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Housing Official, Crony Get Prison Term

Wednesday, December 24, 2014

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The former director of a New Mexico city housing authority and his accomplice will each spend over a year in prison for stealing more than $100,000 in federal funds.

Danny Garcia, 39, the former executive director of Gallup Housing Authority, and Michael Virruso, 62, were sentenced Thursday (Dec. 18) for conspiring to commit false claims and making false claims against the U.S. Department of Housing and Urban Development (HUD), announced U.S. Attorney Damon P. Martinez.

Both men pleaded guilty July 8 to the two charges. Garcia also pleaded guilty to theft from a program receiving federal funds.

Gallup NM
Wolfgang Staudt / Flickr

The Gallup (NM) Housing Authority provides low-income and Section 8 housing to city residents. The city, near Albuquerque, is situated along Route 66 and has just over 20,000 residents.

The Gallup Housing Authority is a city agency that provides low-income and Section 8 housing to residents throughout Gallup. The authority received federal funds through the “Capital Fund Program,” which provides grants to public housing agencies to make improvements to those properties.

The agency receives about $400,000 in CFP grants each year.

The Sentencing

Garcia, now a resident of Snowflake, AZ, was sentenced to 20 months in prison followed by three years of supervised release. Virruso, of Gallup, will spend 18 months in prison followed by three years of supervised release.

Garcia was also ordered to pay $105,000 in restitution, including $75,000 that must be paid jointly by both defendants.

“The sentencing […] should send a strong message to anyone who serves in a position of public trust that abuses for the purpose of personal enrichment will be vigorously investigated to ensure they are brought to justice and debarred from future participation in government programs,” said Phyllis G. Robinson, special agent in charge, HUD Office of Inspector General.

The Scheme

According to the indictment, between June 2010 and October 2012, Garcia and Virruso engaged in a scheme to steal HUD funds designated for the Gallup Housing Authority (GHA).

The two had met through a local bowling league, the documents said.

HUD
HUD.gov

HUD's mission is to make quality, affordable housing available to all Americans. In Gallup, NM, the fraud included double billing and no-bid contracts between cronies.

Virruso netted $75,000 through the scheme, while Garcia took in $15,000 by using a GHA debit card for personal purchases, prosecutors said.

Contract Fraud

As executive director of GHA, Garcia was responsible for selecting contractors for GHA projects; reviewing and approving authority invoices; and requesting HUD funds to pay for projects.

According to the indictment, Garcia awarded a contract in the summer of 2010 to a company called Catteneo Construction to remove and replace sidewalks in a GHA development. Virruso was a foreman with Cattaneo. Garcia also appointed Virruso as safety inspector on the project.

During the project, Virruso submitted invoices to GHA for work that the company had already performed and been paid for, prosecutors said.

Garcia used GHA funds to pay Virruso’s invoices and then obtained reimbursement from HUD

In March 2011, authorities said, GHA planned to replace sidewalks at another location. This time, the agency unilaterally invited Cattaneo to perform the work, rather than invite bids or request proposals.

In that project, Cattaneo submitted and received payment for the work. Additionally, Virruso submitted invoices and received payment for "staking and grading" the site. However, another employee who received regular wages from Cattaneo actually did the job, according to details in the case.

Bogus Enterprise

Then, in May 2011, Garcia and Virruso co-founded MCL Construction.

woman owned business
CC0 Public Domain / Pixabay

MCL’s business plan was to obtain preferential treatment on contracts for work as a minority- and female-owned enterprise, and have the men actually perform and supervise operations.

MCL was nominally owned and operated by Virruso’s girlfriend and Garcia’s wife and another unidentified woman, authorities said.

MCL’s business plan was to obtain preferential treatment on contracts for work as a minority- and female-owned enterprise, and have the men actually perform and supervise operations, the indictment said.

The indictment said Virruso submitted one fraudulent invoice from MCL to Garcia, who approved the invoice for payment from HUD funds, and both men collected a share of the proceeds.

The two men were formerly charged August 2013 with one count of conspiracy and eight counts of making false claims against the United States. Garcia also was charged with three counts of theft from programs receiving federal funds.

   

Tagged categories: Construction; Ethics; Fraud; Government; Government contracts; HUD

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