Federal Judge Unseals Suit That Asks: Did Dallas Screw HUD Out of Hundreds of Millions?

Categories: City Hall, Schutze
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On June 10, 2010, I wrote a column for the newspaper about an official complaint brought to the U.S. Department of Housing and Urban Development (HUD) by two Dallas developers alleging a decades-old pattern of racial discrimination and fraud by the city of Dallas, the county and other local entities against the federal government. Just now that complaint has re-emerged publicly in the form of a federal "false claims" lawsuit seeking what could be billions of dollars in damages.

U.S. District Judge Reed O'Connor unsealed the file on this suit -- which follows -- in an order he signed two days ago, even though his own administrator and the U.S. District Clerk were still insisting yesterday the suit was under seal.

Weird. But take a look at this deal, and you can see why even the judge might treat it as a rogue nuclear device.

The lawsuit, developed by the nation's top false claims law firm in D.C., goes straight at the issue of race in the city's history, claiming that officials here have taken hundreds of millions in federal dollars designed to reduce segregation while using the money to achieve the opposite end.

I sent a copy of it to the city, in case they still thought it was sealed too, and asked them to comment. Haven't heard back yet. It has immediate national implications. If Dallas takes a bullet on this, cities and counties all over the country will probably come into the same cross-hairs.

The complaint is 61 pages of dense reading but not entirely without some chuckles. For example, in filing legally required documentation of local housing patterns by race in local cities and communities over the years, local officials repeatedly forgot to include two communities.

You only get one try at this. In trying to show the feds that racial segregation here isn't all that bad and no great cause for alarm and go ahead and just send us the check, which two Dallas County cities do you think they just oopsed?

You got it. University Park and Highland Park. Highland Park, according to the suit, rings in at 97.27 percent white, while University Park is more diverse at 94.33 percent white. Oops oops.

This is a false claims lawsuit by which the plaintiffs, Curtis Lockey and Craig MacKenzie, who filed the suit on behalf of the federal government, can ask for between 15 and 30 percent of any award. Since damages can entail all of the money local governments have collected from Washington for housing programs over decades -- times three -- the numbers can get into the billions quickly.

In 2009, Westchester County paid $62.5 million to an anti-discrimination center to settle a similar lawsuit. In this kind of false claims suit, the plaintiffs act as freelance agents for the government -- citizens seeking to redress a wrong against their government.

With its emphasis on aggressive federal mandates for desegregation, the suit could be strong medicine for the judge, a former Tarrant county prosecutor nominated to the bench in 2007 by John Cornyn and Kay Bailey Hutchison. But rather than kick it, Judge O'Connor signed an order two days ago granting trial.

If this doesn't settle first, that trial will be a very good show.Curtis Lockey et al v City of Dallas et al
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34 comments
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LegalEagle
LegalEagle

New information on these substantive matters in the precedent setting case, Westchester County:

http://www.lohud.com/article/2... 

Westchester county segregation makes South Dallas look like concentration Camp for blacks, in comparison! 

LegalEagle
LegalEagle

Here are all the Fair Housing Laws & Presidential Executive Orders:

FHEO HomeFile a ComplaintEnforcement ActivityProgramsTopicsLibraryContactEventsHUD   >   Program Offices   >   Fair Housing   >   Fair Housing Laws and Presidential Executive OrdersFair Housing Laws and Presidential Executive Ordershttp://portal.hud.gov/hu... 

LegalEagle
LegalEagle

This says it all:

Promoting Fair HousingI. PurposeIt is HUD's mission to promote non-discrimination and ensure fair and equal housing opportunities for all. In an ongoing effort to provide services and activities on a nondiscriminatory manner and to affirmatively further fair housing, HUD is charged by law to implement and enforce a wide array of civil rights laws, not only for members of the public in search of fair housing, but for HUD funded grant recipients as well. HUD is also charged with ensuring the successful operation of specific enforcement of housing programs. The array of laws, executive orders, regulations, etc. are collectively known as civil rights requirements and called "Civil Rights Related Program Requirements(CRRPRs).":http://portal.hud.gov/hudporta... 

Watchdog
Watchdog

"With its emphasis on aggressive federal mandates for desegregation, the suit could be strong medicine for the judge, a former Tarrant county prosecutor nominated to the bench in 2007 by John Cornyn and Kay Bailey Hutchison. But rather than kick it, Judge O'Connor signed an order two days ago granting trial."

I hear this Judge is by the book, regardless of his party affiliation. These laws are black and white, he will have no choice but to follow the law, which is what I would expect from him. If not, he will have big problems. 

Texaspainter
Texaspainter

Sound of telephone intercom: Buzz BuzzBoss:Yes?Secretary:Uh, Ms. Suhm there are some people from the US Justice to see you...Sound of phone droppingSecretary:Hello? Ms. Suhm Hello?

Paul
Paul

Dagnabbit, I thought that we were supposed to be given a break between corruption scandals ... JWP's case is still ongoing ...

Daily Reader
Daily Reader

JWP's case is moving too slow so this will give us something to fixate on in the meantime.

Paul
Paul

Just so long as it doesn't move the spotlight off of him.

Wylie H.
Wylie H.

Something odd jumped out at me when reviewing paragraph 96 on page 21:  "the Kirby Building and the Davis Building had already purchased the Section 108 loans for 60 cents on the dollar...."

Why did the City do that?  Was that part of the original agreement with Hamilton to incentivize him to do those deals?  If not, why weren't other bidders given the opportunity to purchase that debt at a discount via a competitive bid process?

Jim Schutze
Jim Schutze

Excellent question.

DLaw
DLaw

The better question: The buildings were recipients of federal funds (108 loans). What were the federal requirements regarding accepting those funds? Affordability requirements? Deed restrictions? Sounds like more law suits to me. Class actions on behalf of all those tenants that did not receive the federally required rents!!! 

Bettyculbreath
Bettyculbreath

City Officials should go to jail.This deal smells.

LorleeTheGreat
LorleeTheGreat

Lorlee - Lots of heroes involved in this and you are one of them. 

Lorlee
Lorlee

I was there at the time, I opposed it -- No one would listen.  I tried to get the news media to pay attention -- don't know if it was too arcane or what.  But basically several millions of dollars were loaned on those buildings which didn't have any low income people in them.  The loan from HUD was 15 year note, Developer Notes were 25.  That HUD loan was paid back with CDBG funds (intended for low income people)  So CDBG paid on the loans and when it was time for CDBG to start recouping coming out ahead in years 15-25,  they sold the loans for 60 cents on the dollar.  CDBG was out several millions of dollars.  I think I still have my irate memos somewhere.  I am glad this is finally seeing the light of day.   

DLaw
DLaw

More directly, an intentional attempt to eradicate affordable housing in downtown Dallas. 

lorlee
lorlee

Virtually all housing moneyin Dallas is federal in origin -- the City has none of its own money in the game.  I served on the Community Development Board through which that money flows.  At the time, I thought that how the City used the money was suspect and tried to get it changed, but no one -- and certainly not the City would listen to me.  

Wylie H.
Wylie H.

Good thing you weren't the one that signed what appear to be phony certifications.

Good grief, what a mess.

DLaw
DLaw

It appears that the County, DHA are also in on the Fraud, per the complaint. No wonder this is in the Billions for damages, with treble for fraud. 

Wylie H.
Wylie H.

Wow.... some very, very serious allegations (extremely detailed and well laid out).  And, once again, City Manager Mary Suhm is at ground zero.

It looks like a combination of outright deception and general incompetence/sloth on the part of the City of Dallas.

This is going to be quite interesting to watch.

Lena
Lena

Yeah, and City Hall, County, DHA are going to try to blame it on predecessors, but they worsened the problem, year after year, while in office. 

J. Erik Jonsson
J. Erik Jonsson

If it weren't for public funding of housing, we'd hardly have any politicians in prison, and a bunch of prosecutors would be out of work.

JustSayin
JustSayin

Yeah, its real simple, they dont want blacks and mexicans to live by whites! 

Ms Freedmans
Ms Freedmans

So true, it's called Gentrification and to know that they used poor peoples MONEY, who's needy???? And to know that my community was stolen with it's own MONEY, and yes I'm speaking of Uptown,And I spoke with my represenitive at the time I lived in  District 14 2006-2010, I was aking for Low Income Housing to be Developed, and to find out she knew what was going on, that's why they all we looking at me crazy.Not one represenative said, were woking on that do you have in Ideas, I feel that City HAll needs no Control over DHA , I feel that the people that have been in that position best quilify for the positions, simply they know whats needed and share the same compassion, and can bring jobs some time exprience is best, DHA pays DPD 50,000 a month to patrol it's propertys, when an unemployed tenent could use or an unemployed family member could use that job. And I know for a fact crime rate is low, simpley there is no housing no housing no people!!! And I know we have Lawyers, Judges, Business people, and a few locals, that's suppose to be for the people, sitting around that Horse Shoe what's relly going on? As a matter of FACT I told them that they were taking Dallas back to Jim Crow!!!

So
So

Jim Crow is alive and well in Dallas Texas! It's probably the largest city in the country where it is true!

Replay
Replay

Did they take the money and lie? You know they did.

Ron James
Ron James

When will these politicians ever learn? You can get away with this kind of stuff for a while, but eventually you'll have to pay the piper.

Paul
Paul

Nope, the politicians rarely pay for their misdeeds ... the taxpayers end up picking up all of the tabs, the original check and then the setttlement check and finally the costs of incarceration should incarceration actually occur.

Cima
Cima

When is the fraud by politicos in Dallas going to stop? They need to be prosecuted to the fullest extent of the law.  

Parkland, The County, NTTA, City Hall, DISD.............does it ever stop?

BillP
BillP

If Dallas committed financial fraud and discrimination as claimed, they deserve exactly what they get! If true, its nothing short of financial terrorism! 

scottindallas
scottindallas

The problem is the citizens pay these fines while the racist politicos that orchestrated these schemes get off Scot free.

Mister_Mean
Mister_Mean

So true-I was going to comment that it is only tax payer monies but you know that.   Would it not be wonderful to have our elected leaders be responsible for damages?

DM
DM

This is why we have to elect the right officials to start with and demand firing these people at City Hall, DHA and the County who are responsible. 

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