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First of two Parts. Read part two here.

While Orange County officials give themselves high marks for the county government’s housing authority, internal whistleblowers allege that the agency’s Vietnamese-dominated hierarchy systematically discriminates against Latinos and knowingly allows Vietnamese residents to defraud the county’s housing voucher program.

Whistleblowers assert that some Vietnamese rental voucher tenants have been underreporting their income and receiving housing assistance despite running lucrative businesses, owning luxury cars and designer purses, and living in homes with high-end appliances and electronics.

Even when housing inspectors and other agency employees refer these tenants for further investigation, whistleblowers allege housing authority superiors, also Vietnamese, block fraud referrals from moving forward.

Demand for rental assistance programs is so high among low-income residents in Orange County that the last time the Orange County Housing Authority opened its waiting list in 2012, the agency was inundated with more than 48,000 applications.

That same year, DA investigators launched a probe after a group of eight whistleblowers stepped forward. Many are Latino housing inspectors who have been complaining about their Vietnamese counterparts for more than a decade.

The ensuing 18-month-long DA investigation was completed last fall and didn’t result in formal criminal charges. Yet several sources said the probe revealed widespread misconduct within the housing agency.

Leon J. Page, a senior deputy in the County Counsel’s office, confirmed that the situation prompted the county to hire a risk management consulting firm last December to delve into the allegations.

Given ongoing media questions about the DA probe – along with the personnel investigation – county supervisors last month publicly balked at approving a glowing audit report by Orange County’s Performance Auditor Philip Cheng.

Cheng’s report was completely silent on the long-standing internal whistleblower complaints.

Given that background, several county supervisors publicly questioned why Cheng went silent on those issues in his report, which does make several recommendations on improving anti-fraud programs without mentioning any problems inside the agency.

That kind of approach seems to fly in the face of the intent supervisors expressed when they established the Performance Audit in 2008, aiming to have an aggressive management analyst who could connect the dots between sound accounting and good management practices.

“…If there is a conclusion in [the auditor’s] report that management is performing well and hitting all their targets, but this ‘investigation’ reveals that management is not properly, say, supervising employees or things are going on where employees have been doing certain things under the nose of management, I would think that we would have a lot of questions about that,” County Supervisor Todd Spitzer said during the meeting last month.

The complaints filed by the group of whistleblowers at the agency are tied to alleged tenant and employee fraud within the Housing Choice Voucher Program, also known as Section 8.

Whistleblowers have also raised issues about nepotism in hiring and promotion practices, preferential treatment and special consideration for employees involved in intimate or personal relationships with their superiors, a lack of workplace diversity, discrimination and a multitude of other issues at the agency, according to documents reviewed by the Voice of OC, including letters, emails, memos and other correspondence between the whistleblowers, their representatives and various local and federal agencies over a span of nearly four years.

Cheng’s performance audit did note challenges in fraud investigations, noting that in the past, when potential fraud or abuse was identified internally, the “decision whether to refer these potential fraud/abuse cases to the Orange County District Attorney (OCDA) for investigation was inconsistent, leading to some frustration among staff looking for action to be taken on their referrals.”

At last month’s public board meeting, County Supervisor John Moorlach questioned OCHA Manager John Hambuch about why fraud investigations at the housing agency had dropped from 485 in the fiscal year 2010-11 to 83 investigations during the fiscal year 2013-14.

“Is that because everybody is doing a good job or is that because you have a lack of staff,” asked Moorlach.

Hambuch blamed the DA’s office, saying that DA investigators conduct the fraud investigations, and adding that the housing authority doesn’t have the ability to control their assignments.

“I believe [the DA investigators] were diverted in their assignments from investigating some of our cases to do some other work,” Hambuch told the board.

Calls to Senior Assistant District Attorney for special projects Michael Lubinski were not returned, and DA spokeswoman Susan Kang Schroeder declined to address a reporter’s questions.

Both the performance audit’s assessment of the fraud referral process and Hambuch’s characterization of how the fraud investigations are handled stand in stark contrast with what whistleblowers first reported to federal authorities in 2011.

Whistleblowers alleged that some supervisors deliberately impede fraud referrals from being forwarded to investigators from the DA public assistance investigations division who work within the housing authority, and that underlings who properly submitted fraud referrals experienced reprisals, in the form of retaliation and intimidation for simply doing their job.

Records provided by the county counsel’s office confirm that until last April, when the agency implemented an overhaul of the fraud referral policy, supervisors were given the sole discretion of reviewing all internal fraud referrals. The housing authority created a fraud referral committee, which now reviews all internal fraud referrals, however, despite these changes, sources within the agency say supervisors are still given final authority on fraud referrals.

The fraud committee is also working with the DA investigators to prioritize referrals and review a two-year backlog of fraud cases awaiting further investigation. Housing Authority records show that at the start of the year the backlog was at 214 cases, and by June the staff had made only a small dent in the total, with a total of 192 still awaiting investigation.

Cheng’s Performance Audit report is totally silent on whether housing fraud referrals were being mishandled by agency supervisors or whether there was any collusion between employees and the Section 8 tenants.

The DA investigations are key to routing out housing fraud as investigators gather evidence that can conclusively determine if a tenant is defrauding the housing authority. In some cases, tenants have been forced to repay the agency tens of thousands of dollars and have been criminally prosecuted and convicted for failing to accurately report their income.

Cheng defended the accuracy of his review to county supervisors publicly last month, pointing out that his office was aware of the DA’s investigation, but left it to the outside investigator to handle the personnel issues, and instead focused the audit on operational efficiency and performance outcomes.

“So whatever the personnel issues were overall, we still stand by our recommendation and our finding that overall the housing authority is doing well,” said Cheng, who praised the agency’s management for doing a “very diligent job” overseeing a more than $140 million budget and administering more than 10,000 housing vouchers.

OC Human Resources Director Steve Danley confirmed to the board that he has reviewed a summary draft of the investigation into the personnel issues, but said that the issues seem to be limited to “line staff.”

“I don’t think it’s going to come out to be something that’s – although there are issues – that it’s going to be pervasive throughout the organization,” said Danley.

Information provided to the Voice of OC by the county counsel’s office indicates that the personnel investigation is focused on time sheet fraud violations committed by some housing authority inspectors, as well as the failure of some inspectors to sufficiently conduct housing inspections.

The Voice of OC’s request to interview the Orange County Housing Authority’s top ranking officials, Executive Director Karen Roper, and Hambuch was declined by Page, who stated in a letter that the county was obligated to maintain the confidentiality of the DA’s investigative files.

However, late last month, Roper told members of the Housing and Community Development Commission – an advisory board appointed by the county supervisors that focuses on general policy direction and provides oversight of housing related issues – that after receiving a “couple of anonymous allegations of fraud” the housing authority “immediately engaged” its internal audit department to address the issue.

“All of these were proactive in the county requesting these…to make sure that if there is any fraud or wrongdoing we are really proactive in helping out…,” Roper told the commission.

Roper also informed the commission that the DA’s investigation found “no fraud or mismanagement,” but that the process helped the agency pinpoint areas for improvement, such as training and collaboration.

“We’re very happy [with] the results of what came out of that,” said Roper. “That brought us together as a team…working with the DA and county counsel…and staff at all levels in the housing authority.”

In an interview after the audit was released, Moorlach said that he had not seen a copy of the DA’s investigation, but pointed out there were no criminal charges stemming from that inquiry.

After studying the audit report and speaking with Cheng as well as the lead auditor, Moorlach said that from the standpoint of reviewing the agency to improve performance, reduce costs and ensure efficiency, “I thought the report was rather thorough.”

Supervisor Patricia Bates’ interim chief of staff Brian Probolsky also said shortly after the audit report was released that he didn’t think his boss had seen the DA’s investigation.

Given that criminal charges were not filed as a result of the investigation, and that the performance audit gave the housing authority a “clean bill of health” he said it sounded like the Voice of OC was making a “mountain out of a molehill.”

Yet statistics on the Orange County Housing Authority’s Housing Choice Voucher Program, do seem to show that among both Section 8 applicants and tenants, Asians are disproportionately represented when compared to their population size.

Census records show that in Orange County, where Latinos comprise more than a third of the residents and more than 21 percent of all people living in poverty, Asian residents receive a greater share of public housing subsidies from the Orange County Housing Authority despite representing a significantly smaller portion of the general population and those living in poverty.

The latest U.S. census figures show that countywide, Latinos comprise 34.2 percent of the population, while Asians represent 19.2 percent of the county’s residents. About one fifth, or 21.6 percent of the county’s poor are Latinos compared to 12.2 percent of Asians, according to the latest estimates from the 2013 American Community Survey of the U.S. Census Bureau, which defines poverty as a family of four, including two children, earning less than $23,624 annually.

The housing authority’s jurisdiction includes 31 cities and unincorporated areas throughout Orange County, but doesn’t include the cities of Garden Grove, Anaheim and Santa Ana who operate housing authorities of their own.

Anaheim and Santa Ana have sizable Latino populations and those residents would likely apply to get on the waiting list of their respective city. However, if a person works in the Orange County Housing Authority’s jurisdiction, they could apply for that waiting list as well.

Federal data from the Department of Housing and Urban Development show that among those receiving tenant based vouchers from the housing authority, 38 percent are Asian, while 18 percent are Latino, according to a snapshot of head of household data from May 2013 through August, 2014.

And according to data in a May 2014 report submitted by OC Community Services to the federal government, the demographics of applicants from the most current waiting list (2012) show that of the 48,392 applicants, 26 percent (12,568) are Asian, while 22 percent (11,038) are Latino.

Similar data submitted by OC Community Services in a 2010 report shows more disparate figures from the OC Housing Authority’s 2005 waiting list for the Section 8 vouchers. Of the 13,270 applicants on the waiting list at the time, 42 percent were Asian, while Latinos comprised 21 percent of the applicants.

The statistics may be skewed by Latino residents who don’t apply to the Orange County Housing Authority for Section 8 assistance because they don’t fall within the agency’s jurisdiction. However information that might have clarified this – such as how many Latino wait list applicants receive Section 8 vouchers – is not available.

In response to a Voice of OC public records request for a breakdown of Section 8 voucher recipients by race/ethnicity and nationality from the housing authority, the county responded that the agency doesn’t collect this data and referred a reporter to racial/ethnic data compiled by HUD.

Cheng’s audit report also doesn’t include a racial/ethnic breakdown of tenants served by the Orange County Housing Authority, but does have a city breakdown of the households receiving housing assistance.

By a wide margin, Westminster outpaces every other city with a total of 1,994 households that have active vouchers. Irvine comes in second, with 1,194 households.

Combining the two cities represent about 30 percent of the agency’s households. Westminster is home to one of the largest Vietnamese populations in the country on a per-city basis.

These statistics reflect inequities in the Section 8 program that internal whistleblowers allege have arisen from years-long discrimination and corruption within the agency.

Voice of OC reporter Thy Vo contributed to this story.

Readers can contact Yvette Cabrera directly at: yvettecabreraoc@gmail.com

Day Two: What the Whistleblowers told government officials and how, they argue, it went nowhere.