GAO AFFIRMS HUD ON THE HIGH RISK LIST

From http://www.gao.gov

Major Management Challenges and Program Risks: Department of Housing and Urban Development (Other Written Prod., 01/01/99, GAO/OCG-99-8).

This publication is part of GAO's performance and accountability series which provides a comprehensive assessment of government management, particularly the management challenges and program risks confronting federal agencies. Using a "performance-based management" approach, this landmark set of reports focuses on the results of government programs--how they affect the American taxpayer--rather than on the processes of government. This approach integrates thinking about organization, product and service delivery, use of technology, and human capital practices into every decision about the results that the government hopes to achieve. The series includes an overview volume discussing government wide management issues and 20 individual reports on the challenges facing specific cabinet departments and independent agencies. The reports take advantage of the wealth of new information made possible by management reform legislation, including audited financial statements for major federal agencies, mandated by the Chief Financial Officers Act, and strategic and performance plans required by the Government Performance and Results Act. In a companion volume to this series, GAO also updates its high-risk list of government operations and programs that are particularly vulnerable to waste, fraud, abuse, and mismanagement.

--------------------------- Indexing Terms -----------------------------

REPORT NUM: OCG-99-8

TITLE: Major Management Challenges and Program Risks: Department of Housing and Urban DevelopmentDATE: 01/01/99

SUBJECT: Accountability. Federal agency reorganization, Financial management, Risk management, Mortgage programs, Personnel management, Housing programs,Management information systems, Internal controls
IDENTIFIER: Performance and Accountability Series 1999HUD Grants Evaluation Management System

HUD 2020 Management Reform Plan


6. JUNE 15, 1999 GAO REPORTS THAT LOAN SALES WERE POSITIVE FOR COMMUNITIES

From http://www.gao.gov

On Impact on Homeowner's Equity: Homeownership: Information on Single-Family Loans Sold by HUD (Letter Report, 06/15/99, GAO/RCED-99-145).

Pursuant to a congressional request, GAO provided information on the single family loans sold by the Department of Housing and Urban Development (HUD), focusing on the: (1) status of single-family loans sold; (2) ways in which HUD has ensured that the purchasers of these loans abide by the forbearance requirements contained in the loan sales agreements; and (3) changes HUD has made in the staffing resources used to service the loans it holds. GAO noted that: (1) as of the end of 1998, most homeowners whose loans were sold and for which GAO had data on the disposition of the loan, continued to own their homes; (2) according to the company responsible for servicing these loans, for 55 percent of the 58,012 loans that it serviced, homeowners were current under the original, or forbearance, agreement terms of the loans; (3) an additional 14 percent of the loans had been paid off or refinanced; (4) the remaining 31 percent of these loans were delinquent, pending foreclosure, foreclosed, in bankruptcy, or resolved in some other way; (5) to ensure that the servicers of single-family loans honor the borrower protections contained in the loan sales agreements-including reduced mortgage payments-HUD conducted compliance reviews of loan servicers and operated a toll-free telephone complaint and information line for borrowers whose loans had been sold; (6) through these methods, HUD found, among other things, that loan servicers sometimes did not appropriately consider borrowers' ability to pay higher payments and that some borrowers thought loan servicers required too high a mortgage payment; (7) according to HUD, servicers have taken action to address the findings and concerns raised by HUD's compliance reviews and its telephone complaint line; (8) however, in some cases, HUD's records either do not show whether servicers took corrective action or do not describe the corrective action taken; (9) while data on the staffing devoted specifically to servicing HUD-held loans were not available, total staffing and staffing devoted to managing both HUD-held loans and HUD-owned properties has declined dramatically, particularly in the last 2 years; (10) specifically, staff located in field offices who were responsible for managing single-family loans and properties declined by an estimated 56 percent-or 683 full-time equivalent staff-during fiscal years 1997 and 1998--over twice the rate of the total staffing decline during this period; (11) this decline in staffing levels occurred despite an increasing workload resulting from property disposition; (12) furthermore, much of the decline in staffing occurred after HUD had dramatically reduced its inventory of HUD-held loans; and (13) according to HUD officials, the reduction in the inventory of HUD-held loans allowed the Office of Housing to decrease


7. JULY 19 1999 GAO REPORT CONFIRMS $2.2 BILLION OF SAVINGS ON LOAN SALES PROGRAM BEFORE CUOMO CANCELLED IN OCTOBER 1997

(Note: GAO reports in private that savings were significantly understated)

From http://www.gao.gov
On Savings to Taxpayers from Loan Sales: Housing Finance: Budget Savings From the Sale of HUD Loans (Letter

Report, 07/19/1999, GAO/RCED-99-203).

Defaults on mortgages insured by the Department of Housing and Urban Development's (HUD) Federal Housing Administration (FHA) increased during the 1980s, primarily because of weak real estate markets. By the early 1990s, HUD owned nearly 110,000 single-family and 2,400 multifamily loans that it had insured. In a series of six sales held between 1994 and 1997, HUD sold 98,640 single-family loans and 1,093 multifamily loans. The sales generated more than $2.2 billion in budgetary savings. This report discusses the reasonableness of (1) HUD's estimates of budgetary savings from the sale of its single-family loans and (2) the model HUD used to estimate savings from the sale of multifamily loans. GAO concludes that HUD's estimates of budgetary savings from the sale of the single-family loans it reviewed were reasonable.

--------------------------- Indexing Terms -----------------------------

REPORT NUM: RCED-99-203

TITLE: Housing Finance: Budget Savings From the Sale of HUD Loans
DATE: 07/19/1999
SUBJECT: Mortgage loans, Loan defaults, Cost control, Foreclosures
, Sales contracts
IDENTIFIER: HUD Single Family Mortgage Assignment Program


8. MARCH 17, 2000 DYNCORP PRESS RELEASE ANNOUNCING 10 YEAR CONTRACT BY HUD OIG TO DYNCORP (ALREADY IS SUBCONTRACTOR TO LOCKHEED MARTIN ON HUD SYSTEMS; PRIME CONTRACTOR ON DOJ ASSET FORFEITURE FUND AND MANAGER OF DOJ JUSTICE AUTOMATION NETWORK AS WELL AS OTHER DOJ LITIGATION SUPPORT AND CASE MANAGEMENT CONTRACTS)

From:

http://www.dyncorp.com
Search Results

Title: DynCorp Client: The Department of Housing and Urban Development (HUD)
Last Modified: 4/13/99 8:42:55 PM

Summary: Department of Housing and Urban Development (HUD) Client: U.S. Department of Housing and Urban Development (HUD) Summary: As a subcontractor

to Lockheed Martin, DynCorp, I&ET, Inc. 

DynCorp does the following: Staffs the HUD Headquarters’ computer systems peration Monitors environmental and operations.

Title: News and Events
Last Modified: 3/17/00 3:52:02 PM
Summary: Latest News U.S. Department of Housing and Urban Development (HUD) Office of Inspector General ( OIG) A 10-year task order to provide support a secure
private nationwide network for HUD OIG electronic
data bases.
Read more. DynCorp Team Wins GSA Seat
Management Contract: Win Increases Market Share for DynCorp.


9. MARCH 22, 2000 GAFFNEY TESTIFYS RE MISSING $59 BILLION

http://www.conspiracyplanet.com/channel.cfm?channelid=46&contentid=75
by SUSAN GAFFNEY TESTIMONY SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, INFORMATION AND TECHNOLOGY

Committee on Government Reform 

TESTIMONY of The Honorable Susan Gaffney Inspector General, Department of Housing and Urban Development before a hearing of the Subcommittee on Government Management, Information, and Technology March 22, 2000 1999 Audit Results for the Department of Housing and Urban Development"

Chairman Horn, Ranking Member Turner, and Members of the Subcommittee, I appreciate the opportunity to appear before you today to give you my perspectives on the status of financial management at the Department of Housing and Urban Development (HUD). I am accompanied by Kathryn Kuhl-Inclan, Assistant Inspector General for Audit; James Heist, Director of theFinancial Audits Division; and Benjamin Hsiao, Director of the Information Systems AuditDivision. As the subcommittee is aware, the Office of Inspector General (OIG) reported on March 1, 2000 on our efforts to audit HUD’s fiscal year 1999 consolidated financial statements and issued a disclaimer of opinion.


10. APRIL 3, 2000 GOVERNMENT EXECUTIVE MAGAZINE REPORTS THAT GOVERNMENT FAILS AUDIT; HUD DROPPED TO "F".

Source: Government Executive Magazine http://www.govexec.com/dailyfed/0400/040300k1.htm 

April 3, 2000 DAILY BRIEFING 

Government fails third annual financial audit By Katy Saldarini  

The government has failed the third annual audit of its financial statements, the General Accounting Office announced late last week. At a hearing before the House Government Reform Subcommittee on Government Management, Information and Technology on Friday, Comptroller General David Walker said that most agencies' financial systems aren't in good shape. 

So far in 1999, 13 of the 24 largest agencies have received a clean opinion on their financial statements. A clean opinion is a sign of financial health. Based on GAO's report, Subcommittee Chairman Stephen Horn, R-Calif., issued grades to each of the government's 24 largest agencies. As a whole, the government received a D+ for its fiscal 1999 audit. But only the Department of Housing and Urban Development's grade dropped compared to last year. HUD received an F, down from a D+ in 1998. 

At least nine agencies improved their grades from 1998, but seven agencies were still handed F's, while only two, NASA and the National Science Foundation, got A's. Walker applauded the Social Security Administration for its timeliness in completing its annual financial audit and congratulated the Energy Department for improving weaknesses in its financial statements. But the Defense Department was singled out as one of the worst examples of financial mismanagement in the federal government. Still, agencies that received clean opinions on their audits aren't off the hook. 

Clean opinions can be misleading, Walker said, because "they do not guarantee that agencies have the financial systems needed to dependably produce reliable financial information." The government's finances are still a tangled mess, with serious challenges remaining if they are to be straightened out in the future, Walker said. The federal government, he said, doesn't have accurate cost information, reliable data about loan programs, or reliable inventories that document its physical assets. "I hope during my 15-year tenure I'll be able to express an unqualified opinion on the financial statements of the U.S. government," said Walker. Government wide, a major challenge continues to be accounting for transactions between agencies, which often buy and sell services from each other. 

Assistant Treasury Secretary Donald Hammond said the Treasury Department is making progress on such transactions by disciplining agencies to routinely reconcile them. Joshua Gotbaum, executive associate director and controller at the Office of Management and Budget, noted that just 10 years ago almost no agencies produced financial statements, much less had them audited. I

n 1999, timeliness and quality of agency financial statements improved, Gotbaum said. "We expect much more in the coming years, for this is a process of years, not months." 

Rep. Horn's Financial Management Status Report Agency 1998 grade 1999 Grade NASA A A NSF A A GSA B- B- Labor B- B- SSA B- B- Energy C B- FEMA D+ D+ HUD D+ F NRC D+ D+ HHS D- D+ Treasury D- D- VA D- D+ AID F F Agri. F F Defense F F Justice F D- OPM F F Commerce F D+ Education F D- EPA F D- Interior F F SBA F D+ State F F Transportation F D+ Source: House Government Reform Subcommittee on Government Management, Information and Technology


11. MAY 3, 2000 HUD LOAN SALE QUI TAM LAWSUIT UNSEALED AFTER FOUR YEARS.

http://solari.com/gideon/documents/

 FOR IMMEDIATE RELEASE: May 3, 2000 HUD Loan Sale Qui Tam Lawsuit Unsealed After Almost Four Years.

 Last week, the Department of Justice declined to participate in a qui tam lawsuit filed by a private party who alleged that Hamilton Securities, HUD's lead financial advisor during 1994-1997 mortgage loan auctions, provided insider information to and rigged bids for Wall Street companies including Goldman Sachs, BlackRock Capital (PNC Bank Corp) and Ocwen Financial Corporation (formerly Berkeley Federal Bank & Trust). 

After DOJ notified the Court of the government's decision, United States District Court Judge Louis F. Oberdorfer unsealed the Complaint. Hamilton had filed a motion to unseal the entire file in May 1999, when the case was before recently retired Judge Stanley Sporkin. "When the government decides not to intervene in a qui tam case, that usually indicates that the government doubts that the private party presented a legitimate claim worth pursuing," explains Hamilton's attorney, Michael J. McManus. "Unfortunately, they took far too long to reach that conclusion and a great deal of damage to Hamilton occurred during that time. A proper investigation would have reached the same conclusion years ago." 

The False Claims Act allows 60 days for DOJ investigations into qui tam allegations made by private parties. This suit was filed in June of 1996. DOJ's decision not to intervene in this case comes after a 1,400-day investigation, or 1,340 days beyond the investigation period envisioned by Congress. Hamilton Securities consistently has maintained that the allegations in the qui tam complaint are not true and there is no evidence to support the false accusations. 

HUD security procedures and overlapping levels of review associated with the bidding process made the alleged bid rigging and insider trading impossible. The daily involvement in the loan sales of dozens of HUD employees, including representatives of the HUD Office of General Counsel and HUD's Inspector General's Office precluded this type of alleged fraud. This has been corroborated by HUD's own audits. The HUD Inspector General took the lead in the investigation of Hamilton, and her refusal to publish those exculpatory audits is the subject of a lawsuit brought by Hamilton to ensure that the true facts come to light. 

Every year, HUD issues approximately $70 billion of mortgage insurance that guarantees mortgages used to finance homes, apartment buildings, nursing homes, assisted living facilities and hospitals. HUD pays out approximately $6 billion on claims on defaulted mortgages every year and receives a like amount in defaulted mortgages, which the agency then must manage at great cost to taxpayers. Before the HUD loan sales, HUD was losing approximately 65 cents on the dollar on these defaulted mortgages. The loan sales improved HUD's recoveries significantly so that HUD lost only 10 to 30 cents on the dollar. Optimization bidding software and on line access to information permitted large and small investors access to a wealth of information on HUD and its portfolio and the opportunity to compete directly in the auctions. In October 1997, the Chairman of one oversight committee referred to the loan sales as generating "eye-popping" yields.

From 1994-97, these "eye-popping yields" saved HUD approximately $2.2 billion on HUD's $12 billion mortgage portfolio. It also permitted HUD to issue far more new mortgage insurance at a lower cost. HUD suspended the successful loan sales program due to the investigation. Prior to that suspension, the $2.2 billion in budgetary savings generated by the loan sales was money that could be used for other purposes useful to taxpayers such as deficit reduction or funding other HUD projects. The General Accounting Office confirmed the savings figures in July 1999. 

Under the False Claims Act, a private party who files suit on behalf of the government can receive 15-30% of any recovery if the government's claim is successful. Ervin and Associates, Inc., the private party who filed this qui tam lawsuit, was a servicing contractor to HUD, essentially responsible for debt collection and landlord contract oversight. As the loan sales reduced HUD's portfolio of defaulted mortgages, Ervin's opportunity to do work for HUD diminished. Pursuant to qui tam disclosure rules, Ervin disclosed that its sources for alleged bid-rigging evidence included: · Jeff Parker of the Cargill Group; · Terry R. Dewitt of J-Hawk (FirstCity Financial Corporation of Waco, Texas, a Cargill investment and joint venture partner); and · Michael Nathans of Penn Capital Corporation. 

As its source for alleged insider-trading evidence, Ervin referenced: · William Richbourg of the FHA Comptrollers Office. Since the loan sales commenced, in addition to this qui tam lawsuit, Ervin has sued HUD and several former HUD officials personally and - according to the General Accounting Office - filed 37 bid protests concerning HUD contracting actions. Hamilton currently is pressing forward with litigation to recover money owed to Hamilton by HUD for work completed pursuant to Hamilton's contract to provide services on the loan sales. "HUD is withholding about $2 million of funds owed to Hamilton for services performed for HUD. 

Hamilton understands that this withholding is at the request of the Justice Department and the party who they delegated the investigation to, the HUD Inspector General," says Catherine Austin Fitts, President of Hamilton Securities and former Assistant Secretary of Housing-Federal Housing Commissioner in the Bush Administration. Hamilton also is moving forward with the suit it filed against Ervin last year for his tortious actions. Hamilton's total losses to date - including losses to former employees and shareholders - are approximately $250 million. "As the lead investment banker on $10 billion of loan sales, we are pleased that we have been able to preserve the integrity of these transactions. We intend now to take whatever steps are necessary to ensure we do as good a job recovering our employees' and shareholders' value as we have done for the taxpayers. Step one is that the unsealing of the qui tam lawsuit should free HUD to meet its outstanding contractual obligations to Hamilton as quickly as possible", says Ms. Fitts. 

For more information on the loan sales investigation, see www.solari.com/gideon. All press inquiries should be directed to Hamilton's attorneys, Michael J. McManus or Kenneth E. Ryan at Drinker Biddle & Reath LLP (202/842-8830, ; or 202/842-8807, ).   


11. 5 MAY 10, 2000 HARVARD ENDOWMENT & CAPRICORN SELL LARGEST HUD MULTIFAMILY MORTGAGE BROKER.

Sale of WMF Group by Harvard and Capricorn On May 10, 2000, Prudential Mortgage Capital Company, LLC, a Delaware limited liability company, entered into a Stockholders Agreement (the "Stockholders Agreement") with each of Capricorn Investors II, L.P., Capricorn Holdings, Inc., Demeter Holdings Corporation, Phemus Corporation, Commonwealth Overseas Trading Company Limited, Mohammed A. Al-Tuwaijri, J. Roderick Heller, III, John D. Reilly and Shekar Narashimhan (collectively, the "Selling Stockholders"). Under the Stockholders Agreement, the Selling Stockholders are obligated to tender to Prudential Mortgage Capital Company, LLC their shares of The WMF Group, Ltd. ("WMF") representing in total approximately 65% of the outstanding shares of WMF on a fully diluted basis. 02: Prudential Mortgage Capital Acquisition Corp. is a wholly-owned subsidiary of Prudential Mortgage Company, LLC. Prudential Mortgage Capital Company, LLC is a wholly-owned subsidiary of The Prudential Insurance Company of America.  


12.  MAY 18, 2000 MISSING MONEY AT DEPARTMENT OF DEFENSE FROM SAM SMITH'S PROGRESSIVE REVIEW 

From: http://prorev.com/ Taxpayers for Common Sense http://www.taxpayer.net

The Pentagon’s accounting records are so convoluted that billions of dollars cannot be accounted for, charges a new government report. In fact, no major part of the Department of Defense has ever passed an audit, according to recent congressional testimony by the non-partisan US General Accounting Office, the investigative arm of Congress. Some of the GAO’s findings are astonishing: 

- About 58 percent of the material the Pentagon possesses ($37 billion worth) are items it does not need. 

-  Over the past three years, the Navy lost track of $3 billion in equipment and other items. 

-  At one distribution center for the Navy, there was a backlog of over 122,000 items that had not been properly processed, leading the Navy to purchase items it didn’t need. The GAO testimony follows a March report by the office of the Defense Department’s Inspector General that concluded that the Pentagon’s books were in such disarray that they couldn’t be audited. In fact, the Pentagon’s books are in such poor shape that the military’s money managers last year made almost $7 trillion in adjustments to their financial ledgers in an attempt in make them add up. The Inspector General also concluded the Pentagon could not show receipts for $2.3 trillion of those changes and half a trillion dollars of the adjustments were corrections of earlier mistakes. TAXPAYERS FOR COMMON SENSE http://www.taxpayer.net


13. JUNE 21, 2000 HOUSE VOTE ON HUD APPROPRIATIONS 

From http://thomas.loc.gov/

FINAL VOTE RESULTS FOR ROLL CALL 309 (Republicans in roman; Democrats in italic; Independents underlined) 

H R 4635 YEA-AND-NAY 21-JUN-2000 9:36 PM QUESTION: On Passage BILL TITLE: Departments of Veterans Affairs and Housing and Urban Development Appropriations for FY 2001 YEAS NAYS PRES NV REPUBLICAN 212 5   4 DEMOCRATIC 43 163   5 INDEPENDENT 1 1   TOTALS 256 169   9     --- YEAS 256 --- Abercrombie Gilman Oxley Aderholt Goode Packard Archer Goodlatte Pease Armey Goodling Peterson (PA) Bachus Goss Petri Baker Graham Pickering Ballenger Granger Pickett Barcia Green (WI) Pitts Barr Greenwood Pombo Barrett (NE) Gutknecht Porter Bartlett Hansen Portman Barton Hastings (FL) Price (NC) Bass Hastings (WA) Pryce (OH) Bateman Hayes Quinn Bereuter Hayworth Radanovich Berry Hefley Rahall Biggert Herger Ramstad Bilbray Hill (IN) Regula Bilirakis Hill (MT) Reynolds Bliley Hilleary Riley Blunt Hobson Rogan Boehlert Hoekstra Rogers Boehner Holden Rohrabacher Bonilla Horn Ros-Lehtinen Bono Hostettler Roukema Boswell Houghton Royce Boucher Hulshof Ryan (WI) Boyd Hunter Ryun (KS) Brady (TX) Hutchinson Salmon Bryant Hyde Saxton Burr Inslee Scarborough Burton Isakson Schaffer Buyer Istook Sensenbrenner Callahan Jenkins Sessions Calvert John Shadegg Camp Johnson (CT) Shaw Canady Johnson, Sam Shays Cannon Jones (NC) Sherwood Castle Kanjorski Shimkus Chabot Kaptur Shows Chambliss Kasich Shuster Chenoweth-Hage Kelly Simpson Coble King (NY) Si sisky Coburn Kingston Skeen Collins Knollenberg Skelton Combest Kolbe Smith (MI) Cooksey LaHood Smith (NJ) Cox Largent Smith (TX) Cramer Latham Souder Crane LaTourette Spence Cubin Leach Stearns Cunningham Lewis (CA) Stump Danner Lewis (KY) Sununu Davis (FL) Linder Sweeney Davis (VA) Lipinski Talent Deal LoBiondo Tancredo DeMint Lucas (KY) Tauzin Diaz-Balart Lucas (OK) Taylor (MS) Dickey Maloney (CT) Taylor (NC) Dicks Manzullo Terry Dooley Martinez Thomas Doolittle Mascara Thornberry Doyle McCollum Thune Dreier McCrery Thurman Duncan McHugh Tiahrt Dunn McInnis Toomey Ehlers McIntosh Traficant Ehrlich McKeon Turner Emerson Meek (FL) Upton English Metcalf Vitter Evans Mica Walden Everett Miller (FL) Walsh Ewing Miller, Gary Wamp Fletcher Mink Watkins Foley Mollohan Watts (OK) Forbes Moore Weldon (PA) Fossella Moran (KS) Weller Fowler Moran (VA) Whitfield Franks (NJ) Murtha Wicker Frelinghuysen Myrick Wilson Gallegly Nethercutt Wise Ganske Ney Wolf Gekas Northup Young (AK) Gibbons Norwood Young (FL) Gilchrest Nussle Gillmor Ose   --- NAYS 169 --- Ackerman Green (TX) Olver Allen Gutierrez Ortiz Andrews Hall (OH) Owens Baca Hall (TX) Pallone Baird Hilliard Pascrell Baldacci Hinchey Pastor Baldwin Hinojosa Paul Barrett (WI) Hoeffel Payne Becerra Holt Pelosi Bentsen Hooley Peterson (MN) Berkley Hoyer Phelps Berman Jackson (IL) Pomeroy Bishop Jackson-Lee (TX) Reyes Blagojevich Jefferson Rivers Blumenauer Johnson, E. B. Rodriguez Bonior Jones (OH) Roemer Borski Kennedy Rothman Brady (PA) Kildee Rush Brown (FL) Kilpatrick Sabo Brown (OH) Kind (WI) Sanchez Capps Kleczka Sanders Capuano Klink Sandlin Cardin Kucinich Sanford Carson LaFalce Sawyer Clay Lampson Schakowsky Clayton Lantos Scott Clement Larson Sherman Clyburn Lazio Slaughter Condit Lee Smith (WA) Conyers Levin Snyder Costello Lewis (GA) Spratt Coyne Lofgren Stabenow Crowley Lowey Stark Cummings Luther Stenholm Davis (IL) Maloney (NY) Strickland DeFazio Markey Stupak DeGette Matsui Tanner Delahunt McCarthy (MO) Tauscher DeLauro McCarthy (NY) Thompson (CA) Deutsch McDermott Thompson (MS) Dingell McGovern Tierney Dixon McIntyre Towns Doggett McKinney Udall (CO) Edwards McNulty Udall (NM) Engel Meehan Velazquez Eshoo Meeks (NY) Visclosky Etheridge Menendez Waters Farr Millender-McDonald Watt (NC) Fattah Miller, George Waxman Filner Minge Weiner Ford Moakley Weldon (FL) Frank (MA) Morella Wexler Frost Nadler Weygand Gejdenson Napolitano Woolsey Gephardt Neal Wu Gonzalez Oberstar Gordon Obey   --- NOT VOTING 9 --- Campbell Kuykendall Serrano Cook Rangel Vento DeLay Roybal-Allard Wynn


14. JUNE 22, 2000 FITTS FAMILY AND SOLARI EMPLOYEES SEND LETTERS TO CONGRESS RE HUD'S REFUSAL TO PAY OUTSTANDING DEBTS TO HAMILTON (TRIGGERING HUD ANNOUNCEMENT TO START LOAN SALES AND ASSUME CREDIT FOR $2.2 BILLION SAVINGS) 

Catherine Austin Fitts PO Box 157 Hickory Valley, Tennessee 38042  

June 22, 2000 

Representative Ed Bryant 5909 Shelby Oaks Drive Suite 213 Memphis, TN 38134 

Dear Representative Bryant: 

I am seeking your support for efforts to get the Department of Housing and Urban Development (HUD) to pay $2.1 million (plus interest) to the Hamilton Securities Group (Hamilton), in connection with HUD's program to sell its growing inventory of defaulted mortgages in open competitive auctions to private bidders. My personal interest in the matter is that I am Hamilton's founder and am responsible for closing down the company and ensuring that outstanding bills are collected and monies owed are paid. Hamilton, which is no longer in operation, was an employee-owned business. 

Between 1994 and 1997 Hamilton had a contract with HUD to serve as its lead financial advisor. Briefly, the events surrounding HUD's failure to pay (see greater detail in the attached summary) are these: as the defaulted loans were sold, three things occurred: · First, HUD saved $2.2 billion between 1994 and 1997 as a result of the program Hamilton designed and for which Hamilton served as financial advisor(see summary of attached GAO report); · Second, homeowners in communities benefited as fewer homeowners were displaced (see summary of attached GAO report) and the size of HUD's foreclosed and troubled property inventories decreased; and · Third, as large HUD inventories require large contracts to service defaulted loans and troubled and foreclosed properties, traditional HUD contractors, along with defaulted borrowers, experienced diminished earnings. 

One servicing contractor, Ervin and Associates, filed a Federal False Claims Act case in June, 1996, alleging improper bidding procedures by Hamilton and two of the successful bidders, Goldman Sachs & Company and PNC (Blackrock). The Department of Justice (DOJ's) investigation, which the statute dictates should take place within 60 days, took nearly four years. 

Starting in October 1997, HUD withheld $2.1 million due Hamilton for services rendered and invoiced for work done since 1994, forcing Hamilton to cease operations. It wasn't until April of this year that DOJ, having concluded its investigation, determined that there was no basis for criminal indictment or civil charges. Nevertheless, HUD has yet to pay Hamilton any of the $2.1 million due. I have exhausted not only Hamilton's assets but my personal assets to pay the bills owed by Hamilton when HUD withheld $2.1 million, and legal and administrative costs which arose from the Federal False Claims Act case and DOJ's resulting investigation. 

I hope to pay as much of the remaining obligations as possible. It is only just that HUD pay its outstanding bills to Hamilton. Many former employees and small businesses and consultants are owed money. We did the work that HUD accepted, the profits of which funded HUD programs, and we very much need to be paid what HUD agreed to pay before we did the work. I believe that HUD is not unopposed to paying the $2.1 million owed Hamilton if we are able to demonstrate Congressional support. Therefore, I hope you will support my efforts to have HUD pay its outstanding bills to Hamilton. 

I would like the opportunity to meet with you to outline the merits of our request. Thank you for your consideration to this matter. 

Very Truly Yours,   Catherine Austin Fitts 

cc: Representative, Ed Bryant, 408 Cannon HOB Washington, DC 20515-4207   Attachments: Summary of Events Summary, 3 GAO Reports Summary, Hammer Award Database FBI Letter     Summary of Events   

 Background. Catherine Austin Fitts served from as Assistant Secretary ofHUD and Commissioner of the Federal Housing Administration during the Bush Administration from 1989-1990. After leaving the Administration, in 1991 she founded Hamilton, a small employee-owned company. o Loan Sales: When HUD issued a contract to sell its growing inventory of defaulted loans and foreclosed properties to private bidders, Austin Fitts, who between 1982 and 1989 had been a Managing Director of Dillon, Read and lead banker in its public finance department, competed for and won the contract to serve as financial advisor.   

Greater Proceeds: Hamilton, by using sophisticated computer technology to maximize information available to bidders and ensure greater participation of all bidders, including smaller bidders, was able to generate proceeds far in excess of what would otherwise have been the case. o Greater Recovery Rates: The loan sales themselves improved recovery rates from $.35 to $.70-$.90 on defaulted mortgages. This generated $2.2 billion savings, savings that could then be reallocated to expand housing programs and to reduce the federal deficit. (See summary of attached GAO report.) 

Greater Homeowners' Equity: Subsequent audits by GAO and HUD show that faster resolutions meant more properties remained in the hands of homeowners (See summary of attached GAO report.) and fewer homes and buildings were abandoned, boarded up or in disrepair, diminishing the surrounding homeowners' safety, quality of life, and equity.   

 Federal False Claims Act Case: Hamilton's success did not go unnoticed. Since 1989 a company called "Ervin and Associates" received an estimated $ 7.0 million each year in HUD contracts to service HUD defaulted mortgages and manage foreclosed properties. Ervin's business opportunities diminished rapidly in the wake of HUD's loan sale program. In June, 1996, Ervin filed a Federal False Claims Act case against Hamilton, and two successful bidders, Goldman, Sachs & Company and PNC (BlackRock), charging them with improper bidding procedures and insider trading. The case if successful would yield bounty to Ervin of from 15-30% of the recovery. In October 1997, HUD withheld $2.1 million due Hamilton for services rendered and invoiced to HUD, forcing Hamilton to cease operations; terminated its contract; and cancelled the loan sales. HUD cancelled the loan sales shortly thereafter, although design books prepared by Hamilton and owned by HUD and additional financial advisors on contract made it easy for HUD to continue operationally without Hamilton.   oThe Investigation: DOJ and HUD took four years to complete an investigation the statute dictates should take 60 days, and which generally take one year. In May 1999, DOJ indicated that the criminal investigation was over, In August 1999, the FBI, to which the DOJ had referred the criminal part of the investigation, documented that they found "no concerns, suspicions, or evidence of collusion involving the sales. Even losing bidders did not attribute their lack of success to collusion, or other bidders having inside information." (See attached FBI letter.) In April 2000, DOJ closed its investigation on the civil claims and notified the Court it declined to participate in the case.   

Conclusion: A statute designed to save the government money was used by a company benefiting from the status quo to close an innovative small business which had already saved taxpayers and homeowners substantial sums and would, but for the case, have saved taxpayers and homeowners substantially more.   o HUD still won't pay its debt to Hamilton: As the founder and person who stayed on to close the company, Austin Fitts used her personal funds to liquidate Hamilton's assets to pay employees and creditors; acquire legal representation in connection with the Federal False Claims Act case and DOJ's four-year investigation; and to seek recovery of the $2.1 million due Hamilton. Her personal resources are now exhausted. Even though the investigation has concluded, HUD has still not paid its debt. Instead HUD takes the position that Austin Fitts should prosecute her claim for $2.1 million in the U.S. Court of Claims, which could take years. Litigation against HUD, with resources as limitless as hers are now limited, is as illusory a remedy as a determination, three years and ten months too late, that Federal False Claims Act case was without basis. oRequest for your Support: Austin's family is both Democrats and Republicans with a long-standing tradition as private citizens of active involvement with federal, state, and local government. Her late grandfather, as dean of the Wharton School, conducted research which paved the way for the first unemployment offices in Pennsylvania. Her late father, as chief of surgery at Penn Medical School, used the specialty he acquired serving in the China-Burma-India Theatre in World War II, to regionalize the treatment of trauma throughout the country. One of her uncles, a retired business school professor, counsels in New Hampshire's schools and prisons on alternatives to war. Her brother, as dean of Penn Law School, consults to citizens groups which monitor the integrity of the electoral process. Her late grandfather and step-grandfather, medical partners, worked with the U.S. Senator, our great uncle, to bring penicillin to Tennessee. Her late aunt served on the local school board in New Hampshire. Another uncle, an academic surgeon, built the first organ bank in South Carolina. Her stepmother works to ensure that women are appropriately represented on Tennessee's juries. One of her uncles, trained also as an engineer and lawyer, serves Tennessee directly as chief architect, to ensure that it's public buildings are safe, functional, and attractive. Her sister serves as vice president of the Massachusetts Lawyers' Alliance for World Security, which works to advance the rule of law as an alternative to war. Her cousin in Hickory Valley, Tennessee serves on our city council and supports her husband in helping the local farm bureau and co-op and promoting conservation efforts. The events described here, and their effect on a small business and personal assets within the family, have shaken our family's confidence in government and the judicial system. HUD's immediate payment of what it owes Hamilton would help to restore our confidence. 

Summary of GAO Reports   On Savings to Taxpayers from Loan Sales: Housing Finance: Budget Savings From the Sale of HUD Loans (Letter Report, 07/19/1999, GAO/RCED-99-203). Defaults on mortgages insured by the Department of Housing and Urban Development's (HUD) Federal Housing Administration (FHA) increased during the 1980s, primarily because of weak real estate markets. By the early 1990s, HUD owned nearly 110,000 single-family and 2,400 multifamily loans that it had insured. In a series of six sales held between 1994 and 1997, HUD sold 98,640 single-family loans and 1,093 multifamily loans. The sales generated more than $2.2 billion in budgetary savings. This report discusses the reasonableness of (1) HUD's estimates of budgetary savings from the sale of its single-family loans and (2) the model HUD used to estimate savings from the sale of multifamily loans. GAO concludes that HUD's estimates of budgetary savings from the sale of the single-family loans it reviewed were reasonable. 

--------------------------- Indexing Terms ----------------------------- 
REPORT NUM: RCED-99-145 TITLE: Homeownership: Information on Single-Family Loans Sold by HUD DATE: 06/15/99 SUBJECT: Mortgage programs Mortgage loans Foreclosures Reductions in force Human resources utilization Loan defaults Loan repayments Internal controls Financial management IDENTIFIER: HUD Single Family Mortgage Assignment Program     On Management Problems from Growing Inventories Since Loan Sales Cancellation and Drop in Recovery Rates: Single-Family Housing: Stronger Measures Needed to Encourage Better Performance by Management and Marketing Contractors 

(Testimony, 05/16/2000, GAO/T-RCED-00-180). Pursuant to a congressional request, GAO discussed the Department of Housing and Urban Development's (HUD)-single family housing, focusing on the implementation of its management and marketing contracts. GAO noted that: (1) HUD has experienced widespread problems with the management and marketing contracts since they started in April 1999; (2) property maintenance and security, which was a problem under HUD's previous property disposition approach, remains a significant problem; (3) although monitoring improvements have aided HUD's ability to detect such problems, these improvements have not had a sufficient impact in remedying them; (4) in addition, older properties have accumulated in inventory as the contractors have focused their sales efforts on the newly acquired, more saleable properties; and (5) also, while HUD encourages contractors to sell properties quickly, it does not provide incentives for the contractors to focus on properties that have been in inventory for a long period of time. --------------------------- Indexing Terms ----------------------------- 
REPORTNUM: T-RCED-00-180 TITLE: Single-Family Housing: Stronger Measures Needed to Encourage Better Performance by Management and Marketing Contractors DATE: 05/16/2000 SUBJECT: Housing programs Contract administration Marketing Federal property management Internal controls Mortgage programs Property disposal IDENTIFIER: HUD Good Neighbor       
Summary of Hammer Award on HUD Loan Sales     Title: Mortgage Sales Team Hammer Awards AGENCY INFORMATION Agency Name: HUD\FHA Subagency(ies): FHA Location: District of Columbia\Washington Nominating Entity: HUD REINVENTION TEAM Team Name: Mortgage Sales Team Team Contact Person: Audrey Hinton & Joe McCloskey Phone/Fax/Email: (202) 708-3730 & (202) 708-1672 Address: 451 7th Street, S.W. City: Washington State: District of Columbia Zip Code: 20410 Program Area: Back to Basic/Streamlining Brief Description: HUD launched an aggressive program to sell defaulted single family and multifamily HUD-owned mortgages. By 1994, HUD owned almost 2,700 multifamily mortgages valued at more than $7 Million. HUD's single family holdings included 92,000 mortgages valued at about $4 Billion. The work required by these holdings adversely affected HUD staff's ability to perform its principle function of servicing and managing the insured mortgage inventory. Now, with fewer HUD owned mortgages, resources are available to ensure homeowners and residents receive good customer service. Agency Contact: Rick Greenfield 202-708-2733 NPR Contact: Jerry Nikolaus 202-632-0391   PRESENTATION Date of Award: 12/11/96 Location: Washington, D.C. Award Presenter: Secretary Cisneros     

FHA COMMISSIONER ANNOUNCES RECORD RETURN ON SALE OF SINGLE FAMILY LOANS WASHINGTON – Housing and Urban Development Assistant Secretary for Housing/Federal Housing Commissioner William Apgar today announced the record-setting results of the Federal Housing Administration's (FHA) highly successful sale of single family loans to the private sector. On September 22, 2000, FHA auctioned 8,053 single family loans (SFLS 2000-1), with an unpaid principal balance totaling $480,868,067. The sale generated gross proceeds in excess of $467 million, or 97.2% percent of the unpaid principal balance of the mortgage loans. Market participation was very strong as evidenced by the fact that the return is the highest generated to date in the agency's mortgage auctions. Salmon Brothers Realty Corporation was the sole winning bidder of the portfolio. Bidders were permitted to submit bids on individual blocks of mortgages as well as combinations of mortgage blocks. FHA determined the bid or bid combinations that provided the maximum return to the taxpayers. "We couldn't be more pleased with this sale," said Apgar. "FHA's mortgage sales have produced over $2.25 billion dollars in budget profits since 1994. These funds continue our housing and neighborhood initiatives and help reduce the deficit. The sales also reduce the burden on HUD administrative personnel, allowing them to concentrate on expanding homeownership and protecting the health of our $400 billion mortgage insurance portfolio." FHA, which is part of HUD, has a wide variety of insurance programs for single family, multifamily and health care facility mortgages. Last year, it insured a record 1.3 million mortgages worth $125 billion. FHA now insures a total of about 6.7 million mortgages for homes located across the country. Through the years, it has unlocked the door to homeownership for 30 million American families, many of them minorities and low or moderate income people. The success of this sale is attributed to the team efforts of the FHA's newly established Asset Sales Office, which is staffed by Karen L. Williams and Mary Joyce Smith. Both are on detail from the Federal Deposit Insurance Corporation's Franchise and Asset Marketing Department with extensive experience in asset sales. Ms. Williams is in charge of the sales office. Ms. Smith was responsible for the coordination of the public and private sector teams involved in the sale. Three private sector firms assisted HUD in this sales effort. Myerberg & Company, L.P., a New York based investment banking firm, was the Transaction Specialist responsible for the marketing and sale of the portfolio. Gardiner, Kamya & Associates, P.C., a management consulting and certified public accounting firm located in Washington, D.C. provided Due Diligence service. Federal Asset Advisory Company, LLC., Program Financial Advisor, a joint venture real estate investment banking firm with offices in New York and New Jersey provided program oversight. The Multifamily & Healthcare Loan Sale is scheduled for November. For additional information see the HUD Asset Sales Website at: www.hud.gov/fha/comp/asset/hsgloan.html   


15. JUNE 29, 2000 ASSOCIATED PRESS REPORTS ON RECENT SENATE GOVERNMENT REFORM HEARINGS RE GROWING DEFAULTED PORTFOLIO (NO LOAN SALES) 

(Note: Various local papers in Memphis, Boston, run articles on HUD foreclosure issues triggering foreclosure moratorium in selected areas by HUD; no mention is made of missing $59 billion or HUD's inability to get financials certified)   

To view the entire article, go to http://www.washingtonpost.com/wp-dyn/articles/A30181-2000Jun30.html

U.S. Conducting 240 Probes of Possible Mortgage Fraud About 240 criminal investigations into possible mortgage fraud are underway in 38 states, including Maryland, and the District of Columbia, federal officials said yesterday at a Senate hearing.

The officials from the inspector general's office of the Department of Housing and Urban Development testified at a two-day session on whether the federal government is facilitating a fraudulent practice known as property flipping. The inspector general's office joined critics who contend that HUD and the Federal Housing Administration fail to properly monitor lenders and appraisers on federally backed loans.

Home buyers nationally are complaining about fraud and abuse in mortgage practices, generally referred to as predatory lending.

Flipping occurs when dilapidated properties, often in distressed neighborhoods, are bought and quickly resold, with only cosmetic repairs and wildly inflated prices. Usually the buyers are unsophisticated first-timers who cannot afford repairs and also make the mortgage payments. The homes often go to foreclosure. 

The HUD inspector general's office has been working with federal prosecutors in six regions of the country since 1999 to detect mortgage fraud by lenders and appraisers. Yesterday, federal prosecutors said they are investigating the inspector general's findings of fraud in the Washington area.

Channing Phillips, a spokesman for the U.S. attorney's office for the District, said he could not comment on the size or scope of the investigation.

The inspector general's office also would not comment.

At the Senate hearing yesterday, Philip Kesaris, the assistant inspector general for investigation, called the flipping schemes "the fraud du jour."

According to HUD Inspector General Susan Gaffney, "Massive property-flipping schemes involving FHA-insured mortgages continue to be uncovered" in locations such as New York, Baltimore, Chicago and Los Angeles. 

Gaffney said one investigation involves 1,200 FHA-insured loans totaling more than $160 million. About 25 percent of the loans have already resulted in defaults. Gaffney said "about 100 individuals employed in various segments of the real estate and lending industry requested and paid for" fraudulent documents in the loans.

Sen. Susan Collins (R-Maine), chairman of the Governmental Affairs investigative panel that held the hearings, argued that the FHA and HUD encourage flipping by failing to properly oversee loans and to bar "bad actor" lenders and appraisers.

The FHA's role is crucial in cases of flipping, according to these critics, because it insures the loan, gives what appears to be a government stamp of approval to buyers and ends up paying the lender back if the property is foreclosed. The FHA last year insured 1.3 million loans with an all-time record value of $125 billion.

Collins repeatedly disputed Federal Housing Commissioner William Apgar's contention that flipping involving FHA loans is "isolated." 

Collins said her staff's nine-month investigation found "the federal government essentially has subsidized much of this fraud."

HUD Inspector General Gaffney also called on HUD to tighten controls. Gaffney said HUD has halved its housing staff, "overly relied on contractors" to monitor loans and appraisals and missed "obvious fraud indicators."

Collins also released a General Accounting Office report that said HUD needs to "significantly improve" its process for approving lenders.

Apgar claims the monitoring staff has increased "seven-fold" and says most flipping is occurring in the sub-prime market, in which high-interest-rate loans are made to people with poor credit. Federal insurance is not involved.

Yesterday Apgar said flipping was "isolated to what we call hot zones," such as New York, Chicago and Baltimore, "where there is a significant ring of fraud." 

The FHA, HUD and the Treasury Department have pledged for years to fight predatory lending, and recently outlined another series of regulatory steps and legislative proposals. HUD announced initiatives on flipping--including requiring lenders to restructure inflated mortgages--the day before Collins's hearings.     

Senators Denounce Mortgage Abuses 
By Marcy Gordon AP Business Writer Thursday, June 29, 2000; 1:07 p.m. EDT

 WASHINGTON –– Senators of both parties complained Thursday that the government had failed to adequately monitor lenders in the federally-insured mortgage business, and that the unchecked abuses left some homebuyers with crumbling houses and unaffordable payments. At a hearing Thursday, several senators denounced the practice of property flipping – buying homes, often in distressed urban neighborhoods, making cosmetic repairs and quickly selling them at sharply higher prices. The Department of Housing and Urban Development has contributed to the problem with lax oversight of lenders, they said. 

HUD officials, for their part, maintain that instances are isolated of property flipping involving government-backed mortgages. Sen. Barbara Mikulski, D-Md., said HUD Secretary Andrew Cuomo "responded immediately" after she complained to him that the agency had become "an accomplice to the flippers" in Baltimore because of insufficient oversight. "This hearing is about government letting people down," Sen. Richard Durbin, D-Ill., said after the Senate Governmental Affairs investigative subcommittee heard testimony from three homebuyers who were duped by unscrupulous lenders, real estate agents and lawyers. HUD has been "failing to keep an eye on these lenders," Durbin said. Sen. Susan Collins, R-Maine, who heads the panel, said property flipping "increasingly plagues our nation's cities and victimizes first-time homebuyers." She said HUD "has been slow to act to curtail this fraud. ... Surely, HUD has a duty to protect the unsophisticated homebuyers who are the targets of these fraudulent sales and lending practices." Subcommittee investigators found frequent instances of fraud, such as inflated property appraisals and falsified documents attesting that homes have been renovated, in their nine-month inquiry into property flipping. 

While flipping is legal in and of itself, fraudulent practices often are used to lure buyers into investing more money in houses than they are worth. Unsuspecting buyers can be left with dilapidated houses with only minor cosmetic repairs made to jack up prices, as well as high mortgage payments, tarnished credit records and possibly foreclosure. The investigation turned up problems in Baltimore, Chicago, Los Angeles, New York City and South Florida. Collins and Durbin cited a new report by the General Accounting Office, Congress' investigative arm, that found HUD has not done enough to hold banks and other mortgage lenders accountable for poor performance and violations. But William Apgar, HUD Assistant Secretary for Housing, maintains that instances of flipping involving government-insured mortgages are "isolated." "We see isolated examples of fraud and we take strong action against it," he said Wednesday in an interview. "One flipped loan is too many." By contrast, Apgar said, most flipping is occurring in the growing high-rate mortgage market for people with poor credit, which does not involve federal insurance. He also rejected the GAO report's criticism of monitoring by his agency, saying it didn't fairly evaluate HUD's oversight programs. HUD has banned 52 lenders from doing government-insured mortgage business in recent years and has established a program to review home appraisers, he noted. HUD's Federal Housing Administration insures billions of dollars in home mortgage loans made by private lenders for low- and moderate-income people. Many of the loans involved in flipping are insured by the FHA, according to Collins. 

The General Accounting Office report concluded that HUD needs to "significantly improve" its process for approving lenders seeking to make FHA-insured loans. "HUD has not taken sufficient steps to hold lenders accountable for poor performance and (FHA) program violations," said the report, which was requested by Collins and Rep. Rick Lazio, R-N.Y., chairman of the House Banking subcommittee on housing. © Copyright 2000 The Associated Press


16. SEPTEMBER 2, 2000 "BUSHWHACKED" IS LEAD STORY ON MEDIA BY PASS AND CONSPIRACY DIGEST WEBSITES, PICKED UP BY NETSCAPE, SIGHTINGS AND DAVID ICKES MAGAZINE.
http://www.conspiracydigest.com

Click. BUSHWACKED: HUD Fraud, Spooks and the Slumlords of Harvard by Uri Dowbenko © 2000.


17. SEPTEMBER 2, 2000 FBI INVESTIGATING HUD OIG IN BOSTON, FORT WORTH AND DC, STAFF SUSPENDED ASSOCIATED PRESS.

Workers in HUD Watchdog Office Suspended for Misuse of Computer 
By John Solomon Associated Press Writer  Sep 2, 2000 - 12:52 AM 

WASHINGTON (AP) - Several employees at the agency that checks for fraud and abuse in federal housing programs have been suspended in an investigation into the use of government computers to obtain sexually explicit materials, officials said. The investigation into the Department of Housing and Urban Development inspector general's office caught Secretary Andrew Cuomo off guard because the watchdog agency didn't inform the department. "We heard about the allegation. We had not been previously informed," HUD Deputy Secretary Saul Ramirez said Friday. "We're obviously very concerned because such use of government computers is clearly a violation of the department's policy." "We have asked for a response from the IG and she has repeatedly failed to provide that response," Ramirez said in a statement. 

In a letter to Ramirez on Friday, Inspector General Susan Gaffney blamed a canceled meeting for the delay and said, "I now look forward to discussing the issue at our rescheduled meeting" next week. A HUD official familiar with the investigation, speaking only on condition of anonymity, said senior auditing employees at the inspector general offices in Washington, Fort Worth, Texas, and Boston have been suspended in connection with the probe. The official did not know exactly how many employees have been suspended. "The investigation involves the improper use of government computers to download sexually explicit materials and, in some cases, the distribution of the materials via HUD e-mail," the official said. A spokesman for Gaffney declined comment. 

All Cabinet departments and other major federal agencies have an independent watchdog office of inspector general, responsible for guarding against waste, fraud and abuse. The official said the allegations of the misuse of computers by HUD inspector general employees was overseen by the President's Council on Integrity and Efficiency, which monitors the conduct of the inspector generals. The council used FBI agents and investigators from the Labor Department's IG office to conduct the investigation, according to officials and documents. Documents obtained by The Associated Press show investigators requested computer usage logs for 10 HUD inspector generals' employees showing which Web sites they visited during 1999. The request was made last December. The senior HUD official told the AP the suspensions were handed out within the last few weeks. Calls to the offices of three employees on the list this week confirmed they have been placed on leave. 

Rep. Tom Lantos, D-Calif., wrote Gaffney on Friday expressing concerns that workers within an agency charged with guarding against abuse were involved in misusing computers. He also chided Gaffney for not telling HUD officials earlier. "I have received reports that senior members of your office have been subjected to disciplinary actions, including suspensions, for accessing and downloading pornographic material from the Internet during the workday using their HUD computers and transmitting such materials using HUD's e-mail system," Lantos wrote. "In my view, it is clear that you are required to advise both Congress and HUD senior management about these matters," he added. The HUD matter comes just a few weeks after the White House acknowledged that a handful of its employees were reprimanded and one was suspended without pay a year ago for downloading pornographic material from the Internet. 

AP-ES-09-02-00 0052EDT © Copyright 2000 Associated Press. Brought to you by the Tampa Bay Online Network


18. SEPTEMBER 5, 2000 FROM THE WILDERNESS DISCLOSES POSSIBLE HUD AND PROMIS CONNECTIONS "FROM THE WILDERNESS" IS IN THE NEWS: UPDATES AND HIGHLIGHTS SEPTEMBER 5, 2000 

Publisher/Editor Mike Ruppert was sourced in the "Toronto Star" for a breaking story on investigations by the National Security Section of the RCMP in connection with Promis software. Ruppert has also been interviewed recently by "The Washington Post's Michael Dobbs" on the same subject. Although not central to an evolution of the nearly 20 year- old saga of this legendary software created by, then stolen from former NSA programmer Bill Hamilton, Ruppert was able to provide RCMP investigators with documents from former Green Beret William Tyree linking Promis to, among other things, billionaire banker Jackson Stephens. The saga of this modified and apparently treacherous software that allows secret viewing of sensitive data bases has twisted back into the national security interests of Canada. It has also emerged as a possible factor in the four year persecution of former Assistant Housing Secretary Catherine Austin Fitts by HUD and the Department of Justice.


19. SEPTEMBER 6-8, 2000 NEWSMAKING NEWS PUBLISHES ITS HARVARD SERIES, INCLUDING INFORMATION ON HARVARD INVESTMENTS IN HUD AND HARKEN AND RUSSIA AND PUG WINOKURS INVOLVEMENT WITH DYNCORP, PROMIS AND PLAN COLUMBIA.
https://newsmakingnews.com/catharvardindex.htm  

HOW THE MONEY WORKS AT HARVARD
The Money Lords, the Drug Lords, the Slum Lords, the "Pug Winokur Data Dump".
    

UPDATES:
Click. THE PROMIS-LIKE PROFITS OF THE  HARVARD ENDOWMENT
by Catherine Austin Fitts © 2000 

Click. THE MONEY LORDS OF HARVARD: HOW THE MONEY WORKS AT THE WORLD'S RICHEST UNIVERSITY.
by Catherine Austin Fitts © 2000

WHY THE HARVARD CORPORATION PROTECTS THE DRUG TRADE. by LINDA MINOR © 2000.  Click. Part 1.  Click Part 2.Click Part 3.
Click. THE "PUG WINOKUR DATA DUMP." by the Octopodes.
Click. BUSHWACKED: HUD Fraud, Spooks and the Slumlords of Harvard by Uri Dowbenko 
© 2000.


20. SEPTEMBER/OCTOBER, 2000 AL MARTIN’S THE CONSPIRATORS REVEALS HUD-IRAN CONTRA FRAUD, SAYING THAT OLIVER NORTH REFERED TO HUD AS FOLLOWS "HUD IS THE CANDY STORE OF COVERT OPERATIONS."

 http://www.almartinraw.com

Frankly, I've always agreed with that idea, that it's better for the people themselves not to know the whole truth. I've always thought that.  And it is that very notion that has allowed the fraud to happen. It allowed it to go forward. It allowed it to expand.

It's what George Bush had said to me privately once when I was at a dinner with
him in Miami in late 1985. Jeb was there and Felix Rodriguez was also there. The whole cast of characters.

But George Bush, Sr. always said that his concept of government, what he believed
in, and how he had always operated, was on the Big Lie principle.

Of course, we all know what the Big Lie principle is.

Essentially it's what allowed Iran­Contra fraud to happen and to foster other frauds
­­ to increase into enormous amounts of money, way beyond what was envisioned.
Because if it all ever was put together under one roof, the people would be much
less likely to believe that such an enormous and intricately woven conspiracy could
ever exist.

It's much easier for people to believe one $300 million deal was bogus over here
and another $400 million deal was bogus over there than to understand that there
was a chain of conspiracy between all these deals.

And, of course, the public are the ultimate bagholders.

Speaking of Iran­Contra Real Estate Fraud, another interesting angle that has not really been looked into is the international component of these frauds (not all of
them, of course) but the international component in some of these real estate
frauds, particularly the larger ones.

The media's never been keen on piecing the international components into these
frauds because of the obvious limitation of space, of column inches, it takes to put in
a lot of factors. A lot of components. A lot of operations internationally.

Also there's this generalized fear that if you start talking about the international
aspects of these frauds and involvement of foreign banks and foreign real estate
companies and the conservative politicians those companies are linked to in their
own nations, then you start to get into that Big Conspiracy that everyone likes to shy
away from.

But in fact, I will devote more timein the future to the foreign connections.
A good example in Iran­Contra Real Estate Fraud was the connection between
Olympia & York Development Group in Canada and its U.S. subsidiary, The
Cadillac Development Group, headquartered in Miami, which was very closely
aligned with Jeb Bush.

You will see that many of Jeb Bush's fraudulent real estate deals also involve the
Cadillac Investment Company and this was particularly true of busted out HUD
deals, which were always the most profitable of all.

These were the so­called Section 8 busted out HUD property deals that could be
refinanced endlessly ­­ and on a tax­free basis, no less.

Or they were virtually tax­free because of the tax incentives offered on Section 8
property.

That was the most common way of repackaging of HUD property ­­ Section 8
development deals.

That's why you would see Bush Codina or Cadillac Investment Group real estate
signs in the worst sections of major cities ­­ the black areas, the Latino areas, and
places where there was a lot of Section 8 HUD housing.

In Section 8 housing, there was never a lot of scrutiny.

Those deals were designed, so that they could be set up very easily, financed very
easily, and they wouldn't be scrutinized that much.

That was the original pre­Iran­Contra notion as a matter of fact ­­ how to entice
money into low income housing. There was horrendous fraud committed within
that Section 8 housing. At least half of all of the repackaged HUD deals I marketed
for others were busted out Section 8 deals that were being picked up again and
refinanced. HUD had already wiped it off or taken the loss and they would essentially transfer the property a second time for fresh money. What would happen is there would a secondary default, then a tertiary default, and on and on.

For instance, there was a development in Miami, a HUD Section 8 development,
which is a huge complex. It was over 830 apartment units spread all along the
Overtown, Hialeah border. It was mixed black and Latin low income.
That one deal was busted out and picked up seven times from 1984 to 1986 and
refinanced seven times. The same piece of property. Not one penny was ever spent
to improve the property.

Ultimately there was $83 million sucked out of it seven different times. And HUD
took it on the chops each time.

But it's a great deal to look at. It was called Blackbird.

The name of Bush's deal for it was the Blackbird Investment Group, Ltd. Blackbird. Get it?

Guess who one of the general partners were? Who had the codename Blackbird?

Richard Secord, of course. 

24. Iran­Contra Real Estate Fraud

I'd like to break down frauds by regions, to give the reader a better idea of how
Iran­Contra fraud, weapons trafficking and narcotics, was principally undertaken in
so­called Iran­Contra­friendly states.

These are states which had very solid Republican governors and very solidly
Republican bureaucracies that could be controlled.

When hearing about Iran­Contra states, we tend to immediately think of Florida or
Texas or Nevada or Arizona ­­ the better known Iran­Contra states.

One seldom thinks of Connecticut or Illinois, where there was extensive Iran­
Contra activity, particularly in real estate and banking fraud.

And speaking of Connecticut, a serious student of Iran­Contra would remember
the Jeb and Neil Bush instigated real estate fraud in Connecticut involving the
Mohawk Indian tribe, which later became known as the Carrollton Development
Swindle.

That was the proposal Jeb and Neil had become involved in ­­ to build a casino
under the Indian Rights Act in concert with the Mohawk Indian tribe in
Connecticut.

The long and short of it is, of course, the Mohawk Indian tribe wound up getting
swindled out of approximately $4 million before the deal fell apart.

Subsequently, they did try to squawk about it a great deal.

The New York Times became involved, and did several pieces on it pointing out
the fraud.

One of the Indian leaders, in fact, did go talk to Congressman Jack Brooks who was
then Chairman of the House Judiciary Committee.

Of course, nothing was ever done because the Mohawk Indian tribe understood
that if they were to continue to push their complaints regarding Jeb and Neil's
activity in swindling them, it was very likely that the State of Connecticut would
have revoked their charter rights to build casinos and bingo powers and that type of
thing.

So frankly, the Indian tribe just walked away from it and took the $4 million hit
and kept its mouth shut after that.

Another interesting fraud state to look at is Illinois.

I was extensively involved in marketing Illinois­based deals, and marketing to
people in Illinois. This was under the guise of marketing to the "right" people as it
were ­­ not just average investors. Illinois at that time was controlled by Republican Governor Thompson, who is very closely aligned to the Bush faction. And certainly, he profited quite handsomely from Iran­Contra fraud in many of the oil and gas frauds perpetrated in Illinois.

For instance, I was present at the Whitehall Hotel on East State Street in downtown Chicago when the Governor was paid a bribe in cash. Not a bribe. That's the wrong word. He was paid his "percentage," shall we say, for a series of deals involving Dr. Keller and that slimy Republican­connected promoter in Chicago, the famous CPA, Al Barrish.

In Chicago proper, you tend to think of Cook County as being solidly Democrat.
But it never has been. That was particularly true in the mid 1980s.

There was a very small, but well financed and cohesive, cell of Republicans that
operated within Cook County. These Republicans were led by a Cook County judge
named Harold Gordon, who bird­dogged deals for me in Illinois. And he was very
good. Very well­spoken, and naturally the title of Judge helped.

So every time I was in Illinois, he would lend credibility to transactions by being
there and he did quite well for himself.

How we paid him off consistently, by the way, was by giving him cheap stock all
the time in deals that we were pumping up. We let him buy stock for, let's say,
twenty cents a share in some penny deal, and then we'd let him get out at eighty
cents a share. This was a common way of paying people back because the transaction
seemed perfectly legitimate.

Gordon made a lot of money ­­ in the hundreds of thousands of dollars because of
us. He was personally friendly with Governor Thompson and knew many
Republicans in Cook County. The very same Republicans who were GOPAC
members were involved in supplying us with money by investing in these
fraudulent deals.

Another large Iran­Contra profiteer in Illinois was Congressman Henry Hyde, who
profited enormously on that Oak Brook Savings and Loan series of transactions.
They were known as the Glenwood and Glenbrook Realty Limited Partnerships.
Jeb, Neil and George Jr. all had a piece of it, and, of course, those Glenwood and
Glenbrook deals were just out­and­out fraud. I mean, you can't put it any other
way. There wasn't even any pretense to make these things look legitimate. It was
just out­and­out fraud.

The Oak Brook Savings and Loan took it on the chin for $8 or $9 million dollars in
that deal. He personally profited by a million dollars. And of course, Hyde was forced to disgorge some of it and had to pay $800,000 in congressional fines when he
was secretly censured because of this transaction.

Pursuant to Iran­Contra activity, Chicago worked the way Miami did. There was
one FBI officer who was in control of political liability suppression later on, and
who monitored all of these deals. The same split faction. That is, you had a faction
that didn't know what was going on, and then the faction within this FBI office that
did know what was going on. And it was not the FBI's own office in Chicago, but it
was a small ancillary office in Mt. Prospect, Illinois which handled the suppression
later on.

You will see that the subsequent indictments ­­ after Iran­Contra fell apart ­­
generated out of Illinois, came from that Mt. Prospect office.

All of the subsequent investigations during the Iran­Contra cover­up (so that
those investigations could be controlled and where they would lead to could be
controlled) were generated out of the Mt. Prospect, Illinois office.

Chicago is also notable in my mind insofar as most of the Iran­Contra Carribean­
based real estate fraud (of which there was much) was based out of Chicago.
The reason this was the case, by the way (people often speculated why Chicago) is
because most of those Carribean development frauds were run by two guys, Peter
Green and Bill Lucher.

Lucher, of course, was a very close friend of Ollie North. Both Secord and North
often had disguised interests in Iran­Contra Carribean­based real estate development
fraud, like the North­controlled Intercontinental Industries, SA and/or the Secord­
controlled Stanford Technologies Overseas International, SA.

One of the deals that stands out that I had helped to market was that St. Lucian
development deal, which was a fraud. We were able to successfully market a lot of
that deal through GOPAC members.

That deal only fell apart when it became evident that the St. Lucian government
never intended to grant the building permits for the development because the land
that had been optioned to supposedly build this luxury townhouse community and
yacht club (the typical fraudulent Carribean development) was in an
environmentally sensitive area of St. Lucia.

There was no way the St. Lucian government was going to issue the permits to
build this development on the land.

The land, as a matter of fact, wasn't even suitable. You couldn't build anything on
it. It was swampy sort of land. But we kept that deal going right until 1986. That
was a nice choice fraud ­­ about $13.5 million was raised from that fraud. Richard Secord profited directly, I would guess, by a half million dollars or more.

North probably profited to the same extent through his Intercontinental Industries, SA, although as it has been noted before, it was not North himself. North never really profited personally from any of these transactions, unlike Secord. North, in some cases, used money from the Intercontinental Industries to finance illicit covert operations in Central America, as well as the purchasing of weapons. This was particularly true after early 1986 when congressional money
dried out.

Of course, to get away from real estate fraud for a minute, Illinois was also a choice
area, particularly southern Illinois around Alni, Illinois, where there was some oil
production on the border of Kentucky.

That whole area was used for Iran­Contra oil and gas fraud.
Our principal guy in Alni was named Royce, who owned a little public shell called
the Royce Development Group, which was later changed to the name on the pink
sheets of Dutch Creek Petroleum.
That's when we tried to pump it up again.
Carl Royce was the individual behind it. He was subsequently indicted and got, I
believe, a ten­year sentence for fraud. He was made the designated fall guy, shall we
say.
But we pumped up that Dutch Creek Petroleum deal from about eight cents a
share to maybe sixty or seventy cents a share before we pulled the plug on it.
We sucked a lot of money out of that fraud, and Al Barrish, as a matter of fact, was
the guy that would package this stuff up into highly leveraged oil and gas
partnerships ­­­ three to one or four to one write­offs, this type of thing ­­ so that
"investors" could actually pull their money out of the deal within two years ­­
before the deal fell apart, with the tax incentives.
We see in the 1990s that the IRS reversed a lot of these oil and gas tax shelters that
had enormous tax leverages in that there were hundreds and hundreds of limited
partnership deals.
And people had to pony up some pretty big tax money because of it.
But look at the deals that were not reversed ­­ they had extreme leverage. That
tells you where the politics of the situation were. Of all the deals I marketed, not
one was ever reversed by the IRS.
We see deals that were reversed were often deals that had been marketed by larger
security firms that were in fact genuine deals ­­ not a politically oriented transaction
to raise illegal covert monies. But I marketed over 300 deals and not one of them was ever reversed later on.
Also, I wanted to mention another Iran­Contra state in terms of fraud ­­ not only
real estate fraud, but also mining fraud ­­ Nevada.
People have often asked me why there was so much corporate fraud concentrated
in Nevada. It's because of the control that Bush had within the Nevada Secretary of
State's office.
After all, the Secretary of State was a very close associate of George Bush ­­ the
infamous Frankie Sue DelPapa. She was later investigated umpteen times in the
late 1980s and early 1990s, but no charges were ever proven against her.
She was investigated for having substituted corporate records, which in fact, she
did. That's one reason she was there. She made corporate records disappear, and
she did substitution of corporate records.
The Bush faction had such incredible control in the State of Nevada that you could
literally commit fraud with absolute impunity. When you have a sympathetic
Secretary of State who's prepared to destroy corporate records, or alter corporate
records, or actually substitute corporate records and steal other people's
corporations, which DelPapa did, it's incredible what you can get away with. And
what we did get away with.
In the Nevada series of mining property deals that we did, they were mostly
sponsored under the Glory Hole Master Limited Partnership Development, which
was actually Colorado­based, but extended deals also into Nevada.
Students of Iran­Contra would remember that the Glory Hole mining properties
were controlled in Colorado. The control was through retired CIA and FBI agents ­­
all of the Board of Directors, the Trustees ­­ everybody was either retired CIA or
retired FBI.
To make those deals work, it involved a lot of Republican judges. There was Judge
Ed Barnes, who was a state district judge in east Texas, Judge Barnhill in Colorado,
and Judge Nottingham in Colorado.
These judges were subsequently investigated.
None were ever indicted, but they were subsequently investigated for surreptitious
investments they made, actually paper investments they made in certain mining
deals and reaped just enormous rewards for monies that they had never actually
invested ­­ except on paper.
Speaking of judges, this borders on another subject that we haven't really got into
and that's judicial involvement in Iran­Contra frauds.
The connection between U.S. Attorney's offices and certain federal judges, and even State Attorney General's offices and certain state, district or circuit judges
wherein Iran­Contra sensitive criminal fraud cases would be consistently
investigated by the same parties within those state or U.S. Attorney's offices.
These cases would consistently wind up in the jurisdiction of certain Republican­
appointed judges to make sure that the outcome was what everybody wanted to see
the outcome to be.
You'll see there were plea bargains in these cases.
In cases where the designated fall guy didn't like the idea of being the designated
fall guy and wanted to put on some sort of so­called CIA Defense (which of course
has much broader implications than just the CIA), you will see that the people who
tried to do that didn't fare so well.
They received very long prison sentences, and often the judges (it's particularly
true in Miami) would close their courtrooms to the media when there was an
uncooperative designated scapegoat.
They would either close the courtrooms or attempt to close the courtrooms.
This finally stopped in 1988 when there were increasing howls from the
Democrats on the Hill and increasing media agitation about this consistent use of
"National Security" in Iran­Contra sensitive fraud cases to keep out the media.
Frankly, the practice was politically untenable after 1988.
In the Nevada properties, there had to be at least the semblance of reality,
particularly in the mining deals. All of the mining deals I marketed in Nevada,
including the Helena Mining deal and the Cosmos Development deal ­­ it was
similar to the oil and gas frauds.
In other words, the oil and gas frauds were based on old beat­out limestone
pumpers that pumped one barrel a day perhaps and had been pumping a barrel a
day for fifty years.
Give them a shot of acid every ninety days, and they'll pump fifty gallons of water
and one gallon of oil a day.
But you just do manipulation of the logs and meters.
You make that one barrel a day appear like three hundred.
The mining deals were mostly the same way. In Nevada, all of the mining deals
that I marketed ­­ the gold, silver, platinum mining deals ­­ were all what's known
as open pit leach mines. And they did, in fact, produce precious metals, but
nowhere near the production we were actually claiming in these deals.
Let's put it that way. People familiar with mining would know that in leach
mining you have to move an incredible quantity of earth. You have to build these enormous pools, which almost look like swimming pools. Then there's the acid and
solution and electrolytic zinc rods which attract the metals from the sands.
But frankly, to make a leach mine profitable, it has to be an incredibly large
operation. Anybody with any brains who visited these sites would have known that
there wasn't anywhere near the amount of metals coming out of these mines that
what we claimed.
Thanks to our Nevada friends in the Bureau of Natural Resources in Nevada,
which was very solidly Republican controlled, we could easily manipulate it to
make it appear that much more was coming out of these mines than there actually
was.
The final Iran­Contra note I wanted to make about Nevada was the egregious
swindle that George Bush Sr. himself instituted in concert with Frankie Sue
DelPapa on that Cosmos Development deal.
The scenario in question later became known as the Peruvian Gold Certificate
Swindle, where DelPapa actually substituted corporate records.
Bush had formed a corporation with a very similar sounding name. This was so
commonly done ­­ mimic corporations with similar sounding names.
You simply substitute the records and it was an out­and­out swindle of the
Durham family. This is the scenario that the famous California conspiracy theorist,
E.E Eckert, got involved in.
Of course, he pounded away on this conspiracy for years in that little rag sheet he
printed, The Contact.
And he actually presented a pretty good case of it. We're talking about a man and
his staff of about three guys who spent years investigating this fraud. And they did
have it put together awfully well.
But it was such an egregious fraud, an out­and­out theft by George Bush.
What Eckert did was to connect this fraud to ever larger frauds. He connected this
gold certificate fraud into big money, tens and hundreds of millions of dollars in
bank loans at Banque Paribas, Credit Lyonnais, Union Bank of Switzerland.
This is also part of the National Bank of Greece swindle that was instituted by
Prime Minister Papandreou and George Bush together.
As a matter of fact, Bush's attorney, C. Boynton Grey, flew to Athens.

You would see his travel records to the same places all the time ­­ to Paris, Zurich
and Athens.

Eckert did a good job of pointing out who he met with ­­ the President of the
National Bank of Greece, for instance. This wound up being an enormous swindle in the end and this is what is called the Grade One Swindles in Iran­Contra. These are the swindles that nobody is ever going to want to look at because it gets far too close to the way everything works and what it's really all about.

Eckert for a long time tried to get the major media interested in it.

And they would bite. ABC bit a couple of times on it. As long as the fraud could
be contained, to say, "Well, it's just a small $75 million fraud, and Bush was
connected to it."

But the minute Eckert was able to show that this was up in the clouds . This is one
of the frauds in the clouds that makes the world go around, that ultimately were to
involve Daiwa Bank and Sumitomo Bank.

It's an interesting example.

They had hired me at one time as a consultant to provide some further information for them, which I did.

They needed some connecting pieces of the puzzle.

But this is a very interesting fraud that an entire book could be written about. It's a
fraud that starts out with a $50,000 investment by George Bush. Ultimately it grows
into a $2 or $3 billion international bank fraud.

How? By simply rehypothecating loans and/or borrowing ever greater amounts of
money, using proceeds to pay back the old loans, or in some cases to partially pay
them back, which was more common.

Then the corporate entity would go bankrupt. Credit Lyonnais was one of the very
few banks to ever admit that it lost money, that it had in fact lost about $68 million
on this fraud.

Of course, they would have no comment when they were asked about George
Bush's involvement with this fraud.

But Eckert knew and the Financial Times London knew that Bush's signature was
on loan papers at Credit Lyonnais.

You may remember this famous scenario. FT London revealed that Credit
Lyonnais had a fire in their reserve document storage facility in Paris and (wouldn't
you know it?) there were three or four file cabinets that got burned up, including all
of the Bush documents. Excerpt from "The Conspirators: Secrets of an Iran Contra Insider" by Al Martin ($29.95), available at 877-776-9004. Al Martin Raw: Iran Contra Conspiracy ( http://www.almartinraw.co)


21. SEPTEMBER 27, 2000 NEWSMAKING NEWS STORY UPDATING HARVARD SERIES FOR ANNOUNCEMENT OF HARVARD ENDOWMENT GAINS. HARVARD ENDOWMENT'S ASSETS HAVE NOW GROWN FROM $5 BILLION TO 19 BILLION IN A DECADE. https://newsmakingnews.com/catharvard9,27,00.htm

HARVARD ENDOWMENT ZOOMS A  THIRD TO $19.2B


Author: By David Abel, Boston Globe Correspondent.  Date: 09/23/2000 Page: F1 Section: Business. Patrick Healy of the Globe staff contributed to this report. 

Harvard, already the world's richest university by far, last year added significantly to its
fantastic wealth: The school's endowment jumped nearly a third, to $19.2  billion from $14.4 billion.

That's larger than the annual budgets of 142 countries, including Cuba, Jordan, and Lithuania.

The $4.8 billion dollar increase alone is larger than the total endowments  reported last year by some of the nation's other top universities, including the Massachusetts Institute of Technology ($4.3 billion), Columbia University ($3.6 billion), and Dartmouth College ($1.7 billion).

Many institutions expect to see a significant increase in their endowments this year, but Harvard's will likely extend its financial lead over other top universities.

What does such a significant increase mean for Harvard's 18,000 students and 2,000 faculty members?

 "I don't think this should signal any kind of sea change," said Joe Wrinn, a Harvard spokesman.

"A university has to think long term and about the cyclical nature of the economy. We don't know what our future needs will be. But we're very appreciative of what the management company has accomplished."

The 32 percent return on the university's more than 8,600 investments was higher than in any other year since 1983. The Standard & Poor's 500 index rose 7.3 percent over the same period.

The principal reason for the jump was a 155 percent return in private equity investments, which includes venture capital. Harvard is one of the few colleges that has enough money to invest in such accounts, which are considered speculative. Still, those investments represent only 15 percent of Harvard's portfolio.

"We've always maintained a well-diversified portfolio," said Jack R. Meyer, president of Harvard Management Co., which oversees the endowment. "We're happy about where it is, and we'll be happy if venture capital does well again. But we're not planning any changes."

Most schools have yet to report their endowment returns. Last year, 34 colleges reported endowments above the billion-dollar mark, and the average rate of return was 11 percent. The highest return was about 29 percent, according to an annual study by the National Association of College and University Business Officers.

"Obviously Harvard has done extremely well," said Damon Manetta, a spokesman for the association. "That's probably an indication of how the rest of the institutions are doing."

The real question now for Harvard deans is what percentage of the  endowment they will devote to the university's operating budget.

Traditionally, the average spending rate for colleges is about 5.5 percent. Harvard, which provides generous amounts of financial aid but now costs students an estimated $33,110 per year, devotes 4 percent to 5 percent of its endowment to its operating budget.

"The critical question for Harvard is what are its priorities," said Gordon Winston, an economics professor at Williams College and director of the school's Project on the Economics of Higher Education.

"If they use it to significantly increase access to a superb education like Harvard, that's not faulting them. But it's also questionable whether children of the wealthy should get a Harvard education for nothing."

Harvard's endowment comes from donations as well as investment income.

In December 1999, the university ended a seven-year capital campaign that set a record in higher education philanthropy by raising $2.6 billion.

In total through fiscal 2000, the endowment surpassed investment benchmarks in almost every account. Returns failed to beat benchmarks only in emerging markets investments and inflation-indexed bonds.

Last fiscal year's increase more than doubled the previous year's 12.2 percent return and is higher than the 23 percent average return between 1996 and 1999.

For now, Harvard officials say they don't expect their success to change next year's investment strategy. 

"The lesson, I would say, is that it's possible to earn substantial returns while
still maintaining a pretty diversified portfolio," Meyer said.

SEE BOSTON GLOBE ARCHIVES FOR 1990 VALUATION OF $5 BILLION; . 1/10/90 Harvard to replace Cabot -- Endowment's Earnings Lagged Market Recently. "NY - For 15 years, through two vicious bear markets and the volatile 1980s, Walter Cabot has been the steward of the Harvard University endowment, helping it to grow from $1 billion to more than $5 billion by branching out into investments that would have reaised eyebrows in an earlier era: venture capital, leveraged buyouts, real estate, oil and gas, and stock index options and future. Perhaps Cabot's greatest moment was sheltering Harvard from the Oct. 19, 1987 stock market ....)


22. SEPTEMBER 27, 2000 GAO ISSUES REPORT ON ABSENCE OF INFO-SOVREIGNTY AT US TREASURY (DYNCORP IS ONE OF THE CONTRACTORS PROVIDING SERVICES ALONG WITH FEDERAL RESERVE AND GROUP OF UNNAMED PRIVATE CONTRACTORS) 

September 27, 2000 The following items were added to GAO's World Wide Web site in Portable Document (PDF) format. - Financial Management Service: Significant Weaknesses in Computer Controls. AIMD-00-305. 17 pp. plus 2 appendices (5 pp.) September 26, 2000. http://www.gao.gov/new.items/ai00305.pdf

From www.dyncorp.com: DynCorp IS has worked with Unisys to provide program management support to the U.S. Department of Treasury Financial Management Service's nationwide system for electronically transferring benefits to welfare recipients.      


23. OCTOBER 5, 2000 FROM THE WILDERNESS "PROMIS" REPORTS ALLEGATIONS THAT HUD IS DYNCORP TEST SITE FOR NEW WORLD ORDER "NAGASAKI SYNDROME.

From the Wilderness discloses that Bill Tyree has reported that Pug Winokur and DynCorp are using HUD as a prototyping of PROMIS to compromise info sovereignty of government agencies so that the tool can be used to ensure that a countries banks and government financial agencies can be compromised to ensure obedience to the New World Order in its move to one world government. Tyree's comments appear to indicate that this explains the "missing money" at HUD and other federal agencies. Tyree refers to this is the Nagasaki syndrome; building and dropping the bomb once or twice so that you don't need to use it again.


24. OCTOBER 3, 2000 HUD FOIA WILL NOT RELEASE DYNCORP CONTRACTS DUE TO CONTRACTOR REFUSAL TO RESPOND HUD.

OIG reports to Solari that they have no responsive records related to a DynCorp contract with HUD OIG in response to a Solari FOIA of August 7th. Conversations with Carolyn Betts, General Counsel of Solari, indicate that they say they do not have them as such documents would be the Office of Procurement. Subsequent conversations with the office of procurement indicate that the "prime contractor" refuses to respond to requests. Solari is waiting for a response to subsequent "focused" requests regarding who is the prime contractor and a copy of DynCorp's task order to provide 10 years of knowledge management's services to the HUD IG.


25. WEEK OF OCTOBER 12, 2000 HUD REPORTED TO PAY ERVIN $2MM.

 Private reports that HUD finalized its settlement with Ervin & Associates, settling all Ervin's litigation with HUD and former and current government officials. HUD agrees to pay Ervin $2MM.


26. OCTOBER 12, 2000 SENATE PASS HUD APPROPRIATIONS (HOUSE PASSED IN JUNE).

 http://thomas.loc.gov/   U.S. Senate Roll Call Votes 106th Congress - 2nd Session (2000) as compiled through Senate LIS by the Senate Bill Clerk under the direction of the Secretary of the Senate   Vote Number: 272 Bill Number: H.R.4635 Vote Date: October 12, 2000, 1:23 PM Title: H.R. 4635 As Amended Req. for Majority: 1/2 Result: Bill Passed   Available Reports Vote Summary Ordered by Senator Ordered by Vote   Vote Summary Yea Nay Present No Vote 87 8 0 5     Alphabetical by Senator Abraham (MI)Yea Akaka (HI)Yea Allard (CO)Nay Ashcroft (MO)Yea Baucus (MT)Yea Bayh (IN)Yea Bennett (UT)Yea Biden (DE)Yea Bingaman (NM)Yea Bond (MO)Yea Boxer (CA)Yea Breaux (LA)Yea Brownback (KS)Yea Bryan (NV)Yea Bunning (KY)Yea Burns (MT)Yea Byrd (WV)Yea Campbell (CO)Yea Chafee (RI)Yea Cleland (GA)Yea Cochran (MS)Yea Collins (ME)Yea Conrad (ND)Yea Craig (ID)Yea Crapo (ID)Yea Daschle (SD)Yea DeWine (OH)Yea Dodd (CT)Yea Domenici (NM)Yea Dorgan (ND)Yea Durbin (IL)Yea Edwards (NC)Yea Enzi (WY)Yea Feingold (WI)Nay Feinstein (CA)NV Fitzgerald (IL)Yea Frist (TN)Yea Gorton (WA)Yea Graham (FL)Nay Gramm (TX)Nay Grams (MN)NV Grassley (IA)Yea Gregg (NH)Yea Hagel (NE)Yea Harkin (IA)Yea Hatch (UT)Yea Helms (NC)NV Hollings (SC)Yea Hutchinson (AR)Yea Hutchison (TX)Yea Inhofe (OK)Nay Inouye (HI)Yea Jeffords (VT)Yea Johnson (SD)Yea Kennedy (MA)NV Kerrey (NE)Yea Kerry (MA)Yea Kohl (WI)Yea Kyl (AZ)Nay Landrieu (LA)Yea Lautenberg (NJ)Yea Leahy (VT)Yea Levin (MI)Yea Lieberman (CT)NV Lincoln (AR)Yea Lott (MS)Yea Lugar (IN)Yea Mack (FL)Yea   McCain (AZ)Nay McConnell (KY)Yea Mikulski (MD)Yea Miller (GA)Yea Moynihan (NY)Yea Murkowski (AK)Yea Murray (WA)Yea Nickles (OK)Yea Reed (RI)Yea Reid (NV)Yea Robb (VA)Yea Roberts (KS)Yea Rockefeller (WV)Yea Roth (DE)Yea Santorum (PA)Yea Sarbanes (MD)Yea Schumer (NY)Yea Sessions (AL)Yea Shelby (AL)Yea Smith (NH)Yea Smith (OR)Yea Snowe (ME)Yea Specter (PA)Yea Stevens (AK)Yea Thomas (WY)Yea Thompson (TN)Yea Thurmond (SC)Yea Torricelli (NJ)Yea Voinovich (OH)Nay Warner (VA)Yea Wellstone (MN)Yea Wyden (OR)Yea           By Vote -Yeas-Nays-No Vote- --- YEAs 87--- Abraham (MI) Akaka (HI) Ashcroft (MO) Baucus (MT) Bayh (IN) Bennett (UT) Biden (DE) Bingaman (NM) Bond (MO) Boxer (CA) Breaux (LA) Brownback (KS) Bryan (NV) Bunning (KY) Burns (MT) Byrd (WV) Campbell (CO) Chafee (RI) Cleland (GA) Cochran (MS) Collins (ME) Conrad (ND) Craig (ID) Crapo (ID) Daschle (SD) DeWine (OH) Dodd (CT) Domenici (NM) Dorgan (ND) Durbin (IL) Edwards (NC) Enzi (WY) Fitzgerald (IL) Frist (TN) Gorton (WA) Grassley (IA) Gregg (NH) Hagel (NE) Harkin (IA) Hatch (UT) Hollings (SC) Hutchinson (AR) Hutchison (TX) Inouye (HI) Jeffords (VT) Johnson (SD) Kerrey (NE) Kerry (MA) Kohl (WI) Landrieu (LA) Lautenberg (NJ) Leahy (VT) Levin (MI) Lincoln (AR) Lott (MS) Lugar (IN) Mack (FL) McConnell (KY)   Mikulski (MD) Miller (GA) Moynihan (NY) Murkowski (AK) Murray (WA) Nickles (OK) Reed (RI) Reid (NV) Robb (VA) Roberts (KS) Rockefeller (WV) Roth (DE) Santorum (PA) Sarbanes (MD) Schumer (NY) Sessions (AL) Shelby (AL) Smith (NH) Smith (OR) Snowe (ME) Specter (PA) Stevens (AK) Thomas (WY) Thompson (TN) Thurmond (SC) Torricelli (NJ) Warner (VA) Wellstone (MN) Wyden (OR)   --- NAYs 8--- Allard (CO) Feingold (WI) Graham (FL) Gramm (TX) Inhofe (OK) Kyl (AZ)   McCain (AZ) Voinovich (OH)     --- Not Voting 5--- Feinstein (CA) Grams (MN) Helms (NC) Kennedy (MA) Lieberman  


27. OCTOBER 13, 2000 (RELEASED ON INTERNET), WHY IS $59 BILLION MISSING FROM HUD? NOVEMBER 6 INSIGHT MAGAZINE.   http://www.insightmag.com/archive/200011065.shtml 

11/06/2000

Why Is $59 Billion Missing From HUD?

By Kelly Patricia O’Meara © 2000

Billions of dollars are missing from the U.S. Department of Housing and Urban Development’s books. Some HUD officials blame computer glitches; others allege widespread graft.

The Department of Housing and Urban Development (HUD) has earned a failing grade from the House Government Reform subcommittee on Government Management for the way the agency manages taxpayers’ money. Subcommittee chairman Stephen Horn, R-Calif., is said to be furious that HUD’s most recent financial report shows the agency is unable to balance its checkbook and cannot account for $59 billion.
       For most Americans, it is incomprehensible that $59 billion could be missing from the ledger of a single agency. But despite years of earning failing grades — as well as years of being unable to account for tens of billions of dollars — the Clinton/Gore management team at HUD has continued to shell out hundreds of millions of dollars to the same contractors hired to ensure financial systems are in place and working. It doesn’t take a certified public accountant to see that HUD Secretary Andrew Cuomo’s financial house is not in order, and Susan Gaffney, the inspector general (IG) of HUD, tells Insight, “It’s more serious than you know.”
       This dire yet brutally honest evaluation by the IG came in response to questions about her testimony concerning HUD’s 1999 audit, delivered before Horn’s subcommittee in May. And HUD’s 1999 audit still has not been completed even as the agency is nearing the starting date for the 2000 audit. Instead, Gaffney submitted a 14-page “summary” for 1999, providing a laundry list of systemic reasons for HUD’s financial woes. Indeed, it took Insight a day and a half just to make sense of the IG’s simplified testimony concerning these financial shenanigans.
       Beyond the fact that $59 billion is unaccounted for and that auditors have had to make manual adjustments to the checkbook system retroactively, it is glaringly apparent in the IG’s report that taxpayers should consider themselves lucky that the amount isn’t much higher. What also is more than evident is that the IG devoted most of her testimony to explaining failed processes at HUD rather than focusing on any specific examples of theft, conversion, embezzlement and other larceny.
       For instance, according to Gaffney’s testimony, she could not sign off on the 1999 audit because of “the undetermined effects of the conversion problems of the general ledger from the Program Accounting System [PAS] to HUD’s Central Account and Program System [HUDCAPS] during the fiscal year, the integrated state of HUD’s reconciliation efforts and their documentation for the general ledger accounts for the fund balance with Treasury, and the late manual posting of numerous and significant adjustments (some as late as Feb. 25, 2000) directly to the financial statements, for which we lacked sufficient time to test their legitimacy.”
       What the IG is saying is that HUD’s finances are in a shambles because, during 1999, the agency was converting to a new computer system, the field offices didn’t balance their checkbooks on a monthly basis and manual postings were made to the financial statements so late that the IG had no time to review whether the postings were correct. Gaffney does report in one section of her testimony that “242 adjustments, totaling about $59.6 billion, were made to adjust fiscal year 1999 activity.”
       The IG, however, does not explain where the “adjustments” were made, for what services or from which region or field office. But she tells Insight that HUD’s financial problems stem from glitches within the agency’s computer systems.
       “The material weakness,” explains the IG, “is that HUD does not have a single financial ledger system in place and this year they tried to implement that. The effort was flawed to say the least. The financial systems flowing in were incompatible and the system rejected transactions, and the rejected transactions weren’t corrected in the new ledger system. HUD does not have a reliable and accurate statement of its financial condition.”
       Apparently, the HUDCAPS system that has been going online since 1997 and is supposed to correct the agency’s overwhelming financial-management problems now is being scrapped. According to Gaffney, just last week she was made aware that Chief Financial Officer Victoria Bateman has decided that HUDCAPS does not do the job and that a new add-on system is being implemented. It’s anyone’s guess when the new system will be fully integrated with the old “new” system which, to date, has done nothing to enhance HUD’s ability to account for the billions of dollars in missing tax money.
       According to one source familiar with HUD’s finances who spoke on condition that he not be identified, blaming computer glitches is what is done when they want to hide fraud. “The history of effort and expenditures that has been poured into correcting deficiencies at HUD does not support a theory of incompetence. If you don’t have decent accounting systems it’s because someone wants to make sure you don’t. It’s standard operating procedure that if one system is being replaced you keep the old one up and running while you work out the kinks in the new one — they’re run parallel. In this case, they took down a system that was running, replaced it with a system that wasn’t and then cried, ‘Oh, we can’t balance the books!’ They can’t say the resources don’t exist to correct the problem. If Cuomo can find hundreds of community builders to run around neighborhoods, he can find enough people to balance the checkbooks.”
       And the source adds, “Furthermore, if I wanted to rip off HUD, this is exactly how I would do it. Don’t run parallel systems, don’t bother to balance the books and then radically reengineer the system all at the same time that you double the volume of work. It’s a system ripe for financial fraud. The point is that you have to know what checks were authorized in a specific place and how they sort out, and if you balance the books monthly it becomes very easy to zero in on where the fraud is taking place. What the IG has missed is that it’s not about knowing a problem exists, it’s about fixing the problem — you want to know where and why you’re missing $59 billion. A huge computer system isn’t needed for HUD to balance the books; monthly statement reconciliation is all that is necessary.”
       The source continues: “Everything that has transpired at HUD is not an accident, and it sure isn’t a computer glitch. When you take the different material violations of the most basic financial-management rules and compare them to the time and effort put in to have first-rate systems, it is impossible to explain it as anything other than significant financial fraud. The losses could be far greater than $59 billion, but they don’t know for sure because the audit isn’t completed. Secretary Cuomo is a very smart control freak, so it’s ludicrous to think that he doesn’t know what is going on. There are several ways to correct these problems. Most are basic, but if you want to use the big sledgehammer, the Office of Management and Budget [OMB] and Congress have the ability to make HUD balance the books or [they] shut down the money supply. They are the guardians at the gate. But that is the most telling thing about this problem — OMB and the appropriators have been silent. This is exactly what happened right before the savings-and-loan scandal.”
       So is it possible that a problem within the agency’s computer systems is the cause of tens of billions of dollars being unaccounted for or missing? Not if you ask whistle-blower Jack Ballinger.
       In 1994 Ballinger began working for the New York City Housing Authority (NYCHA) as a contract inspector. He worked his way up through the system and was made manager of a new section, the Computer Operations and Reports Section. He was there only a few weeks when he became aware of major problems in payments to contractors. What he found was the main financial-management computer system, known as Financial Management Services (FMS), contained files verifying payments of more than $50 million on nearly 150 contracts that did not show up on the computer system used by the bookkeepers and investigators to track the services provided. Called CAD, this system should have been keeping track of the inspections, the inspector, dates of inspection and inspection results.
       Realizing the gravity of the problem, Ballinger reported the missing files. Shortly thereafter the new section was disbanded, his staff was sent back to their previous positions and he was transferred to Coney Island as a boiler inspector. Nonetheless, he was joined in calling for an investigation by a dozen other “clean” inspectors. Ballinger first requested an investigation by the New York City Department of Investigations. When nothing happened, he contacted Bill DiBlasio, then the IG for HUD in New York (and now Hillary Rodham Clinton’s campaign manager); HUD IG Gaffney in Washington; Rep. Rick Lazio, R-N.Y.; and HUD Secretary Cuomo, whose agency provides more than 90 percent of the funding that NYCHA receives.
       Despite overwhelming evidence of corruption — including audio- and videotapes of bribes being offered and accepted, as well as one inspector telling his story of an organized group of inspectors receiving bribes — there was no serious investigation of the misappropriation of funds within the NYCHA. “The IG,” says Ballinger, “said it was a paperwork mistake and cleared up. But not one person who looked at this could see it as a paperwork problem, and this has been going on for almost two years. There were hundreds of contracts being reported and monitored through that computer system and it would have taken someone a lot of work to pick out 143 that weren’t there every month. I can’t say that the inspections haven’t been done, but there is no record of the work being done on these 143 files. Still they were getting paid. It’s almost funny how sloppy they are about it. They leave a trail because they know that no one will be held accountable.”
       The financial problems Ballinger uncovered in the NYCHA are similar to those at HUD. For instance, the IG’s testimony to Congress also raises the issue of a wide variety of people having access to the accounting system with no controls or audit trail to tell what transactions are taking place and under whose guidance. The IG states, “HUD uses a powerful utility system to resolve data discrepancies by directly altering the data in the HUDCAPS financial tables. … There were an excessive number of users with access to the utility, including users from four different contractor firms as well as HUD program offices. We questioned the need for the high number of users and the database administrator agreed not all the users on the list require access to perform their jobs. Allowing uncontrolled use of such a utility exposes HUD’s financial data to damage and fraudulent activities.”
       Gaffney is saying that just about anyone can get into HUD’s financial system, including many who don’t have any business or authorization to be in it . Once in, intruders can change numbers, take money and engage in financial fraud without anyone catching or stopping them.
       While Gaffney cannot force changes within HUD, as IG she can bring the problems to light. Unfortunately, the testimony she provided to Congress did little more than alert members to the already-known fact that there are serious financial-management problems under Cuomo at HUD. The IG’s report provides no specific data to help lawmakers, who have oversight of this agency, recommend appropriate and necessary changes. In fact, it is possible members of Congress had the same difficulty deciphering the IG’s testimony as everyone else with whom Insight has spoken. Despite the fact that the entire report by the IG to Congress deals with financial mismanagement at HUD, not once in all of her 14 pages of testimony did Gaffney so much as use the word “money.”
       How much HUD’s missing $59 billion is of concern to lawmakers is anyone’s guess. Chairman Horn, as well as Senate Governmental Affairs Committee Chairman Fred Thompson of Tennessee and Senate Appropriations subcommittee on VA-HUD Chairman Kit Bond of Missouri, did not return Insight’s calls about these matters.


28. OCTOBER 19, 2000 HUD IG FILES HARASSMENT COMPLAINT AGAINST CUOMO AND HUD OFFICIALS ASSOCIATED PRESS.

http://dailynews.yahoo.com/htx/ap/20001018/pl/hud_harassment_1.html
Politics Headlines Sources: Reuters | AP | Elections | ABCNews Wednesday October 18 5:59 PM ET HUD IG Files Harassment Complaint 

WASHINGTON (AP) - The Department of Housing and Urban Development's inspector general has filed a sexual discrimination and harassment complaint against Secretary Andrew Cuomo and other top agency officials. HUD officials contend Susan Gaffney's complaint is an attempt to distract attention away from an investigation that resulted in several senior officials in her office being suspended for using government computers to obtain sexually explicit materials. ``This is nothing more than a diversion from her misconduct regarding the downloading of pornography in her office and retaliation for our efforts to get to the bottom of it,'' HUD spokeswoman Lisa MacSpadden said Wednesday. 

In her 19-page complaint, Gaffney detailed more than 30 occasions on which she said she was harassed and intimidated by top HUD officials for her efforts to root out fraud and abuse at the agency. Gaffney filed the complaint, dated Oct. 13, with HUD's Office of Departmental Equal Employment Opportunity. She said Cuomo would frequently call her at home, often on Saturday mornings, to berate her job performance. She accused Cuomo and his aides of leaking damaging information about her to the news media and said she received tips that Cuomo was attempting to compile damaging information about her. Gaffney said her male counterparts at the agency ``have not been subjected to behavior that is any way similar'' to what she endured. She is demanding written apologies from Cuomo and HUD Deputy Secretary Saul Ramirez as well as written guarantees that HUD officials will stop their discriminatory behavior. But HUD officials say Gaffney's complaint was spurred by the agency's pornography investigation. 

Just nine days before she filed her complaint, Gaffney wrote in a memo to Ramirez that ``your continuing harassment of me about this issue will not benefit you.'' Gaffney's office did not return a call seeking comment. But Rep. Thomas Lantos, D-Calif., who asked HUD to investigate the pornography abuses in the IG's office, said in a letter to Ramirez that Gaffney's complaint was clearly political. ``Although she claims to have been subject to criticism for almost four years, her decision to charge you and the secretary with sexual harassment comes just three weeks before the general election,'' Lantos said. The offices of Gaffney and Cuomo operate separately, and the two have clashed frequently since he took over at HUD in 1997. 

Gaffney has been highly critical of some of Cuomo's prized initiatives, and his aides have accused her of being a pawn of Republicans even though she was appointed by President Clinton. Sen. Christopher Bond, R-Mo., called Gaffney ``a tireless public servant.'' ``Her fight for good government inside HUD has been a difficult one,'' he said.   


29. NOVEMBER 5, 2000 FBI RAIDS HUD OFFICE IN DENVER ROCKY MOUNTAIN NEWS.

http://www.insidedenver.com/news/1105fbi5.shtml 

FBI raids HUD office in Denver 
By Sarah Huntley Denver Rocky Mountain News Staff Writer 

 FBI agents raided the Denver regional office of the U.S. Department of Housing and Urban Development last week in an investigation of federal employees. Agents on Wednesday interviewed several Denver police officers who work with HUD's Operation Safe Home as witnesses. Operation Safe Home is a national program that pairs local and federal law enforcement officials to rid public housing of gangs, drugs and violence. 

The interviews with four detectives and a sergeant followed a raid of the HUD office at 17th and California streets on Tuesday. The investigation comes six weeks after U.S. Rep. Barney Frank, D-Mass., called for an audit of the program by the General Accounting Office. Frank said he was concerned that Operation Safe Home, launched six years ago, was being run by the HUD inspector general without independent financial oversight. Denver Police Chief Gerry Whitman said Saturday that the five officers will continue to work cases they had started and will keep their jurisdiction over public housing communities in the city. But Whitman said he did not know when, or if, they will return to the Operation Safe Home task force. 

The chief said he pulled the officers from the HUD office on Monday after learning of the investigation and confirming that the Denver officers were not the targets of the probe. Leadership recently changed at the regional HUD office. A new acting special-agent-in-charge was assigned to the office within the past 10 days, said Mike Zerega, spokesman for the inspector general's office of HUD. The new agent is Bob Groves, who had worked in the office from 1993 to 1994. Zerega said he could not discuss the reasons behind the transfer or comment on what happened to the former special-agent-in-charge, Jeffrey Finn. Neither Groves nor Finn could be reached Saturday. November 5, 2000


30. WEEK OF OCTOBER 25, 2000, FOX NEWS SERIES ON MISSING MONEY.

O'Reilly of Fox News covers "missing money" at HUD in interview with Congressman Ose of Horn Subcommittee, as well as reports of missing money at Department of Education


31. WEEK OF NOVEMBER 1, 2000, DENVER TV REPORTS PHIL WINN BEING INVESTIGATED.

Stew Webb reports that a Denver tv station has reported that Phil Winn, former Ambassador to Switzerland, is under investigation in connection with HUD. (Winn figured prominently in 1989-90 HUD "mod rehab" scandal related to Denver based HUD fraud).


32. NOVEMBER 5, 2000 CBS 60 MINUTES REPORTS ON INSURANCE FRAUD MENTIONING ANDREW AND MARIO CUOMO & NEW YORK MOB   

60 Minutes spot include FBI and US Attorney giving on camera interviews on ongoing investigation re National Heritage Insurance. Prior article on topic:

BANKING ON ANDY CUOMO

HUD Secretary and rising Democratic star Andrew Cuomo wants to go places--assuming he can leave some baggage behind.

by Sam Dealey and James Ring Adams © January 1999

It couldn't have been more straightforward. The Senate Banking, Housing, and Urban Affairs Committee had a form. The form was entitled "Statement for Completion by Presidential Nominees." The nominee was President Clinton's choice for housing secretary, 41-year-old Andrew Cuomo, who was to complete the questionnaire and return it before his confirmation hearing in January 1997. Simple, no?

Evidently not. One question read: "Give the full details of any civil or criminal proceeding in which you were a defendant, or any inquiry or investigation by a Federal, State, or local agency in which you were the subject of an inquiry or investigation." One of the cases he listed, Smith v. Cuomo, et al., had been brought against him and others by the owner of a south-Florida savings and loan, alleging an illegal takeover attempt. But Cuomo failed to disclose a later suit, brought by the S&L itself, and settled only two months before his hearing. Why? Perhaps because Oceanmark v. Cuomo, et al. revealed that in 1988, federal banking regulators investigated Cuomo and fellow investors for possible change-in-control violations. The nominee should have listed that investigation, too, in answer to the second part of the question. He did not.

How serious is this? Reagan White House aide Edwin Meese was investigated by an independent counsel for incomplete personal financial disclosures. Several Reagan administration officials were prosecuted in the Iran-contra matter for withholding information from Congress. Interior Secretary Bruce Babbitt has his own special prosecutor, probing the question of false statements to Congress. And then there's Cuomo's predecessor at HUD, Henry Cisneros, who resigned in the face of an independent counsel investigation. The allegation? Making false statements to the FBI about pay-offs to a blackmailing mistress during a routine background check.

The Justice Department apparently has not investigated Cuomo's responses. But it has looked at him for another reason. The issue: Did Cuomo retaliate against Oceanmark by pressuring the federal agency charged with thrift oversight to close the S&L? After a preliminary investigation, Attorney General Janet Reno concluded that the standard for appointing an independent counsel had not been met. Yet Reno's inquiry was narrowly tailored. A broader review of Cuomo's involvements with Oceanmark reveals serious questions of bank-regulation skirting.

Some of Cuomo's fellow investors in Oceanmark are also prominent figures in an array of political and financial scandals. And the secretary clearly grows anxious when asked about his past business associates and their affairs. HUD lawyers even threatened a lawsuit when TAS submitted detailed questions.

Most notable among Cuomo's past associates is Michael Blutrich, head of the law firm which Cuomo joined as a $150,000-a-year partner in 1985. Blutrich recently pled guilty to looting an insurance company in Florida of some $237 million, some of which went into a business controlled by the Gambino crime family. Andrew Cuomo would like to play down his close relationship with Blutrich and dismiss it as a thing of the distant past, but financial disclosure documents show a relationship lasting practically to the day of Cuomo's Senate confirmation hearing as HUD secretary in 1997.

THE SON ALSO RISES

As the eldest son of Democratic lion Mario Cuomo, Andrew had one of the best educations in hands-on politics. He got into the game at 16, helping in his father's first state-wide race. He took part in Mario's losing bid for mayor of the Big Apple in 1977, and in his successful run for lieutenant governor a year later. But Andrew's real start came in 1982 when, at 24, he ran his father's winning gubernatorial campaign. In a primary against the formidable New York City Mayor Ed Koch, Andrew led the campaign from 37 points down to a victory margin of four. In the general run-off against the vastly better financed Republican Lew Lehrman, Andrew again prevailed. The uphill victories testified to Andrew's burgeoning campaign and management skills.

During his father's years in the governor's mansion, young Cuomo refined his political touch. He campaigned hard for Walter Mondale's presidential bid, bringing in savvy media consultants. And he was largely responsible for staging one of his father's most memorable moments, the carefully crafted speech at the 1984 Democratic National Convention.

Young Cuomo also got an education in hard-nosed politics. In 1983, the New York State Investigation Commission (SIC) concluded that Cuomo and two other aides--including current NBC News star Tim Russert--bullied members of the allied Liberal Party to support a Cuomo-favored candidate to head the party. According to the SIC report, the three men "intervened in the internal affairs of the Liberal Party in order to obtain a resolution of the factional dispute." Party members testified that the governor's aides threatened them with the loss of lucrative state jobs and patronage if the party's fight was not resolved in a way "acceptable" to the governor.

After this brush with notoriety, Andrew left Albany in 1984 for Manhattan to join the staff of New York District Attorney Robert Morgenthau. In 1985 he became a partner in the Park Avenue law firm of Blutrich Falcone & Miller, a haven for his dad's financial boosters. One partner, Lucille Falcone, was Mario's chief fundraiser and, according to reports, Andrew's girlfriend. In his memoirs the governor even wrote he would likely join the firm when he left public service. (It ceased to exist before he could do so.)

Also in 1985, Andrew took a leaf from the playbook of his future brother-in-law Joseph Kennedy, who had started his career by founding a non-profit corporation to provide low-cost heating fuel to the poor. Andrew's variant was a non-profit called Housing Enterprise for the Less Privileged (HELP), which provides transitional homes and services to the homeless. In 1988 he quit his law practice to work full-time as president of HELP, a post he manned until joining HUD as assistant secretary for community planning and development in 1993.

Cuomo's zeal for philanthropy turned not-so-neighborly, however, when community legislators questioned the location and size of HELP projects, and when they attempted to slow what they saw as the non-deliberative, willy-nilly speed with which those project proposals were approved. One of these communities was Westchester County, a largely affluent New York suburb whose liberal denizens were shocked at the prospect of a housing project in their backyards.

Paul Feiner, then a county legislator who was skeptical toward HELP, says Cuomo interrupted a telephone conversation one night in 1988 with an emergency breakthrough by an operator. Cuomo's call was a tongue-lashing for Feiner's position on HELP. "There was a tremendous amount of pressure," recalls Feiner. At the time he told a reporter that Cuomo had threatened him, saying, "I'll ruin your career. I'll break every bone in your body," unless Feiner supported the project. Cuomo dismissed these allegations. "It's sad that [Feiner's] mind would work in such a way," he said. "I think it's even ethnically disparaging."

Now the Democratic supervisor of a Westchester town who holds a seat on HELP's advisory board, Feiner hardly seems out to get Cuomo. In fact, he calls HELP a "total success" and says that "perhaps without the pressure it would have been impossible to get the complex built.... But I would have preferred a little more compromising with the community. It was a bad taste of government where things were being rammed through."

THE OCEANMARK BOG

Notwithstanding such unpleasantness in the non-profit sector, it's one of Andrew's for-profit ventures that has now come back to haunt him. As a corporate lawyer in the Blutrich firm, he represented a group that in 1986 decided to invest in a family-owned, federally chartered savings and loan in North Miami Beach called Oceanmark. Andrew himself was also one of the investors. The original owners of the thrift, the Fenster family, had lived in Florida for generations, and they soon concluded that they were losing control of the bank to outsiders who wanted to plunder its assets and discard the shell.

Their suspicions were aroused by the accidental discovery that what they called Cuomo's "New York Group," supposedly five major investors, consisted of at least 22, who among them controlled more than half of Oceanmark's stock. Concealed takeover groups are a major no-no in financial regulation, and Cuomo's group had filed none of the required change-in-control papers. So the Fensters' lawyers hit them with the first of what has become a series of lawsuits.

A constant theme in this convoluted legal history is the political well-being of Andrew Cuomo. The New York Group offered to settle this first suit in 1990, just an hour before the Fensters' legal team was set to take a deposition from Andrew. (Several months before, Cuomo had backed out of another scheduled deposition, submitting an affidavit that he was sick with nausea, diarrhea, and headaches. The next day the New York Post had run a picture of Cuomo, wearing black tie at a party the previous night, over the caption, "He's one sick puppy.")

As part of the deal, Lynn Fenster and her family signed off on a press release apologizing to Andrew for "statements made in the heat of the moment." "I regret any personal hardship this purely business dispute may have caused Mr. Andrew Cuomo," read the release. "I have always considered him an outstanding professional and count him as a friend."

The 1990 deal looked like a total victory for the Fensters. The New York investors agreed to put their stock in trust for five years and then give Oceanmark first dibs on buying it back.

What the Fensters didn't know, however, was that the Federal Home Loan Bank Board (FHLBB) had separately investigated the New York Group and entered into a secret supervisory agreement on June 17, 1988. The agreement noted that "the FHLBB believes there is an issue as to whether there has been a violation of" control laws, but "is willing to forebear from the initiation of proceedings." The terms were that Cuomo and the other group members had to dispose of their Oceanmark stock within a year. If any remained in their hands, stated the agreement, the stock "shall be donated to Oceanmark." By acceding to the agreement's stern language, Cuomo and his fellow investors avoided any fault-based action by the FHLBB.1

1 Cuomo and the other signatories may have misled regulators in order to close the deal. According to the agreement, these stockholders, "consistent with their desire to no longer be involved with Oceanmark, have already entered into an agreement for the sale of their stock." But that's exactly what the group did not do.

Despite its clear interest in knowing about the agreement, Oceanmark only learned about it by chance in early 1991. For the next three years, the thrift tried without success to get a copy from the Office of Thrift Supervision (OTS), the new federal regulator set up after the savings-and-loan debacle. Finally, in 1994, the Fensters took Cuomo and his group to state court in Florida, charging them with "an illegal conspiracy to commit fraud" by failing to abide by the supervisory agreement.

The suit dragged on until 1996, when suddenly an armistice was reached. Oceanmark received a copy of the federal order, and the New York Group agreed to exchange their stock for a largely worthless class of non-voting shares. The bank withdrew its suit. But what astounded Lynn Fenster was the speed with which the settlement was approved. "It went through like a rocket," she says.

The Fensters were especially impressed when Cuomo assured them he could clear up a residual problem with the OTS office in Atlanta, which supervises Florida thrifts. "One of the things that Andrew said," recalls Ms. Fenster, "was, 'Don't worry about a thing. I know people in Atlanta and I can take care of this.'"

AN INDEPENDENT COUSEL ALL HIS OWN

Why did the settlement come so quickly? To the Fensters it seemed that members of the New York Group, even those no longer active in the case, had suddenly decided to smooth the path for Andrew's career. Indeed, just three weeks later Cuomo was nominated to replace Henry Cisneros as HUDsecretary. But the Fensters were less inclined to throw rose petals on his progress. The result was a nasty face-off that led to the Justice inquiry.

As part of the 1996 settlement, Cuomo asked for another public apology. This time the Fensters refused. Explains their lawyer William Friedlander, "If Oceanmark said publicly that their claim had no merit, then everything we had negotiated for--which was the right to bring it again, to dismiss it without prejudice--would have gone out the flue."

According to the Fensters, Cuomo took "no" very badly, threatened reprisal, and retaliated by pushing the OTS into an extended examination aimed at closing Oceanmark down. "Within a month after we refused to do what Andrew demanded," says Friedlander, "the OTS was back on this bank like white on rice. And they ate us for lunch."

When Oceanmark began receiving what its auditors saw as unusual demands concerning recapitalization requirements from OTS regulators, the Fensters appealed to the agency's ombudsman. In a letter of March 4, 1997, Oceanmark noted that the acting head of the OTS at the time, Nicholas Retsinas, was simultaneously HUD's assistant secretary for housing and the federal housing commissioner, and hence subordinate to Secretary Cuomo. The thrift alleged that Cuomo had used his authority to punish the Fensters and force a sale of Oceanmark, which, says Friedlander, would have incidentally produced a payoff on the non-voting stock held by the New York Group.

The ombudsman considered the charge against Cuomo a political hot potato and passed it on to the Treasury Department's inspector general. The FBI launched its own investigation. In late July 1998, even as FBI agents were still conducting interviews, the ombudsman revisited the complaint and concluded that OTS personnel might have been "plain-spoken," but they "did not act in a retaliatory manner." He found "no information" showing Cuomo's influence.

In early September 1998, the Fensters filed yet another suit, charging Cuomo, Retsinas, and current OTS Deputy Director Richard Riccobono with a "conspiracy" to ruin Oceanmark. Cuomo, they said, had used his political power to pressure the others into harassing Oceanmark. But the real news was buried deep inside the lawsuit. The Fensters said they had been interviewed by the FBI, and that the bureau appeared to be conducting its own investigation of Cuomo and his associates.

In fact, Justice did conduct a preliminary investigation of Cuomo--the kind of inquiry that can lead to the appointment of an independent counsel. Reno confirmed this on September 8, 1998, when she announced her determination that "there were no reasonable grounds to believe that further investigation [by a court-appointed special prosecutor] was warranted." Then she went a step further, announcing that Justice lawyers would defend Cuomo, Retsinas, and Riccobono in the latest Oceanmark suit.

Cuomo's spokesmen now cite Reno's statement in rebutting the Oceanmark charges. In a letter to TAS, "HUD staff" wrote:

The real question...is will you allow your publication to be used as a mouthpiece for the bogus and self-serving allegations made by Oceanmark Bank. You are now on notice that the allegations...are false. You are also on notice that these allegations are ten years old, previously published, and now proven baseless by the Department of Justice, FBI, and Republican Senate. The publication of these statements which you now know to be false and slanderous is actionable. Your publication has a history of printing false material regarding Mr. Cuomo. The Secretary intends to pursue all legal avenues regarding this matter. 2

2 The current allegations are, of course, not ten years old, but arise from the Fensters' 1996 refusal to sign a statement similar to their 1988 apology to Cuomo. Cuomo's problems with the thrift were "previously published" in the October 1994 TAS, in connection with Oceanmark's efforts to obtain the secret supervisory agreement. The "false material" in question, HUD staff has specified, was an item on Secretary Cuomo's press conferences. (See On the Prowl, TAS, December 1997, and Correspondence, TAS, January 1998.)

A similar letter to TAS from Cuomo's private lawyers states, "We intend to protect his interests and will not tolerate any purported reporting, based on smear tactics, to enhance anyone's private business agenda or to increase circulation."

OTS recently withdrew its examiners from Oceanmark, and the Fensters' latest suit alleging an elaborate "Cuomo Conspiracy" seems strained at best. But there do appear to have been violations of the supervisory agreement, which federal regulators have failed to pursue--specifically the divestiture of the investors' stock. The case also puts a spotlight on some people who Cuomo perhaps wishes would remain in the dark.

THE NEW YORK GROUP

Heading up the New York Group was Sheldon Goldstein. Originally from Brooklyn, Goldstein moved to nearby Rockland County in the mid-fifties, where he set up shop as a real-estate developer and businessman. By the 1980's he was a millionaire several times over and had a long list of corporations to his name.

Goldstein could also be a generous political benefactor. According to an analysis by Newsday, Goldstein, his family, and associates donated over $102,000 to Mario Cuomo's gubernatorial campaigns from 1982 to 1989. In the 1982 campaign alone, the Goldstein machine contributed more than $49,000. Shortly after Cuomo was first elected, Goldstein was appointed chairman of the State University Construction Fund, a lucrative patronage title.

In addition to Oceanmark, Goldstein, Cuomo, and others in the New York Group shared extensive interests in two other financial institutions, Hudson United and the Savings Bank of Rockland County. Oceanmark's Lynn Fenster recalls how the New York Group operated: "Shelley Goldstein would put out a call for money, and you would go. And if you didn't go--you almost didn't have a choice. You didn't have a say. The first time you didn't bring your money--he told me this--you didn't get to go again. And the first time you ever got worried about your money or didn't want to stay there, he would literally write you a check and you would never get called again." This seems to be borne out in an April 16, 1987 memo Oceanmark obtained from Cuomo's files. "It is imperative that you and I sit down together and discuss the whole Venture deal and on Monday I will put out the call for $500,000," Goldstein wrote to Cuomo. "What Ed Wachtel [a New York Group investor] and I decided to do is call for all monies, put it in the Savings Bank of Rockland County and draw the money as we need it but to have it in the bank." Jeffrey Fenster, Lynn's brother and partner, paints a similar portrait: "Shelley would gin up an investment and he would put out a call for money. And Shelley had a thing that no one would ever lose money. He always gave them their money back if they lost money."

Goldstein was also a chief client of Cuomo--and Blutrich and Falcone--at their law firm. Other aspects of the cozy Goldstein-Cuomo relationship frequently cropped up in New York papers during the mid-1980's, including:

• In 1984 Arco Management won a state contract to manage the Bridge and Jackie Robinson housing projects in New York City. It later turned out that the Division of Housing and Community Renewal, the state agency that awarded the contract, had done so under a non-competitive bid. The following day the agency director claimed that the unorthodox move was in response to an emergency. The director also told the New York Times that Arco was "recommended to me but by whom I don't remember." Arco was owned by Goldstein and managed by one of his two sons, both of whom belonged to the New York Group. John O'Connell, another New York Group investor, was also a member of Arco. Andrew was his dad's right-hand man in Albany at the time, and Goldstein, as chairman of the State University Construction Fund, was a state official.3

3 Arco is currently a "prime contractor" for HUD property management in Minnesota, D.C., Puerto Rico, the Virgin Islands, and every state east of the Mississippi River. Upon becoming HUD secretary, Cuomo recused himself from decisions directly involving Arco.

• In 1987 Goldstein and Cuomo were wrapped up in a criminal and civil case and a State Investigation Committee (SIC) inquiry into a campaign quid pro quo. The allegations were that after Goldstein was denied part-ownership in a Manhattan building rented to the state, he influenced the governor's office to cancel part of the lease. Afew years earlier, while a special assistant to his father, Andrew had amended the lease. According to the Times, Goldstein told the SIC, "I threatened to ruin [the building owner] in the state of New York as a window contractor." Soon after, Goldstein resigned as chairman of the State University Construction Fund for "personal reasons," according to a state spokesman, but presumably under pressure to do so after his embarrassing admissions. Cuomo testified to the committee that he had acted in the state's best interests at the time, not Goldstein's.

• In 1988, plans for a proposed thruway exit near Sterling Forest, the largest timberland tract in the New York City area, were scotched for economic and environmental reasons. The project had been pushed by Governor Cuomo. A report by the state comptroller noted that, "over the years, this project has been repeatedly rejected by past state governors and the New York State Thruway Authority as unwarranted based on the area's traffic needs and as simply a boon for private land developers." Goldstein, according to the New York Times, had extensive property interests in the area and, in 1986, attempted to purchase the 30-square-mile forest. Andrew Cuomo was his attorney in the deal.

When questioned about his ties to Goldstein, Cuomo has distanced himself. "I am one of 10, 15, 20 lawyers who represent him," he told the New York Times in December 1987. But the April memo from earlier that year suggests a closer relationship. "I really don't know what you did on your taxes," Goldstein wrote Andrew. "I called and found out you filed for an extension. Please, please let's put it together or some day it will come back and bite us."

THE WITNESS FORMERLY
KNOWN AS BLUTRICH

Another New York investor in Oceanmark was Michael Blutrich, a name partner in Cuomo's firm. In 1996 Blutrich was exposed as a target in one of the largest-ever FBI fraud probes, and in November 1998 was convicted on 22 counts of racketeering, fraud, and money-laundering. In that scam, Blutrich and others plotted with the then-chairman of the Orlando, Florida-based National Heritage Life Insurance Company to loot some $237 million from the company through inside loans and sham real-estate deals.

In 1990 the Blutrich group approached Heritage and offered to invest $4 million. There was just one problem: They only had a million. So the investors illegally "borrowed" the rest from an escrow account at Blutrich's firm. Soon after, a $3-million advance for "future commissions" was drawn from the insurance company by the Blutrich group and deposited into the firm's escrow account. The investors bought land near the Catskills in New York, then billed Heritage for millions more than they had paid.

Another sham loan involved a Bronx land parcel owned by 4305 Associates, a two-person corporation formed in 1988 and named for the parcel's street address. Blutrich was vice-president and 50-percent shareholder; Lucille Falcone, president and equal shareholder. Blutrich persuaded a cohort to pose as a real-estate appraiser, who valued the property at $2,346,000. It was actually worth only $700,000. Heritage made a $1.5 million loan, a large chunk of which found its way into Blutrich's pockets.

Predictably, Heritage soon found itself in financial straits, and its directors became uneasy for their shareholders, 26,000 (75 percent) of whom were elderly. Two years later, the insurance company collapsed, a $440-million debacle. The Blutrich group, meanwhile, had walked away with $93 million in laundered money, and sunk over two and a half times that much in bad deals. By July 1996, Heritage's chairman pled guilty to the scam and received eight years in prison in exchange for his cooperation. Blutrich, along with several associates, was indicted the following month and has since begun to cooperate with the FBI. One of the loans that federal agents are investigating was a piddling $300,000 to underwrite Scores, a New York strip club which the Feds charge became a racket for the Gambino crime family.

In exchange for testifying and helping the FBI, Blutrich recently entered the federal Witness Protection Program--and a substantially discounted lifestyle. In court documents, one of Blutrich's former associates, Shalom Weiss, charges that during the heyday of the scam Blutrich dropped $50,000 per week "supporting a lavish lifestyle and expensive habits." The lavishness included a Porsche, a yacht, and a $12,000 wristwatch, all of which he gave up as part of his plea agreement.

Blutrich's expensive tastes included a passion for boys' basketball. According to Weiss, "much of Blutrich's ill-gotten gains were spent supporting or covering up" pedophilia. "He exploited the young boys he raped and molested. He beguiled the parents of the boys whose basketball teams he coached so he could meet his prurient need." In 1994, after a two-year sting, Blutrich was charged with multiple counts of sexual assault on a minor (to which he secured a sweetheart plea-bargain), and a story in the December 1998 Penthouse quotes an anonymous partner in Blutrich's law firm saying, "Everyone knew what Michael was doing with these young boys. On more than one occasion a mother of one of these boys would come up to the office screaming and complaining about what Blutrich was doing." According to the story, several sources "close to the situation" said Cuomo left the firm in 1988 in part because of Blutrich's behavior. A former partner of Cuomo's disputes this, however. "That's a total lie. No one had knowledge that [Blutrich] was involved in any of this s--t," says the source, who wishes to remain anonymous.

Cuomo downplays his relationship with Blutrich. In a letter to TAS, the secretary's Fort Lauderdale attorneys wrote, "Many years ago, Secretary Cuomo practiced in a law firm with Mr. Blutrich and participated with many investors, including Mr. Blutrich, in a tax-credit syndication." In fact, along with Blutrich and Lucille Falcone, Cuomo was one of three general partners in L&M Associates, a tax-sheltered oil and gas investment. And although the partnership began many years ago (September 17, 1986), it was not until January 21, 1997--the day before his Senate confirmation hearing to become housing secretary--that Cuomo quit doing business with Blutrich and sold his interest in L&M at a loss. A monthly disbursement check to Cuomo from the venture, a copy of which TAS has obtained, bears Blutrich's signature, and an accompanying letter shows that it was mailed in 1995 to Cuomo's HUD address, with "best personal regards."

Cuomo did not have to sell his stake in L&M to become secretary; he need only have recused himself from decisions involving the partnership (which he had done two weeks earlier). That he ultimately did sell seems to suggest he was troubled by doing business with an accused criminal. Yet Blutrich's fraud case had been widely reported months earlier, and Cuomo's former business associates had known about it almost immediately. "After...the firm was raided by the FBI...a former employee called me," says Cuomo's former partner. "I think that call, I'm sure, went out all over the city. And that's when I became aware that the FBI was investigating Michael in connection with Scores and the Mob." Presumably, it was only the prospect of public scrutiny that prompted Cuomo to finally withdraw his investment.

BETTER LEFT UNSAID

Less than a month after the ink dried on the second Oceanmark settlement in November 1996, Andrew Cuomo was nominated for HUD secretary. A month later, accompanied by his wife Kerry Kennedy (whom he had married in 1990), one of their two daughters, his mother Matilda, sister Maria, and mother-in-law Ethel Kennedy, Cuomo sailed through an adulatory confirmation hearing notable only for what was not brought up: Oceanmark Federal Savings and Loan.

The chairman of the Senate committee charged with confirming Andrew was Alfonse D'Amato, whose hearty dislike for the Cuomos was well known--and generously reciprocated--after many years' rivalry in New York politics. D'Amato might have been expected to turn the hearing into a blood bath, given the ample press coverage Oceanmark had received in the preceding decade. What's more, Florida's Connie Mack also sat on the committee. AHUD lawyer confirms that a Florida GOP official sent committee members a package alerting them to the Oceanmark imbroglio. Amazingly, however, the thrift never came up.

Senate Banking sources say the oversight had more to do with D'Amato protecting his own chairmanship than Andrew Cuomo's well-being. There was speculation at the time that Cuomo might challenge the New York senator in his 1998 campaign, and that he posed a significant threat. (A Mason-Dixon poll conducted at the time showed Cuomo edging out D'Amato 41-38 percent.) According to these sources, it was understood that if D'Amato could protect his seat by sequestering Cuomo on HUD's top floor, so much the better. "Generally a lot of people felt there were understandings that obviously they were going to try to stay out of each other's way," says a senior committee aide.

Another reason that Cuomo's involvement with Oceanmark wasn't mentioned at the hearing may be that D'Amato had his own not-so-kosher connections to the New York Group. During the 1980's D'Amato was embroiled in a nasty HUD scandal of alleged favoritism, back-scratching, and campaign donor quid pro quos. Goldstein, a heavy D'Amato donor, and seven members of the New York Group realized a $17-million windfall from a juicy HUD packagepatched together by a senior HUDofficial, Joseph Monticciolo, and pushed through by D'Amato. Upon leaving HUD, Monticciolo became the titular head of a Goldstein investment group that included these New York Group members. Congressional and Justice probes were launched. Ultimately Monticciolo rolled and said D'Amato asked him to cover for the senator, but the case could not be made. These eight investors at one time owned nearly half of the New York Group's shares in Oceanmark, according to documents from Cuomo's files.

If D'Amato wasn't going to bring up Oceanmark, neither was Cuomo--even if it meant a material omission on his nomination form. Cuomo will not explain why he did not list the Oceanmark suit among the court cases in which he had been a defendant. His HUD lawyers wrote TAS that "The FBI, Department of Justice, and U.S. Senate (Republican controlled) have all stated that all nomination forms and procedures were correctly complied with by Mr. Cuomo." But there is no public record of any such statements. What's more, according to the Office of Government Ethics, only the Senate Banking committee would have evaluated Cuomo's questionnaire. Asked why Cuomo did not divulge that he was investigated by federal banking regulators, HUD lawyers reply with word games. "Mr. Cuomo was merely a witness in connection with an FHLBB examination of Oceanmark," they claim, and consequently not directly the subject of the inquiry.

Young Cuomo is considered one of the Democratic Party's fastest-rising stars. He has indicated he'd like to play a major role in Al Gore's New York campaign machine in 2000, and Washington rumor holds that he's a strong contender for the second spot on a Gore ticket. More recent speculation predicts a possible run for retiring Senator Daniel Patrick Moynihan's seat in 2000. The GOP opponent in that race could turn out to be none other than Alfonse D'Amato. If that's the case, you can bet the bank on one mud ball that neither candidate will be throwing.


Sam Dealey is TAS's assistant managing editor. James Ring Adams is an investigative writer for TAS.


33. NOVEMBER 8, 2000 AL MARTIN ALLEGES BUSH AND CUOMO FAMILIES INVOLVED WITH NY MOB IN HUD AND INSURANCE FRAUD   

http://www.almartinraw.com/ 

THE CONSPIRATORS Secrets of an Iran Contra Insider by Al Martin (© 2000 Al Martin) 

What will it be like with George Bush Jr. as president? It will be a return to the "Bush" form of government -- namely a government of shadowly cliques, secret commissions and defacto star chambers. The new Bush Administration will probably accelerate the pace of re-arming China to make China the new boogeyman because nobody makes any money unless there's a boogeyman. The Bush Adminstration will then use that as an excuse to pump up defense spending, to wit, all defense contractors have given very generously to the Republican Party. Consequently, years later, a new Bush Administration will institute tax cuts for the wealthy and try to eliminate estate taxes which Bush has talked about in the past. 

By the end of the first term of a new Bush Administration, all the surplus which is supposed to be used to reduce the national debt and repay the money his father swiped from social security would in fact be absorbed in new spending and tax cuts. You have to look at the entire Bush Family in this context -- as if the entire family ran a corporation called "Frauds-R-Us." Each member of the family, George Sr., George Jr., Neil, Jeb, Prescott, Wally, etc., have their own specialty of fraud. George Jr.'s specialty was insurance and security fraud. Jeb's specialty was oil and gas fraud. Neil's specialty was real estate fraud. Prescott's specialty was banking fraud. Wally's specialty was securities fraud. And George Sr.'s specialty? All of the above.    

People ask me -- what about all the heat regarding the National Heritage deal recently profiled on "60 Minutes"? It's another fraud. The genesis of the fraud is that a partnership was formed to purchase Heritage Life Insurance for $4 million. This partnership involved all of the Bush Brothers, including, by the way, John Gotti. John Gotti was also a member of the partnership. How did it happen? On a Friday night, this partnership purchased Heritage Life. They proffered a check for four million dollars. The check was worthless. It was no good. Over the weekend Heritage turned over the keys to its offices in Boca Raton, Florida, all its files. Everything. Over the weekend this new partnership proceeds to transfer $4 million dollars of Heritage Life's reserve capital into its own accounts to cover the check that it had written to buy it. It's a true story. Then they proceeded to turn Heritage Life into a fraud center. They perpetuated a variety of fraud, specializing in and concentrating in HUD fraud, They would buy busted out HUD properties for $500,000, then list their value on the Heritage books as $5 million dollars. The other four and a half million dollars would simply go into the partnership's pockets. And they did this repeatedly. Andrew Cuomo, through his father Mario's influence, was hired on as a consultant to the corporation. He was also a member of the Board of Trustees of Heritage Life at $50,000 per year. When Andrew became Director of HUD, Andrew helped cover up Herritage's scams vis-a-vis HUD. Heritage in turn not only buys up HUD property, but it also becomes its own insurer of HUD property. For example, it would claim that the insurance premium on XYZ property was $1 million a year, when in fact the insurance was only $100,000 a year. 

Heritage Life insurance Company was part and parcel of Heritage Financial Group, Heritage Credit Group, Heritage Securities Group, Heritage Banking Group. It was much more than just an insurance company. Heritage was a consolidated financial group involving securities, banking, and insurance. One of the principals of the company was John Gotti. Among the directors was George Sr., George Jr., Jeb, Neil, etc. These were the directors of the holding company which was called Heritage Group International. Because of the relationship (Gotti's involvement) Richard Brenneke and the National Brokerage Group become involved in selling Heritage policies and securities. Richard Brenneke was very close to John Gotti and more importantly was very close to Gotti's superior, Paul Castellano. When it came to pass, Brenneke was head of National Brokerage Group which had a primary securities relationship with Blinder Robinson, Meyer Blinder, the old con artist. National Broekerage Group in turn marketed Heritage product, Heritage insurance, Heritage annuities, Heritage securites and Heritage partnerships, etc. Andrew Cuomo will become another Franklin Pearce, another scapegoat. The missing $59 billion dollars from HUD coffers is probably a record, but only in terms of public disclosure.   

You know I talked to my shrink today. I'm practicing my therapy again. I'm taking blank pieces of paper and putting them through my shredder. He calls it "relaxation therapy"...     

 People ask me what should they invest in. I remember in 1985-86, Secord owned the Canon franchise in Washington DC. It supplied paper shredders to the US Government. True story. I say invest in Canon because with George Bush in office, it will be black ops and illegal covert operations heaven. It also reminds me of Ollie North who had lapel pins made up. He thought it was a humorous knock-off of the 1950s slogan, "Better Dead than Red," so he freshened it up. Remember the Motto of the Day... Better Shred Than Read. 


34. NOVEMBER 21, 2000 CLINTON PARDONS FELON IN HUD IRAN CONTRA FRAUD 

Clinton Gives Pardon in HUD Scandal Crime

Source: The Associated Press Published: 11-21-00 1906EST Author: By MICHAEL J. SNIFFEN 

WASHINGTON (AP) - President Clinton granted a full and unconditional pardon Tuesday to a former U.S. ambassador who pleaded guilty in a Department of Housing and Urban Development scandal during the Reagan administration. The Justice Department announced Clinton's pardon for Philip D. Winn of Denver, also a former housing official and developer, without comment on the president's reasons. That's the usual practice in presidential pardons, which are often issued near the year's end holidays. Winn was a prominent Colorado developer who became an assistant HUD secretary during a portion of the Reagan administration. He later returned to his development firm, the Winn Group, and subsequently served as U.S. ambassador to Switzerland from August 1988 to August 1989. As part of a bargain with prosecutors, Winn pleaded guilty on Feb. 9, 1993, to one count of scheming to give illegal gratuities to HUD officials who had authority to award federally subsidized housing to projects that his company was developing. Winn agreed to cooperate fully with Independent Counsel Arlin Adams' continuing investigation of the scandal. He was sentenced in 1994 to two years' probation and ordered to pay a fine of $981,975. Winn has an unpublished telephone number and could not be reached for comment. His attorney was out of the office and did not immediately return calls. In his plea bargain, Winn admitted that in 1987 he let another HUD assistant secretary, Thomas Demery, have the free use of a condominium and car in Vail, Colo. Court papers said that, in return, Demery allocated federal funds to projects in which Winn had a financial interest. Demery was charged with multiple felonies, later agreed to cooperate with prosecutors and pleaded guilty to accepting a $100,000 loan from a developer doing business with HUD and falsifying a receipt to make it appear that he paid $500 to stay in the Vail condo partly owned by Winn. Prosecutors alleged that HUD officials in Washington steered housing grants to selected Winn-backed projects through a pattern of fraud, conspiracy and cronyism. They said the Winn Group received millions of dollars in HUD subsidies and tax credits during the 1980s. Another former HUD official, Silvio J. DeBartolomeis, who went to work for the Winn Group, pleaded guilty in October 1992 to influence-peddling violations. He admitted preparing the phony receipt for Demery at Winn's direction.


#35. DAVID SCHIPPER'S BOOK ON THE IMPEACHMENT ILLUMINATES EFFORTS BY CISNEROS/HUD TO ASSIST GORE WITH USE OF INS TO CREATE DEMOCRATIC VOTES IN 1996 CAMPAIGN; FOCUS INCLUDES LA; INVOLVEMENT OF ELAINE KAMARK AND OFFICE OF REENGINEERING GOVERNMENT IN PUSHING INS TO CREATE NEW CITIZENS; WERE HUD'S TRACS DATABASE AND VIOLATIONS OF THE PRIVACY ACT INVOLVED?

David Schippers new book has the detailed descriptions on the use of expedited processing of new citizens by INS in 1996 and the extent to which these issues were involved in impeachment investigations and deliberations. This includes information regarding Henry Cisneros, Secretary of HUD, providing assistance to President Clinton and Vice President Gore regarding the idea of doing this in February 1996 to promote greater numbers of Hispanic voters, including help from a group in Los Angeles.

It also includes a description of Elaine Kamark and Gore's Office of Reengineering Government involvement in pressuring INS through the period. No mention is made of the INS attorney who later disappeared at the same time the former White House Intern was assassinated and Hamilton's offices were seized and the intense physical harassment and surveillance of Catherine Austin Fitts was underway; all in Washington.

Secretary Cisneros involvement raises the question to what extent the HUD databases (such as TRACS) and subsidy systems were used---including in violation of the Privacy Act---to achieve similar results at HUD as were achieved at INS and whether this helps explain various efforts to prevent Hamilton from accessing HUD data as well as later attempts to seize and destroy all Hamilton databases.

Schipper's does not appear to be aware of the use by President Clinton of the CIA Inspector General's report (confirming drug dealing by the CIA targeted at South Central LA and other heavily minority populated areas) to back the Republicans down on the impeachment vote in October 1998 (See www.copvcia.com for the From the Wilderness story and a link to the CIA IG report). It would be interesting to integrate this knowledge, considering that the heaviest drug trafficking and money laundering markets, California, New York, Texas and Florida, are also the areas of the heaviest Hispanic vote as well as being the source of approximately 80% of presidential campaign fundraising.

SellOut: The Inside Story of President
Clinton's Impeachment
by David P. Schippers, Alan P. Henry

Editorial Reviews                  Amazon.com

While no one came out of the Monica Lewinsky scandal looking good, David Schippers, the chief investigative counsel for the Clinton impeachment, wants to be sure Americans know just who contributed to the debacle and how. A trial attorney and a Democrat, Schippers was hired by Republican congressman Henry Hyde to lead an oversight investigation of the Justice Department, then was redirected to handle the impeachment. The quintessential honest man, Schippers was shocked, not so much by Clinton's actions (which he calls a far-reaching conspiracy to obstruct
justice with perjury, lies, and witness tampering), but by Republican and Democratic politicians who sold out the impeachment process. If you ever want to vote again, you might not want to know what went on behind the scenes in the Capitol Hill meat grinder leading up to and during the impeachment proceedings against William Jefferson Clinton.... Lies, cowardice, hypocrisy, cynicism, amorality, butt-covering--these were the squalid political body parts that, squeezed through the political processor, combined to make a mockery of the impeachment process. Of course, Schippers does want you to know what happened, and he also wants you to vote--against those who made the mess. And so he names names--of Republican senators who refused to allow evidence on the floor, of the five Democratic congressmen who never examined the evidence, of the GOP senator who said, "You're not going to dump this garbage on us," and also of the politicians who did an honest job, or at least asked reasonable questions (such as Joseph Lieberman). Schippers also reveals the evidence he was building against the Clinton administration regarding illegal INS actions and Chinagate, but that he was forced to drop. He reviews the successful struggle to get a full hearing in the House and the "flat-out rigged ball game" in the Senate. He discusses the president's pattern of abuse and intimidation of women, including some highly disturbing information regarding Kathleen Willey, Juanita Broaddrick, and Dolly Kyle Browning. Most of the documents related to the impeachment are still sealed, so Schippers's story is more diatribe than new information. Perhaps what this book confirms most (besides the ugly, self-serving side of politics) is the chasm between those trying Clinton, who firmly believed that his lying was destroying the structure of government, and those who felt that lying about sex was nobody's business. Schippers is clearly in the first camp: "I do not care what you are lying about. If you're the President of the United States and you lie under oath, you should be removed from office."

Lesley Reed Book Info Uncovers the dishonesty, cowardice, and hypocracy behind the impeachment trial of President William Jefferson Clinton, detailing why the Democrats sold out law and decency to protect Clinton and how Clinton and his agents blatantly tried to fool the American people. DLC: Clinton, Bill, 1946- --Impeachment. Bipartisan Bashing., November 16, 2000

Reviewer: Christopher Bonn Jonnes

Anyone who cares enough about freedom and democracy to take the time to cast a vote must read David Schippers' book, "Sell Out." Schippers establishes himself as a fair and independent thinker with high integrity, and then proceeds to tell the true story behind the impeachment of Bill Clinton, revealing the liars and cowards on both sides of the aisle. It's good reading. But the real story in this book is the revelation on what Schippers was working on before Zippergate pushed it to the sidelines. To this he devotes a few dozen pages early in the book in which he details his investigation of Al Gore's activities with the INS prior to the 1996 election. In an effort to expedite the naturalization of one million immigrants who might be more likely to vote Democratic, Team Gore pressured the INS to suspend standard background check procedures on applicants for US citizenship. The result was 75,000 convicted felons naturalized--20% of whom had re-offended as US citizens within two years--and another 168,000 naturalized without proper fingerprinting and FBI criminal history checks. Clinton/Gore imported criminals to maintain power. Literally thousands of US citizens were needlessly robbed, raped, and murdered as a result. In light of the other Democratic voter fraud allegations such as giving away cigarettes in Milwaukee, touring the jails to register misdemeanor crooks, and the mysterious disappearing 50,000-vote Bush lead in Florida late on election night, the INS debacle is something worth reading about. Most people have never heard this story. The mainstream Press won't touch it. This is arguably the worst political offense ever committed in this country, if true. Schippers, a life-long Democrat who voted twice for Clinton, shares the facts and makes a convincing case. --Christopher Bonn Jonnes, author of Wake Up Dead.