[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





 
                     EXPLORING ALLEGED ETHICAL AND


                        LEGAL VIOLATIONS AT THE


                       U.S. DEPARTMENT OF HOUSING


                         AND URBAN DEVELOPMENT

=======================================================================

                                HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON OVERSIGHT
                           AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 4, 2015

                               __________

       Printed for the use of the Committee on Financial Services

                            Serial No. 114-2
                            
                            
                            
                            
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking 
    Vice Chairman                        Member
PETER T. KING, New York              CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
SCOTT GARRETT, New Jersey            GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas              MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico            RUBEN HINOJOSA, Texas
BILL POSEY, Florida                  WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK,              STEPHEN F. LYNCH, Massachusetts
    Pennsylvania                     DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia        AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri         EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan              GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin             KEITH ELLISON, Minnesota
ROBERT HURT, Virginia                ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio                  JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee       JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana          TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina        BILL FOSTER, Illinois
RANDY HULTGREN, Illinois             DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida              PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri                 KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania       DENNY HECK, Washington
LUKE MESSER, Indiana                 JUAN VARGAS, California
DAVID SCHWEIKERT, Arizona
ROBERT DOLD, Illinois
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
              Subcommittee on Oversight and Investigations

                   SEAN P. DUFFY, Wisconsin, Chairman

MICHAEL G. FITZPATRICK,              AL GREEN, Texas, Ranking Member
    Pennsylvania, Vice Chairman      MICHAEL E. CAPUANO, Massachusetts
PETER T. KING, New York              EMANUEL CLEAVER, Missouri
PATRICK T. McHENRY, North Carolina   KEITH ELLISON, Minnesota
ROBERT HURT, Virginia                JOHN K. DELANEY, Maryland
STEPHEN LEE FINCHER, Tennessee       JOYCE BEATTY, Ohio
MICK MULVANEY, South Carolina        DENNY HECK, Washington
RANDY HULTGREN, Illinois             KYRSTEN SINEMA, Arizona
ANN WAGNER, Missouri                 JUAN VARGAS, California
SCOTT TIPTON, Colorado
BRUCE POLIQUIN, Maine
FRENCH HILL, Arkansas
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    February 4, 2015.............................................     1
Appendix:
    February 4, 2015.............................................    35

                               WITNESSES
                      Wednesday, February 4, 2015

Montoya, Hon. David A., Inspector General, Office of Inspector 
  General, U.S. Department of Housing and Urban Development......     5
Perez, Edda Emmanuelli, Managing Associate General Counsel, 
  Office of General Counsel, U.S. Government Accountability 
  Office.........................................................     7

                                APPENDIX

Prepared statements:
    Montoya, Hon. David A........................................    36
    Perez, Edda Emmanuelli.......................................    48

              Additional Material Submitted for the Record

Ellison, Hon. Keith:
    Insert from the Federal Register dated January 6, 2015, on 
      Proposed Rules.............................................    63
    Responses to questions for the record submitted to Hon. David 
      A. Montoya.................................................    77


                     EXPLORING ALLEGED ETHICAL AND



                        LEGAL VIOLATIONS AT THE



                       U.S. DEPARTMENT OF HOUSING



                         AND URBAN DEVELOPMENT

                              ----------                              


                      Wednesday, February 4, 2015

             U.S. House of Representatives,
                          Subcommittee on Oversight
                                and Investigations,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:06 a.m., in 
room 2167, Rayburn House Office Building, Hon. Sean Duffy 
[chairman of the subcommittee] presiding.
    Members present: Representatives Duffy, Fitzpatrick, 
McHenry, Hurt, Fincher, Mulvaney, Hultgren, Tipton, Poliquin, 
Hill; Green, Cleaver, Delaney, Sinema, Beatty, Vargas, Ellison, 
Heck, and Capuano.
    Chairman Duffy. The Subcommittee on Oversight and 
Investigations will come to order. The title of today's 
subcommittee hearing is, ``Exploring Alleged Ethical and Legal 
Violations at the U.S. Department of Housing and Urban 
Development.''
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time.
    The Chair now recognizes himself for 3 minutes for an 
opening statement. I first want to thank everyone for being 
here today, including our witnesses.
    Our witnesses are here to discuss two reports. The first is 
the Inspector General's report on allegations of improper 
lobbying and obstruction at the Department of Housing and Urban 
Development.
    For those returning members to the committee, you will 
remember that we first discussed this report almost a year ago, 
in February, when Mr. Montoya was here. At that time, Mr. 
Montoya and I talked about the whitewash mentality at HUD. At 
the time, I found those revelations troubling, but I hoped that 
we could chalk it up to just a few bad apples at HUD.
    But we are back here again today to discuss what happened 
with those bad apples because of other completely unrelated 
allegations that have surfaced. In fact, I think we are going 
to hear many stories of the waste, fraud, and abuse that is now 
taking place at HUD.
    The second report our witnesses have been asked to discuss 
concerns the questionable hiring practices at the Department 
that might have created a glaring conflict of interest. And 
that is within the Office of Public and Indian Housing. I want 
to make clear to committee members that these are very 
different allegations against different employees in different 
departments and divisions responsible for very different tasks.
    But they seem to display the same cavalier attitude that 
shows these employees do not believe in following the rules. 
And they do not care about getting caught, and when they are 
caught they don't care about obstructing an investigation or 
Congress. Their purpose is to protect themselves and each 
other. And sadly, what we find is that they get away with it. 
And sometimes, they even get rewarded during periods of bad 
behavior. It is an attitude that I think Americans are learning 
is prevalent throughout this Administration and it is an 
attitude of which we are all quickly getting very tired.
    I want to make clear that we are not here to debate the 
importance of HUD, the importance of its mission, or the work 
that they do. Millions of Americans who have fallen on hard 
times--veterans, single mothers, their children--all rely on 
HUD's programs, and we should all recognize and applaud their 
efforts.
    In fact, it is because of the hard work of many HUD 
employees that we are here today. It is because they are the 
ones who have come forward and reported these allegations. They 
already work with limited resources that should not be diverted 
to illegal lobbying efforts or overpaying a lobbyist.
    So I look forward to hearing from our witnesses today to 
learn what sort of reprimands HUD has taken against these 
employees and what steps they continue to take to ensure that 
this attitude of disregard for accountability does not entrench 
itself within the Department permanently. And I hope my friends 
on the other side of the aisle will work with me in this 
committee to get to the bottom of these allegations and ensure 
that these bad acts stop now.
    And with that, I yield to my good friend, the ranking 
member of our Oversight and Investigations Subcommittee, 
Representative Green from Texas.
    Mr. Green. Thank you, Mr. Chairman. Let me acknowledge that 
this is your first hearing as the official Chair. While you 
have occupied the seat before, this is your first time as 
Chair, and I commend you and want to thank you for the 
conversations that you and I have had prior to this hearing. 
While they were personal to us, I will indicate that they have 
been positive and productive. Again, I thank you.
    I would also like to thank our staffs for the outstanding 
jobs that they have done in preparing us for today's hearing. I 
sincerely believe that without the staffs' aid and assistance, 
we would not be nearly as effective as we are. So again, thank 
you staff.
    Mr. Chairman, I am pleased that we are taking an interest 
in how to improve the Federal agency principally responsible 
for providing housing to low-income Americans. Today's hearing 
will cover HUD Inspector General (IG) investigations into 
alleged wrongdoing at the U.S. Department of Housing and Urban 
Development.
    The first report concerns lobbying actions taken by HUD 
that this subcommittee held a hearing on nearly a year ago. The 
IG's report for this incident concluded that HUD had not 
violated the Anti-Lobbying Act. However, individuals at HUD had 
violated HUD's internal policies related to lobbying Congress 
on pending legislation.
    HUD has since taken action to clarify lobbying rules for 
its employees and acted to respond to the concerns raised 
during last year's hearing. More recently, the U.S. Government 
Accountability Office (GAO) determined that the actions taken 
by individuals at HUD violated the Antideficiency Act related 
to the proper use of appropriated funds. As such, I fully 
expect HUD to comply appropriately and to take the necessary 
actions to address this.
    The other topic of today's hearing is related to an IG 
investigation into alleged improper activities of an individual 
at HUD brought on through an agreement permitted under the 
Intergovernmental Personnel Act.
    While these agreements are designed to provide Federal 
agencies the ability to employ subject matter experts on a 
temporary basis, I believe it is our responsibility to ensure 
that it is being done properly. The HUD IG investigation raises 
a number of concerns about the actions taken by individuals at 
HUD and whether there was proper consideration given to 
potential conflicts of interest. I want to be clear, 
perspicuously so, Mr. Chairman. I believe, as do you, that it 
is our subcommittee's responsibility to fully investigate what 
has occurred at HUD. And if wrongdoing is uncovered, it should 
be dealt with appropriately.
    However, like you, Mr. Chairman, I contend that this 
subcommittee's ultimate goal must be improving HUD. HUD's 
mission is critical to the success of this Nation. By and 
large, HUD continues to provide support for affordable housing 
for millions of Americans, including over 14,000 veterans. And 
56 percent of HUD's tenants supported by HUD are elderly or 
disabled.
    HUD currently employs over 9,000 people around the United 
States. While it would appear that the IG's findings suggest 
that former HUD employees may have acted improperly, we should 
not conclude that their actions suggest a larger, more systemic 
problem at HUD.
    I will reiterate that HUD should act appropriately, and it 
appears that HUD is addressing concerns raised by the IG. One 
of the things that I will introduce into evidence at some 
point, Mr. Chairman, is a joint communique signed by the 
Secretary of HUD and the IG indicating a willingness to work 
together to bring resolution to the concerns that have been 
raised. We should not allow this debate to metamorphose into 
anything more than trying to improve HUD.
    Mr. Chairman, I agree with you. And, in fact, it is my hope 
that once the agency has addressed our concerns, this 
subcommittee will turn its attention to more pressing national 
matters, including the struggles of our country's smallest 
banks and the state of our public housing in America.
    Mr. Chairman, nearly every member of this committee has 
heard from small banks about the struggles that they are facing 
in balancing their consumer protections with the regulatory 
burdens with which they struggle. Over 6,000 of our Nation's 
banks, which is more than 90 percent of all banks in this 
country, are under $1 billion in assets. And I believe that we 
must do more to help them lest we wish to stand idly by as the 
industry continues to consolidate.
    While I look forward to this hearing and hearing from our 
witnesses, Mr. Chairman, I do want to work to improve HUD, and 
I am eager to tackle the many other issues that demand our 
attention.
    I yield back.
    Chairman Duffy. The Chair now recognizes the vice chairman 
of our Oversight and Investigations Subcommittee, Mr. 
Fitzpatrick from Pennsylvania, for 2 minutes.
    Mr. Fitzpatrick. I thank the chairman for holding this 
important hearing.
    Today, this subcommittee is going to hear testimony from 
yet another Federal agency about an investigation into improper 
behavior. This week, it is the United States Department of 
Housing and Urban Development, whose own Inspector General 
found evidence that senior employees may have circumvented the 
hiring process to appoint politically connected lobbyists to 
high-level positions.
    Furthermore, this subcommittee will be following up on the 
Government Accountability Office and HUD OIG reports that 
officials violated Federal law by asking employees to contact 
United States Senators to ask for their support on pending 
legislation.
    Last Congress, it was the IRS, the Department of Justice, 
and most tragically, the Veterans Administration. In every 
case, the American people saw high-ranking officials within 
these agencies destroy evidence, skirt the law for their own 
benefit, and adhere to a personal agenda. Over the course of 
the testimony, I hope this committee is able to determine if 
this type of behavior is an isolated incident of just a few bad 
actors, or if it stretches across the entire senior leadership. 
But what concerns me more is that my constituents have come to 
expect this type of behavior from the Administration.
    Finally, this is not a hearing about the good work HUD does 
for struggling families across the United States, including in 
my district back home in Pennsylvania. And for the great number 
of HUD employees who work hard and who serve, I thank them for 
that.
    In fact, this is a hearing about behavior that has occurred 
at previously-mentioned Federal agencies which tarnishes the 
good work that many Federal employees, including those at HUD, 
are doing for the taxpayers. So, Mr. Chairman, I look forward 
to the important work of this subcommittee in the 114th 
Congress to hold accountable Federal agencies and Federal 
employees.
    And I yield back.
    Chairman Duffy. The vice chairman yields back.
    The subcommittee now welcomes our witnesses. Thank you both 
for being here today.
    First, we welcome the Honorable David Montoya. He is the 
Inspector General of the United States Department of Housing 
and Urban Development. Before Mr. Montoya was sworn in as HUD's 
Inspector General in December 2011, he served in senior-level 
positions for the Office of the Inspector General at the U.S. 
Postal Service and the U.S. Department of the Interior, and as 
the Deputy Director of the EPA's Criminal Investigation 
Division. Mr. Montoya is a native of El Paso, Texas, and a 
graduate of the University of Texas at El Paso.
    We also welcome Ms. Edda Perez. She is the Managing 
Associate General Counsel in the Office of General Counsel at 
the United States Government Accountability Office. Ms. Perez 
serves as Associate General Counsel for appropriations law, 
budget issues and financial management, and assurance teams 
within GAO's Office of General Counsel, and she has been with 
the GAO in several different capacities since 1987. Ms. Perez 
received her law degree from Georgetown University and her 
undergraduate degree from InterAmerican University of Puerto 
Rico.
    The witnesses will be recognized for 5 minutes to give an 
oral presentation of their testimony. Without objection, the 
witnesses' written testimony will be made a part of the record. 
Once the witnesses have finished presenting their testimony, 
each member of the subcommittee will have 5 minutes in which to 
ask questions of the witnesses.
    I want to remind the witnesses verbally that while you may 
not be placed under oath today, your testimony is subject to 18 
U.S.C. Section 1001, which makes it a crime to knowingly give 
false statements in proceedings such as this one. You are 
specifically advised that knowingly providing false statements 
to this subcommittee or knowingly concealing material 
information from this subcommittee is a crime.
    On your table, you will see that you have three lights: 
green means go; yellow means you are running out of time; and 
red means stop. The microphones are oftentimes very sensitive, 
so make sure you are speaking directly into it.
    And with that, Mr. Montoya, you are recognized for 5 
minutes.

STATEMENT OF THE HONORABLE DAVID A. MONTOYA, INSPECTOR GENERAL, 
  OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF HOUSING AND 
                       URBAN DEVELOPMENT

    Mr. Montoya. Thank you, Chairman Duffy, Ranking Member 
Green, and members of the subcommittee. I am David Montoya, the 
Inspector General of the Department of Housing and Urban 
Development. I want to thank you for the opportunity to testify 
today regarding our investigative and audit work of legal and 
ethical issues at the Department, including lobbying 
activities, its improper use of agreements under the 
Intergovernmental Personnel Act, and other investigations of 
HUD employees' misconduct. My written testimony outlines a 
number of our concerns.
    While we are encouraged by the positive involvement of 
Secretary Castro and Deputy Secretary Coloretti, our work does 
continue. On February 26th of last year, I testified before 
this subcommittee regarding our investigation of HUD lobbying 
activities. I recounted the series of events and lapses in 
judgment that resulted in HUD engaging in grassroots lobbying 
activities.
    While our investigation did not result in criminal 
prosecution, it demonstrated an institutional failure to follow 
HUD's own existing internal policies. This led to placing the 
Department and its second highest-ranking official, the former 
Deputy Secretary, into a comprising situation, one that leaves 
an impression of lapses in judgment and unethical decision-
making by high-ranking officials.
    In that matter, officials attempted to impede our 
investigation by withholding information and threatening my 
investigating agents. In response to our report of 
investigation, HUD took no formal disciplinary action.
    I am here today to state that unfortunately, we have 
encountered another example of senior officials bending the 
rules and engaging in what I consider misconduct. Over the last 
5 months, we have issued two reports concerning HUD's 
appointment of the Deputy Director of the Council of Large 
Public Housing Authorities, known as CLPHA, to HUD's Office of 
Public and Indian Housing's (PIH's) policymaking division that 
was responsible for developing the regulations applicable to 
the entities CLPHA represents.
    In essence, HUD appointed someone who represented the 
regulated to be in charge of developing the regulations. We 
believe the former Assistant Secretary and former Deputy 
General Assistant Secretary for PIH may have committed 
prohibitive personnel practices and created an inherent 
conflict of interest in doing so. More troubling is that once 
inside HUD, CLPHA's Deputy Director attempted to deregulate 
public housing agency reporting requirements and loosen 
oversight of public--or PIH programs to align with the agenda 
set forth by CLPHA and other similar industry groups.
    These two events alone illustrate what can happen when 
senior officials veer from the course of ethical decision-
making, skirt the edges, and act in a manner that is not in the 
government's best interest.
    The inappropriate and sometimes illegal actions by a small 
group of HUD employees detract from what my experience has 
shown me to be the norm, which is that the vast majority of HUD 
employees are hard-working, dedicated civil servants. In fact, 
many of these cases have come to us by conscientious employees 
who are frustrated that their managers have not addressed these 
issues and allegations.
    In some of these cases, we see a failure to adhere to 
existing policies and procedures, or we see a breakdown in 
responsibility. Particularly troubling to me is when 
information is withheld from my office or employees demonstrate 
a lack of candor with, or even threaten, OIG agents and yet HUD 
takes no action.
    It is a fact that poor actions and behavior are human in 
nature and will occur throughout any industry or entity, 
private or government. HUD is not alone. But what I believe is 
important is what an organization does after such behavior is 
detected to discipline, and create an ethical culture in the 
workplace. It is my opinion that HUD has failed in both.
    One cannot ignore the fact that for the past several years 
HUD has consistently ranked near the bottom in annual surveys 
of the most desirable Federal agency to work for. Misconduct 
and unethical behavior, particularly by high-ranking officials, 
does not, in my view, serve to enhance this unfavorable image. 
Employee morale also suffers when employees observe that 
misconduct is not dealt with and the offending employees are 
allowed to remain in their positions virtually unpunished.
    It is in HUD's best interest that they address misconduct. 
Because according to a 2013 national business ethics survey 
conducted by the Ethics Resource Center, when employees observe 
misconduct on the job, their engagement drops by nearly 30 
percent.
    I do want to express my appreciation for Secretary Castro's 
effort to encourage HUD employees to cooperate with my office. 
Indeed, he issued a jointly-signed letter with me to all HUD 
employees outlining his expectations. I look forward to working 
with the Department and the Congress to ensure that HUD 
programs and personnel operate in a legal and ethical manner.
    Thank you for the opportunity to speak today, and I am 
happy to answer your questions.
    [The prepared statement of Inspector General Montoya can be 
found on page 36 of the appendix.]
    Chairman Duffy. Thank you, Mr. Montoya.
    The Chair now recognizes Ms. Perez for 5 minutes.

STATEMENT OF EDDA EMMANUELLI PEREZ, MANAGING ASSOCIATE GENERAL 
      COUNSEL, OFFICE OF GENERAL COUNSEL, U.S. GOVERNMENT 
                     ACCOUNTABILITY OFFICE

    Ms. Perez. Good morning, Chairman Duffy, Vice Chairman 
Fitzpatrick, Ranking Member Green, and members of the 
subcommittee. Thank you for the opportunity to discuss our 
legal opinion concerning the Department of Housing and Urban 
Development's use of appropriations to prepare and transmit an 
email to the public.
    GAO concluded that HUD violated the anti-lobbying provision 
of its Appropriations Act and the Antideficiency Act. The legal 
opinion was requested by this subcommittee's previous chairman. 
Representative McHenry asked GAO whether HUD violated anti-
lobbying provisions when the Deputy Secretary prepared and 
transmitted an email on July 31, 2013.
    That email encouraged recipients to contact specific 
Senators regarding pending legislation. We relied upon facts 
determined from the investigation done by HUD's Office of 
Inspector General and information that HUD provided to the 
subcommittee. We also asked HUD to provide us with additional 
facts and its legal views. HUD did not provide any additional 
facts or legal views to GAO.
    The provision applicable in this case is Section 716 of 
HUD's 2012 Appropriations Act, which was carried forward by the 
2013 Appropriations Act. Section 716 is commonly referred to as 
an anti-lobbying provision. It prohibits the use of 
appropriated funds for indirect or grassroots lobbying in 
support of or in opposition to pending legislation.
    Grassroots lobbying occurs when an agency makes clear 
appeals to the public to contact Members of Congress regarding 
pending legislation. The email transmitted by the Deputy 
Secretary requested that recipients contact 17 named Senators 
in support of the Senate's version of HUD's 2014 appropriations 
bill, which was pending in the Senate at that time. The email 
emphatically urged recipients to encourage the Senators to take 
various actions: to vote in favor of procedural motions to 
advance consideration of the bill; to oppose specific 
amendments HUD considered harmful to the bill; and to vote in 
support of the bill itself.
    Among the over 1,000 recipients of the Deputy Secretary's 
email were members of the public. GAO concluded that HUD 
violated Section 716 by preparing and transmitting the email. 
The provision is violated when there is evidence of a clear 
appeal by an agency to the public to contact Members of 
Congress in support of or in opposition to pending legislation.
    Here, the Deputy Secretary's email, on its face, made 
several clear appeals to the public to contact Members of 
Congress regarding HUD's pending appropriations bill. HUD did 
not deny that it engaged in grassroots lobbying. Rather, HUD 
emphasized that the email was sent by its Deputy Secretary, who 
is a Presidentially-appointed and Senate-confirmed official.
    HUD noted that the Department of Justice has opined that a 
similar anti-lobbying provision which is enforced by Justice 
does not restrict the activities of certain Executive Branch 
officials such as Presidential appointees. Notably, however, in 
interpreting that provision in Section 1913 of Title 18, 
Justice does caution against such officials engaging in the 
sort of lobbying activity that section was intended to prevent.
    GAO's opinion did not analyze whether HUD violated Section 
1913, a provision enforced by the Department of Justice, not 
GAO. GAO analyzed HUD's compliance with the appropriations 
provision found in Section 716.
    GAO does not agree with HUD's view that the Deputy 
Secretary is exempt from the appropriations provision. Section 
716 would not prevent the Deputy Secretary from engaging in 
normal executive legislative relationships. It does however 
establish a brightline rule prohibiting a clear agency appeal 
to the public to contact Members of Congress in support of or 
in opposition to pending legislation. And in this case, there 
is evidence of such an appeal to the public, and GAO concluded 
that HUD violated the anti-lobbying restriction of Section 716. 
By using its appropriated funds in violation of this 
prohibition, HUD also violated the Antideficiency Act.
    The Antideficiency Act is a cornerstone of fiscal laws by 
which Congress enforces its constitutional power of the purse. 
It is also a funds-control statute that is designed to 
implement agency fiscal discipline.
    Under the Act, officials of the government may not make or 
authorize an obligation or expenditure exceeding the amounts of 
available appropriation. In other words, agencies may not spend 
more than Congress provides. The legal effect of Section 716 is 
to make no funds--that is, zero--available to HUD for indirect 
or grassroots lobbying. By using funds to prepare and transmit 
the email in question, HUD spent funds in excess of the amount 
available. And because no funds were available for grassroots 
lobbying, HUD violated the Antideficiency Act.
    Consequently, HUD must report an Antideficiency Act 
violation to the President and Congress, and transmit copies of 
the report to GAO in accordance with the law. As of this date, 
GAO has not received a report from HUD for this Antideficiency 
Act violation. Thank you, Chairman Duffy, Vice Chairman 
Fitzpatrick, and Ranking Member Green.
    This concludes my statement, and I would be pleased to 
answer any questions you may have.
    [The prepared statement of Ms. Perez can be found on page 
48 of the appendix.]
    Chairman Duffy. Thank you, Ms. Perez.
    The Chair now recognizes himself for 5 minutes. Mr. 
Montoya, maybe just a brief recap. After last year's hearing, 
after the information came to light with regard to the lobbying 
effort within HUD, what happened to Mr. Jones, Mr. Mincberg, 
and Mr. Constantine in regard to disciplinary action, and where 
are they today?
    Mr. Montoya. Thank you for that question, Mr. Chairman. Mr. 
Mincberg has left the organization. Nothing--no personnel 
action, if you will, took place against him prior to his 
leaving, but he has left the organization.
    Chairman Duffy. So he wasn't removed for his actions? He 
left on his own volition?
    Mr. Montoya. Left on his own. He resigned, yes, sir. With 
regards to the Deputy Secretary, he left and took another 
position with the State. Nothing happened with him, although 
our investigation did not suggest that he had any real direct 
involvement in the email, and may have been unknown with 
regards to the email contact list.
    Chairman Duffy. Is it fair to say Mr. Jones was, in your 
opinion, relying on the advice given to him by others?
    Mr. Montoya. Yes, sir. I think last time I testified, I 
classified it as ``ill-advised.'' He was ill-advised by his 
attorneys who should have kept him from this situation.
    Chairman Duffy. Okay.
    Mr. Montoya. And with regards to Mr. Constantine, I believe 
he may have been issued a reprimand or an oral counseling, 
which we would not consider a personnel action--oral 
counseling.
    Chairman Duffy. But he has been removed from HUD, yes?
    Mr. Montoya. No, no.
    Chairman Duffy. No?
    Mr. Montoya. He is still the ethics official for HUD.
    Chairman Duffy. He is the ethics official for HUD?
    Mr. Montoya. Yes, sir.
    Chairman Duffy. Was Mr. Constantine misguided, do you 
think, like Mr. Jones?
    Mr. Montoya. The evidence suggested that Mr. Mincberg had 
several conversations within his hallway about this more 
aggressive lobbying. I did fault Mr. Constantine for not taking 
more of an aggressive approach himself in asking the question, 
what is it you are talking about? Especially because it dealt 
with the Secretary and the Deputy Secretary.
    Chairman Duffy. Did Mr. Constantine cooperate with your 
investigation?
    Mr. Montoya. We had to interview him 3 times. So to the 
extent that he was willing to be interviewed--
    Chairman Duffy. Is that standard practice that you would 
interview someone 3 times? Or usually, if someone is 
cooperative, does it take only one time?
    Mr. Montoya. It is not unheard of that we interview 
somebody several times if we need to go back for additional 
information. In his case we, quite frankly, didn't feel that 
the story was straight. So that is why we interviewed him 3 
times.
    Chairman Duffy. Do you think he was fully forthright with 
you in the first interviews that you did with him?
    Mr. Montoya. No. And quite frankly, although he didn't say 
it, I believe he was a little fearful of retaliation of 
speaking up.
    Chairman Duffy. But he has not been removed. He is in the 
Ethics Division.
    Mr. Montoya. That is correct, sir.
    Chairman Duffy. Okay. Has there been any promotion or 
increase in pay?
    Mr. Montoya. I am not aware that there would be for him.
    Chairman Duffy. Okay. I want to switch gears and go to the 
more recent investigation with regard to Ms. Gross being hired 
by HUD. Listen, it is not uncommon, and I think many Americans 
might not like this, but sometimes lobbyists will come to work 
for the government and sometimes government employees will 
leave and go work for lobby firms. It is referred to as the 
``revolving door.'' That is not uncommon, or that is not 
illegal, is it? No.
    Mr. Montoya. No. It would depend on the circumstances.
    Chairman Duffy. But with Ms. Gross, however, she was 
brought into HUD in her governmental personnel agreement. Did 
she resign her position from CLPHA?
    Mr. Montoya. No, she did not. She maintained her position 
as the Deputy Director and was, quite frankly, being paid by 
CLPHA with HUD reimbursing payments. So in essence, she was 
still a full-fledged paid employee of CLPHA while employed in 
Federal service.
    Chairman Duffy. In these IPA agreements between agencies 
and outside organizations, is that uncommon that they would 
keep their position at the outside organization?
    Mr. Montoya. I don't believe it is uncommon. I think what 
was uncommon here is, she was put in a very key, high-ranking 
role--she wasn't there as an advisor, per se--to sort of inform 
HUD of what the industry was dealing with when it came to 
regulations. There is nothing wrong with that sort of advisory 
role, but she was in a key, policymaking position.
    Chairman Duffy. And that is where the difference is, that 
she was not there in an advisory role, which is the traditional 
position of an IPA individual. Instead, she was in a policy-
making position and still kept her position the CLPHA, which is 
a lobbying organization and has a certain view and perspective 
of what HUD should be doing with regard to reforms. Is that 
correct?
    Mr. Montoya. Yes, sir, that is correct.
    Chairman Duffy. Do you have an opinion as to whether--was 
she loyal to HUD, was she loyal to CLPHA, was she loyal to 
herself? How did she navigate her role in HUD?
    Mr. Montoya. Quite frankly, everything suggests to me and 
to us that she was loyal to CLPHA and to the industry, not only 
with regards to the fact that she wanted to maintain the higher 
salary that CLPHA was giving her as opposed to the salary she 
would have made as a Federal employee, but quite frankly, in 
trying to deregulate some of the regulations that had 
established HUD in a better position, especially with regards 
to improper payments.
    Chairman Duffy. Thank you. And my time has expired.
    The Chair now recognizes the ranking member, Mr. Green from 
Texas, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. Thank you again to the 
witnesses.
    Let me start with you, Ms. Perez. And thank you for 
appearing today. With reference to the report that you are to 
receive from HUD and that Congress is to receive as well, you 
have indicated that you have not received it. But would you go 
on and indicate at this time that this is not unusual given the 
length of time that has lapsed? And that sometimes it can take 
months to get these reports to the appropriate parties?
    Ms. Perez. Yes, sir, it can take several months for us to 
get reports from agencies when we have indicated that they have 
violated the Antideficiency Act. Some agencies have done it in 
a matter of weeks, others have taken several months and even 
years.
    Mr. Green. And just for the record, to make it very clear, 
you are not contending that anything untoward has occurred by 
virtue of the report not having reached your office to date.
    Ms. Perez. No, sir. The main concern and purpose of that 
report would be for the agency to be able to identify what 
actions it has taken to correct these violations, as well as to 
take actions to prevent violations in the future. So we really 
view it as forward-looking because that is part of what the 
statute requires, to impose additional safeguards.
    Mr. Green. Thank you. And with reference to the anti-
lobbying, you do concede that if the wording in that letter had 
been appropriate to indicate that the Administration opposes a 
certain piece of legislation, or this is the Administration's 
position on a piece of legislation, that it would have been 
perfectly appropriate and would not have been a breach. Is that 
a fair statement?
    Ms. Perez. Yes, sir. What our case law recognizes is that 
it is fine for agencies and Administrations to make their views 
known to the public, including their views on pending 
legislation. But--
    Mr. Green. Thank you. I am going to have to intercede for 
just a moment and move to Mr. Montoya because there are a 
couple of things I have to get into with him.
    Ms. Perez. Sure.
    Mr. Green. Sir, thank you. It appears that two Texans have 
joined together to issue a joint communique, you and the 
Secretary. And I would like to ask a couple of questions about 
this. Is that something that is commonplace for a Secretary, to 
sign a communique with an IG?
    Mr. Montoya. No, sir. I have to say no, and I am not sure I 
know of any other situation like this.
    Mr. Green. And if you had to characterize it as either 
unique or commonplace, you would lean more toward unique than 
commonplace, would you not?
    Mr. Montoya. Yes, sir, I would agree with that.
    Mr. Green. And in this communique, you indicate that you 
are working together to eliminate waste and mismanagement. And 
you go on to indicate that you believe that you can prevent 
these inefficiencies and that we can work together to make HUD 
a more effective and efficient organization. Is that a fair 
statement?
    Mr. Montoya. Yes, sir. That, in fact, is the mission of the 
IG.
    Mr. Green. And have you found the new Director, Director 
Castro, to be someone that you can work with to date? And do 
you find him moving in the right direction?
    Mr. Montoya. With my initial conversations, and the fact 
that he would sign this joint letter in response to many of the 
concerns that I have raised, or the subject of this testimony, 
yes, I am encouraged by that. And I look forward to him making 
those changes.
    Mr. Green. The organization itself, HUD, you have indicated 
that the infractions should not be perceived as pervasive, that 
these are things that occur in large organizations the size of 
HUD--9,000-plus employees--and you have been very clear on 
this. But I think for the record it is important to reiterate 
this. Is this true?
    Mr. Montoya. Yes, sir, that is correct.
    Mr. Green. And it is also true that what has been done is 
something that is correctable with a reasonable amount of 
effort and time. And you are eager to work with the new 
Secretary to make these corrections.
    Mr. Montoya. Yes, sir, and that is key, what an 
organization will do when it comes across misconduct.
    Mr. Green. Yes, sir. And you agree that the new Secretary, 
given his initial expression to you, should be given an 
opportunity to make the necessary corrections so that we can 
move forward with HUD.
    Mr. Montoya. Yes, sir, absolutely.
    Mr. Green. And finally this. The people who have been 
involved in these infractions, for the most part, are all no 
longer with HUD. I do understand that they left under 
circumstances that are sometimes questionable in the minds of 
some, but they are no longer there. Is that a fair statement?
    Mr. Montoya. It depends on which example of which we are 
speaking. There are a fair amount who are still there.
    Mr. Green. Yes, but the--Mr. Jones is no longer there.
    Mr. Montoya. No, sir, he is no longer there.
    Mr. Green. Ms. Gross is no longer there.
    Mr. Montoya. That is correct; she is no longer there.
    Mr. Green. So for the most part, we can say that HUD has 
been--whether they have left, and that is a good thing, their 
leaving.
    Mr. Montoya. I would say--well, I don't know about Deputy 
Secretary Jones. I actually thought he was trying to do a lot 
to change the culture with regard to some of this conduct. With 
regards to Ms. Gross, yes, it is a good thing she has left.
    Mr. Green. Okay. And HUD is putting those behind them--
    Chairman Duffy. The gentleman's time has expired.
    Mr. Green. Thank you very much, Mr. Chairman.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the former chairman of this 
subcommittee. And we appreciate all the good work he has done 
on the subcommittee as chairman and the good work he has done 
on this issue. He is also the Majority Deputy Whip and the vice 
chairman of the full Financial Services Committee. The Chair 
now recognizes Mr. McHenry from North Carolina for 5 minutes.
    Mr. McHenry. I thank my friend from Wisconsin. And I hope 
you will enjoy the same working relationship I had with the 
ranking member during my time. And congratulations on your new 
chairmanship, Sean. We are happy you have taken over, and I am 
sure the staff is much happier to work with you.
    So, Mr. Montoya, thank you for being here, and Ms. Perez, 
thank you for being here, as well. I appreciate the work that 
you all do on a daily basis for the taxpayers and for the 
American people. It is important work.
    Mr. Montoya, in your report you outline several other cases 
of employee misconduct in the Department of Housing and Urban 
Development. In your opinion, were the administrative remedies 
that the Department put in place sufficient?
    Mr. Montoya. No, sir, I don't believe they are. And quite 
frankly, when they do issue some personnel action it seems to 
amount mostly to counseling sessions, verbal oral counseling. 
Which, quite frankly, don't amount to penalties even under 
their own code of conduct. A minimum penalty would be a 
reprimand, and that is in written form that generally stays in 
an employee's personnel file for 2 years. So when HUD tells us 
that they have handled it and they have issued corrective 
action, oral counseling to us does not--
    Mr. McHenry. So, why? Why does that matter?
    Mr. Montoya. I think, again, that is what I said earlier. I 
think in order to establish that ethical culture in a workplace 
your have to discipline as appropriate when the circumstances 
arise. And I think in many of the examples we give you, it 
would suggest that there should have been a stronger reprimand 
or at least a stronger way of addressing--
    Mr. McHenry. So you work with the Department of Justice on 
these investigations, and you turn over--you have criminal 
referrals, at times, you turn over to the Department of 
Justice. Have they prosecuted in these cases?
    Mr. Montoya. No. And often, they will defer to us and to 
the Department because they feel that the administrative 
actions available to the Department are sufficient enough to 
address the issue, some of these being, obviously, reprimand up 
to removal--
    Mr. McHenry. So HUD--most HUD employees are in the union. 
Is that correct?
    Mr. Montoya. That is correct, sir.
    Mr. McHenry. Okay. So how has the union involvement been in 
terms of taking action against people who have done wrong--
broken the law, broken ethical standards? Have they helped?
    Mr. Montoya. No. Quite frankly, I think the union will come 
to the aid of the employee irrespective of what he has done. In 
one of the examples I gave, with a gentleman who was running a 
business for over 6 years in the Department--working 2 to 3 
hours a day on that business, by his own testimony--I think the 
initial recommendation was to remove him. And it was the union 
who helped retain him for--retain him by only having to suffer 
through a 30-day-without-pay penalty. The problem with that, 
though, is he was awarded twice in that same year with a 
monetary award.
    And he was promoted, if you will, with regards to his 
performance rating. He went from an ``exceeds,'' which he had 
historically been, to an ``outstanding'' that year.
    Mr. McHenry. Isn't that a deeper issue when some guy is 
spending basically 40 percent of his time on a daily basis 
doing something else, and yet he is given high marks for 
exceeding his job? Perhaps maybe he should be doing more work 
or have more responsibility to maybe fill up his day if he can 
actually spend about half of his time working for the taxpayer 
but collecting full pay. Isn't that a deeper cultural problem?
    Mr. Montoya. Yes, sir. In fact, I plan to look into it. As 
we were preparing for this testimony, it came to our attention 
that not only he, but another employee who was running a 
business was also given several monetary performance awards. It 
is my suspicion that they were given these awards in order to 
offset the loss in pay. And so I do plan to look into it and 
ask the question--
    Mr. McHenry. Sir, look, these are important programs. You 
have Public and Indian Housing, you had a loan officer who 
embezzled over $800,000 from the taxpayers--and he was hired 
despite the fact that--as you outline in your report--he had a 
10-year criminal history. First of all, how did he slip through 
the cracks? And second of all, has he paid us back yet? Has he 
paid my constituents back and the American taxpayers back for 
the money he embezzled?
    Mr. Montoya. I don't believe he has done that yet.
    Mr. McHenry. But how did he slip through the cracks with a 
10-year criminal record?
    Mr. Montoya. Well, here is the irony. HUD, I believe, knew 
of that, of some of that. They also had a systemic concern with 
how they were really looking into employee backgrounds. We 
actually issued a report on what they did wrong in that 
particular case--actually, it was in a prior case--and what we 
thought they could do better.
    Mr. McHenry. And have they corrected this?
    Mr. Montoya. When we initially submitted that, what we call 
a ``systemic implication report,'' it was 5 or 6 months before 
this gentleman was hired. So they obviously didn't do it in 
that 5- or 6-month period because then they hired this one with 
the large criminal history. My staff is actually now going back 
to ask those questions: whatever happened to that; and did you 
implement that? I don't have an answer for you now.
    Mr. McHenry. Thank you.
    Thank you, Mr. Chairman.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from Minnesota, Mr. 
Ellison, for 5 minutes.
    Mr. Ellison. Thank you, Mr. Chairman, and Mr. Ranking 
Member.
    Mr. Montoya, do you argue that when someone has worked for 
a membership association of a public housing agency and has 
that background, they should be prohibited from serving in 
leadership at HUD on public housing issues?
    Mr. Montoya. Well, it depends. Absolutely not if they come 
in as a full-fledged government employee. They are responding 
to a vacancy announcement, they are selected. They come in as a 
full-fledged government employee. I do have a concern when they 
come in while still working for those associations. So, it is 
kind of a dual answer there.
    Mr. Ellison. Yes. You are well aware that there are people 
who come, do government service, who have been in the private 
sector but then come work at the FDIC, the OCC, the Consumer 
Financial Protection Bureau, things like that.
    Mr. Montoya. Absolutely.
    Mr. Ellison. It happens all the time. And then in the 
public housing space, would you say it is somehow unique from 
those other examples I gave?
    Mr. Montoya. No. And quite frankly, she could have come in 
as a GS-15 government employee having left CLPHA. But she 
absolutely could have done that. The irony there is that then 
she could have tried to deregulate in her government role 
which, obviously, still would have been a concern for us.
    Mr. Ellison. Thank you. And let me also mention that I just 
think that it is important--and I wonder if you agree with 
this--that experts in affordable housing and development and 
management who work for nonprofits or government should be able 
to work in public policy positions. As a general principle, it 
sounds like you agree with that.
    Mr. Montoya. I do. And I actually don't disagree with the 
fact that they can come into a Department under an IPA in an 
advisory role, right? But not in key positions doing what Ms. 
Gross did.
    Mr. Ellison. Okay. How would you describe how HUD is 
providing appropriate oversight of the IPA process so that IPA 
experts are provided with the guidance to meet all the 
requirements at the beginning of their service rather than 
later on down the line?
    Mr. Montoya. Oh, I would say their oversight was poor to 
nonexistent when these started. It is my understanding now that 
the Office of General Counsel is actually reviewing every IPA 
for ethical considerations, these sorts of things. But I am 
looking at everyone they have--I think they have 16 IPAs so I 
have launched a review of all 16 to find out if we have any 
more circumstances like we did with Ms. Gross.
    Mr. Ellison. Okay. Well, I just want to say that I am 
personally appalled by how poorly Congress has funded public 
housing. At this time--there has been a study that said that 
the maintenance budget for public housing--to get public 
housing back up to snuff at acceptable standards would be 
upwards of $26 billion. And yet in the last 10, 12 years we 
haven't come anywhere close to that. I am concerned about that.
    You have people with inadequate lighting, elevators that 
aren't working, mold, all at the same time when low-income 
people all over this country really need housing. So this is 
something that continues to be a concern of mine. And, we are 
going to continue to watch this issue closely.
    Mr. Montoya. Well, sir, you would be interested to know 
that one of the sections of the PIH requirements that Deb Gross 
tried to deregulate was the requirement for quality standard 
reviews every year. She wanted to push that out to every 2 or 3 
years, which would have added more to the very maintenance 
problems you are talking about. To not require these public 
housing authorities to look at this every year so that these 
people have a clean, safe home is a concern for us. And that is 
one of those things she tried to change.
    Mr. Ellison. Thanks for your service.
    Mr. Montoya. Thank you, sir.
    Mr. Ellison. And I will yield back.
    Mr. Montoya. Thank you, sir.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the vice chairman of the 
subcommittee, the gentleman from Pennsylvania, Mr. Fitzpatrick, 
for 5 minutes.
    Mr. Fitzpatrick. I thank the chairman. And as I said in my 
opening statement, this hearing is not about the important work 
that HUD does, or the need to provide adequate resources to 
HUD. I think we can all agree that is important. This hearing 
is about waste, fraud, and abuse within the agency which, 
hopefully, we all agree we need to get after. And, Mr. Montoya, 
I want to thank you for what I would describe as your great 
work within the agency.
    Mr. Montoya. Thank you, sir.
    Mr. Fitzpatrick. The investigations you do--we have met in 
my office, we have met here in public forums and hearings, and 
I have always found you to be very direct and very prepared. I 
want to go back to the issue of the Council for Large Public 
Housing Agencies. Was this organization ever a registered 
lobbying organization with the Federal Government, the Council 
itself?
    Mr. Montoya. Yes, sir, it was.
    Mr. Fitzpatrick. What was the timeframe?
    Mr. Montoya. I believe they relinquished their registration 
as a lobbyist in 2009. There was a law change there so I think 
it was a 2009 timeframe.
    Mr. Fitzpatrick. So they were registered Federal lobbyists 
up until 2009, then they terminated that registration?
    Mr. Montoya. They did, but they didn't end the practices 
that they had done as a lobbyist. They continued those. In 
fact, Ms. Gross and the male employee she hired from CLPHA, 
both in our interviews, attested to the fact that their roles 
and responsibilities didn't change. They did the very same 
thing.
    Mr. Fitzpatrick. So you are saying that they either 
terminated their registration or they let it lapse and didn't 
renew it. Nevertheless, the individuals within the Council for 
Large PHAs continued with the same course of conduct. Would 
that be communicating with HUD and attempting to influence 
their policy?
    Mr. Montoya. Yes, sir.
    Mr. Fitzpatrick. Would that be acting as a lobbyist without 
being a federally-registered lobbyist?
    Mr. Montoya. I am not an attorney, but that would be my 
impression and interpretation, yes, sir.
    Mr. Fitzpatrick. So effectively, you are saying that the 
Council is continuing to act as a lobbyist today.
    Mr. Montoya. That would be my opinion, yes, sir.
    Mr. Fitzpatrick. Was Ms. Gross herself ever a federally-
registered lobbyist?
    Mr. Montoya. Yes, sir. She was, as well as the male 
employee that she hired from CLPHA to work directly for her at 
HUD.
    Mr. Fitzpatrick. The President's Executive Order 13490 bars 
individuals who have been federally-registered lobbyists within 
the past 2 years from working in Federal agencies in the 
specific areas in which they lobbied. Is that correct? Is that 
your understanding of that--
    Mr. Montoya. Yes, sir, that is correct.
    Mr. Fitzpatrick. --Executive Order? If appears as though 
Ms. Henriquez and Ms. Hernandez violated this Executive Order 
when they hired Ms. Gross then. Is that correct?
    Mr. Montoya. Yes, sir, that is my opinion. It is correct.
    Mr. Fitzpatrick. Now, Ms. Gross was--how would you describe 
that relationship? Like a contracted employee? Not a direct 
employee of HUD, correct?
    Mr. Montoya. Correct. It is sort of a quasi-contractual 
type employment.
    Mr. Fitzpatrick. Was she qualified to hold that position if 
she had applied as any American would apply to HUD for a 
position--as a job description, with requirements and 
qualifications? If she had applied directly, was she qualified 
to hold that position?
    Mr. Montoya. That is a great question, Mr. Fitzpatrick. 
What I would tell you is that there was a vacancy announcement 
for that position for which she applied. She originally was 
disqualified for not having the right criteria. Then she was 
placed on the list after some finagling, if you will, by the 
Assistant Secretary. And then ironically, the Assistant 
Secretary voided the announcement, saying that no one on the 
list, including Ms. Gross, was qualified. And out of a five-
point scale she rated them all as two, right? And then goes and 
hires her under this IPA agreement at $40,000 more than she 
would have been making if she had simply become a Federal 
employee.
    Mr. Fitzpatrick. So it would appear to an inquiring 
independent investigator that something was up here. We would 
call that a clue.
    Mr. Montoya. Yes, sir, absolutely.
    Mr. Fitzpatrick. On the issue of compensation, as a 
contracted employee was she actually compensated more than the 
direct position would have paid?
    Mr. Montoya. Yes, sir, she was. And she also received 
salary increases and bonuses during a period of time that 
Federal Government employees did not.
    Mr. Fitzpatrick. As a contracted employee, was she required 
to file financial disclosures with the Federal Government?
    Mr. Montoya. Under the IPA agreement, we believe yes, that 
she was required to.
    Mr. Fitzpatrick. And did she do that?
    Mr. Montoya. She did not. HUD doesn't feel that she should 
have.
    Mr. Fitzpatrick. So you are saying that HUD hired a 
position for Deputy Assistant Secretary--
    Mr. Montoya. Yes, sir.
    Mr. Fitzpatrick. --hired a person who wasn't qualified, 
paid her more than the position otherwise would have paid, and 
then she failed to file financial disclosure forms. Was anybody 
disciplined within the organization for this course of conduct?
    Mr. Montoya. No. In fact, the Office of General Counsel 
parsed words and definitions with us over whether she should or 
shouldn't have filed a financial disclosure form because of 
her--but it is my belief that because of her position and the 
sheer salary alone she should have.
    Mr. Fitzpatrick. My time is up.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the gentleman from Maryland, Mr. 
Delaney, for 5 minutes.
    Mr. Delaney. Thank you, Mr. Chairman. And I want to thank 
the witnesses for their testimony, which is obviously very 
concerning. It is concerning on an absolute basis in terms of 
actually what happened and what you are reporting. But it is 
also concerning because, like most of my colleagues, I believe 
HUD does extraordinarily important work. And as my friend from 
Pennsylvania had pointed out, this is not a hearing about HUD. 
But HUD does do extraordinarily important work. And the 
overwhelming majority of the employees at HUD are dedicated 
public servants working hard in an honest and ethical manner 
for the good of the taxpayers.
    But this kind of situation tends to put them and the whole 
organization in a negative light, which is unfortunate for the 
taxpayers, for the organization, and for the people. And so 
when thinking about--kind of lifting up a little bit and 
thinking about some of your observations about things in terms 
of how they are run at HUD and how these things can happen, and 
just thinking about my own experience in the private sector 
running a public company that was subject to lots of 
regulations and lots of compliance, we kind of had four pillars 
that we tried to build upon in terms of making sure we had an 
organization that ran to the highest standards of ethical and 
compliance behavior.
    The first was making sure we had really good training so 
that people understood what the rules are. Second, we made sure 
we had the infrastructure in place for ongoing monitoring and 
compliance. Third, we made sure we had a culture of 
accountability so if people actually broke the rules there were 
real consequences and people saw that there were consequences. 
And then finally, it was really important to set the right tone 
at the top. In other words, making sure that senior management, 
when they are talking about mission and execution, they are 
also talking about culture and behavior. And I was pleased 
about the joint letter that you sent with the Secretary, and I 
think the Secretary is doing a terrific job at the organization 
and is really bringing fresh energy in general.
    But I am interested, Mr. Montoya, in your observations on 
how HUD operates as it relates against those four--at least in 
my words--pillars: training; compliance infrastructure; a 
culture of accountability; and setting the right tone at the 
top that actually this stuff is really important.
    Mr. Montoya. Thank you for the question, sir. And I will 
tell you, it is music to my ears. Because what you are really 
talking about is building an ethical culture in an 
organization. Unfortunately, the government, unlike the private 
sector, doesn't always do such a great job at that. And I would 
agree with you, a lot of it has to do with the tone at the top, 
the very beginning. And I believe that is why the Secretary 
signed that joint letter and why I am so encouraged.
    Certainly, the supervisory enforcement--that their ethical 
conduct is beyond reproach, and the training to be better 
supervisors when it comes to dealing with misconduct. And then, 
of course, you need the peer commitment, where you have 
individuals supporting each other to come forward. And we see a 
lot of that in these cases that we have where they are coming 
forward on this.
    It is hard for me to put a finger on exactly what the 
culture is or what the attitude is, except to say that I think 
when nothing is done, nothing substantive is done with 
misconduct, people sort of lose their oomph, their desire to 
really do anything.
    Mr. Delaney. It is disrespectful to them in a way, right?
    Mr. Montoya. Yes, it is.
    Mr. Delaney. Because they are doing their job, correct?
    Mr. Montoya. And again, the government does not do a good 
job of this. I would agree that every government organization 
should publicize, maybe not using the names, but publicize it. 
``Unfortunately, we had an employee who did this. This is the 
penalty they received.'' So that everybody knows that, one, 
they take this stuff seriously; and two, there are consequences 
for misconduct. And then what that misconduct was. It goes to 
building that ethical culture. HUD does not do that, and I 
don't know of many agencies who do that, quite frankly, in the 
government.
    Mr. Delaney. What about the training as it relates to 
really what the limitations are? How do you feel that is done?
    Mr. Montoya. In some of the employees who come to us, and 
we ask them why are you coming to us, I am not your first-line 
supervisor, many times their answer is, ``My manager is 
incompetent, they need training, they don't know how to handle 
this, they won't handle it.'' So I think HUD would do better at 
getting their managers trained. But, unfortunately, the 
examples we are talking about today are at the highest levels 
of the organization. The Assistant Secretary is a political 
appointee, Mr. Mincberg was a schedule C, Ms. Gross was in the 
GS-15 position. Those are high-ranking positions. Those are not 
rank-and-file positions.
    Mr. Delaney. Right.
    Mr. Montoya. So that is a larger concern for me.
    Mr. Delaney. Right. Again, I am really gratified that the 
Secretary is working with you in sending out those messages. 
Because that is exactly the kind of tone at the top I think we 
need. And it sounds like there is a lot to build on that, so--
    Mr. Montoya. Absolutely.
    Mr. Delaney. But, again, I appreciate both of your 
testimonies.
    Mr. Montoya. Thank you--
    Mr. Delaney. And I thank you.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from Maine, Mr. 
Poliquin, for 5 minutes.
    Mr. Poliquin. Thank you, Mr. Chairman. And thank you very 
much, Mr. Montoya and Ms. Perez, for being here today. We 
really appreciate you being here and being forthright with us.
    Mr. Montoya, Deborah Hernandez and Sandra Henriquez--am I 
correct in assuming they were senior personnel at HUD or are 
senior personnel at HUD?
    Mr. Montoya. Ms. Henriquez was the Assistant Secretary, and 
that is a politically-appointed position. She is no longer with 
the organization.
    Mr. Poliquin. Right. Is that a senior position at HUD, sir?
    Mr. Montoya. Absolutely, sir.
    Mr. Poliquin. Okay. And how did they both meet Debra Gross?
    Mr. Montoya. I think Deb Gross came to their attention, 
quite frankly, by somebody in, at the time, an appropriations 
committee who was forwarding her name to HUD to hire.
    Mr. Poliquin. Okay. And Debra Gross was a lobbyist 
advocating for the funding of taxpayer dollars for affordable 
housing. And so, that might have been how they got to know Ms. 
Hernandez and Ms. Henriquez, who had senior positions at HUD. 
Is that correct?
    Mr. Montoya. That is correct. And our indication is that 
they actually have a personal relationship outside the 
workplace.
    Mr. Poliquin. They did, or they do not?
    Mr. Montoya. That they did at the time, and I believe they 
still do at this--
    Mr. Poliquin. And am I correct in assuming that Ms. Gross 
was paid more than the normal Federal employee at that grade 
level?
    Mr. Montoya. Yes, sir, that is correct.
    Mr. Poliquin. Okay. And she was hired by Ms. Hernandez and 
Ms. Henriquez. Is that correct?
    Mr. Montoya. That is correct.
    Mr. Poliquin. Okay. Am I correct in assuming that Ms. 
Gross, when she was at HUD but still a lobbyist for funds 
dispersed by HUD for programs she was lobbying for, also hired 
two other employees who were former lobbyists to come and work 
with her at HUD?
    Mr. Montoya. One of them was a former lobbyist. The female 
she hired I don't believe was a lobbyist.
    Mr. Poliquin. Yes.
    Mr. Montoya. But I don't--I would have to go back and check 
my records.
    Mr. Poliquin. Do you find that odd?
    Mr. Montoya. I don't find it odd that you would bring 
people into an organization that you had worked with if they 
were good. I do find it odd that she was bringing them in for 
the purposes of helping her deregulate--
    Mr. Poliquin. Sure. And part of that work, I believe, Mr. 
Montoya, was Ms. Gross--who is a former lobbyist now--working 
at the organization that she used to lobby for.
    Mr. Montoya. Correct.
    Mr. Poliquin. Okay? She was attempting to weaken the income 
verification system such that taxpayers who were funding 
affordable housing would have less of an opportunity to verify 
that those taxpayer funds were going to the right people in the 
right amount. She attempted to weaken that system. Is that 
correct, sir?
    Mr. Montoya. Yes, sir. A system that, at one point, was 
costing the Department $3 billion.
    Mr. Poliquin. Okay, and in 2000--
    Mr. Montoya. They brought it down to $1 billion.
    Mr. Poliquin. Okay. In 2013, I believe, there were $1.2 
billion of improper payments--
    Mr. Montoya. Correct.
    Mr. Poliquin. --made by HUD, who shouldn't receive those 
payments, or they received too much. Is that correct?
    Mr. Montoya. That sounds about right, yes, sir.
    Mr. Poliquin. Okay. And Ms. Gross--who is the former 
lobbyist, now working at HUD--was attempting to weaken that 
system with two other people that she hired from the outside. 
Is that correct?
    Mr. Montoya. That is correct, sir.
    Mr. Poliquin. Do you think it is normal practice here in 
Washington, sir--I am a freshman Congressman--for these large 
agencies that are responsible for disbursing taxpayer dollars 
for good causes to hire people who used to lobby them? Isn't 
that sort of like hiring the fox to guard the chicken coop?
    Mr. Montoya. It depends on what position you put them in. 
In this case--
    Mr. Poliquin. Yes, but these are senior officials at HUD. 
Is that correct, sir?
    Mr. Montoya. Yes, sir.
    Mr. Poliquin. Okay. Am I correct in assuming that former 
Deputy Secretary Maurice Jones, Jennifer Jabroski, Francey 
Youngberg, Jonathan Horowitz, and Elliot Mincberg sent out an 
email to 1,000 individuals, including 47 of their HUD staffers, 
lobbying, or asking them to lobby, 17 U.S. Senators to pass 
legislation favorable to HUD where they worked? Is that 
correct, sir?
    Mr. Montoya. That is correct, sir.
    Mr. Poliquin. Yes. Is that against the law?
    Mr. Montoya. That would be a determination by DOJ.
    Mr. Poliquin. And what have they determined?
    Mr. Montoya. They didn't accept the case from us as a 
referral. They referred it back to HUD for administrative 
action.
    Mr. Poliquin. Okay. So they did not--Justice decided not to 
determine if this was illegal or not.
    Mr. Montoya. Correct.
    Mr. Poliquin. Do you think it was illegal, sir?
    Mr. Montoya. Sir, I am not in a position to be able to 
answer that.
    Mr. Poliquin. Do you think it broke the spirit of what we 
are trying to do here in government?
    Mr. Montoya. Absolutely, it broke the spirit.
    Mr. Poliquin. Okay. Am I also correct that one of these 
individuals, Elliot Mincberg, tried to impede or did, in fact, 
impede your investigation regarding the lobbying of 17 Senators 
to pass legislation favorable to HUD? And he did that by 
intimidating staffers, and by also trying to influence 
testimony of other witnesses? Am I correct, sir?
    Mr. Montoya. That is correct.
    Mr. Poliquin. Okay. Does the new HUD Secretary, Julian 
Castro, have any experience in dealing with affordable housing 
issues?
    Mr. Montoya. Sir, I believe when he was the mayor in San 
Antonio, he--
    Mr. Poliquin. Does he have any experience in dealing the 
affordable housing issues, sir?
    Mr. Montoya. I don't know that I could answer that.
    Mr. Poliquin. Okay. One last question, if I may, Mr. 
Chairman. I am going to ask you if these individuals are still 
working at HUD? And if not, what are they doing? Former Deputy 
Secretary Maurice Jones is no longer at HUD. Is that correct?
    Mr. Montoya. That is correct.
    Mr. Poliquin. Okay. Deborah Hernandez, where is she?
    Mr. Montoya. She is now in the--
    Mr. Poliquin. Is she at HUD, sir?
    Mr. Montoya. She is at Ginnie Mae. She is still--
    Mr. Poliquin. Okay, she is still at HUD, and still being 
paid by taxpayer dollars, even though she has been involved in 
this mess.
    Mr. Montoya. That is correct.
    Mr. Poliquin. Okay.
    Chairman Duffy. The gentleman's time has expired.
    Mr. Poliquin. May I have another minute, sir? I am a 
freshman. I think you would--that is a request that is fair.
    Chairman Duffy. The gentleman will be recognized for 1 more 
minute. And we will offer a 6-minute questioning to--
    Mr. Green. If you would, Mr. Chairman, I will claim that 
additional minute. Thank you.
    Chairman Duffy. Very well. The gentleman is recognized for 
an additional minute.
    Mr. Poliquin. Thank you, Mr. Chairman. And thank you, Mr. 
Green, for that consideration. I appreciate it.
    Mr. Montoya, are you surprised that hardworking American 
taxpayers have lost their trust in government? When you have 
huge agencies like HUD that are responsible for doing good 
things for the American people, but abuse and misuse taxpayer 
dollars, hire lobbyists who used to be pulling for funding and 
now are advocating on the inside for their former 
organizations, that hire individuals without interviewing them 
and pay them more than they should, and then when they are 
caught they try to impede your investigation by intimidating 
staffers and trying to influence the testimony of others, do 
you think there is any reason why the American people have lost 
their faith in government, sir?
    Mr. Montoya. I would want to categorize the career Federal 
employee versus what we have here. In many of the examples, 
these were not career Federal employees. They were in the 
Department for a very short period of time--
    Mr. Poliquin. So you think this is all--do you think--
    Chairman Duffy. The gentleman's time has expired.
    Mr. Poliquin. Thank you very much, sir. I appreciate it.
    Chairman Duffy. Thank you, Mr. Poliquin.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Cleaver, for 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman, and thank you to 
Ranking Member Green.
    Not to be argumentative, but the Secretary was mayor of San 
Antonio, the second-largest city in Texas. I was mayor of the 
largest city in the State of Missouri. And it is virtually 
impossible for a mayor of one of the major cities not to deal 
with affordable housing almost on a daily basis. And it would 
be rare, maybe nonexistent, that a mayor of one of, say, the 
top 50 cities in the country would not--maybe top 75--deal with 
affordable housing, including probably some of the smaller 
cities.
    But my question goes to the disagreement, Mr. Montoya, 
between the IG's office and HUD's, not in terms of the overall 
reported wrongdoing, but rather, I think, on some key points 
that I would like to get into a little deeper. Your report 
suggests that HUD paid the IPA a full salary and that is a 
violation, whereas HUD says that there is no mandate by OPM 
that there should be cost-sharing. OPM does not demand or 
require cost-sharing. Is that correct?
    Mr. Montoya. I am not sure that I said it was a violation. 
It does not demand cost-sharing, but I think it does raise the 
question as to why.
    Mr. Cleaver. I want to go in this direction. Do you think 
that there is a need for greater clarity in what happens when 
we have this transfer of personnel to another Department as to 
the payment of the salary? Does your report at least imply that 
there should be clarity, or are you saying there is clarity?
    Mr. Montoya. No, there should be more clarity. For example, 
OPM says that there is no restriction for these IPAs to hire 
people, right? OPM, I think, says though that the spirit of it 
suggests that they shouldn't be in hiring positions, they 
should be more in advisory. So that has to be cleared up. And I 
think, yes, the pay issue needs to be cleared up, as well.
    Mr. Cleaver. And I think that may be something that this 
committee needs to deal with. And my second and final point 
that deals with some disagreement is the fact that HUD suggests 
that based on the advice of the General Counsel, Ms. Gross was 
not required to submit disclosures or attend the ethics 
training. Is that correct?
    Mr. Montoya. Yes, sir, that is their position. We 
wholeheartedly disagree. We recommend that they go to the 
Office of Government Ethics to get an opinion from them. I 
don't believe they have done that at this point, though.
    Mr. Cleaver. Do you disagree that the General Counsel said 
that this was not required?
    Mr. Montoya. No, I agree. They said it was not required. I 
disagree with their opinion and their position. I believe it is 
required. I believe it should be required.
    Mr. Cleaver. So, there is a disagreement between the 
General Counsel and the IG?
    Mr. Montoya. Correct, sir.
    Mr. Cleaver. Okay. So the point I am trying to make, and 
perhaps poorly, is that there seems to be a number of points 
that are not clear. And so the agency is now getting tagged 
with being--having major ethical lapses on some issues that are 
not clear. Now, I am not defending anything, any wrongdoing. 
But I am saying that it might not be in the best interest of 
the Federal Government, at a time when there are folks who are 
preaching and pushing distrust in the government of their own 
country. And so, do you agree that we need to clear up at least 
these two points?
    Mr. Montoya. I don't know just how much clarity one needs. 
I think that, one, HUD is looking at these things. And there 
were a number of people who felt that this issue was an 
appearance issue. I will give credit to CLPHA. Even their 
Executive Director, before she let her Deputy Director go to 
HUD, raised the concerns that she thought this was a conflict, 
correct? There were several employees within the Department who 
raised concerns that it was a conflict. They were retaliated 
against and reassigned to other locations.
    So I don't know how much clarity you need if appearances 
tell you.
    Mr. Cleaver. I agree, that was wrong. We cannot ever 
support wrongdoing. That was wrong. But if the General Counsel 
says that it is not required to submit disclosures--and I am 
getting ready to deal with the IPA--what do I do?
    I didn't go to law school and--thank you, Mr. Chairman.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from Arkansas, Mr. 
Hill, for 5 minutes.
    Mr. Hill. I appreciate the opportunity. Thank you, 
witnesses, for being with us today. I want to associate myself 
with the remarks of Mr. Delaney from Maryland on those of us 
who come to Congress from the private sector who spend hours 
and hours of personnel time trying to comply with a myriad of 
government regulations and duties and responsibilities. And I 
thought he summarized that quite well.
    Mr. Montoya, is there a whistleblower program at HUD?
    Mr. Montoya. I don't know that HUD itself has one, but we 
have one in the OIG's office.
    Mr. Hill. Is each cabinet agency required, under OPM 
requirements, to have an independent whistleblower process 
connected to their Departmental IG, for example?
    Mr. Montoya. Yes, sir.
    Mr. Hill. And how long have you been at HUD? Remind me.
    Mr. Montoya. I have been there for 3 years now, sir.
    Mr. Hill. Have you been at another cabinet agency before 
that?
    Mr. Montoya. Several others, yes, sir.
    Mr. Hill. So how does the whistleblower activity at HUD 
compare to previous places you have been? Are there more 
complaints?
    Mr. Montoya. I don't know that I have enough background to 
answer that question except to say that even with regards to 
the Gross case, we still see retaliation of employees when they 
bring up issues like questioning the propriety of bringing in a 
lobbyist and their being reassigned. So that does raise 
concerns for me.
    Mr. Hill. Yes, because the private sector--since Sarbanes-
Oxley, of course--all have the public companies all have 
responsibility under whistleblower statutes. So I am not sure 
the government would be very accommodating or thoughtful in a 
response like that if it were a private sector player. Who is 
the executive officer at HUD responsible for H.R. policy?
    Mr. Montoya. I don't know off the top of my head who that 
current person is. I think it was Mr. Anderson, but I think he 
is leaving, so I am not sure who is in the acting role at this 
point.
    Mr. Hill. It is surprising to me that you don't know that, 
as a part of this investigation. Wouldn't the Assistant 
Secretary or Undersecretary for Administration responsible for 
the Department's H.R. practices be somebody you would have 
questioned in your investigation?
    Mr. Montoya. Well, not necessarily. It just depended on the 
circumstances. I don't believe we had to interview him in this 
particular case. Because it was an IPA process that didn't 
necessarily go--and HUD is very stovepiped, right? So when this 
was happening in a PIH, that is who primarily was dealing with 
it. It wasn't necessarily the overall human resources manager 
at HUD.
    Mr. Hill. So do you think that is a weakness, a management 
weakness, in the Department that they don't have an overall 
personnel person who oversees this in all their independent--
quasi-independent Departments or agencies?
    Mr. Montoya. We testified on a number of occasions that we 
think the Department is too stovepiped on a number of issues, 
including their IT systems, that there is not this enterprise-
wide view of a lot of these things: H.R.; legal; and in some 
cases, their IT system. There are a number of areas that have 
caused us concerns.
    Mr. Hill. Do you think the idea of an IPA as a concept has 
been taken advantage of here in this particular instance? And 
do you think that this merits a more systematic overview by 
Congress in the use of the IPAs by Executive Branch agencies?
    Mr. Montoya. We have seen in HUD's situation that it looks 
like they have misused it on a couple of occasions. And we are 
looking at the other 16. That would draw a question for me as 
to what the rest of the government is doing with these IPAs.
    Mr. Hill. Does the Office of Personnel Management have some 
responsibility in setting the best practices for use of IPAs 
across cabinet agencies?
    Mr. Montoya. Yes, sir. They are the ones who set the 
standards and the guidelines for that.
    Mr. Hill. Were the actions at HUD reported to OPM, and did 
they take any action in the process of reviewing this 
particular matter?
    Mr. Montoya. I believe we did refer it to OPM. I couldn't 
tell you off the top of my head, sir, what response we received 
from them on that. I would have to get back to you on that.
    Mr. Hill. I would appreciate it if you would sort of 
respond to my line of questioning on IPAs, what the best 
practice policy is from OPM on that. And then I would be very 
interested in the results of your review of the other 16 at 
HUD.
    Mr. Montoya. Yes, sir.
    Mr. Hill. Thank you for your service to your country.
    And I yield back, Mr. Chairman.
    Mr. Montoya. Thank you, sir.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentlelady from Ohio, Mrs. 
Beatty.
    Mrs. Beatty. Thank you so much, Mr. Chairman, and Mr. 
Ranking Member. And thank you also to our witnesses today.
    Let me just first say that I certainly join my colleagues 
in wanting to be on the record for saying how concerned I am 
about the instances of impartiality, the conflict of interest 
that you both have outlined in your testimony. And also, the 
improprieties with HUD's use of the IPA funds.
    Second, let me just say how appreciative I am for the joint 
letter. And especially in paragraph one, when you both talk 
about if, together, we can take care of the mismanagement and 
the waste, we can do what our real mission is, and that is to 
expand the opportunities for all.
    And that ties into my third statement, as I go into my 
question, is several of my colleagues have said it is not about 
HUD and the programs. I want to be on the record saying that I 
somewhat disagree with that. Because every time you come into a 
hearing and we talk about the wrongdoings, the rogue employees, 
it frequently, down the road, leads to the culture of the 
entity and the organization and how we put dollars in it.
    I am very much a proponent of HUD and the services that 
they provide. With that said, when I go to your testimony you 
stated that HUD cannot know whether the policy decisions 
enacted during the Deputy Director's tenure were 
inappropriately influenced or in the best interest of HUD and 
all of it's stakeholders.
    Can you place explain this finding, and how HUD can 
mitigate or eliminate the IPA mobility program improprieties? 
And especially since you talked about the clues that you saw.
    Mr. Montoya. Yes, ma'am. Thank you for the question. There 
is only so much we can get from witnesses and what they tell 
us, and sort of the spirit as to what was going on. We 
obviously weren't privy to a lot of the conversations that Ms. 
Gross and Ms. Henriquez and Ms. Hernandez may have had with the 
regulated industry.
    So we are putting it back on HUD to sort of dig a little 
deeper with their staff to feel them out, and figure out 
whether, in fact, there were things that were changed that 
maybe shouldn't have been or that they should call into 
question.
    My larger concern with making that statement was that Ms. 
Gross at one point had inquired as to how to avoid going 
through the Departmental clearance process, having to go 
through the OIG. She was actually trying to find a way to keep 
us from seeing and hearing, through that clearance process, 
what she was doing.
    So because of that, I do have some concerns that maybe 
something slipped by us. And so we are putting it back on HUD 
to review themselves the policies before, during, and after she 
left to ensure that nothing got by any of us.
    Mrs. Beatty. Do you think that we should be looking at 
putting more human and financial resources into different, 
better or more training on accountability, management or the 
rules and regulations? Because these things, earlier you said 
these are very clear rules and regulations of what a person 
could do, whether hiring or bringing someone in at the 
appropriate salaries for the GS-13s or GS-15s. But yet I heard 
a figure of $40,000 more given to this person, being given 
bonuses when Federal employees did not get--
    Mr. Montoya. Well, ma'am, I guess my answer to that would 
be that I don't think there are enough rules, regulations, 
policies, procedures or training that are going to influence a 
person's conduct. I think ultimately it boils down to how that 
person is going to conduct themselves in the workplace, 
especially as Federal employees. We have this stewardship 
responsibility that we are entrusted to care for these very 
sensitive positions that we hold on behalf of the taxpayers. So 
I think it boils down to the person.
    I just don't believe--I am not a proponent of more and more 
rules, rules, rules, regulations, much like the two gentlemen 
testified or commented about in the regulated industries. It 
really boils down to how people are going to behave. And I 
think that is more of a conduct ethical issue with the 
individuals.
    Mrs. Beatty. You just mentioned how people behave. Do you 
believe that the vast majority of the HUD employees are doing 
the fair due diligence, or can you compare it to saying that 
maybe what we are hearing today; are these just a few bad 
actors?
    Mr. Montoya. All I can say to you is that a vast majority 
of the employees at HUD are really hardworking, conscientious 
civil servants. They have an honorable mission, one that I 
thoroughly enjoy myself.
    And, quite frankly, there are a number of them--a number of 
conscientious employees who were the ones who called us on 
these issues. They saw the wrongdoing, they saw these 
misconducts. They are the ones who are calling us. And I think 
that is fantastic that employees feel good enough to call us. 
And hopefully, today they are hearing that my office will, in 
fact, do something about that when they do call.
    Mrs. Beatty. Thank you.
    Chairman Duffy. The gentlelady yields back.
    The Chair now recognizes the gentleman from Virginia, Mr. 
Hurt, for 5 minutes.
    Mr. Hurt. I thank the chairman for holding this hearing. 
This is my first appearance on this Oversight Subcommittee, and 
I can tell you I represent Virginia's 5th District. And I think 
that my constituents, if they were hearing what we are hearing 
today, would be bewildered. Perhaps not surprised, 
unfortunately, but bewildered by what we are hearing. And I 
guess a couple of quick questions for Mr. Montoya.
    Where is Ms. Hernandez now?
    Mr. Montoya. She is now with Ginnie Mae in--
    Mr. Hurt. And Ms. Henriquez?
    Mr. Montoya. Ms. Henriquez left. She is with another 
housing-type association. I couldn't tell you off the top of my 
head--
    Mr. Hurt. A lobbying association, like--
    Mr. Montoya. I don't know if it lobbies or not, sir, to be 
honest with you.
    Mr. Hurt. What about Ms. Gross? Where is she?
    Mr. Montoya. She has gone back to CLPHA in the role that 
she held the whole time, the Deputy--
    Mr. Hurt. Let's talk about CLPHA. It is actually called the 
Council for Large Public Housing Authorities, right?
    Mr. Montoya. Correct.
    Mr. Hurt. What is its purpose?
    Mr. Montoya. To engage not only Congress, but the 
Department.
    Mr. Hurt. Who does it represent?
    Mr. Montoya. They represent the housing authorities, the 
large--
    Mr. Hurt. And so the employees of this organization, they 
advocate for policies that are favorable to these authorities.
    Mr. Montoya. Yes, sir.
    Mr. Hurt. Also called ``lobbying,'' in the--
    Mr. Montoya. Yes, sir.
    Mr. Hurt. So how long had Ms. Gross worked for this 
lobbying outfit prior to being engaged at HUD?
    Mr. Montoya. I don't have an exact date in front of me. For 
a number of years.
    Mr. Hurt. What was she being paid when she was hired?
    Mr. Montoya. I couldn't tell you the exact salary. I know 
the GS-15 salary is at about $155,000, so she was making just 
under $200,000--
    Mr. Hurt. Working for the Council.
    Mr. Montoya. For the Council, correct, sir.
    Mr. Hurt. And so I guess my question is, is when they went 
through the process and she was denied initially, it sounds 
like that was voided, and then she was sort of hired on the 
side through this IPA. Is that right?
    Mr. Montoya. Yes, sir. And we have emails to the effect 
that they, in fact--
    Mr. Hurt. Why was she hired? Why do you think that she was 
hired?
    Mr. Montoya. According to--
    Mr. Hurt. Share that with us?
    Mr. Montoya. According to Ms. Henriquez--and I will quote 
her--``She wanted to shake it up.''
    Mr. Hurt. What does that mean? What do you think it means?
    Mr. Montoya. I think, quite frankly, it meant that she 
wanted to shake it up so they could deregulate. Because that is 
in the--that is in--
    Mr. Hurt. That was the--in the interest of the--
    Mr. Montoya. Of the regulated.
    Mr. Hurt. --of the--and in the interest of those who pay to 
be members of this authority's--
    Mr. Montoya. Correct.
    Mr. Hurt. --Council, correct?
    Mr. Montoya. That is correct, sir.
    Mr. Hurt. So that was why she was brought in?
    Mr. Montoya. That is what it looks like.
    Mr. Hurt. And she was denied, based on that fact alone, 
from the ordinary hiring process?
    Mr. Montoya. I don't know--
    Mr. Hurt. Is that how I understand it?
    Mr. Montoya. I don't know why she was denied, except that 
she--
    Mr. Hurt. You said that she was disqualified, or I saw on 
your report that you said she was disqualified.
    Mr. Montoya. Right.
    Mr. Hurt. Disqualified.
    Mr. Montoya. The email communication suggests was wanted to 
hire her under the IPA so she could make more money, so she 
could maintain her salary.
    Mr. Hurt. And so the concerns--what is it that dictates the 
concerns that the rules or the statutes in the subject--is it a 
conflict of interest? Is that the concern for why somebody 
would not be hired as an ordinary employee?
    Mr. Montoya. Yes. Not only does--
    Mr. Hurt. A conflict of interest?
    Mr. Montoya. Yes, sir. An inherent conflict of interest.
    Mr. Hurt. Okay, so why is it that she could be hired as 
an--under this intergovernmental personnel agreement without 
concern for conflict of interest, but she couldn't if she was 
being hired as an ordinary employee?
    Mr. Montoya. I don't think that she couldn't. I think maybe 
her qualifications would have been satisfactory. I don't think 
it had to do with that. I think they disqualified her so that 
they could then hire her under the IPA. And therein lies the 
little conspiracy, if you will.
    Mr. Hurt. So when your office confronted Ms. Henriquez and 
Ms. Hernandez, did they tell you the truth? Did they tell you 
the truth about whether or not they had communicated with her 
in advance?
    Mr. Montoya. Yes, Ms. Henriquez was very quick to tell us, 
yes, that is what I did. It was Ms. Gross and the two employees 
that she hired who were less than forthcoming.
    Mr. Hurt. Okay, so what does that mean? Did they lie to 
impede the investigation?
    Mr. Montoya. I guess if you want to go down that road, yes. 
That--we like to call it--because we don't really know, in some 
cases, exactly where that fine line was. But yes, they were 
absolutely less than truthful with us.
    Mr. Hurt. Really quickly--my time is running out--but Ms. 
Perez, following up on Mr. Hills' question, I would love to get 
your thoughts on the differences between the hiring practices 
for an ordinary employee, Federal employee, versus under this 
intergovernmental personnel agreement. Why on earth would the 
concerns relating to conflicts of interest be different?
    And my time has expired, so--
    Ms. Perez. Sir, actually we haven't done any work in that 
area.
    Mr. Hurt. Okay.
    Ms. Perez. We are aware generally of the Act, but haven't 
worked on that area.
    Mr. Hurt. Thank you.
    Ms. Perez. Thank you.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the gentleman from Massachusetts, 
Mr. Capuano, for 5 minutes.
    Mr. Capuano. Thank you, Mr. Chairman. I want to thank you 
two for testifying today, and I apologize for not having been 
here but you know how it is. We are between two committee 
hearings. So I didn't hear it all, so some of the stuff I might 
have to ask or say might be repetitive. And for that I 
apologize, but that is what we do here.
    I guess I want to put things in perspective. As I 
understand it, there are about 9,000 HUD employees. Is that a 
reasonable estimate?
    Mr. Montoya. Actually about 8,000, sir.
    Mr. Capuano. So, about 8,000 employees, and looking at a 
list--give or take a dozen names, 15 names here, of people who 
have committed acts that are questionable, ranging from the 
terrible, horrendous crime of nepotism, trying to help a family 
member--which I know is against the rules, I get that--but I 
don't think any of us want to send anybody to Sing-Sing for 
that. We want to make sure it doesn't happen to the best of our 
ability, but there are worse--two other people who stole large 
sums of money, and maybe some other things.
    That means roughly--my calculations--0.1 percent of the 
employees have committed significant enough issues for you to 
get involved in. Not that that forgives the individual actions 
at all, but I just don't want anybody to walk away with the 
idea that somehow HUD or any other agency that I am aware of is 
full of people, all of whom want to commit nefarious, terrible 
actions.
    I know that is not your intention, but sometimes when we 
sit here and only talk about the bad actors that is what some 
people hear at home: that the world is full of bad actors. And 
for me, I am a former mayor, as are some of my other 
colleagues. A lot of our time is spent dealing with people who 
do things they shouldn't be doing.
    We don't spend our time and effort, as you don't spend much 
of your time, with people who have done the good things. 
Because that is not what you are there for. You are there to 
police it and to do all those things. And that is the right 
thing. And from everything I have heard, you have done a great 
job, and the IG's office is an area that we all expect and we 
all support and appreciate. But I don't want anybody listening 
to this to think that somehow everybody at HUD is scheming to 
try to deal around the edges.
    I know that for me, one of my biggest problems was my 
police officers. Because, again, they only dealt with people, 
every day, who had committed some action that was wrong, either 
speeding or 10 times worse. And sometimes they might forget 
that 99.9 percent of us are good, law-abiding citizens. 
Actually, that is my problem right now, my NSA problem, but 
that is a different issue.
    So I just wanted to be clear about that. To me, I think 
that is important. And I really do think that--I guess the 
other thing I heard is that there was some concern about 
unions. I want to be really clear. In my--I have negotiated 
with unions, and unions are there.
    You never--unions don't have to come defend their 99.9 
percent good members. They only step up when there is a 
wrongdoing to defend their members to make sure that they get 
proper treatment. So I--again, that is their job. It is like a 
lawyer. They have a responsibility to their membership to make 
sure that their membership really did do a bad act that was not 
overly punished.
    And to be perfectly honest, the only thing I found 
problematic about your written testimony is the fair amount of 
time spent on differences of opinion on category or degree of 
punishment. You think that some people should have been 
punished more severely than they might have been.
    I guess that is fair. But I also don't think that is 
really--I don't think that is a measure of whether you have 
been successful or whether HUD is a good agency. That is a 
reasonable difference of opinion. I personally think that, for 
instance, most of the people on Wall Street who did bad things 
all got off. They all got off. Nobody from Wall Street has paid 
an ounce of contrition for the actions they took in 2006, 2007, 
and 2008.
    So I understand the problems, but I don't want to lose 
focus as to what we are here for. We are here to make sure that 
HUD employees--and that is your job--toe the line. And when 
there is a wrongdoing, that the HUD administration helps you 
and others correct that situation.
    And from what I have seen and what I have read on you, most 
of that has happened. Is that a wrong impression? Is that a 
wrong conclusion, from your report?
    Mr. Montoya. To be clear, sir, the report gives you only a 
small smattering of examples. Unfortunately, there are more. 
But I would say it is not like there is a rampant misconduct 
issue in HUD. I think my major concern is how HUD is dealing or 
not dealing with misconduct when they do come across it. And I 
think with regards to my written testimony, that is where I do 
the parsing. Not so much about what they did or could have been 
more, but how they are handling what they are doing to create 
an ethical culture.
    Mr. Capuano. And do you feel that the current 
Administration is doing--I am getting--not necessarily 
everything you are going to want, but are they--grade them on a 
scale of one to 10; 10 being perfect, being you being the guy 
making the decision, one being, I don't know, the most 
unethical person in the world making the decision. What would 
you give them as a grade?
    Mr. Montoya. Both the new Secretary and the Deputy 
Secretary have only been there maybe 6 or 7 months, the Deputy 
Secretary even less. I will give him a 10 with regards to the 
Secretary signing that joint letter. Because I think that 
speaks volumes to the tone at the top. I could give him higher 
than a 10 because I think that is the best thing he could have 
done to establish his game plan for how he is going to run the 
organization. And I look forward to working with him with that.
    Clearly, these things we are talking about were not under 
his tenure. And so, I do look forward to how he and the Deputy 
Secretary are going to handle these going forward.
    Mr. Capuano. I just want to point out for the record that 
no one has ever given me a ``10'' on anything. So, that is 
pretty good.
    Thank you. Thank you, Mr. Chairman.
    Chairman Duffy. The Chair would agree. The gentleman's time 
has expired.
    The Chair now recognizes the gentleman from Colorado, Mr. 
Tipton, for 5 minutes.
    Mr. Tipton. Thank you, Mr. Chairman. And I would like to 
thank our witnesses for taking the time to be here today. We 
have covered a lot of ground, and I really don't want to rehash 
a lot of that. But I really wanted to question you, Mr. 
Montoya. In your opening statement, you brought up that you had 
been threatened in the OIG when you are doing some of these 
investigations. I find that pretty curious. How are they 
threatening you?
    Mr. Montoya. In the case of Mr. Mincberg, he threatened to 
hold my agents accountable. He never really clarified what that 
meant. But the fact that he would even threaten the agents to 
hold them accountable in some way, shape or form, to me, is 
just inappropriate and not something that I would want to start 
seeing more of at HUD.
    Mr. Tipton. Now, the OIG--obviously, through other 
Departments--is this just isolated to HUD? Or do you have this 
type of reaction as you are doing other investigations?
    Mr. Montoya. I don't know that we have had anybody--and so 
just to be clear, he was at a very high-ranking position. He 
was a schedule C, he was a political. So for him to do it, that 
certainly doesn't go well. We don't get that sort of 
disrespect, if you will, from rank and file. I think most of 
them are very willing to cooperate with us. And, again, these 
are good employees just trying to do their job every day.
    Mr. Tipton. So you haven't experienced it from other 
appointed officials? This is just something that was isolated 
to HUD, where you had threats that were coming back--
    Mr. Montoya. This one was isolated to the circumstances. 
But I spoke very loudly about it so that everybody got the 
message it was not something I was going to allow or put up 
with, quite frankly.
    Mr. Tipton. Okay, thank you. I did want to follow up on Mr. 
McHenry's question, as well. You had indicated that you have 
the systemic implementation report that is coming out. And I 
think there is frustration on both sides of the aisle when we 
are talking about $843,000, American taxpayer dollars, which 
are being lost through fraud coming out. When is that report--
is that finalized?
    Mr. Montoya. Are you referring to the IPA review that we 
are--
    Mr. Tipton. I believe so. I think--I am just quoting you. 
You referred to the systemic implementation report.
    Mr. Montoya. Oh, that had to do with how HUD was not 
appropriately handling personnel background investigations or 
review before they hired them. So we had a situation where they 
hired an individual that they clearly should have done a little 
bit more of a background on before hiring. And so we went in to 
view why this happened. So we don't just look at what happened, 
we look at why it happened. We issued this report to say we 
think you could do this better, that better, you can create 
some policies that will help you avoid that. That report went 
to them 5 or 6 months before they then hired the individual 
with a long criminal history who was able to steal almost 
$800,000.
    Mr. Tipton. So do you feel your report was ignored?
    Mr. Montoya. I don't know. I have my staff following up 
with the Department to figure out did you do anything in that 6 
months or did you ignore us, or is it just taking you that much 
longer to get this thing in place? I don't--I can't answer 
that--
    Mr. Tipton. Just by way of timeframe, when did you issue 
that and the follow-ups, and how long has it been since HUD has 
responded to you?
    Mr. Montoya. I don't know that I have an exact date off the 
top of my head for you on the implication report. I can 
certainly get that back to you. Generally, HUD won't respond on 
when they finish it. We just sort of expect that they do. And 
so that is why I have my agents going back to--
    Mr. Tipton. Has this been a year, 2 years?
    Mr. Montoya. I don't know if I could give you an exact 
date, sir. I would have to get back to you on that.
    Mr. Tipton. So we have absolutely no idea, and there is no 
enforcement. They aren't indicating that--do they feel an 
obligation to get back to you?
    Mr. Montoya. In certain situations we do require them to 
get back to us in a sort of 90-day period. I don't know if we 
did on this implication report or not.
    Mr. Tipton. Do you think that would be a good idea? In 
Washington, $843,00 is not a lot of money. But I will tell you, 
in my hometown, it is.
    Mr. Montoya. Oh, absolutely, sir. And yes, absolutely, it 
would be a good idea.
    Mr. Tipton. And was it--in that recommendation or that 
report, also, a look-back? Because you just cited that after 
you had put out this report this person slipped through the 
crack. So was there also a recommendation to be able to have a 
look-back on employees who were hired in that interim period of 
time?
    Mr. Montoya. Yes, and that prompted us to go back to look 
at what is going to go on. And we will put that back to HUD, 
they will go back to review the employees they hired within 
that timeframe.
    Mr. Tipton. Okay, great.
    Ms. Perez, I don't want you to feel completely left out. 
And Mr. Montoya, you might want to speak to this, as well. I am 
concerned about the lobbying issue, as well, going over. And as 
I understand, under Section 716 on the Anti-Lobbying Act, the 
Deputy Secretary is a Presidential appointee. Were any rank and 
file employees involved in terms of doing the letter or issuing 
the letter for that lobbying?
    Ms. Perez. Yes, sir, there were a number of employees 
involved in preparing the email that the Deputy Secretary 
transmitted. Our focus in the legal opinion was looking at 
whether the Department had violated the anti-lobbying provision 
of Section--
    Mr. Tipton. And that was at his direction. So it was an 
abuse of power.
    Chairman Duffy. The gentleman's time has expired.
    Mr. Tipton. Thank you.
    Chairman Duffy. In the interest of equal time, the Chair 
now recognizes for 1 minute the gentleman from Texas, the 
ranking member, Mr. Green.
    Mr. Green. Thank you, Mr. Chairman. And I may give you some 
time back. I want to thank the witnesses for appearing today. I 
am especially pleased to hear you say that you would give the 
new Secretary, Secretary Castro, a 10, which is an indication 
to me that you are looking forward to good things from him.
    I look forward to working with you, and I believe that HUD 
is going to move in the right direction. There are some things 
that have to be corrected. I think they are taking corrective 
actions. But we are moving in the right direction. And we all 
agree that HUD is a necessary agency and that it does good 
things.
    Thank you very much.
    Mr. Montoya. Thank you, sir.
    Chairman Duffy. Thank you, Mr. Green.
    The subcommittee thanks both Ms. Perez and Mr. Montoya for 
your work, your service, and your testimony today. We 
appreciate it.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    Without objection, this hearing is adjourned.
    [Whereupon, at 11:40 p.m., the hearing was adjourned.]
                            A P P E N D I X



                            February 4, 2015


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