mostly for either false statements or alleged bribes, and most of these cases are still pending trial. I think the Justice Department would be the proper source to talk about them. That is, in the event they can be talked about at this point of time.

Mr. STILL. Do you have information on the number of resignations and early retirements?

Mr. HAYNES. Yes, sir, I do. I would like to probably say a little more about the bribery cases. To the extent that they exist, by their very nature, they are clandestine. During the time I spent in the FBI, the bribery cases were the most difficult to prove. You almost always had to have either of the parties cooperate in giving information-either the giver or the receiver of the bribe--and this cooperation is very difficult to secure. You don't see many bribery prosecutions.

Mr. COLLINS. Do you have the figures on those?

Mr. HAYNES. Yes, on the indictments.

Mr. ST GERMAIN. We will have those put in the record. (The information referred to follows:)

EMPLOYEES INDICTED SINCE JULY 1, 1969

Ernst Soffer (construction analyst), Multifamily Housing Insuring Office, New York, N.Y.

Arrested by FBI on September 18, 1970 on bribery charge. Voluntarily retired December 1970. Entered plea of guilty March 15, 1971, received oneyear suspended sentence, fined $500 and placed on probation for 5 years. Theodore W. Bednarz (appraiser), HUD Area Office, Newark, N.J.

On March 17, 1971, indicted on 19 counts of bribery. Employee suspended— awaiting trial.

James F. Haught, former Director FHA Insuring Office, Charleston, W.Va.

Indicted on bribery, August 1971-awaiting trial.

Ann Dupre (loan specialist), Joseph Jankowitz (appraiser), Charles Joshua (appraiser), Rose Cohen (supervisory assignment clerk), Herbert K. Cronin (chief underwriter), Greville Harvey (appraiser), Edward J. Goodwin (appraiser), Frank Dreis (former appraiser-retired February 1971), HUD Insuring Office, Hempstead, N.Y.

Varying counts of bribery and withholding information, March 1972. All employees have been suspended and are awaiting trial.

Joseph Lawler (inspector), Richard R. Hendricks (inspector), HUD Area Office, Philadelphia, Pa.

Indicted March 29, 1972-violation of section 1001, title 18, U.S.C. Submission compliance inspection reports.

James Walter Ashton, Deputy Chief Underwriter, FHA Insuring Office, Charleston, W. Va.

Indicted January 20, 1971-2 counts of violation of sections 657 and 495 of title 18, U.S.C. Entered plea of guilty to violation of section 657 (embezzlement of Government funds), received 5 years' probation. Employee resigned February 5, 1971. Second count of indictment (forgery) was dismissed. Thomas J. Gallagher (former Director), FHA Insuring Office, Philadelphia, Pa.

Indicted May 11, 1972-10 counts of bribery and 10 counts of income tax evasion.

CASE DISPOSITION SUMMARY

The cases closed in fiscal years 1970, 1971, and 1972, through March 31, 1972, resulted in the following totals of monetary and punishment dispositions:

These figures are not broken down between those cases referred by OIG to the FBI and those initiated by the FBI. To obtain such a breakdown would necessitate an individual review of all the closed cases from which monetary or punishment disposition resulted.

Mr. STILL. Mr. Petersen supplied those.

Mr. HAYNES. There are only a few. I can supply those for the record or read them into the record, whatever you desire.

Mr. ST GERMAIN. Mr. Haynes, would you be good enough to define what you mean when you say "audit"?

Mr. HAYNES. Yes. An audit is a detailed examination of the operations of a given organization to determine whether or not the functions are being carried out effectively, efficiently, and in accordance with the law and the policies and regulations. Audits are more and more going into what the auditors refer to as a management or operational audit, and getting away from the detailed bookkeeping-type audit, in order to assure management that the resources under their control are being put to proper use and, as I said, effectively and efficiently.

Mr. ST GERMAIN. Well, you mentioned that in the Miami case a developer was alleged to have received favorable treatment. Mr. HAYNES. Yes.

Mr. ST GERMAIN. And you looked into those and the finding was that there was no proof of the fact that he received favorable treatment?

Mr. HAYNES. Yes, sir.

Mr. ST GERMAIN. I am not contesting your findings here. However, we have many brandnew developers coming out of the bottle like the genie since we instituted 235 and 236 programs.

Now, if you look at a particular area office or regional office and find that a new developer is getting all kinds of reservations and being given all kinds of projects, you can look into the favorable treatment. aspect. However, if there is bribery involved, it is rather difficult to prove because it is clandestine. One of the two parties must inform and this seldom occurs.

Do you go that one further step and have some expert in the construction field who knows, such as an estimator who knows what the cost should be, go into the project and estimate the project and determine the cost to the developer-not what he is alleged to have spentwhat kind of value he is actually putting into the project. Suppose it is a $3 million project, is there-taking into account overhead and profit-the differential that should be in there in value.

Was the value of the land inflated? In other words, I have come across some of these cases, Mr. Haynes. They buy a piece of property at a very low price. Then they are allowed to account for a comparable value and the next thing you know that piece of property jumped to four or five times what they paid for it. That is approved as part of the cost. I am wondering when you find the term "audit treatment has been accorded," and you are looking to find-I know you are brandnew-you are going to find out whether or not this brandnew developer that came out of the woodwork is giving you value. Is he giving a dollar's value for the dollar he receives?

Mr. HAYNES. It is somewhat hard, I think, to generalize, Mr. St Germain. In the specific instances down in Miami that we alluded to, the normal inspection and appraisal procedures were done by

HUD, FHA. I am informed that the houses being built by that particular developer were considered to be of reasonable value and reasonably well constructed.

We do make, from time to time, in a multifamily housing development, a detailed cost audit to determine whether or not the cost claimed was actually incurred. They are not done on 100 percent of the cases. We accept certain certifications from independent public accountants as to cost. You may want to address this particular question to Mr. Gulledge in connection with the general procedures by HPMC-the appraising and valuation of the project.

Mr. ST GERMAIN. I tell you what, Mr. Haynes. In the appraisal and evaluation procedures, Secretary Romney agreed that the comparable cost is not the best way to appraise property.

Mr. HAYNES. I believe he testified that steps had been taken within recent months to tighten up on the question of land valuation.

Mr. ST GERMAIN. I was very happy to hear that, Mr. Haynes. Furthermore, you certainly can't go into every project, but you can keep people on their toes as Mr. Brown said. If developers and regional office directors, as well as local office directors, were aware of the fact that on any given day a team is going to troop in-a group of experts and they are going to go right down to the cost of every nail in the project, they will be more responsible.

If you have experts in the construction field, it doesn't take that long, and it can be done. Unfortunately, there are developers taking advantage of the taxpayers' money, and it is our duty to weed out this type individual.

Mr. HAYNES. I certainly agree. We have done this in the past, spot checked as in the 235 audit report, which was released by the Secretary. I believe the auditors addressed themselves in part to the problem of land valuations under 235 and listed eight specific projects in which land profits were, or seemed to be, excessive. And we made some recommendations on how to avoid this in the future. This had a part in changing the departmental procedures in evaluation of land. Mr. STILL. Can we turn a little bit to numbers and people?

Mr. HAYNES. Yes, sir.

Mr. STILL. In analyzing Mr. Petersen's testimony, it appears that one attorney in Justice works full time on HUD cases. In HUD itself, does FHA still maintain its own investigative unit?

Mr. HAYNES. No, sir; it does not.

Mr. STILL. Is that a recent step taken under your direction?

Mr. HAYNES. I think it has been true for some period of time, since 1954.

Mr. STILL. We should question Mr. Gulledge. I seem to recall him testifying in October that he maintains his own investigative unit which furnishes him weekly reports.

Mr. HAYNES. I can only conjecture, Mr. Still. I think he was probably referring to a group that interfaces with ours, reviews the audits and investigations and keeps him advised. I think it is probably one or two people.

Mr. STILL. Now, we have had quite a bit of discussion about audit versus internal compliance, et cetera. We have been informed that 10 auditors have been placed in the manpower reserve pool. Is this accurate, and if so, do you anticipate a problem in discharging your responsibilities?

71-962-72-pt. 3- 4

Mr. HAYNES. I will answer the second part first. I do not anticipate any problem. As you know, there is a reduction in personnel throughout the Department and the Office of Inspector General is bearing its share of this reduction. The 10 people that you allude to probably are the 11 people that were placed in the manpower reserve as a result of the reorganization and reduction decided by the time I came on board. Of the 11 people that are in the manpower reserve, I believe eight of them are auditors, one is clerical, one is an inspector, and one is a former civil rights compliance officer. Now, we are also, in addition to reducing 11 people here in Washington, reducing about 55 to 58 people throughout the country-in audit staff. These auditors were not put in the manpower reserve, but, through our placement efforts, they have been transferred into vacancies in insuring offices. I think part of the consideration that went into planning this, is that the Department did have a number of vacancies out where the action is. The operating slots that are in various offices had vacancies, and it was felt the auditors were particularly well qualified to fill some of the vacancies. So a decision was made that we would rely to a greater extent on the results of project audits given to us by independent public accountants, and that some of our staff would be transferred into the other jobs.

I think this is a reasonable decision and one that will not interfere with us doing our work properly.

Mr. STILL. Do you anticipate having any additional resources? Mr. HAYNES. We are adding 15 people to the investigative side. We are understaffed with investigators and we are going to add an additional 15 positions.

Mr. STILL. Will they be operating under centralized control or will they be in regional and area offices?

Mr. HAYNES. Our entire operation is under centralized operation. It all reports to me.

Mr. STILL. Your function?

Mr. HAYNES. Yes, and the investigators will be added to my function.

Mr. STILL. Mr. Maxwell, the Secretary has discussed repeatedly all of the facts contributing to the problems of the city; the problems of crime in particular have been emphasized.

This committee has just concluded a series of hearings on the operations of the Law Enforcement Assistance Administration.We saw firsthand the effect crime in Detroit had on the abandonment problem. We endeavored to determine whether or not there has been any meaningful coordination under the memorandum signed by the Attorney General and Secretary Romney. We looked at this from the point of view of preserving HUD or FHA investments in this particular area we toured.

We are trying to determine what coordinating efforts are taking place or have since the memorandum was signed. Do you have any information in that area?

Mr. HAYNES. Mr. Maxwell?

Mr. MAXWELL. I can probably supply additional information in this area. I will say that the Secretary is, of course-has made a number of statements indicating his concern with the contribution crime does make on the housing situation in the inner city, and prior to the

current series of meetings which the Secretary has been holding in various cities, the so-called top meetings, he was in touch with Attorney General Mitchell, and discussed the relation between these problems. And I feel sure that a continuing cooperation can grow out of that

contact.

In addition, I know there has been some coordination between the Department and LEAA in connection with the programs. I am not prepared to go into detail.

Mr. STILL. Would you supply that information for the record?
Mr. MAXWELL. Yes, sir. I would be pleased to.
(The information referred to follows:)

COORDINATION EFFORTS BETWEEN HUD AND LEAA WITH RESPECT to
CRIMINAL JUSTICE

In mid-1969 Secretary Romney and Attorney General Mitchell sent a joint letter to Governors apprising them of the kinds of aid which could be obtained by using model cities funds and LEAA funds and urging them to foster close coordination between State planning agencies ("SPA's") established under the Justice Department program and city demonstration agencies ("CDA's") responsible for model cities programs. The letter specified the kinds of steps which could be taken by SPA's and CDA's to assure effective coordination.

Also during mid-1969 Assistant Secretary Hyde of HUD and Administrator Rogovin of the Department of Justice addressed a letter to mayors of model cities urging SPA's and CDA's to work closely together. At about the same time, HUD sent a memorandum to CDA Directors which set forth steps to be taken to foster coordination between CDA and SPA local law enforcement planning efforts.

In December of 1969 HUD's chief crime and delinquency advisor, James W. Shumar, met with 19 SPA directors and their staffs to explain a format for SPA's to use in explaining to model cities personnel what SPA's could offer to them. The format included descriptions and explanations of the omnibus crime bill and other legislation, the State criminal justice plan and the SPA's capabilities for funding and technical assistance.

In July and August of 1970 HUD held criminal justice planning seminars in Boston, Chicago, San Francisco and Atlanta explaining to representatives of every model cities CDA the omnibus crime bill and the importance of coordinating efforts with SPA's funded by LEAA. Also participating in these seminars were model cities citizens, chiefs of police from model cities, SPA staff and representatives from LEAA.

In 1970, Assistant Secretary Hyde and HUD's chief crime and delinquency advisor Mr. Shumar participated in the annual State planning agency directors conference in Colorado Springs and explained the usefulness of working with CDA's.

At the last two annual conferences of the International Association of Chiefs of Police (IACP) HUD has sponsored workshops on law enforcement planning for model cities. In these workshops HUD points out to police executives the benefits and desirability of working with city demonstration agencies and the use of model cities funds to obtain LEAA funds from SPA's.

HUD has contracts with the IACP and the National Council on Crime and Delinquency to provide technical assistance to model cities. Included in this assistance are instructions on coordinating local plans with regional and State planning agencies funded by LEAA.

Most recently, HUD has appointed a representative to work with LEAA in its eight action impact cities, seven of which are model cities. The Interdepartmental Council to Coordinate All Federal juvenile delinquency programs, created in August 1971, provides another area of cooperation between HUD and the Department of Justice.

Cooperation in the use of HUD and LEAA funds in the area of criminal justice is not always a result of direct cooperation between the agencies in Washington. It also results from agencies at the local level trying to solve common local problems. For example, a recent survey revealed that local housing agencies funded by HUD are working with recipients of LEAA funds to combat crime in public housing and public housing neighborhoods.