oversight

Knox Pest Control Settled Allegations of Charging Unallowable Costs for Preservation of HUD-Owned Properties in the Federal Housing Administration Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-09-29.

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 29, 2016
                                                                                              MEMORANDUM NO:
                                                                                              2016-CF-1810



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: Knox Pest Control Settled Allegations of Charging
               Unallowable Costs for Preservation of HUD-Owned Properties in the Federal
               Housing Administration Program

                                           INTRODUCTION

The U.S. Department of Housing and Urban Development’s (HUD) Office of Inspector General
(OIG) assisted the U.S. Attorney’s Office of the Northern District of Alabama in the civil
investigation of Guardian Pest Services, Inc., doing business as Knox Pest Control and J.J.S.K.
Solutions, Inc. Knox Pest Control has its principal place of business in Columbus, GA.

                                             BACKGROUND

A HUD home is a one-to-four unit residential property acquired by HUD as a result of a
foreclosure action on a Federal Housing Administration (FHA)-insured mortgage. HUD
becomes the property owner and offers the property for sale to recover the loss on the foreclosure
claim. HUD needs assistance to preserve the properties it obtains under FHA’s Single Family
Property Disposition Program. Performance work statements describe the services required by
contractors to assist HUD with the preservation of the properties. These services include
inspections for and treatment of pest infestations. Paragraph 5.2.7.2 of the performance work
statement required that if an infestation was found during an inspection, the subcontractor was to
hire an unaffiliated contractor to perform the termite treatment. The subcontractor hired Knox
Pest Control to perform either the termite inspections or termite treatments for HUD properties
throughout Alabama.



                                               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.
                              RESULTS OF INVESTIGATION

The civil investigation found that the termite inspections and termite treatments were being
performed by Knox Pest Control and J.J.S.K. Solutions, Inc., which are the same entity.
Therefore, the United States contended that it had certain civil claims against Knox Pest Control
arising from claims for termite inspection and treatment services performed on HUD homes. On
June 2, 2016, Knox Pest Control entered into a settlement agreement with the Federal
Government to pay $91,377 in three equal installments of $30,459. Knox Pest Control and the
Federal Government entered into the settlement agreement to avoid the delay, uncertainty,
inconvenience, and expense of lengthy litigation. The settlement agreement is neither an
admission of liability by Knox Pest Control nor a concession by the United States that its claims
are not well founded.

                                    RECOMMENDATION

We recommend that HUD’s Office of General Counsel, Office of Program Enforcement,

1A.    Acknowledge that the attached settlement agreement for $91,377 represents an amount
       due HUD.

       As of June 2, 2016, the settlement agreement of $91,377 was reached, and it represents
       an amount due HUD. Included in the settlement agreement is a repayment agreement
       explaining that Knox Pest Control will pay $91,377 in three equal installments of
       $30,459 by electronic funds transfer with the final payment expected by March 6, 2017.
       In accordance with HUD Handbook 2000.06, REV-4, the final action target date will be
       set at April 5, 2017. At issuance of this memorandum, HUD OIG will enter a
       management decision into HUD’s Audit Resolution and Corrective Action Tracking
       System, along with any supporting payment information received to date.




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