oversight

The Alphabet Group, LLC, Marks Group, LLC, and Imagineers, Inc., Settled Allegations Related to Section 8 Rent Certifications

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-09-19.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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




                                                 September 19, 2016
                                                                                                    MEMORANDUM NO:
                                                                                                     2016-CF-1807


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

                  //signed//
FROM:             Christeen Thomas
                  Director, Joint Civil Fraud Division, GAW

SUBJECT:          Final Civil Action: The Alphabet Group, LLC, Marks Group, LLC, and
                  Imagineers, Inc., Settled Allegations Related to Section 8 Rent Certifications


                                                 INTRODUCTION

The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General
(OIG), assisted the U.S. Attorney’s Office for the District of Connecticut in the civil
investigation of The Alphabet Group, LLC, Marks Group, LLC, and Imagineers, Inc. Alphabet
and Marks are owners of residential housing in Hartford, CT, and Imagineers administers the
Section 8 program for the City of Hartford Housing Authority.

The investigation began due to a qui tam filing 1 in the U.S. District Court for the District of
Connecticut.

                                                   BACKGROUND

HUD’s Section 8 Housing Choice Voucher program provides rental subsidies through tenant-
based vouchers for housing units chosen by tenants in the private market. These vouchers are
administered locally through public housing agencies (PHA). To participate in the program,
property owners enter into housing assistance payments contracts with the PHAs, which

1
  The False Claims Act allows private persons to file suit for violations of the False Claims Act on behalf of the
Government. A suit filed by an individual on behalf of the Government is known as a “qui tam” action, and the
person bringing the action is known as a “relator.” If the Government prevails in a qui tam action, the court may
award the relator a share of the False Claims Act award based on the contributions the relator made to the
investigation.
                                                     Joint Civil Fraud Division
                                      400 State Avenue, Suite 501, Kansas City, KS 66101
                                Visit the Office of Inspector General Web site at www.hudoig.gov.
authorize rental subsidies to property owners on behalf of low-income tenants. By accepting
each monthly housing assistance payment from the PHA, the owner certifies that the rent to the
owner is not more than rents charged by the owner for comparable unassisted units in the
premises. Additionally, the PHA may not approve a tenant’s lease unless it determines that the
rent to owner is a reasonable rent in accordance with 24 CFR (Code of Federal Regulations)
982.507.

On May 17, 2012, the relator filed a qui tam action in the U.S. District Court for the District of
Connecticut against Alphabet, Marks, Imagineers, and others. 2 The relator alleged that Alphabet
and Marks violated the False Claims Act by charging higher rents for tenants who received
Section 8 rental assistance than for tenants in comparable unassisted units in the same premises.
The relator also alleged that Imagineers, which administered the City of Hartford’s Section 8
program, improperly approved the relator’s housing assistance payments contract because the
monthly rent under the contract was more than the rent charged by Alphabet for comparable
unassisted units in the same premises.

                                      RESULTS OF INVESTIGATION

In August 2015, the United States Attorney’s Office for the District of Connecticut declined to
intervene (join) in the qui tam suit brought by the relator. However, the parties reached
settlement agreements to avoid the delay, uncertainty, inconvenience, and expense of lengthy
litigation.

On December 23, 2015, Imagineers reached a settlement with the Government and the relator for
$30,000. Of that amount, $3,500 was paid to the United States, and the balance will be paid to
the relator and the relator’s attorneys.

Imagineers admitted no fault in the action but acknowledged and agreed as follows: “The
Section 8 voucher program provides that public housing agencies and their contractors
(collectively, PHAs), including Imagineers, may not approve a lease until the PHA determines
that the initial rent to owner is a reasonable rent. A reasonable rent is determined by comparison
with rents for other comparable unassisted units in the local market and the owner’s premises.”

In a separate settlement, on February 19, 2016, Alphabet and Marks agreed to pay $4,000, of
which $700 was paid to the United States and the balance will be paid to the to the relator and
the relator’s attorneys.

Alphabet and Marks admitted no fault in the action but acknowledged and agreed that by
accepting each monthly housing assistance payment under the HUD Section 8 program, an
owner certifies that the rent to owner is not more than rent charged by the owner for comparable
unassisted units in the premises.




2
    The other defendants included the City of Hartford and an agent of Alphabet.

                                                           2
                                RECOMMENDATIONS


We recommend that HUD’s Office of General Counsel, Office of Program Enforcement,
1A.   Acknowledge that $3,500 of the $30,000 in the attached settlement agreement with
      Imagineers, Inc. represents an amount due HUD.

1B.   Acknowledge that $700 of the $4,000 in the attached settlement agreement with The
      Alphabet Group, LLC, and Marks Group, LLC represents an amount due HUD.

      As of the date of this memorandum, the settlement amounts due HUD had been paid in
      full. Therefore, no further action is required by the Office of General Counsel. At
      issuance of this memorandum, HUD OIG will enter a management decision into HUD’s
      Audit Resolution and Corrective Action Tracking System, along with the supporting
      payment information to show that final action was completed.




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