Inside Stories of
by Uri Dowbenko
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HUD Fraud, Spooks and the Slumlords of Harvard
by Uri Dowbenko
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
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
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
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
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
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
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
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
Hamilton Securities maintained that the allegations in the complaint
were not true, and there was no evidence to support the false
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
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
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
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
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
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
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
More homeless people on the streets are a sure bet.