NYC’s public housing agency seeking ‘restitution’ in corruption scheme

New York City’s public housing agency will belatedly implement more than a dozen recommendations meant to stop low-level corruption within the next year while seeking “restitution” from employees implicated in a long-running kickback scheme, administrators said on Tuesday.

Top officials from the New York City Housing Authority made the commitments during a City Council hearing on Tuesday, three weeks after 70 current and former NYCHA employees were arrested and charged with taking cash bribes from vendors in exchange for small repair contracts. Under NYCHA rules, superintendents had the power to award contracts under $10,000 for painting, window repairs and other small jobs, with little oversight from the agency. A federal monitor and city investigators first flagged the situation as ripe for abuse as early as 2019.

The city’s Department of Investigation in 2021 urged NYCHA to centralize the “micro-purchasing” process, establish a cost schedule for routine jobs and review cost estimates before scheduling payment. But NYCHA didn’t follow the recommendations until the Feb. 6 takedown.

“Problems with the micro-purchasing process persisted … because frontline supervisors at the housing development level continued to have primary authority over small procurement purchases,” said DOI Commissioner Jocelyn Strauber.

NYCHA CEO Lisa Bova-Hiatt told councilmembers that over the next year, the agency will be implementing the guidance, along with several other DOI recommendations, including anti-corruption training for staff. She said she has also asked NYCHA’s inspector general at the department to talk with federal prosecutors about “seeking restitution, not only from vendors but from employees who have put their greed above NYCHA and our residents.”

“What happened here can’t happen again,” Bova-Hiatt said.

Inspector General Ralph Iannuzzi, DOI spokesperson Diane Struzzi and a spokesperson for the U.S. attorney’s office for the Southern District of New York, which is prosecuting the cases, declined to comment on the effort to get NYCHA employees to pay back the alleged bribes. The indicted staffers still employed by NYCHA are suspended without pay, officials said.

But NYCHA leaders also said the decentralized contracting process for small jobs was intended to streamline repairs and tackle a backlog of roughly 584,000 work orders. The housing authority received 229,000 work orders last month alone, said Daniel Greene, NYCHA’s executive vice president of property management.

NYCHA estimates it needs more than $78 billion to fully fund repairs and renovations across its 177,000 apartments.

During Tuesday's hearing, councilmembers lit into what U.S. Attorney Damian Williams has called a “culture of corruption” around small-time contracting. They also cited reporting by the news site The City that revealed how vendors charged different rates for the same work at various campuses, billing the taxpayer-funded agency hefty amounts for comically small jobs, including installing new lightbulbs.

“This is a really big slap in the face for NYCHA and for the city and for government,” said Councilmember Gale Brewer of Manhattan, who demanded to know how NYCHA would assess the “scope of the ripoff.”

NYCHA superintendents and associates would allegedly skim between $500 and $2,000 off contracts for minor construction projects that faced little scrutiny, according to Williams.

The alleged kickbacks eventually ballooned to more than $2 million and were associated with more than $13 million in NYCHA business across at least 100 developments, prosecutors said.

Williams called the scheme a classic “pay to play” where NYCHA employees would require contractors to pay upfront to be awarded the job, or would demand payment after the work was completed.

A federal monitor overseeing NYCHA noted in 2019 that the agency's reliance on the same contractors, despite poor workmanship, was leading to overall worsening conditions. The monitor, Bart Schwartz, said superintendents' power over those small contracts was resulting in “shoddy” repairs.

At the City Council hearing, several NYCHA tenants criticized the alleged fraud, poor workmanship and violation of their trust.

“My anger is filled with grief,” said Aixa Torres, president of the resident association at Manhattan’s Alfred E. Smith Houses. “We know what’s going on in our developments and we know what it is to live in quality and without quality and right now most of us are living [without].”

Torres added that NYCHA residents and tenant association leaders should have more say in how contractors are performing. “Who better than us to assess if a job was well done,” she said.

This story was updated throughout with information about the City Council hearing.