oversight

                                               U.S. DEPARTMENT OF
                               HOUSING AND URBAN DEVELOPMENT
                                        OFFICE OF INSPECTOR GENERAL




                                            January 29, 2014


                                                                                           MEMORANDUM NO:
                                                                                                2014-CF-1801

Memorandum
TO:            Dane M. Narode
               Associate General Counsel, Office of Program Enforcement, CACC

               //signed//
FROM:          Kimberly Randall
               Director, Joint Civil Fraud Division, GAW


SUBJECT:       Final Action
               John Sherman
               Violations of U.S. Department of Housing and Urban Development Real Estate-
                  Owned Program Requirements


                                          INTRODUCTION
The Office of Inspector General (OIG) investigated allegations that John Sherman violated U.S.
Department of Housing and Urban Development (HUD) real estate-owned (REO) owner
occupancy program requirements. The Cincinnati HUD Office referred the complaint to HUD-
OIG.

                                           BACKGROUND
When a HUD home becomes available for sale, the principal method of sale is a competitive
sales procedure. The property is publicly advertised for 10 days for sealed bids, with a
possibility for an extended listing period. It is usually listed on the Multiple Listing Service and
on internet listing sites maintained by management companies under contract to HUD. Its list
price is determined by an independent appraisal. Any real estate broker who is properly
registered with HUD may submit a contract for purchase. In accordance with HUD policy,
priority is given to owner-occupant purchasers during the initial 10 days of the list period. If the
property remains unsold at the conclusion of the 10 day period, there is a review of all bids,
including investors, for the highest acceptable bid.


                                         Office of Audit – Joint Civil Fraud Division
                                  400 State Avenue, Suite 501, Kansas City, KS 66101-2406
                               Visit the Office of Inspector General Website at www.hudoig.gov
The owner-occupant bidder certifies on HUD Form 9548, Sales Contract, that the purchased
property will be owner occupied as the primary residence. The form is signed by the bidder, the
real estate agent, and a HUD official. The purchaser also certifies on HUD Form 9548-D,
Addendum to the Sales Contract, that he/she has not purchased a HUD-owned property within
the past 24 months and will occupy the property as primary residence for at least 12 months.
The real estate broker certifies on HUD Form 9548-D that he/she has not knowingly submitted
the HUD-9548, Sales Contract, for the property on behalf of an investor purchaser. The broker
further certifies that he/she has discussed the penalties for false certification with the
purchaser(s).

                              RESULTS OF INVESTIGATION

Our investigation revealed that John Sherman failed to comply with the HUD REO program
requirement that an individual who purchased a REO home during its initial offering period must
be the owner-occupant of the purchased home for one full year. On April 20, 2012, Mr.
Sherman purchased the subject property in Dayton, Ohio, for $8,000 as a priority purchaser and
owner-occupant through the REO program. Mr. Sherman certified that he was submitting the
offer to purchase as an owner occupant. However, we determined that Mr. Sherman did not
intend to occupy the property, nor did he ever live in the property.
On July 24, 2013, we issued a referral to HUD’s Office of General Counsel recommending that
HUD pursue an action against John Sherman under the Program Fraud Civil Remedies Act
(PFCRA), 31 U.S.C. (United States Code) 3801-3812. To resolve the matter, HUD accepted a
settlement agreement from Mr. Sherman on October 18, 2013, in which Mr. Sherman admitted
that he never lived in the subject property or ever intended to do so after the purchase. He paid
$7,500 to HUD to resolve the matter, the maximum recovery allowed under the PFCRA for a
false statement.
                                    RECOMMENDATION
We recommend that HUD’s Office of General Counsel, Office of Program Enforcement
1A.    Agree to allow HUD OIG to post $7,500 to HUD’s Audit Resolution and Corrective
       Actions Tracking System.




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