The reports list 13 other instances of blatant misuse of some of $25 million in federal funds and claim that city staff "actively thwarted" an investigation by a new director who discovered the misspending after starting work last summer.
City Attorney Manuela Albuquerque, who prepared one of the reports, said her office has forwarded that information to the U.S. Department of Housing and Urban Development's Office of the Inspector General, which can then refer the matter to federal prosecutors.
The Berkeley City Council tonight will receive the reports, which document abuses allegedly committed by 14 full-time and eight part-time staff at the agency that disburses rent subsidies under HUD's Section 8 program.
In addition to paying rent for dead tenants, Albuquerque said the housing authority staff gave some clients more subsidies than they were entitled to, paid Section 8 rent for tenants who didn't financially qualify for it, played favorites by subsidizing rents for ineligible families while eligible ones remained on waiting lists, failed to verify whether subsidized apartments were even occupied, paid subsidies to landlords retroactively before contacts started, and in one case subsidized the rent of a registered sex offender after failing to do a background check.
Albuquerque is recommending the city council contract out its federal housing aid program to a third party because the city is "incapable of competently providing full-staffing services." Berkeley City Manager Phil Kamlarz, who prepared the other report, is recommending the city fire all 22 employees, although by contract the 14 full-time ones would have to be reassigned to other departments.
Also at the same meeting, Berkeley's City Council, which has functioned as the governing board of the Housing Authority, will consider HUD'S request to disband and name seven new outside members to run the agency.
Berkeley's Housing Authority has been in "troubled" status for mismanagement since 2002. Serious problems surfaced in 2005 when a city audit revealed the housing authority gave HUD fraudulent data, Albuquerque said.
Housing Authority manager Sharon Jackson resigned in early 2006 during that investigation, but Albuquerque said it wasn't clear exactly where the fault lay. Jackson, who now works as a staff member in Benicia's housing authority, was unavailable for comment Monday.
The abuses within the department came to light, Albuquerque said, when new manager Tia Ingram took over last summer. Ingram reported two to four alarming claims of staff wrongdoing each day, Albuquerque said.
Albuquerque said housing authority staff "actively thwarted or resisted" Ingram's efforts to investigate and report the problems.
City Council Member Gordon Wozniak said that while the council should bear some responsibility for the alleged abuses and wasted taxpayer money, trust was placed in city staff to do the job right.
"We have egg on our face," said Wozniak. "This looks very bad on the city.We've always been told (by the staff) that HUD is the bad guys, that their reporting requirements were onerous. But I do take some responsibility.
"We had these audits and we never dug in enough. We should have asked some tough questions. I think this will be a shock to the council because this is the first we've heard there's a problem."
Wozniak said he would like to see an independent committee formed to investigate how to prevent problems in the future. He said he's not in favor of rehiring staff members if they are fired.
"If they have been breaking the law, we shouldn't rehire them somewhere else," said Wozniak.
In her 22 years as city attorney, Albuquerque said she has never seen such a large problem in any city department.
"We have information that could constitute criminal wrongdoing or fraud," said Albuquerque. "We are required to give it to the inspector general and we did."
Albuquerque said she has no idea how much money was lost. She said the problems are in "every facet" of the department, "everything the housing authority does. We have evidence they were just blatantly not following the rules and it was very, very troubling."
Larry Bush, a regional HUD spokesman, said it is rare that HUD would cut off a city from federal housing funds completely. It can come in and take over the housing authority, he said. In Berkeley's case, HUD recommended the city council absolve itself and appoint others to run the authority.
"We had told Berkeley their program was coming to the end of our patience," Bush said. "We're looking for who is going to fix it, not who is to blame."
Berkeley Mayor Tom Bates said he would have "preferred that the staff stay in place, but that may not be realistic."
"It's going to be pretty radical surgery, but under the circumstances it may be justified," said Bates. "It's pretty amazing, some of this stuff. These employees will be put back into the system, but hopefully under more supervision."
E-mail Doug Oakley at email@example.com.