Property Management Firm to Settle Allegations of Defrauding the U.S. Department of Housing

The False Claims Act applies to virtually any intentional submission of a false claim for payment to the federal government. Often times, this involves healthcare fraud and fraud in the defense contracting sector. However, every now and then, a story will emerge involving a less-publicized public entity on the receiving end of unethical, unlawful false claims.

In today’s story, we will review a case involving the U.S. Department of Housing and Urban Development. Known colloquially as HUD, this group is involved with several different aspects of the housing industry, including mortgage lending, housing assistance, and Section 8 housing vouchers. With its heavy involvement in consumer transactions, including home loans and residential rental properties, it is no wonder that HUD was recently involved in an investigation of a property management company alleged to have unlawfully collected money under the Section 8 housing assistance structure, resulting in a whistleblower lawsuit and eventual settlement for $640,000.

Details of the Case

The defendant in the case is Foley Family Property Management, Inc., which is based in California and operates dozens of low-income housing units across the United States. Of particular concern is its Kansas City, Kansas, property, known as Terrace Points, which rents units to low-income individuals qualifying for Section 8 housing. The internal operating procedures at Terrace Points quickly became the center of a state and federal investigation after a whistleblower revealed possible less-than-lawful tactics involved in renting to certain individuals. More specifically, its property manager was allegedly accepting government money for residents who did not meet the criteria for low-income housing vouchers due to illegal alien status and other disqualifying criteria.

Under the rules of the federal Section 8 housing statutes, families enrolled in the program must be present in the United States legally. If a property manager or owner submits a claim to HUD for reimbursement under the Section 8 program for illegal aliens, this is considered a false claim and can result in liability under the False Claims Act.

Allegedly, Foley Family Property Management was collecting money from HUD for housing illegal aliens for a period ranging from November 2005 through January 2011, resulting in an overpayment of hundreds of thousands of dollars. In addition, several employees working at Terrace Points faced criminal liability for accepting counterfeit citizenship documents and falsely reporting tenants’ eligibility in exchange for bribes. The property manager and nine tenants are facing federal criminal charges in a separate case.

The company has agreed to settle the matter despite not admitting any wrongdoing.

Government Response

State and federal governments work tirelessly under the FCA to combat fraud. In a statement, U.S. attorney Barry Grissom said:

“Today’s settlement demonstrates our continuing commitment to protect the integrity of federal programs. It is important that limited federal assistance resources be preserved for those who lawfully qualify and need them….”

The Office of Inspector General reiterated this point by stating:

“The settlement should send a strong message that the United States Department of Housing and Urban Development, Office of Inspector General, will aggressively investigate those who fail to exercise integrity in connection with HUD programs. Working in conjunction with the U.S. Attorney’s Office, we will use whatever means necessary – both civil and criminal – to isolate and punish individuals or companies that commit fraud against HUD’s programs and personally benefit from the fraud perpetrated at the expense of individuals qualified to receive housing assistance.”