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Prison, $786k Tab in Section 8 Fraud

Tuesday, January 21, 2014

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A public housing director and her husband will serve several years in prison and pay nearly $800,000 in restitution for eight years of fraud involving the federal Section 8 rent-subsidy program in New Mexico.

Former Taos County Housing Authority executive director Carmella Martinez, 42, of Arroyo Seco, NM, was sentenced Thursday (Jan. 16) to months in federal prison; her husband, Paul G. Martinez, 44, was sentenced to 24 months in prison. Both prison terms will be followed by two years of supervised release.

The couple must also jointly pay $786,014.04 in restitution, the FBI announced.

Affordable Housing
HUD

The scandal further exacerbated the region's affordable-housing shortage.

The sentence stems from the couple's guilty plea to one of 49 criminal counts.

8-Year Fraud

Carmella and Paul Martinez were charged in December 2012 in a 49-count federal indictment with conspiracy, theft from programs receiving federal funds, and theft of government property.

The indictment alleged that between November 2003 and December 2011, the couple stole federal funds provided by the U.S. Department of Housing and Urban Development (HUD) to the housing authority for the Housing Choice Voucher Program, commonly known as "Section 8."

Section 8 rental subsidy funds (officially, Housing Assistance Payments, or HAP) are supposed to go to approved property owners and landlords on behalf of eligible low-income beneficiaries.

Section 8

The Taos County Housing Authority receives about $2.8 million in HUD funds annually, officials said.

Carmella Martinez was employed by the authority—as a financial specialist and, later, as executive director—over those eight years.

According to the indictment, Martinez was responsible for processing HAP checks to approved Section 8 property owners and landlords and providing preliminary approval of requests for rent subsidies to property owners and landlords under the Section 8 Program.

Authorities say she conspired with her husband to steal the Section 8 housing funds. Under the scheme, Carmella Martinez would issue fraudulent HAP checks for Section 8 housing assistance to various payees, including her husband and to bank accounts the couple held.

South Bronx Section 8
Wikimedia Commons / Jim.henderson

The Housing Choice Voucher (Section 8) Program provides rent subsidies for low-income residents. This is Section 8 housing in South Bronx, NY.

The Martinezes then presented the fraudulent checks for payment at various locations.

48 Counts Dismissed

The couple pled guilty in August 2013 to count one of the indictment, which charged them with conspiracy to commit theft concerning programs receiving federal funds and to commit theft of government property.

In her plea agreement, Carmella Martinez admitted that she had been issuing duplicate Section 8 HAP checks for the couple's benefit since 2000; her husband, she said, joined her in the scam in 2003.

The scheme ran until December 2011, when the Martinezes learned they were the subjects of a criminal investigation. Carmella Martinez told authorities that she and her husband "stole at least $786,014.04 in federal funds" through the scheme.

Paul Martinez made the same admissions in his plea agreement.

Under the agreement, the United States moved to dismiss the remaining 48 counts of the indictment after sentencing.

Stealing from 'Those Who Need it Most'

The scandal left the housing agency in an uproar. The area's Section 8 waiting list was closed in May 2012 amid an overhaul of the housing authority that included recertifying tenants and many owners. Critics complained that the actions exacerbated an already-severe shortage of affordable housing in the area.

The waiting list contained 757 names; the housing authority served about 360 families at the time, officials told The Taos News.

Housing
HUD

An FBI official said the decade-long theft of public housing funds was "like taking money out of the pockets of those who need it the most."

Special Agent in Charge Phyllis Grissom Robinson, of HUD’s Office of Inspector General said, “The sentence imposed against Ms. Martinez and her husband should send a strong message that [HUD's] Office of Inspector General will aggressively investigate those who fail to exercise integrity in connection with HUD programs, the end result will be both unpleasant and costly to the offending party.”

“For many low-income people in New Mexico, government rent assistance can mean the difference between having a roof over their heads or being homeless," said Special Agent in Charge Carol K.O. Lee of the FBI’s Albuquerque Division.

"Stealing from these programs is like taking money out of the pockets of those who need it the most,” Lee said. “The FBI will continue to work with our partners to make sure this kind of crime is aggressively investigated and the guilty parties brought to justice."

   

Tagged categories: Government; Housing; HUD; Laws and litigation; Residential

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