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CHEATING CRACKS FOUNDATION OF `HOMES FOR HOMELESS'

It sounds like a good idea: Let homeless and poor people live temporarily in vacant government-owned houses at very low rents until they can get back on their feet.

But the "Homes for Homeless" program at the U.S. Department of Housing and Urban Development is so riddled with abuse that some houses went to well-off individuals and poor tenants were overcharged or bilked out of their money, according to documents.HUD investigative audits and reports obtained by the Associated Press show:

- Houses in Baton Rouge, La., were rented or sold to non-homeless people, including one making $58,000 a year.

- A Denver fixer-upper house was sold to a builder making $30,000 a year who could afford to pay cash for the property.

- Low-income buyers in St. Louis lost thousands of dollars in down payments when a HUD-approved middleman disappeared with their funds.

- A low-income tenant in Miami was charged a $900 security deposit to rent a house.

HUD relies on local nonprofit groups working with the homeless to find tenants for the properties. The agency acquired the homes when owners foreclosed on federally insured mortgages.

HUD leases the homes for just $1 a year so the groups, in turn, can charge very low rents to people coming out of shelters or living on low incomes.

While some nonprofits have found legitimate tenants for the homes, many have cheated and let friends, relatives and business associates live in the houses, documents show.

HUD auditor D. Michael Beard says the 6-year-old program is a failure and should be closed.

"We've looked at whether the program has achieved its goals, and clearly it has not," said Beard. "It's just too easy to cheat."

More than 300 organizations - mainly privately funded homeless coalitions and community service groups - hold leases on 1,289 of the homes around the country.

The groups sign agreements promising to house only homeless or low-income people.

The department doesn't have enough staff to make sure they honor their promises, officials say.

"We don't manage the non-profits, we manage the properties," said Tony Hernandez, HUD's top official in Denver.

HUD kicked Denver-based Ecumenical Refugee Services Inc. out of the program after it learned about the inappropriate house sale. The group's director said the sale was the work of a single employee, who has been fired.

The department inspects the houses once a year for maintenance and damage and periodically checks the groups' tenant and financial records.

Even the inspections failed to stop abuse in Baton Rouge.

HUD inspectors saw expensive cars parked in front of houses that contained nice furniture and big- screen televisions, documents show.

Tenants were later found to be friends and business associates of the group's director. One tenant earned $58,000 a year and paid no rent, according to Beard and local newspaper reports.

HUD told the group to stop the practice but continued leasing it more properties and failed to monitor the group to see if the problems had been corrected.

It finally terminated Safety Net's leases and kicked the group out of the program following local press reports earlier this year.

HUD also terminated its dealings with Allied Housing Group Inc. of St. Louis. The group collected thousands of dollars in down payments from low-income buyers, then tried to buy additional houses with the money, HUD documents show. The deals fell through.

The state sued the group to retrieve the money, but the group's officials can't be located, according to state and HUD officials.

Meanwhile, HUD's Florida office is investigating South Point Family and Children Center Inc., a Miami group that charged one tenant a $900 security deposit. Nelson Bell, the group's director, said, "We don't feel we've overcharged any tenants."

Jacquie Lawing, deputy assistant secretary at HUD, said tighter rules are making it harder for cheaters. Groups now get two-year leases, down from five, and are examined before they get any new properties. The agency also limited the number of houses each HUD office could lease. The changes have led to fewer problems, she said.

Under pressure from Congress, HUD said last month that no new leases would be issued as of Jan. 1. HUD will decide next year whether to end the program, said Lawing.

Rep. Spencer T. Bachus, R-Ala., who chaired hearings on the program in August, said the program should be scrapped.

"It attracts charlatans," said Bachus. "It's laughable. It ought to be discontinued."