Greuel Critical of Housing Authority's 'Reckless' Spending

Los Angeles City Controller Wendy Greuel Tuesday released an audit sharply critical of the city's low-income housing agency, citing its "reckless" spending of taxpayer money.

The audit of the Housing Authority of the City of Los Angeles found deep flaws in the agency's travel policies, according to Greuel. Commissioners and other staff used agency money to pay for the travel of non-staff members and repeatedly spent far above allowed amounts on meals without documenting what was consumed and who was present at the lunches, the audit found.

Greuel, an announced candidate for mayor, said former Housing Authority Chief Executive Officer Rudolf Montiel, who was fired in March, was directly to blame for the abuses. However, she said Mayor Antonio Villaraigosa also shares some responsibility because he appointed the commissioners who oversee the agency.

"The mayor's office appoints the commissioners and has oversight over those commissioners, and clearly they needed to be minding the store better," Greuel said. "This was an agency that felt no one was watching."

Villaraigosa's press secretary, Peter Sanders, declined to address claims the mayor should have monitored commissioners' lax travel policies before Greuel began auditing the agency but noted that Villaraigosa took immediate action when the matter came to his attention last spring.

"To restore trust in the agency, the mayor has appointed a majority of new commissioners, including a reform-minded chairman," Sanders said.

"We welcome greater city oversight of HACLA and will work with City Council in addition to state and federal officials on how to best accomplish that," Sanders added.

Villaraigosa, who is on a 10-day trade mission to Asia, also recommended that the commission name Los Angeles Housing Department General Manager Douglas Guthrie as interim chief executive officer of the agency. The board unanimously approved the recommendation on Tuesday afternoon.

The Housing Authority oversees and places residents in about 75,000 federally subsidized affordable housing units and the city's federally funded Section 8 housing program. The Los Angeles Housing Department is funded by the city's budget and is focused on housing code enforcement, renter and landlord complaints and the city's rent stabilization program.

Villaraigosa sent a letter to Guthrie after his appointment was confirmed, urging him to take immediate action to restore public confidence in the Housing Authority.

Villaraigosa called on Guthrie to:

— "institute a top to bottom review of policies and personnel at HACLA and make all necessary changes";

— "immediately implement systematic controls over travel, meal and other expenditures and over the use of agency purchasing cards";

— immediately begin working with Greuel on the audit process and ensure full cooperation from all staff members in the process;

— review the agency's Code of Ethics and implement any provisions needed to strengthen it; and

— report back to the Board of Commissioners and mayor's office within 30 days about the progress of the reform effort.

According to Greuel's report, employees with the Housing Authority were found to have "double-dipped," paying for expenses with agency purchase cards and later being reimbursed for those same costs.

In one case, a public safety official at the agency was approved to drive to a conference in San Diego. Instead, the official used Housing Authority funds to pay for airfare without prior approval. The official also left the conference early to fly to Chicago, charging the Housing Authority for a hotel night that was not used.

In total, Greuel found the agency spent about $300,000 per year on travel during 2009 and 2010, a 300 percent increase over travel expenses in 2006.

Councilman Dennis Zine, who is running for city controller, said the audit showed that illegal actions may have taken place and that some agency employees should be singled out for investigation and terminated.

The district attorney's office has begun an investigation.

Greuel began her audit in March after KCET-TV Channel 28's SoCal Connected and CBS2/KCAL9 reported on the large travel expenses.

Greuel called the audit alarming, saying that it was "the tip of the iceberg."

A seven-month follow-up investigation by KCET, which aired two weeks ago, found that Housing Authority employees also spent thousands of dollars on posh lunches, work meetings and incentives such as clothes and electronics. The Los Angeles Times also reported that Montiel was awarded a $1.2 million severance and settlement package.

The reports spurred Greuel to announce plans for an expanded top-to-bottom audit of the Housing Authority.

The scandals also caused interim CEO Kenneth Simmons to resign his position with a request to return to his No. 2 position with the authority.

City Council members Wednesday grilled Simmons about the audit's findings.

Responding to an angry Councilman Bill Rosendahl, Simmons responded, "It wasn't my initiative, sir. I don't approve of it. I don't agree with it."

Simmons said the spending detailed in the audit did not include any federal funding that goes to subsidize rentals for residents or to build new housing. Instead the money came from close to 20 nonprofits that aid in the Housing Authority's work.

Council members agreed they should have more authority and oversight of the agency. Council members Jan Perry and Eric Garcetti introduced a motion asking the federal government to change regulations or pass necessary legislation to give the city direct authority over the Housing Authority.

Perry introduced an ordinance in 2009 that would allow the council to overrule the Housing Authority board's decisions. Councilman Tony Cardenas committed to scheduling a hearing on the ordinance for early next year.

Newly appointed commission chair Mitchell Kamin agreed the city should have more oversight of the agency and called for commissioners to be subject to investigation by the city Ethics Commission.