1997Investigative Reporting

Safety funds spent on frills for friends

Eric Nadler, Deborah Nelson
and Alex Tizon
December 3, 1996
Index | DAY 1 | DAY 2 | DAY 3 | DAY 4 | DAY 5

Liz Hayden of the Chehalis Tribe inspects cabinets that were installed in her kitchen although she hadn't asked for them.

Day Three:

Tuesday, December 3, 1996

How a few got the best part of the HUD pie

Playing favorites: rules applied unevenly, say critics

Safety funds spent on frills for friends

'Vicious' politics gets the blame for nepotism

The Chehalis Tribal Housing Authority won nearly $800,000 in federal emergency assistance three years ago to fix a failing sewage system and 25 aging homes in dire need of work to make them safe.

Today, the money is gone and the houses and sewers on this Southwest Washington reservation remain desperately in need of repair.

The housing authority ran out of grant money after finishing work on just 10 federally subsidized houses. Those houses are owned by the daughter and sister of the authority chairman, the granddaughter of another board member, cousins of various board officials, and a staff member.

They received not only new roofs and insulation, but custom make-overs that included skylights, new bathrooms, fancy cabinets, oak trim and carpeting - sometimes a different color for each room. They moved walls, closets and appliances.

The authority chairman's daughter ordered at least $5,200 in extras ranging from a new doorbell to removal of entire walls. His sister got at least $4,800 in personal work that included custom cabinetry, carpeting and new bathroom accessories.

All of it was at taxpayers' expense, through the Department of Housing and Urban Development's Office of Native American Programs.

The contractor hired to bring the Chehalis houses up to code charged the housing authority $5,000 for time spent interviewing homeowners on color and design choices.

Less than $30,000 went into fixing the reservation's overflowing septic fields, though $450,000 was earmarked for it.

George Hauer, the executive director of the housing authority at the time, acknowledged the project had got away from him.

When technology troubles slowed the sewage project in the planning phase, a local HUD staff member advised Hauer to spend the money fast on something else or risk losing it to impending budget cuts, Hauer said.

The staff member has since left and denies the conversation took place. But federal auditors later found evidence to support Hauer's version. Hauer said HUD staff told him to proceed without official HUD authorization and to submit a phony budget showing sewage-system repairs.

So without a plan or bid specifications, the housing authority signed contracts to spend all the money on repairs and remodeling. Hauer said he always intended that the residents would repay the housing authority for the nonessential work. But in the rush to spend the money quickly, he said, he didn't make that clear to them.

Liz Hayden, a cousin of the housing-authority chairman, vaguely recalled being told by Hauer that her monthly payments would increase to cover the costs of remodeling.

However, she said, "It's been more than a year now and my rent never went up."

An audit late last year by the HUD inspector general's office estimated that the remodeling job averaged out to $70,000 per home.

Hauer left the housing authority last December, signing a promissory note to repay $25,000 used to cover his personal medical and legal expenses for a drunken-driving accident. He said he hasn't paid it, because he doesn't have the money.

The housing authority is taking legal action to recover the money from Hauer and has also begun billing homeowners for the custom work.

Meanwhile, the housing authority and tribe together have spent at least $50,000 in emergency money over the past 2 1/2 years for pumping to keep sewage out of the tribe's homes.