Knock LA

A 2016 audit from the US Housing and Urban Development Dept. fits into a larger pattern of questionable financial practices

“I am extremely confident and optimistic about the future of our City. Government will be smaller [and] leaner … Our institutions and actions will be more transparent and responsive to the desires of its residents.”

Those were the words of Inglewood Mayor James Butts in his 2011 State of the City address, months after prevailing in a tightly contested mayoral election. Mr. Butts had run on a simple campaign message: this ship is sinking, and I am the one to right it.

Before he emerged victorious, the city’s government faced a massive budget shortfall and was careening toward insolvency.

“The city is in a precarious financial position,” Mr. Butts told the LA Times during his candidacy. “They need someone who has operational, executive and public safety experience … Not just a politician.”

But despite the drastic budget-balancing measures Mr. Butts enacted upon taking office — including reducing city services and significantly shrinking the city workforce’s size and pay — he hasn’t shed the legacy of fraud and fiscal mismanagement dogging Inglewood leadership for decades.

If anything, he’s simply continued the trend.

After doing away with the city’s public trash collection services to save money, Mr. Butts oversaw a private deal with Consolidated Disposal Services in 2012, a company that had hired his brother months earlier. Six years later it came to light that Butts personally profited from that contract, as did Inglewood City Councilmember Eloy Morales.

Shortly after the trash contract details emerged earlier this year, the Mayor also came under fire for paying his executive assistant over a quarter million dollars in total salary and benefits.

Meanwhile, city manager Artie Fields was forced to use almost 60% of the city’s $19 million in cash reserves to fill a $17 million budget gap in 2017 caused at least in part by increasing city salaries, per Mr. Fields’s report.

It’s difficult to imagine a city department tasked with managing money that doesn’t record who it pays and for what, but that’s exactly what the city owns up to.

And according to a newly unearthed investigation, Mayor Butts’s government also mismanaged at least $800,000 in grants from the U.S. Department of Housing and Urban Development (HUD), funds that were meant to support Inglewood’s lowest income residents. Eventually, the city was forced to pay back $600,000 of that money.

A Sept 2016 HUD audit report details how Inglewood’s Housing Authority and its finance department “did not manage the financial operations of its programs in accordance with HUD rules.”

The report centers around the use of funds in Inglewood’s Housing Choice Voucher Program (HCVP), known colloquially as “Section 8.” Every year, HUD gives millions of HCVP dollars to local housing agencies across the country.

That money is meant to subsidize housing for extremely low-income renters, ensuring they pay no more than 30% of their income toward rent. Local agencies are responsible for disbursing these funds and certifying that renters find apartments with minimum livability standards.

In 2013 and 2014, the City of Inglewood had different plans for its HCVP money.

Namely, Inglewood spent $796,186 of program funds on “unsupported transactions” — $605,614 in “overhead” and $190,572 in “personnel costs.”

The former refers to money spent with zero accounting of where it went and why. According to the report, when charging their HCVP account Inglewood failed to keep track of “the departments providing and receiving services [and] the details of the expenses incurred from providing services.”

It’s difficult to imagine a city department tasked with managing money that doesn’t record who it pays and for what, but that’s exactly what the report alleges and what the city owns up to in a response letter.

This wasn’t, however, the only instance of the Housing Authority’s utter abdication of accounting responsibilities. Inglewood also failed to track when employees were working on the HCVP program — but paid them for working on it anyway.

The result was over $120,000 for an Inglewood police officer, about $29,000 for a City finance department accountant, and over $30,000 paid to Inglewood’s housing manager at the time, all with no record as to what these individuals did for the HCVP program to receive that money.

Other infractions are less eye-popping, but equally as eyebrow-raising. HUD caught Inglewood sending HCVP fraud recovery money to the city’s general fund, instead of back to the program itself. Inglewood also demonstrated a pattern of failing to reconcile uncashed checks disbursed by the Authority.

The way Ms. Ohno tells it, the city’s acting housing manager at the time, Maria Pacheco, called Inglewood’s Section 8 reserves the “full employment program.”

Tellingly, the HUD report aligns all too well with portions of a whistleblower lawsuit filed against the city a few months before publication of the audit. The lawsuit alleges the city fired a finance department employee, Barbara Ohno, for attempting to correct — and when that failed, report — corrupt financial conduct within the city government.

First off, Ms. Ohno alleged that across Inglewood’s financial landscape, the city regularly failed to “reconcile the money going in and out of a particular fund,” allowing the city to spend money earmarked for a specific purpose on whatever they wanted. That allegation rings true in the HUD audit finding that Inglewood’s Housing Authority was spending HCVP money without tracking its recipient or purpose.

Ms. Ohno explicitly describes illicit financial activity in Inglewood’s HCVP program as well. She claims the city used the HCVP reserve money — meant to keep housing subsidies going even if ongoing HUD payments were to temporarily dry up — as something of a slush fund to employ city workers that were slated to be laid off as a part of the Mayor’s austerity measures.

The way Ms. Ohno tells it, the city’s acting housing manager at the time, Maria Pacheco, called the HCVP reserves the “full employment program” for this reason. As a result, Inglewood’s Housing Authority spent millions on employee salaries who “did not have any work experience with Section 8 programs.”

Lastly, Ms. Ohno’s lawsuit contends that HCVP transaction reports sent monthly to HUD were consistently incorrect, since the Housing Authority had a practice of reissuing checks that had never been cashed, allowing the Authority to hang on to money it told HUD had already been spent. Both the lawsuit and the HUD report describe Inglewood’s failure to adequately handle uncashed checks.

While HUD didn’t find evidence of the large-scale fraud described in Ms. Ohno’s lawsuit, it’s not out of bounds to imagine the audit found whatever cracks Inglewood’s Finance Department could not fill after the fact. The allegations detailed in her complaint are larger in scale and seriousness than HUD’s report.

It’s impossible to know for sure, especially since the Ohno lawsuit eventually settled. What we do know is at least one person in Inglewood’s government tried to correct the glaring financial misconduct — and she may have been fired for doing so.

In isolation, the HCVP mismanagement revelations don’t constitute an earth-shattering indictment of the entire Inglewood government. But in context, they are troubling.

For one, the optics are atrocious when a city government is improperly spending public money earmarked for low-income Inglewood renters while simultaneously courting billionaire developers and sports owners.

Mayor Butts has yet to pay a political price for publicly saying things like “gentrification is not what’s happening in Inglewood,” even as rent increases outpace LA County overall and the debate around affordable housing reaches a crescendo within the city.

Will this string of exposures result in consequences for Inglewood’s polarizing leader?

After all, “fiscal responsibility” is a cornerstone of the legacy Mayor Butts has touted throughout his time in office. A counterfeit grassroots campaign closely associated with the Mayor has a page dedicated to the topic, promoting “smart and financially responsible policies” under his leadership.

But Mayor Butts’s government has shown the exact type of slapdash financial management that he promised to correct in his April 2011 address to the city.

Ironically, his opportunity to become Mayor emerged because of the shady financial practices of his predecessor, Roosevelt Dorn.

Mr. Dorn pleaded guilty to public corruption in 2010 after using an Inglewood housing program to deal himself a low-interest $500,000 loan to buy a house — half of which he deposited in a bank account, according to prosecutors at the time.

Though the money was eventually repaid, the rub was that months earlier, Mr. Dorn had initiated a change to the program permitting elected officials to take advantage of it.

Mr. Dorn’s downfall came after over a decade of running Inglewood like a “fiefdom,” autocratically wielding power with help from a city charter that gives immense authority to the Mayor as “CEO” of the city.

Similar allegations have been leveled against Mayor Butts.

While he has succeeded in areas where Mr. Dorn failed — like bringing economic development interest to Inglewood — it remains to be seen whether Mayor Butts will fail in the same areas as the Inglewood leaders who came before him.