United States Attorney's Office District of Connecticut
Press Release

LA CASA DE PUERTO RICO, INC., AGREES TO PAY $446,430 TO SETTLE DIVERSION OF FUNDS ALLEGATIONS

Kevin J. O’Connor, United States Attorney for the District of Connecticut, today announced that La Casa de Puerto Rico, Inc., has agreed to pay $446,430 to settle a civil suit filed in March 2005 against the organization, an affiliate organization, La Casa-Elderly Housing, Inc., and three individuals for alleged violations of a U.S. Department of Housing and Urban Development (HUD) statute prohibiting the diversion of certain funds in HUD-financed projects. The Government’s suit sought double damages under the statute.

At all times relevant to the suit, La Casa-Elderly Housing, Inc., was the owner of Nuestra Casa, a multifamily housing project for the elderly located in Hartford. La Casa de Puerto Rico, Inc., was the management agent of Nuestra Casa. Defendants Carmen Rodriguez, Ivette Servera, and Gladys Hernandez were principals of La Casa-Elderly Housing, Inc. In addition, Carmen Rodriguez was the executive director of Nuestra Casa.

At all pertinent times, HUD held a first mortgage on Nuestra Casa that secured a direct loan made by HUD for construction of the housing project. In September 1986, La Casa-Elderly Housing, Inc., entered into a regulatory agreement as a condition of HUD financing of Nuestra Casa. The regulatory agreement prohibited the owner and agents from transferring or disposing of any personal property of Nuestra Casa or paying out any funds, except for reasonable operating expenses and necessary repairs, without the prior written consent of HUD.

In 2003, HUD’s Office of Inspector General audited Nuestra Casa’s operations for the period of January 1, 2000, through December 31, 2002, issuing an audit report in 2004 revealing that project funds totaling $371,430 were allegedly used in violation of the regulatory agreement and HUD regulations. Of the $371,430, the sum of $244,103 was allegedly transferred to La Casa-Elderly Housing, Inc.’s affiliates without HUD’s consent. An additional $16,385 was allegedly spent on ineligible, unnecessary, or unreasonable Nuestra Casa expenses, and a required reserve fund for the project was allegedly underfunded by $110,942.

In reaching the $446,430 settlement, which includes the improperly used $371,430 and a fine of $75,000, the defendants did not admit any wrongdoing. The settlement agreement was signed by both La Casa entities and Rodriguez, who, while not required to pay any money, has agreed to forgo, for the period she has been administratively debarred by HUD, any efforts to serve in a leadership or management position regarding either of the La Casa entities or Nuestra Casa. As a result of the settlement, the Government will be filing a notice of dismissal as to the La Casa entities and Rodriguez. Servera and Hernandez are not parties to the settlement agreement, and have no obligations under it. The Government will be including them in the notice of dismissal.

“Entities that receive federal funding must abide by regulatory agreements and manage the funds properly and responsibly,” U.S. Attorney O’Connor stated. “It is our understanding that the investigation that led to this settlement has inspired the new leadership of La Casa to reform the way it does business. We trust that La Casa will now manage HUD funds wisely, which will allow the organization to devote less time responding to government investigators and attorneys, and more time to assisting the elderly population it serves.”

U.S. Attorney O’Connor noted that, of the settlement proceeds, $360,199.80 will be returned by HUD to the project for appropriate use by Nuestra Casa under the terms of the regulatory agreement. This figure represents the $371,430 of original improperly used funds, less 3 percent, which is deposited into a Department of Justice litigation fund.

“This settlement is the result of a lot of hard work and close coordination on behalf of HUD, the Department’s Inspector General and the U.S. Department of Justice,” said Keith E. Gottfried, HUD’s General Counsel. “This action demonstrates our steadfast and enduring commitment to making sure HUD’s programs are administered in accordance with the law and are free from fraud, waste and abuse. Furthermore, this settlement is evidence that we will take immediate action if our program participants, however large or small, fail to play by the rules and thereby jeopardize the delivery of decent, safe and sanitary housing.”

“HUD regulations governing the use of an elderly project’s funds, like Nuestra Casa, are designed to safeguard the long-term viability of the project,” added HUD Inspector General Kenneth M. Donohue. “When funds are taken away, it jeopardizes the maintenance, order, and operation of the only home these senior citizens know. This action delivers a message; one that we hope elderly housing providers have received.”

This settlement is the result of an audit and investigation conducted by U.S. Department of Housing and Urban Development. The matter was handled within the U.S. Attorney’s Office by Assistant U.S. Attorney William A. Collier, and within HUD’s Regional Counsel’s Office by Attorney-Advisor Alice A. Peterson.

CONTACT:

U.S. ATTORNEY'S OFFICE
Tom Carson
(203) 821-3722
thomas.carson@usdoj.gov