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HUD: Buffalo Spent Funds on Prohibited Activities

Millions in HUD grants may have been misspent.
New report finds millions in HUD money may have been misspent.

BUFFALO, N.Y. - Every year, the City of Buffalo gets millions of dollars from the U.S. Department of Housing and Urban Development to help battle poverty in the city. The money comes to the city through Community Development Block Grants. Last year, the city got $13 million through these grants and over the past decade has received more than $180 million.

In part, the money is supposed to go to help people find housing and revitalize parts of Buffalo that need the financial assistance. After the money is spent, HUD checks to find out if the money went to eligible projects. And according to a report that we've been investigating for six months, the city has spent tens of thousands of dollars on "prohibited or illegal activities."

The HUD Inspector General's office opened an investigation into how Buffalo spent block grant funds, by checking bank and grantee records, conducting interviews and issuing subpoenas to get city documents.

In documents obtained by 2 On Your Side from HUD OIG, the agency says out of operating accounts, Buffalo used federal funds from 2005 to 2010 to make improper payments and in cases, then tried to cover up the payments by transferring money to various accounts. But, at times, HUD says the transfers weren't made.

This investigation began in 2009 and ended in 2011. And over the past three years, HUD has assisted in criminal investigations and has been informing enforcement agencies of their findings.

The report dated in the spring of 2013 and exclusively obtained by 2 On Your Side, through a Freedom of Information Act request show what those findings are.

Investigators list seven areas where federal funds were misused.

Two of them have been previously reported, including travel expenses and the paying of city employees.

In 2011, Timothy Wanamaker, the former director of the Buffalo Economic Renaissance Corporation admitted to using federal funds on flight tickets, hotels and food.

But, the report reveals five new areas of concern that investigators say they found over the five-year period. Like at the Broadway Market, which is run by the city. HUD says at least $250,000 in federal funds were spent on various costs like security, insurance and payroll.

Also to demolish buildings. HUD says $275,000 was paid to Titan Wrecking and Environmental to do demolition work.

HUD also claims there was abuse within two city programs. One that's called Re-Entry, which is supposed to help former convicts in Erie County find jobs. HUD says two program employees also had their salaries paid between 2009 and 2010 with federal funds and that the total cost to the government was $144,000.

The other city program is called Weed and Seed, which has been a long-used tactic to root out crime and violence in Buffalo. HUD says two employees working in this program had their salaries paid for with federal dollars during a four-year period costing $300,000.

And finally, according to HUD, payments were made to lobbyists.

The report cites federal law, which says "paying lobbyists with federal funds is strictly prohibited." HUD says that nine payments equaling $124,000 were made to lobbying firms with federal funds. This while, the city said that it wouldn't spend the money on lobbyists.

HUD names three companies that got the payments -- American Continental Group, Patton Boggs and Capitol Partners -- which are all based in Washington, D.C. The lobbying firms worked for the city on various fronts -- from providing legal advice to vouching for projects for the city to members of Congress. The payments began in 2005 at the end of the Mayor Masiello Administration and go up to 2010, under Mayor Brown.

Along with payments made to a city employee, HUD says at least $136,000 went to "lobbying activities." And that, "the City of Buffalo had actual knowledge that funds were misused for lobbying (...)."

As we reported, travel and city employees were previously reported problems within the City of Buffalo. Travel, according to the report, ended up costing the feds at least $21,000 and $560,000 went to employees.

When all the misused funds are added up, according to HUD, more than $1.6 million was inappropriately spent.

HUD adds that, "The City of Buffalo had actual knowledge of the misuse of program income funds to support non-program eligible activities." And that the city, "exercised reckless disregard and/or deliberate ignorance," in the handling of federal funds.

Responsibility for handling the money the city gets from HUD rests in part with a non-profit agency -- the Buffalo Urban Renewal Agency. And Mayor Brown is the chairman of the agency and has direct control of what agreements should be signed and how money should be spent. The mayor also has influence over who should be appointed to positions of power on the agency's Board of Directors.

It's unclear if HUD wants any of the $1.6 million back, but what is clear is that the city has a long history of mishandling HUD funding.

Several times, the city has had to reimburse programs with city funds, when HUD found money was spent on ineligible projects.

In 2012, the feds found that the city had so many problems handling HUD dollars, like poor record-keeping, that the agency labeled the city a "high risk," grantee -- a term that the city still holds today. This means that the city comptroller's office needs to monitor how the city spends HUD money.

Jim Heaney, a former investigative reporter with the Buffalo News and editor of our watchdog partners, Investigative Post -- has followed the city's spending of HUD funds for years.

"The federal government, through HUD, time and time again, has issued these critical audits, charging the city with mismanaging the money, not following the rules and regulations," Heaney said.

Heaney tells 2 On Your Side's Jeff Preval that the information revealed in HUD's report shows problems on a wider scale.

"A couple things that strike me in what you found is the use of, again anti-poverty funds to pay for lobbyists, I've never seen that one before, that on the surface strikes me as pretty outrageous," and that, "the other thing that struck me in what you found was the federal conclusions that there were apparently numerous instances where the city submitted -- knowingly submitted false documentation to try to snooker the feds, and that's pretty brazen behavior as well."

For the past two weeks 2 On Your Side has been requesting an interview with the Mayor's administration about the accusations in HUD's report of investigation.

We have not been granted an interview.

However, we did receive a statement from the city's Office of Strategic Planning, which says:

"We meet on a regular basis with HUD to discuss matters involving the city. HUD has not made the city aware of any reports issued in 2013."

2 On Your Side will be following up with the city about this report in the coming days, as well as, the city comptroller's office and U.S. Attorney William Hochul.

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