Community Planning and Development Program
The Office of Community Planning and Development (CPD) seeks to develop viable communities by promoting integrated approaches that provide decent housing , suitable living environments, and expanded economic opportunities for low- and moderate-income persons. The primary means toward this end is the development of partnerships among all levels government and private sector.
Common Fraud Schemes: HUD OIG investigative activities show there are, in general, five major fraudulent types of schemes affecting the CDBG program: making false claims for funds; soliciting/receiving bribes or kickbacks; procurement or contracting rigging; theft or embezzlement; and public corruption.
False Claims: The act of knowingly and willfully making false and fraudulent material statements or representations. Stealing or knowingly converting funds for a person's own use
Example: A former employee embezzled nearly $160,000 from the East Saint Louis Community Development, a non-profit organization funded by CDBG. False vendor numbers and invoices were created to receive checks for services and materials never provided. The employee, utilizing her personal checking account, deposited and spent the fictitious vendor payments.
Soliciting a bribe: Solicitation is used in a variety of legal contexts. A person who asks someone to commit an illegal act has committed the criminal act of solicitation.
Example: Two former City of Rochester, New York rehabilitation specialists were sentenced for bribery. They solicited "kickbacks" from contractors in exchange for City of Rochester rehabilitation contracts funded by CDBG.
Procurement and Contracting: Procurement fraud involves an employee working with an outside vendor to defraud his employer through bogus or inflated invoices, services and products that are not delivered, work that is never done or contract manipulation. Often, in exchange for letting the vendor shortchange his own company or organization, the employee gets kickbacks.
Example: Two senior civic leaders of Springfield Massachusetts, together with a real estate developer, and a builder were convicted for steering CDBG funds to renovate bars owned by the civic leaders.
Theft or Embezzlement: The fraudulent conversion of another's property by a person who is in a position of trust, such as an agent or employee.
Example: A New York Rabbi was charged in federal court with misappropriating $700,000 in federal grant money. The Rabbi, president and director of a Jewish day school in Brooklyn, received an Economic Development Initiative (EDI) grant from HUD. He misrepresented to HUD that the entire grant amount would be used to pay off a mortgage on a building to house education and therapeutic programs for disabled preschool children. In addition to the $700,000 grant, the school received over $2.7 million in other EDI grants from HUD. The Rabbi diverted funds to several individuals and entities that were not entitled to the funds. For example, $300,000 was diverted to a corporation in which the Rabbi's son-in-law was an officer and $80,000 was diverted to a variety of other Rabbis and schools and organizations in Brooklyn. Another $78,000 in checks were made payable to the Rabbi.
Public Corruption: Corruption involves behavior on the part of persons in which they improperly enrich themselves or those close to them by misusing power with which they have been entrusted. In short, public corruption is the misuse of public power for personal gain.
Example: The former Mayor and Director of the East Cleveland, Ohio Department of Community Development, a HUD funded organization, was convicted for, among other things, soliciting and receiving bribes, kickbacks and secret payoffs through intermediaries using HUD funds as a "carrot" for contractor bribes.