HUD captured by lobbyists

1/23/2015

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Gross didn't avoid conflicts of interest. Instead, any staff who advocated anything other than minimizing oversight were banished from meetings. (iStock)

A top executive of a trade association that lobbies for local housing authorities was hired by the Department of Housing and Urban Development to regulate those same authorities — and was allowed to keep her paid job at the lobbying association at the same time.

HUD's Inspector General said the 2011 hiring of Debra Gross, deputy director of the Council of Large Public Housing Authorities, was an "inherent conflict of interest" in the same way it would be to hire an Exxon lobbyist to regulate oil companies.

Gross was a registered lobbyist for the group until 2009.

In taking the job as HUD's deputy assistant secretary for public housing project policy, Gross insisted on a $200,000 salary, which is higher than the government pay scale. After starting the job, she was also given several performance bonuses without having performance reviews.

And once at HUD she hired other industry advocates onto her staff. She made it a big priority of her office to scrap oversight scrutiny of housing authorities. Gross and her staff then lobbied for the housing authorities to have the power to pay higher salaries to administrators, to let them turn federal dollars into “profit” and to lower performance metrics they had to report, the inspector general says.

Gross was hired by Assistant Secretary Sandra B. Henriquez to head the federal agency’s Office of Policy, Program and Legislative Initiatives for Public and Indian Housing while continuing to hold her post at the industry group, which represents city-run housing authorities that get billions of HUD dollars annually.

HUD ignored virtually all of the required processes for avoiding conflicts of interest. Gross failed to submit required financial disclosure forms, which can be a crime, and to attend ethics training. She was not unique in failing to file the reports, as more than a dozen other senior HUD officials did the same. The reports are intended to illuminate potential conflicts of interest for the public.

The agency also did not get "prior ethical review by HUD’s Office of General Counsel."

Gross then bypassed procedures to change policy to lessen accountability of how housing project dollars were spent, without going through the regular rule-making process.

“The deputy director attempted to change established regulations through notices versus established methods of regulatory change, such as through the Federal Register ... The deputy director attempted to deregulate [public housing authority] reporting requirements and loosen HUD’s oversight of PIH programs, which aligned with CLPHA’s and other similar industry groups’ agenda,” the inspector general wrote.

She sought to prevent the inspector general from reviewing programs for waste and fraud.

Because HUD’s deputy assistant secretary was not technically even a federal employee, since she was hired under an unusual arrangement that allowed her to keep her trade association job while working at the department, she was not supposed to hire anyone.

But she hired industry colleagues as HUD employees, paying them with federal dollars to espouse the interests and opinions of the public housing industry, including its primary goals of increasing federal funding and reducing oversight. One of Gross's hires was an industry consultant who helped write the job posting to fit her own description to ensure that she would be hired.

“In her HUD policy-making role, it appeared that [Gross] championed the public housing industry’s regulation relief agenda at HUD while retaining her job at CLPHA,” the investigation found.

She hired a former CLPHA colleague who worked internally in HUD to ensure that the department didn't stop housing authorities from charging fees even though the inspector general had previously determined that the fees "did not serve any purpose other than to allow a PHA to de-federalize additional funds from its projects to retain as profit in its central office."

An estimated $82 million in federal funds is lost each year to such fees, and after the money is diverted, HUD is unable to make sure it is used for appropriate purposes. Some of that money may be used to pay for lobbying the government for more money, the inspector general said.

Gross's office also sought to "circumvent" a law ensuring that local housing authority officials don't shower themselves with lavish compensation for their work on poverty programs.

Emails show Henriquez attempting to avoid scrutiny of the way housing project money is spent and avoid any new legislation, specifically strategizing about what might attract an investigation by Sen. Charles Grassley, R-Iowa.

At no point did Gross seek to avoid a conflict of interest; instead, she banished from meetings staff who advocated for anything other than minimizing oversight of how housing authority money was spent, the investigation found.

“[T]he deputy director was required to consider whether her impartiality would be questioned whenever her involvement in a ‘particular matter involving specific parties’ might affect certain personal or business relationships. HUD provided no evidence that the deputy director ever considered this part of her ethical obligations.”

The inspector general also found that CLPHA continued to lobby after it filed a formal termination notice in 2009, which is potentially a crime.

HUD dismissed the inspector general's findings, saying that even though CLPHA's members received billions of dollars from HUD, it didn't have a "financial interest" since it was an organization representing them, not the recipient itself.

Henriquez stepped down in June 2014. She was appointed early in the Obama administration. Gross returned full-time to CLPHA in 2014.

HUD spokesman Jereon Brown said that neither woman was fired and that “[b]oth decided to return to the private sector.”

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