Cityside Management Corporation, a field services provider, paid $4.3 million to settle allegations that the company lied to the Department of Housing and Urban Development about supervising rehab work on HUD-owned houses.
The settlement was announced Thursday by the U.S. Attorney’s Office for the Eastern District of California and the Office of the Inspector General of HUD.
According to the U.S. Attorney’s Office and HUD-OIG, Cityside Management paid the $4.3 million to settle charges that it violated the False Claims Act by “improperly billing” HUD for work supposedly done by Cityside’s subcontractors.
The agencies stated that Cityside had a contract with HUD to perform various property preservation services on houses that HUD had foreclosed on in the wake of the financial crisis.
As part of Cityside’s contract, the company was required to subcontract with third-party vendors to perform various duties at the HUD-owned houses, such as termite inspections, treatments, and repairs on the properties.
Under the agreement, HUD reimbursed Cityside’s expenses for those services.
But the agencies alleged that Cityside promised to inspect the work of these vendors but did not do so.
“In neglecting to perform these inspections, the United States alleges, Cityside knowingly deprived HUD of the benefit of its bargain throughout the term of the contract,” the U.S. Attorney’s Office said in a release.
“Each federal agency manages a myriad of programs throughout the United States,” U.S. Attorney Phillip Talbert said.
“This is especially true of HUD, which implements programs that facilitate fair housing, housing assistance, and home ownership,” Talbert continued. “Given their limited resources, federal agencies must be able to rely on their contractual partners to keep their promises. The Department of Justice will continue holding contractors accountable that fail to do so.”
It should be noted that the U.S. Attorney’s Office stated that the claims settled by the agreement with Cityside are allegations only, adding that there has been no determination of liability.
“When our contractors do not fulfill their obligations, it erodes the public’s trust in the Department,” HUD Deputy Regional Administrator Wayne Sauseda said.
“Limited HUD resources are a critical source of funding to preserve and improve housing stock in the region,” Sauseda continued. “This settlement will help further assure that such future investments yield the expected return to America’s taxpayers.”
James Todak, special agent in charge of HUD-OIG, added: “Due to the size and nature of HUD programs, mismanagement of any kind by contractors exposes HUD to substantial additional costs and delays, undermining the value of HUD homes. HUD OIG is committed to pursuing all acts of fraud, waste, abuse and mismanagement directed towards HUD programs and contracts.”