Here’s the straight news story: According to multiple reliable sources speaking off the record, the U.S. Department of Housing and Urban Development Office of Inspector General will soon conclude a yearlong probe of Dallas City Hall with findings of financial wrongdoing in the city’s housing and economic development departments.

Here’s what’s behind the story: The feds have documented a longstanding practice at City Hall of funneling federal grant money to fake or undocumented community groups supposedly devoted to building housing.

The U.S. Department of Housing and Urban Development Office of Inspector General will soon conclude a yearlong probe of Dallas City Hall with findings of financial wrongdoing in the city’s housing and economic development departments. Facebook

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By fake, I don’t mean they don’t exist. They did or still do. They build houses. But the legally required certifications showing that the groups meet federal standards are nonexistent or fake, and they have received tens of millions of dollars for which they cannot provide bookkeeping.

The OIG findings soon to become public will produce one of two possible outcomes. One: Federal investigators and prosecutors will go after the fake community housing groups first, but they will work their way upstream to top city officials who run the system and/or powerful people in the community who benefit.

Two: The feds will go after low-hanging fruit only, producing one or two prosecutions of minor city officials and operators of fake community housing groups without attempting to snare the higher-ups.

And here is what it all means: If someone were looking for a poster child, a symbol, a prime example to prove why HUD should be abolished, the situation at Dallas City Hall should be first. For decades, City Hall has regarded HUD money as free money, money that will never be counted, money that can be shoveled out the door with impunity.

Far from doing Dallas any good, HUD money here has been the mother’s milk of basic corruption. HUD money has allowed previous city managers (not the incumbent) to bank a safe eight-vote majority on the City Council by pumping free federal dollars into some favored projects, shutting the money off from others.

Think about it. Create a $50 billion-a-year national agency. Give it two or three missions that may be in conflict with each other. Tell it to put the money on trucks and deliver it to political insiders around the country. And then tell the agency — as happened here — to stop asking what happens to its money after it leaves the bank.

What could go wrong?

The system here doesn’t work only by giving money away. It works the other way, too, as means of killing out-of-favor projects by squeezing off federal funding without due process. In fact, HUD money here has been manipulated and used to defeat HUD’s mandated goal of desegregation.

When names are made known in the OIG probe, they will include people who were important actors nine years ago in the Lockey and MacKenzie downtown development matter. Curtis Lockey and Craig MacKenzie were converting a downtown office tower to apartments. The city loved them. At first. Then City Hall found out that more than 50 percent of Lockey and MacKenzie’s apartments would go to poor people and people of color — not the demographic profile City Hall had in mind for its major downtown redevelopment initiative.

The city officials soon to be revealed as having shoveled money heedlessly into phony community groups are the same ones who shut down the Lockey and MacKenzie project when it passed out of political favor. That’s not an anomaly, conflict or surprise. It’s the way it worked.

Until Lockey and MacKenzie, the HUD Fort Worth regional office didn't count its own money. Dallas Observer

For decades, City Hall has used HUD money as political juice to serve agendas out of view of the public and often in direct conflict with official stated policy. What was in it for the officials? We don’t know.

I can think of one explanation, which may not be the only one. It’s one I suggested in a column yesterday: The city officials who made these decisions were people not shielded from political influence by civil service protections. They did what they did to keep their jobs.

I have been able to establish from multiple reliable sources that a meeting about community groups occurred several years ago in the local offices of U.S. Rep. Eddie Bernice Johnson. At that meeting, city executives in charge of handing out federal grant money were castigated for not giving enough money to the southern Dallas black community.

But, wait. This isn’t strictly a black deal. At the same time, all-white wealthy church groups were involved in good works in the South Dallas community — good works that could benefit from fat federal grants. They had their hands out, too, as have artists' groups since then.

So there it is. All of the powerful people behind the scenes, the ones who can get at-will career city officials fired or promoted, are telling the officials the same thing. Just hand out the damn money.

And remember this: Until Lockey and MacKenzie went to war against the city and HUD over their deal, the HUD Fort Worth regional office had a very sleepy record for keeping track of its own money. In fact, one of the things revealed in the Lockey and MacKenzie matter is that even after Lockey and MacKenzie forced HUD’s hand, obligating the HUD fair housing division to investigate, the community development half of HUD conspired with city officials to get HUD’s fair housing people off Dallas’s back.

So from the point of view of top city officials, this was easy. The white rich people wanted their share of the HUD money. The black community groups wanted theirs, too. HUD didn’t care. They didn’t even count it. So if you were a heads-up city careerist unblessed by civil service protection and you wanted to keep your job, you gave them all what they wanted. Money.

HUD didn’t care. They didn’t even count it. So if you were a heads-up city careerist unblessed by civil service protection and you wanted to keep your job, you gave them all what they wanted. Money. Facebook

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As I say, nobody knows yet if somebody has been raking off money and building castles in Spain. Some of the fake community groups have received millions of dollars over the years. The houses they have built tend to have received far higher per-unit subsidies than what goes into houses built by established nonprofits like Habitat for Humanity.

So there has been money slopping around in that whole process that could have gone just about anywhere. But I don’t think we have to assume bribery to explain the larger narrative. We all know this landscape. HUD didn’t make it. HUD just poured a bunch of free money into it.

This is the way Dallas always has worked. Too often, what’s fake are the City Council meetings. All sorts of fine-sounding principles and programs are announced and enunciated. None of them is what’s really going on. What’s real is the money.

The city manager goes around with his or her little satchel of HUD money and hands out some of it over here to keep the white Lady Bountifuls happy, some of it over there to keep the black leaders happy, and if there’s anything left over, maybe a few bucks over in that corner for the Hispanics.

All the insider players are happy. The city manager has a solid eight-vote majority on the council, so he or she gets to keep the job and collect the pension. And you know the rest.

The OIG can either way with the results of its probe: uphill or down. hudoig.gov

Who loses? We all lose. All of the most promising potential of the city — its ability to become a diverse, walkable, livable community — is sold short by a system that survives by handing out favor, power and money behind the scenes. It’s not an accident that a city with so much energy, focus and ambition is able to get so little done. The system about to be exposed is the cancer that explains it.

The OIG has already been on the fake community groups' tails for some months, demanding records that the fake groups can’t produce. The fake groups have been working City Hall hard, desperately trying to find somebody, anybody, who can get OIG off their backs. Our new city manager and his staff have steadfastly refused to be dragged into it, according to multiple sources familiar with these events.

So here is the conclusion: When HUD OIG officially winds up the current probe, the ball will be entirely in the court of the feds. They can go downhill or up with it, at their discretion.

If it’s downhill, then they seek indictments of a couple bit players, grind them into the dust, clap their hands and go home. Uphill is another story. In that case, they use the threat of tough prosecution to persuade the people at the fake community group end of the deal to tell them how it works.

How do you get this money? Where does it start? Whose friend do you have to be? How much can you get? How much can you keep? Do you have to share?

If they can get even part of the way up that hill, then they can begin to ask people higher up a different set of questions. Who told you to put Lockey and MacKenzie out of business? Why did you do it?

At the very top of that hill is a clear view of the way City Hall has done business forever. Maybe from way up there, you can even see the tall chimneys of the Park Cities. I don’t know why I even mention that. I guess I’m just a chimney freak.

Also important here is the national story. Dallas is the perfect test case to prove that whatever marginal good HUD may do for the country is far outweighed by its corrosive, corrupting effect. I reached out to HUD OIG Wednesday for comment but did not hear back.

By the way, I’m not saying it’s HUD fault that Dallas City Hall is a drunk. But it doesn’t help that they keep delivering all that free booze, and you have to wonder why.

