Dallas' City Staff Has Two Stories Why HUD Complaint Is No Big Deal, Both Stupid

Categories: Schutze

lullaby.jpg
commons.wikipedia.com
City staff is endeavoring to protect the peaceful slumber of elected officials concerning the recent HUD investigative report.
The city of Dallas went to federal court earlier this week to stop a federal judge from expressing his opinion about a recent federal investigative report accusing Dallas of practicing racial segregation (the city's brief is below). Plaintiffs in a whistle-blower lawsuit will come back today with their argument urging the judge to go ahead and say what he thinks.

It's very complicated legally -- a thing called an "indicative ruling," in which the judge is being asked to look at new evidence in a case already decided against the plaintiffs and now on appeal. They want him to say whether he might have ruled differently had he known then what he knows now.

This case involves two downtown tower developers who say they reported the city to the U.S. Department of Housing and Urban Development (HUD) when their own dealings revealed to them that the city was engaged in a decade-long conspiracy to cheat HUD out of hundreds of millions of dollars. They say they told HUD Dallas was taking federal desegregation money and using it instead to build condos for rich white people downtown.

Here's the point: Federal law pays rich rewards to those who alert the federal government to government fraud, and those rewards come out of the guilty party's pocket. In some of the city's own court filings in this case, it says it could be on the hook for more than a billion dollars to developers Curtis Lockey and Craig MacKenzie if they can prove they were the ones who blew the whistle first.

We talked about this Wednesday. The judge in this case, Reed O'Connor, tossed out Lockey and MacKenzie's whistle-blower suit last year after agreeing with the city that they weren't the ones who blew the first whistle. The city said -- and the judge agreed -- that the Dallas Observer was the main whistle-blower. I am checking now to see if we get a billion dollars. If we do, I am going to suggest to management that we donate all of it to the whales, but I will offer a compromise position in which they can keep some of it if I can, too. Gotta be flexible. But I don't think it works that way.

See also: Dallas and Its Housing Authority Credit Me With Uncovering Their Housing Scam. I Wish.

Straws in the wind yesterday told me that city staff is making a couple of arguments to the mayor and city officials. First, they are telling the elected officials that they have spoken with HUD, and HUD has no desire to give Dallas a beating. All HUD will seek, they say, is a way forward, an agreement by which Dallas will do better in the future.

Based on what I have been told and have read about HUD's behavior in other similar enforcement matters, that may well be the case. It sounds like them. It's also irrelevant and not a thing from which elected officials should draw much comfort.

As I pointed out in a column a week ago, HUD has a lousy record on enforcement of its own policies, laws and contracts. In both of the recent big cases elsewhere similar to ours, HUD had to be dragged into an enforcement action kicking and screaming by private plaintiffs. There is great division within the agency about how aggressive or conciliatory it should be, especially concerning its biggest potential whip, the threat of withdrawal of all federal housing money from entities that deliberately cheat.

See also: Dallas Doesn't Have To Be the City Portrayed in the HUD Segregation Complaint

It's perfectly plausible that somebody at HUD is whispering in the city's ear not to worry. But that's exactly why Lockey and MacKenzie are in the appeals court -- to hold the agency's feet to the fire. The recent HUD investigative report finding Dallas in non-compliance with federal law is a pretty strong indication that there's a new (second-term) sheriff in town and HUD intends to get tougher on its own. But even if that's not true, Lockey and MacKenzie's case in the appeals court will give federal judges there an opportunity to force HUD's hand, as federal courts have done in other cases.

The second straw is this: The staff is telling elected officials that anybody and everybody who ever got a good look at Lockey and MacKenzie's deal saw right away it was way too sketchy. The two men wanted to renovate a tower at 1600 Pacific Ave. That deal went south in June 2009 when a downtown tax incentive board voted to kill a key subsidy, which had the effect of knocking the developers out of the box for other needed funding. Now staff is telling the City Council these guys were way shady from the get-go.

It's a lie and a libel. Lockey and MacKenzie both have distinguished resumes including projects all over the country. Lockey has been a trusted and successful partner with the city of Dallas on other projects. The city made all of these same arguments when HUD first began to investigate Lockey and MacKenzie's complaints, covering HUD up with paper in the first two years of the probe to show that Dallas did nothing wrong and these guys had a flaky deal.

Given HUD's history on matters like these, it's safe to say the agency probably started with sort of an institutional cultural bias against Lockey and MacKenzie and with a tendency to side with its own local government clients. But after combing records for four years, HUD finally ruled that the Lockey and MacKenzie deal was as good or better than many deals City Hall had treated preferentially.

The point being, all of this stuff -- "HUD loves us, Lockey and MacKenzie are flakes" -- is a song City Hall has been singing for four years. During this period, that lullaby hasn't worked on anybody in Washington. The question now is whether the staff can put the Dallas mayor and city council to sleep. You would think not, but you have to remember that they start out kind of droopy-eyed down there.

City of Dallas response to Lockey and MacKenzie motion for indicative ruling 12-17-2013 US District Judge R... by Schutze


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15 comments
MikeWestEast
MikeWestEast

HUD only enforces the rules if you take the money.  We were stupid enough to take the money and then spend it as we desired.  First step is city will tell HUD that thanks, but no thanks.  We'll call you if we ever want more, but don't wait by the phone.  Second, the penalty talks will get long and difficult.  I'm sure HUD's complicity will be a big factor.  The purpose of penalty is to assist the government in uncovering fraud.  If the government is actively complicit in the fraud, why have the penalty?

dallasdrilling.wordpress.com
dallasdrilling.wordpress.com

The same city staff recommended to the council a lower setback for gas drilling and looser standards. 9 council members didn't listen and did the right thing by going the opposite direction. It will be interesting to see how the same 9 react to this.

holmantx
holmantx topcommenter

So if the Judge bites on the plaintiff's appeal and changes his ruling, this could begin a chain of events that may cost Dallas taxpayers big.  

I hope you (and the DO) hit the lottery, for the sake of the taxpayer.

That means the judge said the whistle was blown by you.

And that just may arrest the HUD perpetual motion machine from starting under its own power and making an example out of Dallas in a very public and costly way.  

I can deal with the loss of federal funds in the future if we can avoid the punitive part.  

Maybe the "everybody does it" defense will work just one more time.  But I doubt it.  There's now precedent that HUD can be forced to to enforce Disparate Impact on behalf of whistle blowers, which blows the game wide open nationwide.

ozonelarryb
ozonelarryb

Same morons who are writing the Davenport denials? Abject proff of failure at DISD.

putt4dough
putt4dough

Sure would be horrible for Obama if HUD (under his administration and appointees) didn't enforce these Civil Rights Violations to the fullest extent of the law. 

JimSX
JimSX topcommenter

@MikeWestEast 

City could never afford to kiss off HUD money without huge tax hikes. Argument of HUD complicity went nowhere in Westchester and State of Texas Ike and Dolly cases. 

JimSX
JimSX topcommenter

@dallasdrilling.wordpress.com  

Very good point. Because of the way the city council system is set up here -- flood them with minutiae, deprive them of independent staff capable of analyzing the minutiae -- it takes a long time for the council to see through the puppet shows the staff puts on for them. But it can happen. On gas drilling, it took Griggs and Hunt catching Suhm in secret defiance of a clear council directive to shock the council into a fully awakened state.One problem here is that the parties who are supposed to be injured by segregation, the black council members, usually defend segregation as a way to build a better ghetto. Listen to Carolyn Davis the other day on KERA: http://keranews.org/post/dallas-segregating-low-income-housing-once-again The white North Dallas members sure are not going to say, "We demand more Section 8 housing in our parts of town." In the end , the only effective sanctions probably have to come from way outside City Hall. As for Lockey and MacKenze maybe cashing in some day? Yeah, I know, but look at it from their perspective: the city screwed them out of a $74 million deal and since then has been working to muddy their names. They did what nobody ever does in Dallas because most people who do business with City Hall are deathly afraid of permanent shunning: they fought back. This has taken five years out of their lives so far. I'm afraid those guys are going to want to be paid. 

putt4dough
putt4dough

"As I pointed out in a column a week ago, HUD has a lousy record on enforcement of its own policies, laws and contracts. In both of the recent big cases elsewhere similar to ours, HUD had to be dragged into an enforcement action kicking and screaming by private plaintiffs. There is great division within the agency about how aggressive or conciliatory it should be, especially concerning its biggest potential whip, the threat of withdrawal of all federal housing money from entities that deliberately cheat."


I have heard the same thing about the great divide in HUD. I have heard that CPD is blocking Fair Housing from being able to fully do their job. CPD has to sign off on certain findings/actions by Fair Housing and they will not cooperate no matter how egregious the findings are. Some fella named Mark Johnston is the head of CPD in Washington; this needs to be investigated and corrected, if true. Regardless if this is true or not, doesn't explain why Shaun Donavan (Head of entire agency) would allow such shenanigans on his watch (appointed by Obama). 


Here you have a group that doles out the money (CPD) having dominion over the group entrusted to enforce fair housing laws and Civil Rights laws (FHEO). Seems like a major structural problem and conflict of interest. 



MikeWestEast
MikeWestEast

@JimSX Besides building supposedly affordable housing, how do we use their money?  I understand we would give away a lot less money to developers, and it will take longer to upgrade downtown, but so be it.  No money, no building.  How does that translate to tax hikes?

putt4dough
putt4dough

In fact, HUD itself can be liable for violation of §3608(d)(5) “when HUD is aware of a grantee's discriminatory practices and has made no effort to force it into compliance with the FairHousing Act by cutting off existing federal financial assistance to the agency in question.” Anderson v. City of Alpharetta, Ga., 737 F.2d 1530, 1537 (11th Cir. 1984). 


 “[E]very court that has considered the question has held or stated that Title VIII imposes upon HUD an obligation to do more than simply refrain from discriminating (and from purposely aiding discrimination by others)…This broader goal [of truly open housing] … reflects the desire to have HUD use its grant programs to assist in ending discrimination and segregation, to the point where the supply of genuinely open housing increases.” NAACP v. Sec’y of Housing andUrban Development, 817 F.2d 149, 155 (1st Cir. 1987). 


 Federal courts have repeatedly held that §3608 reflects a Congressional “desire to have HUD use its grant programs to assist in ending discrimination and segregation, to the point where the supply of genuinely open housing increases….” NAACP v. Sec’y of Housing andUrban Development, 817 F.2d 149, 155 (1st Cir. 1987). Or, as the Third Circuit previously put it,“[HUD cannot] remain blind to the very real effect that racial concentration has had in the development of urban blight…[and] must utilize some institutionalized method whereby, in considering site selection or type selection, it has before it the relevant racial and socio-economic information necessary for compliance with its duties under the 1964 and 1968 Civil Rights Acts.” Shannon v. HUD, 436 F.2d 809, 821 (3d Cir. 1970).


The obligation imposed by §3608 is an affirmative obligation, and calls on HUD to ensure that federal housing and community development funds are used to reduce racial segregation, not to perpetuate or exacerbate it. The Second Circuit made clear that “[t]he affirmative duty placed on the Secretary of HUD by § 3608(e)(5)… requires that consideration be given to the impact of proposed public housing programs on the racial concentration in the area in which the proposed housing is to be built. Action must be taken to fulfill, as much as possible, the goal of open integrated residential housing patterns and to prevent the increase of segregation, in ghettos, of racial groups whose lack of opportunities the Act was designed to combat.” Otero v. New York City Housing Authority, 484 F.2d 1122, 1134 (2d Cir. 1973).


See Administrative Procedure Act. 


putt4dough
putt4dough

@JimSX @holmantx 


AKA "HUD's walking around money"

holmantx
holmantx topcommenter

Federal monies amplify local power way beyond that which can be obtained via local tax collections.

holmantx
holmantx topcommenter

@MikeWestEast @JimSX 

You are right.  If the federal money has been misappropriated then this City should not be part of the program.  Under Disparate Impact guidelines the City should not be a candidate for such federal assistance.  It will de facto abolish the Housing Department.  And does it affect existing subsidized housing reimbursements if HUD finds such a pattern?  

The problem is, as with all umbilical narcotics, federal funds represent power to dole it out locally.

And that is the one thing a politician cannot merely kiss off.

And this is why the case remains so interesting.  

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