HOUSING SCAM

Investigative Reporters and Editors, Inc. The IRE Journal, Nov/Dec 2006 by Cenziper, Debbie

Developers pocket millions targeted to house county's poorest citizens

In a city where dead voters swayed a mayor's race, a superintendent stole public money to spruce up his vacation home with gold plumbing, and dirty cops murdered drug dealers so they could hock the drugs themselves, it was easy to assume that no newspaper story about greed and corruption could rattle readers - much less outrage them.

But our "House of lies" investigation jolted Miami like no story has in years.

The four-part series published in July exposed how the Miami-Dade Housing Agency paid millions of dollars to affordable-housing developers who pocketed the cash but never produced a single house, stranding the poor in one of the nation's most distressed communities.

The stories immediately prompted citywide protests and local, state and federal investigations, including a probe by the inspector general of the U.S. Department of Housing and Urban Development. (HUD money was not used in these local programs.) Halfway through publication, the county manager ousted seven people - practically every top manager of the Housing Agency.

The first of what is expected to be a series of arrests came in late August, when the state attorney charged developer Oscar Rivero with two first-degree felonies for allegedly using more than $700,000 in affordablehousing money to pay for a new house - his own.

On the hook

The newspaper's investigation began in January with a traditional mandate - follow the money. Former Miami Herald publisher Jesus Diaz wanted a local investigation that tracked government spending, which at first didn't sound too appealing to project reporters hoping to break new ground on national issues.

But the newspaper, despite a rich history of local reporting, had not taken a hard look at Miami-Dade government in some time. Seizing on the issue of affordable housing made sense because the signs of the government's failures were everywhere: dead construction projects, barren lots and tens of thousands of families languishing in decrepit and unsafe homes.

The Housing Agency's records were incomplete and skewed by errors, which made getting started a challenge. The agency, one of the largest in the nation, receives tens of millions of dollars every year from local taxes but had never created a reliable database to track its money and projects.

The newspaper filed more than two dozen public record requests. It took three months to review hundreds of paper files and build a database of affordable housing projects between 2003 and 2005. The result was an accurate accounting of the Housing Agency's spending patterns.

It didn't look good.

The Housing Agency had pledged more than $87 million to build 72 developments for the poor. The expected payoff: more than 8,300 new homes.

But approximately 40 percent of the projects funded between 2003 and 2005 had been canceled. Others were delayed for months, even years. Only 14 projects - less than one-fifth of what was promised - had actually been completed.

Overall, the Housing Agency paid more than $12 million to developers who never built the houses they promised and did not return the money. In some cases, the agency allowed developers to take the cash without signing loan documents or pledging land as collateral, leaving taxpayers no easy way to recoup the money.

In one of the most outrageous examples of government waste, the agency diverted $5 million - money earmarked by state law to build homes for the poor - to pay for a new office building with a $287,000 bronze sculpture of stacked teacups called "Space Station," which was shipped from Italy.

One of the more difficult parts of the reporting process was peeling back the layers of a fledgling nonprofit agency that had received more than $16 million in Housing Agency money. The nonprofit struck deals that benefited well-connected developers, former Housing Agency employees, a board member's business partner and a county commissioner's troubled social service agency.

But of its 17 affordable-housing projects, the nonprofit had produced just one, a 100-unit apartment complex for the elderly that was months delayed and riddled with building breakdowns.

Through a series of record requests, the newspaper explored the deals by studying minutes from board meetings, project files and accounting reports, which we took to two forensic accountants for review.

Besides a deep dive through paper files, the newspaper spent months running a series of lengthy database searches.

Using pay backgrounding service Accurint, LexisNexis and various property record databases, the newspaper turned up a startling discovery: Even when affordable homes were built, some developers bypassed the poor and sold to real estate investors who turned quick profits.

Developing a short list of problem developers required hundreds of queries in a Florida Department of State Division of Corporations database. Developers often create limited-liability companies for each project to shield other investments from financial losses. Determining who was responsible for failed projects became a difficult but important step.