Alleged Quake-Funds Misuse Investigated

The head of the Los Angeles Housing Department said Friday that his agency is investigating charges that a developer who has received up to $10 million in earthquake repair loans has misused the money.

Gary Squier, the department’s general manager, said other contractors may also be guilty of misspending quake money. But he said the department is focusing mainly on one developer with six or seven projects, mostly in the San Fernando Valley.

The developer, who Squier declined to name pending the completion of the investigation, has exaggerated the cost of some repairs in order to pocket some of the federal loan money, he said.

The evidence has been turned over to the inspector general for the federal Department of Housing and Urban Development, Squier said.

Squier defended his department’s management of the $321-million earthquake loan program, saying the case is an anomaly among the hundreds of loans issued since the 1994 quake.

“This represents a very small sliver of our cases,” he said.

However, a pending audit by the city controller’s office is expected to be critical of how Squier and his department have kept tabs on the loan program, according to City Hall sources.

The audit, which is expected to be released next week, will charge that Squier’s department has used lax safeguards and procedures to weed out fraud and misuse, sources say.

Squier said he has seen the audit and is not concerned about its findings. “There is nothing in there that blows us out of the water,” he said.

He conceded, however, that his department could have done a better job of making sure that loan recipients pay repair workers the “prevailing wages” that are required under state and federal law.

The pending audit was launched by City Controller Rick Tuttle, whose office said money from the program has been used on questionable home improvements, such as landscaping and the replacement of undamaged appliances.

An initial inquiry by Tuttle’s office found the loan program had “operational deficiencies” and “questionable oversight” that required a full audit.

The controller looked into the loan program in response to complaints from a carpenters’ cooperative, which alleged gross mismanagement of the quake money.