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BUSHWHACKED: HUD Fraud, Spooks and the Slumlords of Harvard

by Uri Dowbenko


Part 2

The Hamilton Bushwhack

      In the Hamilton Securities case, Sporkin's claim to fame is that he managed to illegally keep a qui tam lawsuit sealed for almost 4 years. That could be a "judicial" record.

      In August 1996, an investigation against Hamilton was initiated by HUD Inspector General Susan Gaffney, serving two subpoenas on the company -- and incidentally failing to tell Hamilton about the existence of the qui tam as required by law. The subpoenas demanded hundreds of thousands of documents, mostly HUD documents that HUD already had, or that had been supplied to them as part of the ongoing work -- a clear case of burying Hamilton in paperwork as more ongoing harassment.

      At the same time, a HUD audit team from Denver had completed a favorable audit of Hamilton's program. When Fitts asked HUD IG Gaffney whether she intended to "bury the Denver audit," Gaffney huffed back, "How dare you suggest that I would do any such thing? That would be unethical."

      In fact, she did exactly that. Susan Gaffney never allowed the publication of the Denver Audit team's report which exonerated all of Hamilton's methodology and results.

      Then, at the same time, a smear campaign against Hamilton was being waged through a "US News and World Report" hatchet-job article about HUD Secretary Henry Cisneros and the loan sales program.

      According to Fitts, the lead reporter had been assured "at the highest levels" of the HUD Inspector General's office that Hamilton Securities and Fitts were the subject of a criminal investigation and were guilty of criminal violations.

      There was no evidence, however, either offered by HUD or published by the magazine, and these false allegation also died with the passage of time.

      In a bizarre double-bind mentality, HUD and DoJ -- in a separate court and with a different judge -- had taken the position that the Ervin lawsuit was without merit -- even while Hamilton's legal costs climbed into the millions of dollars.

The Dirty Fingerprints of Lee Radek

      In December 1997, Hamilton wrote a letter to the President's Council on Integrity & Efficiency (PCIE), a committee in the Office of Management and Budget (OMB), to investigate HUD IG Susan Gaffney's conduct.

      Hamilton's four-page highly detailed letter to Neil J. Gallagher, Acting Assistant Director of the FBI's Criminal Investigative Division and Chairperson of PCIE was blunt.

      "The HUD IG has crossed the line in its investigation of Hamilton, which was begun in response to complaints from Ervin & Associates, a disgruntled HUD contractor," wrote Fitts. "The IG's wide-ranging and unfocused "fishing expedition" against Hamilton has failed to produce findings of wrongdoing and threatens the survival of the firm. The repeated leaking to the press of proprietary and confidential information that only the HUD IG could know and the intervention of other Federal Agencies [IRS, FDIC] into Hamilton's affairs constitute a campaign of smear, slander and intimidation that should be investigated and stopped."

      Fitts wrote about many incidents of intimidation and harassment which "demonstrate or suggest that the HUD IG is deliberately leaking information to the press about its investigation of Hamilton. These leaks represent serious and persistent breaches of confidentiality, unethical and unlawful behavior and violations of Hamilton's constitutional rights."

      PCIE declined to investigate. In her next letter to Gallagher in February 1998, Fitts wrote that "since the filing of our complaint, the Hamilton Securities Group Inc. and all of its subsidiaries have been rendered insolvent... In the face of eighteen months of Inspector General 'lynch mobbing' we have exhausted our reserves and have no means to continue an investigation that has no end..."

      After another refusal by PCIE to investigate, Hamilton filed a Freedom of Information Action (FOIA) for the files.

      The files revealed a heavily redacted letter signed by the Lead Coverup Meister himself -- Lee Radek, head of the Department of Justice's ironically named "Office of Public Integrity."

      In a letter dated April 3, 1998 addressed to Thomas J. Piccard, Chairman of the Integrity Committee of the PCIE, Radek wrote "C. Austin Fitts, President of the Hamilton Securities Group, Inc. sent the IC a copy of a civil complaint filed by Hamilton Securities against HUD Secretary Andrew Cuomo, Assistant Secretary Nicolas Retsinas and Inspector General Susan Gaffney. The complaint alleged that HUD's OIG investigation of Hamilton and improper media leaks by the OIG about the investigation was causing Hamilton to go out of business... After reviewing the letter and the attachments, the Public Integrity Section concludes that the allegations in the complaint do not provide sufficient information to warrant a criminal investigation."

      The rest of the page -- seven inches of what used to be text -- is blacked out.

      For the record, US Department of Justice apparatchik Lee Radek has held a virtual stranglehold on DoJ "investigations," consistently covering up the criminal activities of the Clinton Administration. As a linchpin in the corrupt DoJ, he has had many opportunities to coverup crimes and block inquiries -- and he has taken full advantage of his position as a Federal-Mob "enforcer."

      It's an ironic twist of fate, then, that Neil Gallagher -- the FBI staff member of PCIE, whose job it was to investigate allegations against Susan Gaffney -- and Lee Radek appeared together in May 2000 before a Congressional hearing -- as antagonists.

      Gallagher affirmed in public testimony that Radek was indeed under pressure from US Attorney General Janet Reno to stall any investigation into the Clinton-Gore campaign fund raising scandals.

Unsealing the Lawsuit

      Finally in May 2000, US District Judge Louis F. Oberdorfer unsealed the qui tam lawsuit against Hamilton -- and surprise! -- the DoJ decided not to pursue the groundless claims.

      The suit was filed in June 1996, and DoJ's decision not to intervene in this case came after a 1,400 day so-called "investigation" -- or 1,340 days longer than the 60 days mandated by the Federal False Claims Act.

      Hamilton Securities maintained that the allegations in the complaint were not true, and there was no evidence to support the false allegations.

      In fact, HUD security procedures and overlapping levels of review associated with the open bidding process made the alleged bid rigging and insider trading impossible. This was corroborated by HUD's own audits.

      The sources for the alleged bid rigging in Ervin's complaint, kept under court seal for almost four years, included Jeff Parker of the Cargill Group, Terry R. Dewitt of J-Hawk (First City Financial Corporation of Waco, Texas, and a Cargill investment and joint venture partner), and Michael Nathans of Penn Capital Corporation.

The Waco-Cargill Connection

      In retrospect, Hamilton must have been a major threat to the nation-wide money laundering and financial fraud network which uses government-guaranteed mortgages and other programs to scam US taxpayers. The formerly secret sources of the false allegations against Hamilton have some interesting connections.

      SEC documents state that First City Financial Corporation (FCFC) of Waco, Texas started business in 1986 "purchasing distressed assets from FDIC and RTC."

      Another subsidiary, First City Commercial Corp. was used to "acquire portfolios of distressed loans" -- another hallmark of the standard money laundry operation.

      According to the Houston Business Journal (Sept. 24, 1999), "First City Bancorporation, once one of Houston's largest bank holding companies, was acquired out of bankruptcy in 1995 by J-Hawk Corp of Waco and renamed First City Financial Corp."

      "FCFC began its relationship with Cargill Financial Services Corp. in 1991," according to the company's SEC filings. "Since that time, the Company and Cargill Financial have formed a series of Acquisition Partnerships through which they have jointly acquired over $3.2 billion in Face Value of distressed assets. By the end of 1994, the Company had grown to nine offices with over 180 professionals and had acquired portfolios with assets in virtually every state."

      But then -- and now comes the sad part --- the mortgage banking subsidiary of First City Financial Corporation, Harbor Financial Group Inc., filed for bankruptcy (Oct., 1999), just as the notorious Denver-based money laundry, M&L Business Machines, had done years before.

      The corporate shell game of mergers, acquisitions and liquidation is obviously in full play in this scenario.

      The other false accuser listed -- Cargill Financial Services Corp., -- on the other hand, is a subsidiary of Cargill, the Minneapolis-based global agribusiness cartel and the world's largest privately-held company.

      Cargill is a mega-corporate international merchant of agricultural, industrial and financial commodities, and it operates in 59 countries, has 82,000 employees, and about $50 billion in annual sales.

      The financial subsidiary, Access Financial Holdings Corp., was formed to "manage the housing finance business" and "provide residential real estate mortgages," an unregulated arena in which money laundering is often the real business.

      And here's the punch line in this revolving-door-syndrome joke of the Criminal Big Government-Big Business Syndicate.

      The lead law firm listed on First City Financial's 1998 registration statement is Weil Gotshal -- former spooky judge Stanley Sporkin's new employer.

Whistle-Blower Stew Webb's Perspective

      Federal whistle-blower Stewart Webb thinks he knows why Catherine Austin Fitts and her company, Hamilton Securities, were bushwhacked. In fact, he believes that her operation was a direct threat to the "Denver Boys" -- the Bush Crime Family's money laundering operation based in Denver.

      Why was she targeted? "Because she had set up a company which was showing the government how to save money through competitive loan sales programs," explains Webb. "It was a threat to [Leonard] Millman in Denver. Because they were in control of the mortgage program."

      Webb is referring to the many HUD low-income housing-based frauds and scandals in Denver. He claims that one of their proxies was John Ervin himself. "He had his own office in Denver," says Webb. "One of the biggest supplies of money to these boys is the money they're stealing from HUD. They are still robbing HUD like nobody's business."

      "That's a massive covert revenue stream for them," continues Webb. "As of last year, they became the largest apartment owner in the United States. AIMCO. That's Millman and Company in Denver."

      Apartment Investment and Management Co. (AIMCO) is one of the largest real estate investment trusts, or REITs, in the the US with headquarters in Denver, Colorado and 36 regional offices. AIMCO operates about 1,834 properties, including about 385,000 apartment units nationwide in every state except Vermont.

      AIMCO is the successor to the Considine Co,. founded in 1975, by Terry Considine. It was then re-organized as a real estate investment trust and became a public company through an initial stock offering in July 1994.

      In an article called "HUD, AIMCO Clash Over Housing" (Denver Business Journal, May 8, 1998), AIMCO was excoriated by affordable-housing advocates for taking 90,000 low-income ("affordable housing") apartments -- bought from HUD at below market rates -- and converting them into higher end properties, thereby displacing poor renters.

      According to the article, "the revamping also involves upgrading bare-bones properties built with federal funds two decades ago which will allow AIMCO to boost rents."

      AIMCO has also gobbled up Washington DC-based apartment manager NHP, Inc., Ambassador Apartments, a Chicago-based REIT, and the apartment portion of Insignia Financial Group.

      Since AIMCO is the nation's largest owner of affordable housing and the sole provider of such homes in many markets, the implications are ominous.

      More homeless people on the streets are a sure bet.

Part 1  |  Part 3

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