791 F.Supp. 354 (E.D.N.Y. 1992), CV-90-0992, United States v. Incorporated Village of Island Park
|Citation:||791 F.Supp. 354|
|Party Name:||UNITED STATES of America, Plaintiff, v. The INCORPORATED VILLAGE OF ISLAND PARK, Jacqueline Papatsos, in her capacity as Mayor of the Incorporated Village of Island Park, Charlotte Kikkert, in her capacity as Trustee of the Incorporated Village of Island Park, Philip Taglianetti, in his capacity as Trustee of the Incorporated Village of Island Park|
|Case Date:||April 24, 1992|
|Court:||United States District Courts, 2nd Circuit, Eastern District of New York|
Robert L. Begleiter, Chief, Civil Division, Charles S. Kleinberg, Stanley N. Alpert, Richard K. Hayes, Brooklyn, N.Y., for U.S.
William H. Pauley, III, Snitow & Pauley, New York City, for defendants The Incorporated Village of Island Park, Jacqueline Papatsos, Charlotte Kikkert, Philip Taglianetti and James Fallon.
Allen R. Morganstern, P.C., Mineola, N.Y., for defendants Michael Parente, James Brady and Francis McGinty.
Thurm & Heller, New York City, for defendant Michael Masone.
Dikranis & O'Shea, Long Beach, N.Y., for defendant Geraldine McGann.
James W. Dougherty, Malverne, N.Y., for defendants Daniel and Ellen McGann.
Rosner & Goodman, New York City, for defendants Anthony and Janet Ciccimarro.
Dreyer & Traub, New York City, for defendants Joseph and Debra Ruocco, Mary Ellen and Dennis Guerin, Joseph and Maria DiDomenico, and Kenneth and Donna Moore.
MEMORANDUM AND ORDER
GLASSER, District Judge:
Who will guard the guardians? The complaint that underlies this action alleges a profoundly disturbing abuse of government programs and of government funds by officials and residents of a small municipality. And yet, the undisputed facts material to the disposition of this motion reveal a still more disturbing failure by the federal officials charged with oversight of those programs to ensure the just and lawful administration of these affairs. Now the government, which for so long permitted these alleged misdoings to proceed with impunity, has brought suit after the time in which to present most of its claims has passed. The government urges that its own failure to enforce the public trust in a timely manner should be disregarded. But "even wrongdoers are entitled to assume their sins may be forgotten," Wilson v. Garcia, 471 U.S. 261, 271, 105 S.Ct. 1938, 1944, 85 L.Ed.2d 254 (1985); and it is unworthy of those charged with the protection of the public interest to decline blame for their own lack of vigilance.
This action arose from the administration of a Community Development Block Grant Program ("CDBG Program") and of a Section 235 Housing Program and from the alleged misuse of Housing and Urban Development ("HUD") funds in those programs by the Village of Island Park, New York ("Island Park" or the "Village") between 1979 and 1983. The government filed this action on March 22, 1990; it filed an amended complaint on May 11, 1990. The amended complaint lists eight causes of action: (1) violation of the False Claims Act, 31 U.S.C. §§ 3729 et seq.; (2) fraud; (3) violation of the Fair Housing Act, 42 U.S.C. §§ 3601 et seq.; (4) breach of fiduciary duty; (5) aiding and abetting breach of fiduciary duty; (6) unjust enrichment; (7) constructive trust; and (8) erroneous payment of funds. The government has named as defendants: The Incorporated Village of Island Park; Jacqueline Papatsos (as mayor of Island Park); Charlotte Kikkert, Philip Taglianetti, and James Fallon (as trustees of Island Park); and, as individual defendants, Michael A. Parente, James G. Brady, Francis R. McGinty, Michael Masone, Geraldine McGann, Harold Scully, Daniel McGann, Eileen McGann, Anthony Ciccimarro, Janet Ciccimarro, Joseph Ruocco, Debra Ruocco, Mary Ellen Guerin, Dennis Guerin, Joseph DiDomenico, Maria DiDomenico, Donna Moore, and Kenneth Moore. All defendants have moved this court for summary judgment as to all causes of action on the ground that the applicable limitations period for each claim expired before the government filed its complaint. The defendants also argue that certain administrative proceedings conducted against the defendant Geraldine McGann have preclusive effect in this action. For the reasons set forth below, the motion of the defendants for summary judgment is granted in part and denied in part.
Section 235 of the National Housing Act, 12 U.S.C. § 1715z, established the Section 235 Program to provide mortgage-assistance subsidies to enable lower income families to acquire homes. Pursuant to the 235 Program, HUD makes monthly payments to a mortgagee to subsidize the payments made by a participating mortgagor. The housing is built by a private developer who obtains mortgage commitments from a HUD-approved lender and who applies to HUD for approval of the development.
Island Park administered such a Section 235 Program: It purchased land with CDBG funds obtained from Nassau County and resold the property to participating developers. Under the Island Park Section 235 Program, 44 single-family homes were constructed in the municipality over a four-year period that began in 1979. The homes were built in three phases: Five were built in the first phase; 22 were built in the second; and 17 were built in the third segment of development.
The Halandia Group constructed and marketed the five homes in the first phase of the program. An Affirmative Fair Housing Market Program ("AFHMP") was submitted to HUD with respect to the first phase pursuant to 24 C.F.R. §§ 200.600. On February 14, 1980, HUD approved the AFHMP and stated that:
The selecting or giving of preference to prospective purchasers ... is not permitted. Transactions should be entered on a first-come-first-serve basis. The principal standard in determining compliance with the Affirmative Fair Housing Marketing Plan is diligent good faith effort.
Defendants' Exhibit 11. The Nassau Office of Housing reported to HUD that the five homes of the first phase were purchased by four white families and one Hispanic family. Defendants' Exhibit 12.
The developer for the second phase of the Section 235 Program was Ocean Park Properties, Inc. The AFHMP for this segment of the program was approved with similar caution from HUD as to the use of preferences in selecting recipients of the homes. Defendants' Exhibit 14. No AFHMP was submitted for the third phase of the Program.
The government alleges that Island Park preselected non-black residents of the Village to receive the Section 235 houses. At
the direction of then mayor Michael Parente (a defendant in this action), Village clerk Harold Scully and his staff gave the preselected persons advance notice of advertisement for the houses and instructed these persons to bring informal applications to the Village Hall on the morning the advertisements were scheduled to appear. In this way, the government alleges, the Village of Island Park was able to award the Section 235 houses--for which there were to be federally subsidized mortgages--to preselected individuals while maintaining the guise of a regular and impartial "first-come, first-served" process. Many of these preselected individuals either served the Village in official capacities or were related to others who held office in Island Park. No black family received a Section 235 home in Island Park.
Of particular interest to the government is the conduct of defendant Geraldine McGann. During the time of the administration of the third segment of the Section 235 Program, she was both a Village trustee and the Special Assistant to HUD Regional Administrator Joseph Monticciolo; she is alleged to have voted on HUD-related matters in her capacity as a trustee of Island Park during her tenure as a HUD employee. The government also alleges that, during the third phase of the program, she arranged for her son, defendant Daniel McGann, to receive one of the HUD houses. The government alleges that McGann participated in a "conspiracy" to cover up the misdoings of the officials of Island Park by, inter alia, drafting a letter to HUD for the signature of Mayor Parente that denied any wrongful acts in the administration of the Island Park Program. Plaintiff's Exhibit F. Further, the government alleges that McGann (and possibly Monticciolo) may have attempted to remove documents from HUD in 1990.
However, allegations of wrongdoing by McGann were formally considered after the government, on March 22, 1990, served a Notice of Proposed Removal on her as a HUD employee. Defendants' Rule 3(g) Statement ¶ 77. Several of the charges against McGann were initially sustained by HUD Associate General Deputy Assistant Secretary for Housing James E. Schoenberger. Defendants' Exhibit 58. McGann appealed this determination to the Merit Systems Protection Board ("MSPB") before which a full evidentiary hearing--including direct and cross-examination of witnesses--was conducted on March 21, 1991. Defendants' Rule 3(g) Statement pp 82-83. After that hearing, Administrative Judge Joseph E. Clancy dismissed all charges against McGann. Defendants' Exhibit 60. The government did not appeal this decision to the United States Court of Appeals for the Federal Circuit.
The government contends that it did not learn of the wide-spread wrongdoing by officials of Island Park until press reports in June of 1989. Government's Rule 3(g) Statement ¶ 138. However, HUD first began to receive complaints about the...
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