Housing and Urban Development on Monday suspended funding for the Virgin Islands Housing Finance Authority after finding widespread financial mismanagement, inadequate fraud controls, false certifications and improper payments.
A HUD investigation found a pattern of fraud, financial mismanagement, and program failures that emerged following the cleanup of 2017 Hurricanes Irma and Maria that devastated the U.S. Virgin Islands.
Nearly a decade after VIHFA received $1.9 billion in HUD disaster recovery funding. The money spent, however, went to kickbacks and other fraudulent schemes, according to the agency.
HUD Secretary Scott Turner said VIHFA isn’t “receiving another cent” as the agency continues its investigation.
“The Trump administration is changing the game when it comes to who we entrust with taxpayer dollars. Organizations riddled with corruption, mismanagement, and crime will no longer be allowed to squander billions,” Mr. Turner said. “Virgin Islands Housing Finance Authority officials cannot be allowed to prioritize kickbacks over helping families recover from disasters. I promised that HUD would be a faithful steward of the American people’s hard-earned money, and we are keeping that promise.”
Between 2018 and 2021, HUD allocated nearly $1.9 billion to VIHFA for recovery. By 2023, the Office of Inspector General audits found weak financial control and poor oversight and monitoring.
VIHFA’s former Chief Operating Officer Darin Richardson, who oversaw disaster recovery programs, was convicted of charges relating to a kickback scheme.
Richardson was supposed to be overseeing disaster recovery contracts. He steered a lumber storage contract to a favored company, inflated its value from $3 million to $4.5 million and pocketed a $107,000 kickback.
The lumber — meant to help rebuild homes — was left to rot in the sun and was a total loss.
He was sentenced in March to 36 months in a federal prison.
Because his scheme played out through his official duties, HUD says his criminal conduct legally counts as VIHFA’s own conduct.
The HUD investigation also found that, after receiving nearly $2 billion in federal dollars, VIHFA completed just 2% of single-family rental rehabilitation projects and none of the intended single and multifamily housing projects.
According to HUD’s Office of Inspector General, VIHFA’s fraud risk management processes were “at or below the lowest desired goal state,” and VIHFA sought $6.2 million in disaster-related costs that FEMA had already paid.
Other evidence suggested that VIHFA repeatedly made false certifications claiming an effective compliance program and may have submitted additional false certifications to obtain further funding.
