Kemp Upset by Stories of HUD Embezzlements : Escrow Agent Says She Diverted $5.5 Million, Mostly to Help the Poor

WASHINGTON — Secretary of Housing and Urban Development Jack Kemp is “very upset” over allegations that private escrow agents embezzled millions of dollars from the department, including a Maryland woman’s claim that she siphoned off $5.5 million for aid to the poor, a HUD official said Sunday.

Kemp has ordered HUD Inspector General Paul Adams to investigate the alleged embezzlements from HUD’s Washington field office, and on Friday he placed four employees on unpaid leave, Frank Keating, HUD’s general counsel-designate, said.

The Washington Post reported that losses due to embezzlement from the Washington office could amount to $10 million, and the New York Times said that HUD operations in Denver, Houston, New Orleans and Los Angeles also were under investigation.

In Texas, Reba Louise Lovell has been indicted on charges of embezzling $2.5 million from the sales of 55 foreclosed properties in the Dallas area.

Offices Under Audit

A two-year-long investigation in the Washington office led to an inspector general’s audit.

Marilyn Harrell, an escrow agent in Maryland whom federal investigators have dubbed “Robin HUD,” contended that extraordinarily lax management allowed her during a four-year period to divert perhaps $5.5 million, which she said was spent to help feed, clothe and house needy people in the capital.

“I figured that as long as I was going to go to jail anyway, I would help a few people with the time I had left,” Harrell, 46, of Temple Hills, Md., told the New York Times.

In an interview published Sunday in the Washington Post, she said that some of the money may have been “mingled” with funds used to make improvements to her home that included a swimming pool, a $2,500 wide-screen television and basement renovations.

She said the expenses were justified because she had used her house as a shelter for homeless people. She added that she has since transferred the property to HUD.

Her scheme began to unravel last year, she said, when an official in the HUD Washington field office, Everett Rothschild, detected the diversion of funds.

Kemp ‘Extremely Upset’

In a telephone interview with the Associated Press, Keating said Sunday that, based on what he has read in the newspapers: “I’m outraged, and I know (Kemp) is extremely upset that acts like this could take place--although, as noted, all of them allegedly took place prior to him taking office.”

Keating would not comment on Harrell’s statements, and attempts to contact Harrell were unsuccessful.

Keating said that Kemp ordered the inspector general’s office and an accounting firm to conduct a full investigation “to determine the extent of the problem, suggest remedies and construct a system which will make this kind of conduct infrequent, if not impossible, in the future.”

“The fact that in Dallas a closing agent could allegedly embezzle $2 million and not be noticed, the fact that in Maryland a closing agent could allegedly give $5 million to the poor and not be noticed, shows serious mangement deficiencies, and (Kemp) intends to see that that conduct does not recur,” Keating said.