Government Sponsored Thieves: How local politicians are stealing public funds

Recently, local politicians and those on the city council have called for a "tough-on-homeless" approach. Citing the threat of crime, business people and politicians like Mike Moradian and Councilman Joe Muratore would like to make public parks private and have a private police force patrol them. In doing so, they tell us that crime would be reduced and the homeless would be driven out of the downtown. Of course, this has nothing to do with creating a safer community and everything to do with making the area safe for business investors; investors that people like Muratore represent and can make money off of. Furthermore, a recent scandal in the city’s power structure shows that the local elites have been breaking their own laws; laws which could land some of them in jail.

Since early 2009, local politicians have been profiting from government funds aimed at fighting the depressed housing market. Recently, a group of nonprofits, government agencies, and faith-based organizations have been accused of severe mismanagement and embezzlement of federal funds that were meant to create jobs and provide housing for poor and working people. After information was leaked from an insider, many city and community bureaucrats have been placed in the spotlight, causing a scandal within the local power structure. While working class people in the Valley have been forced to work jobs for statistically lower and lower pay, and many can't afford basic housing costs, local officials and business elites and have been lining their pockets with public money.

According to the City's website[1], “Modesto applied for and received $25 million from the federal Neighborhood Stabilization Program to be distributed through the Housing and Urban Development Department (HUD) to help create jobs and stabilize declining property values in neighborhoods.” This money should have gone to benefit potential homeowners and renters with incomes between 50-120% of Area Median Income ($24,275 - $58,260 for Stanislaus County[2]), and local contractors and laborers who would do necessary repairs. This of course has not been the case.

On July 10th, HUD received an anonymous e-mail from a Stanislaus Housing & Support Services Collaborative member outlining their concerns [3]. The veteran member of more than five years[3] requested that their name be kept confidential for fear of being fired[3]. According to the Modesto Bee, The document contained the following claims[3]:

• Three members of the executive committee work for agencies that receive HUD Supportive Housing Program grants, "yet provide supposed oversight and review of their own projects with no input from the" collaborative.[3]

• Executive committee members Gibbs, Michele Gonzales and Glenn Hutsell "rigged" the application review process to get funding for their "pet projects" year after year.[3]

• The executive committee failed to review whether HUD grant recipients were complying with a grant's requirements. If they had done so, they would have spotted the problems at Community Housing and Shelter Services, a Modesto nonprofit that nearly closed because of mismanagement.[3]

• The Homeless Management Information System, a software program designed to record and store information about the homeless and their needs, still is not running after four years.[3]

• Some executive committee members provided fraudulent information on a 2010 HUD grant application.[3]

All this of course, goes against basic HUD guidelines[4], designed to prevent influence in the decision-making process and financial gain or other benefits from receiving grant funds. This new information, regardless of merit, was enough for HUD's Office of Inspector General (OIG) to take a closer look.[5]

Because of the conflicts of interest involving city officials and their private enterprises, the OIG may take as long as six to nine months to complete the investigation[6]. Julie Hannon with the Modesto Parks, Recreation and Neighborhoods confirmed that SCAP received more than $7 million in taxpayer dollars to renovate 21 foreclosed homes[7]. It was later discovered, as KCRA.com reported, that "Stanislaus County Community Assistance Program is being criticized for allowing family and staff to live in government-subsidized homes that are supposed to be for low-income residents."[7] 

Hannon confirmed [8] that Denise Gibbs' parents were living at 913 Rumble Road after $340,000 in taxpayer money was spent buying and renovating the 2,383-square-foot home, and that four to five other homes were occupied by SCAP employees or their relatives[8]. An auditing firm, Moss Adams, that works for the City Council was supposed to begin their investigation in July, but has since been replaced by the HUD's OIG[5]. Leo Briones, "a Southern California political consultant who speaks for SCAP," [9], said the agency will cooperate with city auditors[10]. Members of the organization admit to the allegations and say that these acts are legal because the residents meet the income requirements of the program[8]. As reported in the Modesto Bee on July 6th, "All told, as many as six of the twenty houses renovated by SCAP have been occupied by employees of the agency or their family members. According to SCAP's agreement with the city, the homes were supposed to serve as rental housing for people with special needs, such as seniors, people with debilitating diseases, or families at risk of homelessness." [11] 

Joe Gibbs, Grant Writer and Development Director for SCAP[3], received a bonus of more than $637,000 for writing grant proposals according to the Modesto Bee [12]. This is on top of his regular pay. That’s $637,000 of public money, which was supposed to go towards helping Modesto families but instead went to an official who was already highly paid. In fact, Joe and his wife Denise are SCAP's two highest-paid employees[13], raking in more than $712,000 last year[12], and more than $1.32 million in four years[12]. After the Modesto Bee revealed how much he was earning[12], Gibbs agreed to forgo $436,471 of what he said he was owed [14]. In doing so, he claimed that his "contractual agreement was made with fairness and proper legal standards in mind,[12]" although Pastor Darryl Fair, Chairman of SCAP's Board of Directors, says that after "reviewing SCAP's financial data for the year 2010, the board realized… the 4 percent incentive to our director of business and program development exceeded what was appropriate for a nonprofit agency to offer." [12] 

The same Darryl Fair has recently resigned from Stanislaus Housing & Support Services Collaborative's executive committee, along with at least five others that may or may not include Gibbs[10]. SCAP's new board includes Chairman Jonathan Dattilio of Lincoln, Vice Chairman Patrick Pokorny of Riverbank, Secretary Daniel Malakauskas of Stockton, and Tom Drury of Modesto [10]. They are also currently recruiting others in order to meet their guidelines of seven members[10].

On August 2nd, the city notified Councilman Joe Muratore[15] and his business partner Ryan Swehla[15] of a likely conflict of interest after it was found that Benchmark Commercial Real Estate Services, which they own together[15], was paid a $62,500 commission[15] for the sale of an apartment complex to Trinity Renovations[15], which is also co-owned with Swehla[15]. Trinity also hired Mike Moradian to complete the property inspections through his company Peace of Mind Home Inspections[16]. Moradian is the President of the La Loma Neighborhood Association (LLNA) [17] and sits on the city's Blue Ribbon Commission on Homelessness [18](see The New Map of Modesto in Modesto Anarcho #17 for more information). Moradian has been a fierce crusader against homelessness, trying to shut down the expansion of a drug and alcohol treatment center in the Airport District [17] and helping to push anti-homeless initiatives in the city. Both Moradian and Swehla also played a major role in getting Muratore on the council back in 2009 through their influence with the LLNA[19], and the group no longer retains its non-profit status[20]. Benchmark and Trinity were thus nicely poised to funnel funds into the personal bank accounts of government sponsored thieves and their elitist friends.

As it was reported in the Modesto Bee on August 18th, Muratore was also found guilty of illegally voting in the council decision that initially allowed the city to accept federal housing funds[15]. Since then, Trinity has had it's NSP funds frozen[6] and been barred from working with the HUD program[6]. Muratore admitted guilt to the accusation and the $62,500 commission has been returned[6]. At a Modesto City Council meeting regarding SCAP on August 3rd, 2011, Muratore said he promptly had his attorney notify the California Fair Political Practices Commission after checking logs and “discovering” that he had placed a vote [15]. The FPPC response was a warning letter with no administrative prosecution or fines[15]. Muratore said that at the time that he was as an inexperienced official when he had made the vote.[15]

But, while this Harvard grad plays dumb, Muratore may face federal prosecution or at the least his expulsion from the council. It’s also telling that while businessmen like Muratore and Moradian have called for a ‘tough on homeless’ approach, including a recent push to have a private security force patrol the parks for homeless people, they have broken more laws than any homeless person with an open container. While they attract support from the upper-middle and some of the working classes through a tough on crime stance, in reality they only care about the law when it rules in their favor. For rich elites like Muratore and Moradian, the law and the police are instruments to use at their will, and against us. Moradian and Muratore’s “tough on crime” façade is just a smokescreen for a push to gentrify and develop the downtown; free of lower and working class elements. Surely, just as they have used the SCAP, they will seek to make money from this displacement of poor people as well. Hopefully this scandal exposes people to the swindlers that people like Muratore and all his friends are; willing to take public money that is designed to help people and make themselves even richer.

The current SCAP scandal, just as the current crisis unfolding with the Modesto Police Department and the Stanislaus County Sheriff’s Department, shows us several things. Firstly, that those in power have organized amongst each other in order to siphon money out of the public’s hands and straight into their pockets. The politicians get the deals, and then have their companies or their friends' companies do the work, looking the other way when they take hundreds of thousands of dollars right off the top. Secondly, this scandal proves that those masquerading as our “leaders” have never had our interests at heart. This isn’t a problem of a few bad apples, but a whole rotten tree. The network of business interests and political big-wigs all needs to be pushed out and overthrown. Thirdly, the corruption going on at City Hall is the same as that within the Federal Government and corporations. Our money goes to fund wars and the bailout of banks, while the CEOs kick back and make record-breaking profits. We must take power into our own hands; we must not wait for the elites in downtown Modesto or Washington D.C. to swindle us again while people are without money, food, and shelter.

The time is now to take what we need and occupy it. We shouldn't wait for government officials to screw us over when we can take over hundreds of abandoned foreclosed houses and apartment units ourselves. Talk with neighbors, agree not to call the police, fix the place up, move right in. If an eviction notice comes, tell the bank to shove it. Get together with family and neighbors to drive off inspectors and the cops. Our neighborhoods become vacant save for boarded-up buildings while the bankers grow rich and the Muratores of the world do as they please. Its time for all of them to go, and for all of us to bring this corrupt system down.

Citations:

Citation 1: "Neighborhood Stabilization Program 2." City of Modesto. Accessed 02 Sep 2011. http://www.modestogov.com/nsp2/

Citation 2: "State and County Quick Facts." U.S. Census Bureau. Accessed 02 Sep 2011. http://quickfacts.census.gov/qfd/states/06/06099.html

Citation 3: "Member Criticizes Stanislaus Homeless Aid Panel. Kevin Valine. Modesto Bee. 18 Aug 2011 http://www.modbee.com/2011/08/18/1821832/member-criticizes-homeless-aid.html

Citation 4: HUD Guidelines. Document 14169. HUD.Gov City of Modesto, California http://portal.hud.gov/hudportal/documents/huddoc?id=DOC_14169.pdf

"Forty (40) of these homes will be specifically allocated to provide housing  for special needs households who are in need of permanent housing. All activities will benefit households whose income is at or below 120percent of area median income, with 25percent of the funds for households at or below 50percent area median income."

Citation 5: "Modesto Auditor Off SCAP Probe." Modesto Bee. Ken Carlson. 03 Aug 2011. http://www.modbee.com/2011/08/02/1801069/modesto-auditor-off-scap-probe.html

CItation 6: "Modesto Councilman's Firm Benefitted From Sale of Apartment Complex." Ken Carlson. Modesto Bee. 03 Aug 2011. http://www.modbee.com/2011/08/03/1802526/modesto-councilmans-firm-benefitted.html

Citation 7: "Modesto Nonprofit Under Investigation." KCRA.com. 28 July 2011. http://www.kcra.com/news/28384117/detail.html

Citation 8: "New Question Surface for Modesto Nonprofit." J.N. Sbranti. Modesto Bee. 28 Jun 2011. http://www.modbee.com/2011/06/27/1751953/new-questions-surface-for-nonprofit.html

Citation 9: "Luxuries at Modesto SCAP Homes Described," by Ken Carlson, Modesto Bee, 03 Aug 2011 http://www.modbee.com/2011/08/02/1800648/modesto-nonprofits-role-under.html

Citation 10: "SCAP Turns Over Documents to Modesto." Ken Carlson. Modesto Bee. 01 Jul 2011. http://www.modbee.com/2011/06/30/1756905/scap-turns-over-documents.html

Citation 11: "More Trouble for Modesto Nonprofit Agency Scap." Ken Carlson. Modesto Bee. 06 Jul 2011.

http://www.modbee.com/2011/07/06/1764704/more-trouble-for-scap.html

Citation 12: "Cashing In: Salaries of Modesto Housing Agency Attract Federal Scrutiny." J.N. Sbranti. Modesto Bee. 30 May 2011. http://www.modbee.com/2011/05/28/1709062/federal-investigators-probing.html

Citation 13: "Stanislaus Community Assistance Project." Informational graph. Modesto Bee. Accessed 02 Sep 2011. http://media.modbee.com/smedia/2011/05/28/23/Scapcomp.source.prod_affiliate.11.pdf

Citation 14: "SCAP Worker Gives Up $436k." Ken Carlson. Modesto Bee. 03 Jun 2011. http://www.modbee.com/2011/06/03/1717879/scap-worker-gives-up-436k.html

Citation 15: "Modesto Councilman Muratore Broke Law With Vote, State Says." Ken Carlson. Modesto Bee. 18 Aug 2011. http://www.modbee.com/2011/08/17/1820405/muratore-broke-law-with-votestate.html

Citation 16: "Modesto CIty Hall Facing Questions of Favoritism." Ken Carlson. Modesto Bee. 21 Aug 2011. http://www.modbee.com/2011/08/20/1824048_p2/city-facing-questions-of-favoritism.html

Citation 17: "Modesto Mission Dispute Resolved." Ken Carlson. Modesto Bee. 05 Apr 2011. http://www.modbee.com/2011/04/06/1631944/mission-dispute-resolved.html

Citation 18: "Boards, Commissions, and Committees: City of Modesto Blue Ribbon Commission on Homelessness." City of Modesto. Accessed 02 September 2011. http://www.modestogov.com/council/boards/cag.asp?id=29

Citation 19: "With Cities Squeezed, Neighborhood Groups Catch On." Leslie Albrecht. Modesto Bee. 22 Apr 2010. http://www.modbee.com/2010/04/22/1139118/with-cities-squeezed-neighborhood.html

Citation 20: "Words Matter." Carmen Sabatino. The Voice of Modesto. 30 Aug 2011. http://voiceofmodesto.org/wordpress/?p=2439

Citation 21: "Modesto Puts Brakes On Neighborhood Rehab Program." Central Valley Business Times. 03 August 2011. http://www.centralvalleybusinesstimes.com/stories/001/?ID=19039