The Department of Housing and Urban Development has suspended funding for the Virgin Islands Housing Finance Authority (VIHFA) after it said widespread financial mismanagement, inadequate fraud controls, false certifications, and improper payments were uncovered during a HUD-initiated investigation.
The announcement was made by HUD Secretary Scott Turner.
HUD said in a release that almost a decade after VIHFA received $1.9 billion in HUD disaster recovery funding, VIHFA has spent less than one-third of the funds. The agency said that evidence suggests officials spent the funds on administrative kickbacks and allegedly fraudulent schemes instead of on families or communities recovering.
“The Trump administration is changing the game when it comes to who we entrust with taxpayer dollars. Organizations riddled with corruption, mismanagement, and crime will no longer be allowed to squander billions,” Turner said. “Virgin Islands Housing Finance Authority officials cannot be allowed to prioritize kickbacks over helping families recover from disasters. I promised that HUD would be a faithful steward of the American people’s hard-earned money, and we are keeping that promise. Effective immediately, VIHFA is suspended from receiving another cent as we investigate. Working with the White House Task Force to Eliminate Fraud, we are putting every grantee on notice: there are real consequences for abusing taxpayer dollars.”
‘Pattern of Fraud’
HUD said its investigation uncovered a pattern of fraud, financial mismanagement, and program failures at VIHFA including:
VIHFA’s former Chief Operating Officer, who oversaw disaster recovery programs, is serving a federal prison sentence after being convicted of fraud, money laundering, and criminal conflict of interest
Despite receiving nearly $2 billion in federal dollars, VIHFA has completed just 2% of Single-Family Rental Rehabilitation projects and 0% of Single and Multifamily Housing projects
HUD’s Office of Inspector General deemed VIHFA’s fraud risk management processes were “at or below the lowest desired goal state”
VIHFA sought $6.2 million in disaster-related costs that FEMA had already paid
Evidence suggests that VIHFA has repeatedly made false certifications claiming an effective compliance program and may have submitted additional false certifications to obtain further funding
13-Page Letter
According to a report in the Virgin Islands Daily News, the islands’ government received a 13-page letter from HUD Deputy Secretary Andrew Hughes that was released Monday.
“Nine years later, because of VIHFA’s blatant mismanagement of these critical disaster funds, USVI citizens still do not have the housing and electrical power they were promised nearly a decade ago,” Hughes wrote.
“VIHFA has violated its obligations to distribute and manage taxpayer funds lawfully, has failed to adhere to HUD procurement standards, and has repeatedly made false statements regarding its financial management controls and conflicts of interest,” he wrote.
According to the letter, the federal government “will not accept this record of empty promises and abject failures,” and HUD’s Office of Inspector General “is investigating potential offenses committed by VIHFA, its officers, directors, and/or employees,” according to the letter. VIHFA is suspended from future participation in procurement and non procurement transactions, effective immediately, pending the outcome of that investigation.”
The Daily News reported that Hughes said the VIHFA has proven to be “an abysmal steward of taxpayer funds” and “the pace of actual recovery in USVI is glacial to practically non-existent,” citing data that shows only a small fraction of projected housing recovery projects have been completed.
So far, the VIHFA has spent less than a third of the money provided by HUD, the Daily News stated.
“This failure has, to date, deprived Virgin Islanders of roughly $1.3 billion worth of assistance that Congress intended them to have,” according to Hughes, who addressed the letter to the HFA’s Chief Operating and Disaster Recovery Officer Dayna Clendinen.
Whistleblower Lawsuit
According to the Daily News, Eugene Jones Jr. took over as executive director of the Housing Finance Authority in April 2024, and recently resigned after two years on the job, amid stagnant recovery projects and an ongoing whistleblower lawsuit filed by ex-Chief Operating Officer Stephanie Berry.
Berry claimed she was fired for reporting improper and illegal activities, according to the complaint that names Jones and Clendinen as defendants.
The Daily News reported that when questioned about the letter during a Government House press briefing Monday, Gov. Albert Bryan Jr. said it was a “shock” and “it seems very sensationalized, when you read the letter, to the tone of the letter. It was very unprofessional. So, I don’t know if this is a political stunt — today opens up early voting — or some other action.”
Bryan questioned why the letter was first reported Monday morning by Fox News, who had been given exclusive advance access before HUD publicly released the letter later in the day.
“Why does the press have it? Why does Fox News in particular have it, and why are we only hearing about this now? So we are going to do some real investigation into what is going on,” and “we’ll be appealing that and then getting to the bottom of what exactly is generating these kind of harsh motives in the Virgin Islands,” Bryan said in the briefing.
According to the Daily News, while Bryan implied that HUD’s investigation is a targeted political attack, members of the Biden administration held similar concerns about the V.I. Housing Finance Authority’s lack of accountability.
