Second of two parts. Read part one here.

While Latinos comprise more than a third of Orange County residents and more than 21 percent of those living in poverty, Asian residents are receiving a greater share of public housing subsidies from the Orange County Housing Authority despite representing a significantly smaller portion of the general population and those living in poverty.

That’s no accident, according to nearly a dozen internal whistleblowers inside the housing agency, which serves some of Orange County’s most vulnerable residents through its federally-funded Housing Choice Voucher Program. Also known as Section 8, the program provides rental subsidies to low-income residents.

These whistleblowers, mostly Latinos, had reported complaints about their Vietnamese counterparts inside the agency for more than a decade, but in 2011 began alerting both federal and local authorities, as well as local elected officials to the alleged problems within the housing voucher program.

In the aftermath of the Great Recession, as Orange County struggled to recover from the financial crisis, demand for rental subsidies provided by the agency’s Housing Choice Voucher Program skyrocketed as poor families sought housing relief.

About 25,000 people today get services from the agency, which administers more than 10,000 rental vouchers.

The housing authority came under scrutiny by DA investigators in 2012 after the whistleblowers stepped forward the previous year to disclose the alleged fraudulent behavior. Following an 18-month long DA probe that didn’t result in criminal charges, the county hired an outside risk management consulting firm to investigate personnel issues at the housing agency.

Last month, County supervisors delayed approving a recent performance audit report, concerned that it didn’t present a complete picture of the personnel problems plaguing the housing authority. The supervisors are now awaiting the outcome of the personnel probe before approving the performance audit.

Whistleblowers allege that the agency’s Vietnamese-dominated hierarchy discriminates against Latino employees and knowingly allows Vietnamese residents to defraud the county’s housing voucher program.

They assert that some Vietnamese Section 8 tenants have been underreporting their income and receiving housing assistance despite running lucrative businesses, owning luxury cars and designer purses, and living in homes with high-end appliances and electronics.

A majority of the whistleblowers are housing inspectors or specialists who would regularly scrutinize tenant files for fraud and who would refer suspect tenants to the DA public assistance investigations division within the housing authority.

These workers allege that their housing authority superiors would block fraud referrals on Vietnamese tenants from moving forward to DA investigators.

“We do our job, we get [the evidence] and they either sit on it, or they kick the fraud referral back,” said Cynthia Elizalde, one of the original eight whistleblowers and the only employee who would speak publicly. “Or they automatically say ‘reinstate’ [the tenant], and mostly the ones who they reinstated were Asian.”

Elizalde’s account matched the assertions made by the other whistleblowers in documents obtained by the Voice of OC. She said that despite the risk of more reprisals the group decided to speak out against the alleged abuse because tax-payer money was being misused while thousands of low-income residents continued to wait years to obtain Section 8 housing vouchers.

The whistleblowers hoped that federal authorities would intervene to investigate the matter independently.

“We already knew that no one at the county was going to listen, they were only going to retaliate. We were hoping that someone – HUD or our politicians – would hear what we had to say, would come in… and assess the damage and do what they had to do,” said Elizalde.

Elizalde worked for the housing authority for nearly 13 years, most of that as an occupancy specialist II, where among other duties she verified a tenant’s financial need annually to determine adjustments in rental subsidies, and made fraud referrals when she detected discrepancies.

In August, Elizalde was fired from her job in what she alleges was an act of retaliation for her whistleblowing activities, and she recently obtained a right to sue notice from the Department of Fair Employment & Housing in advance of a civil lawsuit she plans to file against the Orange County Housing Authority.

In the employment discrimination complaint filed under the state’s Fair Employment and Housing Act against, Elizalde alleges that the Orange County Housing Authority discriminated and retaliated against her, harassed her, and terminated her because of her race/ethnicity and because she was involved in the DA’s investigation into the housing authority’s alleged discriminatory practices in hiring and promotion.

The complaint alleges that the housing authority discriminated against not only its Latinos employees, but in the administration of federal funding for its Section 8 rental subsidy program, and in identifying fraud committed within the agency and outside the agency by members of the Vietnamese community.

A Voice of OC request to interview the Orange County Housing Authority’s top ranking officials — Executive Director Karen Roper and OCHA Manager John Hambuch — was declined by Leon J. Page, a senior deputy in the County Counsel’s office, who stated in a letter that the county was obligated to maintain the confidentiality of the DA’s investigative files.

Emails and letter correspondence obtained by the Voice of OC show that the whistleblowers and their representatives contacted high ranking officials and authorities with HUD, HUD’s Office of Inspector General, and the Office of Fair Housing and Equal Opportunity in 2011 to alert them of “serious fraud, waste, and mismanagement” occurring with the housing authority.

However, federal officials did not investigate.

A HUD spokeswoman confirmed that the Orange County Housing Authority had informed the federal agency that personnel matters had arisen from the DA’s investigation, but that the staff in HUD’s Los Angeles office had not been informed of any Section 8 fraud issues at the housing authority.

“There was no red flag, no awareness of anything,” said Gene Gibson, a spokeswoman in San Francisco for HUD’s Region IX office, which oversees housing authorities in California and other western states and territories.

Gibson said HUD doesn’t get involved with personnel or management level issues, and leaves that to be handled by local authorities, but she emphasized that housing authorities are required to conduct tenant income verification and to investigate issues as they arise.

“We provide funding to the housing authority and we require that the housing authority follow the money, and we need reports on how many vouchers they have and how many people they’re housing, but we don’t run the housing authority,” said Gibson.

Documents obtained by the Voice of OC through a Freedom of Information Act (FOIA) request show that as early as 2005 the federal government was aware of Section 8 voucher fraud issues within the Orange County agency.

Through a joint HUD-OIG/OCHA investigation launched in 2005, the housing authority terminated 32 tenants from the Section 8 program for violations ranging from failing to report income to illegally subletting units, documents show.

One tenant prosecuted as a result of this investigation was ordered to pay more than $164,000 in restitution for failing to report her income to the housing authority and for providing false social security numbers.

At the time, the DA’s office described the 2008 prosecution of Laura Bianca Razo as the “largest known public assistance housing fraud case in Orange County.”

Before the whistleblowers went to federal and local authorities in 2011, they reported issues with the fraud referrals to their superiors.

Internal records provided to the Voice of OC document the number of fraud referrals submitted by eight leasing department field representatives who conducted annual housing inspections for a 16-month period from May 2010 to September 2011 and show a wide disparity between the inspectors.

One high performing inspector, a Latino employee, working in the Westminster/Fountain Valley area submitted 144 fraud referrals for that period, compared to a low performing inspector, a Vietnamese employee also covering the Westminster area who submitted just two fraud referrals for the same period.

The high performing inspector received a commendation in 2011 from the OC District Attorney’s Office public assistance investigations division for helping the unit in its “efforts to preserve program integrity” via the investigation and prosecution of fraud in the Housing Choice Voucher program.

Yet whistleblowers contend in documents to federal authorities that their superiors began to retaliate against them because of their DA referrals.

The high performing inspector, for example, was told by his superiors “don’t ask questions” and was investigated internally for filing a high number of referrals, whistleblowers allege.

Documents show that the county responded to the allegations by having the county’s Equal Employment Opportunity office investigate the complaints in 2011.

The following year, EEO Access Manager Romera Liddell informed the whistleblowers that her office couldn’t substantiate the whistleblowers’ claims of “discriminatory actions, hostile work environment, or recruitment violations.”

Liddell noted in her letter that the fraud allegations were handled separately via an “Internal Audit,” and that her office recommended that the OC Community Resources further review policy and practice concerns that surfaced during the investigation.

Concerned that the allegations regarding the Section 8 fraud issues had not been addressed, in March 2012 the whistleblowers contacted then-county Chief Executive Officer Thomas G. Mauk through their union, the Orange County Employees Association.

While whistleblowers did subsequently meet with Mauk that spring, they said their fraud allegations were still not addressed.

In a memo to the housing authority’s employees issued on April 30, 2012, Karen Roper, who is also OC Community Services Director, informed them that the EEO investigation had resulted in “no findings of discriminatory actions, hostile work environment, or recruitment violations.”

Roper also noted that a confidential internal audit, conducted separately from the EEO investigation, focused on the complaints tied to the housing voucher program eligibility, Section 8 wait list management and other program components.

But, she added, “nothing came to their attention that would substantiate the allegations related to fraud or discrimination” at the conclusion of the investigation.

Manipulating the System?

In one case, email communications obtained through a public records request, show that a staff member from County Supervisor Janet Nguyen’s office interceded on behalf of a Section 8 tenant who had already been terminated by the housing authority.

The tenant, who had received rental assistance for “a number of years,” had failed to report her pension to the housing authority, according to the 2009 email.

“My understanding is that apparently [the tenant] used these funds to pay for a residence in Switzerland,” OC Housing Authority Manager John Hambuch wrote in a letter to Nguyen’s policy advisor Diane Nguyen.

Hambuch described the unreported income as a serious program violation and a misuse of federal funds. The amount the tenant would have to repay the housing authority was yet to be determined, but Hambuch estimated it could be as high as $20,000.

How Vouchers Work in OC

Federal HUD regulations require that in order to qualify for a housing voucher, a family’s income may not exceed 50 percent of their county’s median income, and a housing authority must provide a majority (75 percent) of its vouchers to applicants whose incomes don’t exceed 30 percent of the county’s median income.

Here in Orange County that means an individual must earn $31,650 or less annually, while a family’s maximum annual income is based on size, for instance, no more than $45,150 annually for a family of four.

Once selected, most families or individuals pay a minimum 30 percent of their income toward their rent, while the Section 8 program covers the rest through a subsidy that is paid directly to the landlord.

Housing Fraud Investigations

Page said the county’s internal investigations have focused on two areas: Violation of workplace rules (primarily time sheet fraud committed by a few housing authority inspectors; and violation of Housing & Urban Development program guidelines, specifically the failure of housing authority inspectors to sufficiently conduct housing inspections.

In all, the county counsel’s office has launched three reviews, which have been completed or are near completion:

• In December, 2013 the Orange County Housing Authority, in coordination with HUD, launched a four-month internal review of its Housing Choice Voucher Program that has resulted in numerous changes in the way the agency handles its fraud referrals, housing inspections, and other personnel matters.

• The county hired an outside investigator, Ruth E. Graf-Urasaki of Bickmore Risk Services, who in December launched a personnel investigation into alleged employee misconduct at the housing authority. The investigation is pending, but “may result in a decision to impose discipline against one or more OCHA employees,” according to Page. So far the county has paid Bickmore Risk Services $13,055.25.

• In mid-March, Orange County Performance Audit Director Philip Cheng initiated a performance audit of the housing authority, which was released in late September and concludes OCHA is “performing well.”

Yet sources at the housing agency said some inspectors were caught doing personal business on the job, such as sleeping at home, exercising, and taking their children to school while on the clock, sometimes working as little as two hours in a nine-hour shift.

In a letter sent in August to the U.S. Department of Housing & Urban Development, the Orange County Housing Authority acknowledged that the DA’s office notified the county that “employee misconduct may have led to a violation of HUD regulatory requirements.”

Records provided by the county counsel’s office show that the number of fraud referrals submitted by OCHA to the DA investigators had been steadily increasing year to year since 2006, with 348 referrals that year, to a peak of nearly 700 referrals in 2011.

Then, in 2012, the referrals suddenly plunged to 348, and even lower in 2013 to 322 referrals.

So far in 2014, OCHA has submitted 255 fraud referrals.

The number of investigations conducted by the DA public assistance investigators mirrored the referral trend, reaching a peak in 2011 of 711 investigations/fraud referrals closed.

However, although the investigations dipped to 287 the following year, they surged in 2013 with a total of 422 investigations/fraud referrals closed.

So far this year, there have been 272 investigations/fraud referrals closed.

The total program violations found as a result of these referrals and investigations peaked in 2011 with 630 violations. The subsequent years were not as substantial, with 238 violations found in 2012, 277 violations found in 2013, and 204 violations found so far this year.

DA investigations have led to successful prosecutions of Section 8 tenants who have defrauded the housing program.

In one 2011 case, a Westminster mother of two was sentenced to almost three years in state prison for her involvement in a scheme where she underreported her income and received more than $88,000 in rental assistance from the OCHA’s Section 8 Housing Choice Voucher program during a period of more than seven and a half years.

The woman, Lieu Thi Ha, pleaded guilty to 37 felony counts of perjury, 11 felony counts of grand theft and two felony counts of public assistance fraud, in addition to a sentencing enhancement. The scheme involved two of Ha’s relatives – who also pleaded guilty to multiple charges – and the defrauding of multiple county agencies. The court ordered the three defendants to collectively pay $140,000 in restitution.

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