Laxity Cited in Approval of Quake Loans

Los Angeles housing officials were lax in approving and dispensing more than $300 million in earthquake loans and failed to make sure contractors who received loans paid workers federally mandated prevailing wages, according to an audit released Friday by the city controller’s office.

In addition, City Controller Rick Tuttle called for an in-depth review of the entire Housing Department, citing previous audits that found fault with its management.

“Prior audit reports including our own and those of the city’s external auditors have consistently identified system weaknesses that a strong management team should have known about and corrected,” the audit said.

Even more troubling, the audit said the department may have failed to advise tenants of their rights to receive moving costs when they were displaced by the federally funded repair program.

Gary Squier, the Housing Department’s general manager, shrugged off several of the audit’s harshest charges, but he conceded that his agency initially did a poor job of ensuring that contractors paid prevailing wages.

He called the charge that his department failed to advise displaced tenants of their rights “just plain wrong” and said the request for a management audit is “more spin than substance.”

In a four-page press release issued just minutes after the audit was made public, Squier commended his department for managing a program that helped rehabilitate 12,305 homes and apartments under “battlefield conditions.”

The loan program was funded by the U.S. Department of Housing and Urban Development.

The audit said the agency used lax loan approval methods and failed to collect necessary information from borrowers.

But Squier said the loan program’s main goal was to quickly repair quake-damaged homes that displaced thousands of residents. He said it would have been unreasonable to use standard commercial loan procedures under such conditions.