HUD suspends Virgin Islands housing authority funding over fraud concerns

The U.S. Department of Housing and Urban Development has suspended funding to the Virgin Islands Housing Finance Authority (VIHFA) after an investigation uncovered what the agency described as widespread financial mismanagement, inadequate fraud controls, false certifications and improper payments tied to federally funded disaster recovery programs.

HUD Secretary Scott Turner announced the suspension on Monday, saying the agency will immediately halt additional funding to the authority while the investigation continues.

The action follows a HUD investigation into the authority’s administration of nearly $1.9 billion in Community Development Block Grant-Disaster Recovery funding.

In a July 20 suspension notice sent to the authority, HUD Deputy Secretary Andrew Hughes said the agency was taking immediate action pending an investigation by HUD’s Office of Inspector General, which is examining potential offenses by the authority, its officers and employees.

According to HUD, the authority has spent less than one-third of the funds nearly a decade after receiving them. The department alleged that some funds were diverted to administrative kickbacks and fraudulent schemes rather than disaster recovery efforts.

“The Trump administration is changing the game when it comes to who we entrust with taxpayer dollars,” Turner said in a statement. “Organizations riddled with corruption, mismanagement, and crime will no longer be allowed to squander billions.”

According to the suspension letter, the housing authority has received $1.9 billion in federal disaster recovery funding since Hurricanes Irma and Maria struck the U.S. Virgin Islands in 2017 — more than $20,000 per resident. Nearly nine years later, HUD said the authority has spent less than one-third of those funds.

“Nine years later, because of VIHFA’s blatant mismanagement of these critical disaster funds, USVI citizens still do not have the housing and electrical power they were promised nearly a decade ago,” Hughes wrote.

The letter also points to the conviction of former Chief Operating Officer Darin Richardson, who oversaw many of the authority’s disaster recovery programs. Richardson is serving a federal prison sentence after being convicted of fraud, false statements, money laundering and criminal conflict of interest in connection with a scheme involving disaster recovery contracts.

HUD alleged Richardson accepted a $107,000 bribe from a contractor, inflated the value of a lumber contract from $3 million to $4.5 million, and that the authority later allowed the lumber to deteriorate before it could be used.

“It would be irresponsible for the federal government to continue to conduct business with VIHFA,” Hughes wrote, adding that the authority “has violated its obligations to distribute and manage taxpayer funds lawfully, has failed to adhere to HUD procurement standards, and has repeatedly made false statements regarding its financial management controls and safeguards against conflicts of interest.”

HUD said the authority is immediately suspended from participating in federal procurement and nonprocurement programs while the investigation continues, arguing that allowing VIHFA to continue receiving federal funds “is not in the public interest.”

The department said its investigation found that the authority completed just 2% of its planned single-family rental rehabilitation projects and none of its planned single-family or multifamily housing developments despite receiving nearly $2 billion in disaster recovery funding.

HUD also cited findings from its OIG that the authority’s fraud risk management processes were “at or below the lowest desired goal state.”

The department further alleged the authority sought reimbursement for $6.2 million in disaster-related costs that had already been paid by the Federal Emergency Management Agency (FEMA) and repeatedly submitted false certifications about its compliance program in order to obtain additional federal funding.

The suspension remains in effect while HUD’s investigation proceeds. The Virgin Islands Housing Finance Authority did not immediately respond to HousingWire’s request for comment.

This article was generated using HousingWire Automation and reviewed by a HousingWire editor before publication.