Hud Says $800,000 Misused -- Millionaire Spent Tribal Housing Grant At Will, Audit Finds

A $7.8 million housing grant for needy Native Americans helped build a casino for a tiny southwest Oregon tribe and a house for one of its top officials, a new federal audit says.

The house was for Bruce Anderson, former Seattle Sounders owner and a millionaire businessman who controlled housing and economic development on the Coquille reservation in Coos Bay.

Altogether, more than $800,000 was misspent before the the U.S. Department of Housing and Urban Development froze funding and the tribe fired Anderson last year, the report says.

It is the latest in a series of audits by the HUD inspector general that support the findings of a Seattle Times investigation into the federal agency's Indian housing program. The Times documented rampant abuse and mismanagement on the Coquille reservation and throughout the country.

The audit says HUD should require repayment of the $800,000 to the housing authority, but stops short of saying who or where the money should come from.

A tribal spokesman said HUD should share responsibility for the lost funds because the agency waited nearly a year to take action after learning of problems in the tribal housing program.

Anderson, who is also under criminal investigation for his tribal activities, faces potential liability for repayment of the questioned funds.

"I did nothing criminal," Anderson said in a written statement yesterday.

He did not use housing funds to pay for personal projects or casino expenses, he said. But he did use housing money to build a health clinic and create 500 jobs for his tribe, he said. Anderson is part Coquille.

"If my understanding of the rules and regulations proves to be wrong and the health clinic and other projects should not have been built with HUD funds, then arrangements will be made to repay the funds."

The grant was supposed to build 72 to 88 homes for low-income families. But the audit says Anderson improperly used the money to pay for tribal casino bills, the purchase of property from his wife, four personal construction projects, a health clinic, a cranberry bog and a panel factory.

The 6-feet-5 Anderson, once a defensive lineman in the National Football League, used threats of violence and firing to get the cooperation of staff for his improper schemes, the report says.

After employees questioned an order to buy land from his wife, the report says, Anderson "called a staff meeting, threatened them with physical violence, berated them for not being loyal to him, and said if any of them ever told him `no' again they would be fired."

"That's absolute garbage," Anderson said yesterday.

The audit also noted the housing authority board that oversaw Anderson consisted of his son, his real-estate broker, his nephew, a business associate and himself. The authority reported to Coquille Economic Development Corp., whose president was Anderson.

The arrangement allowed housing money to find its way into other corporate ventures, including the Mill Casino, a cranberry bog and a panel factory, the audit says.

Among the inspector general's findings:

-- Anderson used $14,000 in housing authority labor and equipment for construction work on four different sites while trying to decide where to build his new home. He rejected one site as too small for the house he wanted and another as a poor location. He finally settled on tribal property. The tribe halted construction before the house was finished.

Anderson yesterday said he paid for the personal work with $15,000 of his own money that he deposited in a special account - so the housing authority actually owes him money.

-- A Seattle attorney was paid $19,500 in housing funds for legal work on the casino. In one case, the development corporation forwarded a $10,000 legal bill clearly marked "gaming issues" to the housing authority. When the staff balked at paying, they soon received a new copy of the bill, this one marked "housing issues."

-- Two contractors owed money for casino work were paid $15,000 each in housing funds. In one case, the payment was deducted directly from the outstanding balance owed an electrician even though it purportedly was for future housing work. The other case involved a plumber who received the payment after complaining to Anderson about the casino debt. Both said they eventually did some work on the housing project.

-- Anderson had the housing authority pay $200,000 in rental fees to the development corporation for use of tribal construction equipment - even though the tribe had given the authority free use of it.

Besides urging HUD to demand repayment of the money, the audit recommends the agency consider barring Anderson, the lawyer and two contractors from receiving any future federal funds.

In a written response to the audit, tribal leaders said the tribe should not be held responsible for misused money. They acted swiftly to remove Anderson after learning about potential abuses, they said. But the same could not be said of HUD staff, who did a poor job of policing the housing authority despite early tips about problems there, they complained.

The Times investigation found HUD was warned as early as January 1995 that Anderson was misrouting money to nonhousing purposes but they waited until March 1996 to freeze funding.

However, the audit said HUD's performance did not change the tribe's or housing authority's duty to ensure the money was spent properly.

Tribal spokesman Deana Scott said officials will discuss the findings with the HUD tribal housing staff to determine who is responsible for repaying the money. So far, 40 houses have been completed and 26 more are under construction. Despite the setbacks, the tribe hopes to complete 72 homes, she said.