1997Investigative Reporting

Sending good money after bad

HUD missed signs of waste,
then gave tribe more money
By: 
Eric Nadler, Deborah Nelson
and Alex Tizon
December 4, 1996
Index | DAY 1 | DAY 2 | DAY 3 | DAY 4 | DAY 5


Leon Jacobs

A dozen HUD-financed houses on Narragansett Indian land, in Rhode Island, have sat unoccupied for more than a year because the tribe failed to get proper permits before building them.


Day Four:
Wednesday, December 4, 1996

Federal aid for the wealthy

The largest tribe has the greatest need

How a wealthy tribe got federal aid it didn't need

HUD missed signs of waste, then gave the tribe more money

CHICAGO, Ill.

If federal officials had bothered to look, the clues were many.

Clue: Although the Department of Housing and Urban Development had given a Minnesota Indian tribe more than $4 million to build 50 houses for poor tribe members, only half a dozen had been built three years later.

Clue: The tribe's housing authority, which was supposed to oversee how the federal-grant money was spent, hadn't met in two years.

Clue: The tribal leader and two of his lieutenants had been charged with stealing nearly $900,000 from their tribe and its casino, and were well on their way to conviction in federal court.

But somehow, it seems, HUD didn't have a clue.

Even in the face of all this, the Midwest regional office of HUD's Indian-housing program in May gave the White Earth Band of Chippewa another $2.7 million of taxpayers' money.

"They must have been sitting on their brains," said Erma Vizenor, a Harvard-educated reformer who recently became chairwoman of the White Earth Band's housing committee.

Today, 43 houses in various stages of construction are being battered by the vicious storms that mark winter on the White Earth Indian Reservation in the lake country of northwest Minnesota. The force of the freezing ground has broken several concrete foundations.

Workmen tried to nail plywood to some of the frames, but that work stopped abruptly two weeks ago. That's when HUD officials discovered that some of the money needed to finish the job was missing: Eighty-five percent of the original $4.4 million grant has been spent and the tribe has produced only seven livable dwellings.

The vacant, damaged houses at White Earth are symbols of HUD's lax oversight of its national Indian-housing program.

They also reflect HUD's practice of sending good money after bad into troubled projects. Examples:

  • In Alabama, the housing authority for a new, state-chartered tribe that required only a tiny percentage of Native American blood had money woes and management problems since its inception. Yet HUD gave the tribe, the Mowa Band of Choctaw, large development grants three years running. The authority covered cost overruns on the first project with money for the second, then covered that shortfall with the third grant. By the time HUD turned off the spigot, it had poured $5.6 million into the housing authority.
  • In Rhode Island, a dozen new, low-income houses sit empty a year and a half after they were built because HUD released a $3.8 million grant for the Narraganssett Tribal Housing Authority to buy and build on nonreservation land without getting the proper local, state and federal clearances.
  • In Wisconsin, the St. Croix Chippewa housing authority received $5.6 million over five years, despite lacking basic financial controls. Using HUD's automated telephone-withdrawal system, the authority took nearly half a million dollars more than it needed and kept the money in a non-interest-bearing account insured for just $100,000. Development money was misspent on a variety of things, from restaurant meals to apartment buildings.

A baffling lack of action

None of those rival the White Earth case, though, for baffling lack of action by HUD.

It wasn't until September, three months after the three White Earth leaders were convicted in federal court of stealing from the tribe's treasury, that HUD examiners finally showed up to investigate the books of the tribal-housing authority.

The examiners arrived only after the new chairman demanded they come. It was their first visit in years.

Even as HUD examiners were visiting White Earth, housing-authority workmen were using federal money to remodel a house owned by Jerry Rawley - one of the convicted tribal leaders.

The HUD officials "just let it happen," said Jim Jackson, the recently appointed chairman of the new board of the White Earth housing authority.

Interviews and records show that while some members of the White Earth Band lived in squalor, leaders made rich by the tribe's casino rewarded their friends with HUD-subsidized houses and remodeling grants, and illegally helped themselves to a lucrative HUD building contract. The director of the tribal-housing authority and his board complied with their demands.

To see the effects of all this, one need only visit Terri Fairbanks' kitchen, with its drafty windows, broken walls and hazardous electrical outlets. She lives in an old HUD-built house on the White Earth reservation. From her wheelchair, she struggles every day with three children and welfare benefits of $621 a month. Luckily, her sister Brenda comes by once in awhile to help.

The 29-year-old mother asked the housing authority for repairs, but she didn't have the kind of influence Jerry Rawley had.

Fairbanks was on a list for a new house, but was bumped for someone else. Today, she cringes at the sight of so many HUD houses going to waste on her reservation, but feels she's lucky to have what she does.

"Some people can't even get houses," she said. "There's people living two or three families in a house."

Rigging elections and getting rich

Tribal Chairman Darrel "Chip" Wadena ran the 22,000-member White Earth Band for 20 years, and financed an opulent lifestyle by stealing nearly $900,000 from his people, court records show. His closest supporters, Rawley and Rick Clark, rigged tribal ballots to assure his re-election, the court found.

Wadena was the most powerful Indian leader in the state. He visited the White House several times.

The tribal council built a casino five years ago with a $6.6 million land settlement many tribe members wanted to spend on housing and other social programs. The casino became Wadena's base, from which he rewarded himself and his friends with high-paying jobs.

Meanwhile, tribal dwellings deteriorated.

Wadena got interested in the housing authority, but mostly as a source of money and influence. He stacked the board and awarded houses to his friends and relatives.

And he put his heavy hand on Michael Heisler, who had been executive director for 15 years. Heisler admitted in a recent interview with The Seattle Times that he did whatever Wadena ordered him to do, including breaking the law.

In 1993, after HUD approved giving the White Earth Band $4.4 million to build low-income houses, Wadena ordered Heisler to award the contract to a drywall company partly owned by Wadena. Heisler, who earned $47,000 a year until he was fired recently, said he knew it was illegal to award the job without bids, but "I had to. Either that or lose my job."

Asked why HUD employees hadn't discovered the drywall-company deal, Heisler said, "Maybe they weren't looking."

Mohammed Rahmah, development director in the Chicago office of HUD's Office of Native American Programs, said, "Some of this stuff I have nightmares about."

Had Heisler refused to break the law, "he might have lost his job for a few months," Rahmah said. "But we certainly would have looked upon him more favorably."

To make matters worse, the drywall company's work was poorly done, said Jackson, the new housing-authority chairman.

"Studs on the inside walls are buckling," he said. "There are windows leaking."

HUD didn't see auditor's report

White Earth was on HUD's list of "standard" housing authorities, which, in the agency's vernacular, meant the tribe didn't need much attention.

Before HUD's move toward deregulation in 1992, federal officials would visit a construction project at a reservation as often as once a month. If Wadena had gotten a no-bid contract back then, "we would have known about it," Rahmah said.

As it was, HUD missed seeing even a private auditor's report that would have eliminated the housing authority from grant consideration and put the authority on probation. Auditor Robert Tauriainen didn't uncover any fraud in his September 1995 report to the tribe. But he did find that the debt owed to the housing authority by tenants and homeowners had risen sevenfold in the previous five years.

Rahmah said information in the report would have killed the grant and put the housing authority on "high-risk" status. But the tribe simply didn't mail the report to HUD for a year.

The new White Earth tribal chairman, Eugene "Bugger" McArthur, says HUD employees should have recognized what was going on. "They should have been the ones that blew the whistle," he said.

In September, McArthur wrote a letter to the administrator of HUD's Indian-housing programs in Chicago, flatly accusing HUD of a cozy relationship with Wadena. That finally got HUD's attention, and examiners were sent in.

The housing-authority staff members, most of whom were loyal to Wadena, barricaded themselves inside the housing-authority office, leaving only when HUD took control on Nov. 6. Most have since been fired, and the grant given to the tribe in May has been impounded.

The new leaders promise to get the housing program back on track. But this time, they're not expecting much assistance from the federal government.

"I don't know if HUD can help us at all," sighed Vizenor, the new housing chairman. "They can't even help themselves."