Empowerment Zone: FBI, HUD scrutinize records

04/18/2008

By Ramon Bracamontes / El Paso Times

Some of the El Paso Empowerment Zone's records have been confiscated by federal agents who are investigating the corporation -- but exactly what they are looking for is not known.

Several former Empowerment Zone employees, a city official and a U.S. Department of Housing and Urban Development official have confirmed that the FBI and HUD's Office of the Inspector General have been looking at Empowerment Zone records and talking to employees for the past six months.

"The OIG and FBI have been around, but we don't know what they are looking at. They don't tell us," said William "Bill" Lilly, director of the city's Community and Human Development Department, which now oversees the Empowerment Zone.

And Patricia Campbell, spokeswoman for the regional HUD office, said HUD officials have been working with city officials to answer some audit questions, but that the process has been slowed because some records have been seized.

"The city's ability to respond to us has been hampered by the fact that the HUD office of inspector general has possession of some of their records," Campbell said from her office in Fort Worth.

The city took over the Empowerment Zone in March 2007 after a city and HUD audit turned up some questionable transactions. The Empowerment Zone was established in 1999 with a $25 million HUD grant that was to be used to promote economic development in an 11-square mile area extending from Downtown to the Lower Valley.

Instead of administering the grant and its programs, City Council voted then to establish the Empowerment Zone.

Last year, City Council reversed that decision, and the Empowerment Zone now falls under the city's community development department.

Sometime between March 2007 and this year, the FBI and the office of the inspector general got involved. Office of inspector general officials were not available for comment, and FBI officials said they do talk about whether the agency is involved in investigations.

Phyllis Rawley, the former El Paso Empowerment Zone executive director, said she has been aware that HUD had some questions and she has offered to help resolve any issues, but said no one has asked her.

She also said no one from the inspector general's office nor the FBI has contacted her.

"I back my staff. We didn't do anything corrupt," Rawley said. "If we did something wrong, we got slapped on the hand and we corrected it and moved on."

Rawley was director for more than three years. She resigned in December 2006 to accept a new job in California.

Campbell said the initial questions from last year's audit remain, and that HUD officials are continuing to work with city officials to clear up those questions. But, she said anything they are doing is separate from the other federal agencies.

"The city still has a number of tasks ahead, including review of several of the loans the Empowerment Zone made, including some loans that are now in default," Campbell said.

The city also has yet to comply with a request that an independent audit of the Empowerment Zone's files be done, she said.

Lilly, who is overseeing the Empowerment Zone's reorganization, said the zone now has a new strategic plan that will go before City Council for approval on April 29.