United States v. Southland Management Corp., Inc.United States v. Southland Management Corp., Inc.
MEMORANDUM OPINION AND ORDER
This cause is before the court on the motion of defendants W. Thad McLaurin, Charles C. Taylor, Jr. and Arthur W. Doty for summary judgment pursuant to
The United States, on behalf of the United States Department of Housing and Urban Development (HUD), brought this civil suit against the defendants under the False Claims Act,
The National Housing Act was enacted to “assist private industry in providing housing for low and moderate income families and displaced families.”
“Since most tenants of low income are on welfare and cannot afford to pay the full contract rental price, Congress created the Section 8 housing program to subsidize their rent.”
Id.
at 313.
See also
To receive the housing assistance payments, property owners submit to HUD each month an “Application for Housing Assistance Payments” — or HAP voucher— in which they provide information regarding, inter alia, the tenants, number of units for which payment is requested, the contract rent amount, amount of rent payable by the tenants, and total amount of housing assistance payment requested. The HAP vouchers include an “Owner’s Certification,” by which the owner, or the management agent on behalf of the owner, certifies that the data supplied is correct and computed according to the Section 8 contract and applicable rules and regulations, that no unauthorized payments have been received, and, as is of paramount relevance in the case at bar, that the dwelling units are in “Decent, Safe, and Sanitary condition.”
Turning, then, to this case, the record reveals that in approximately 1980, defendants Doty, McLaurin and Taylor formed a partnership, known as Jackson Apartments, Ltd., for the purpose of owning a rehabilitating the Jackson Apartments in accordance with HUD’s “Section 8 Substantial Rehabilitation Program.” To fund their construetion/renovation of the Jackson Apartments, a 120-unit complex that had originally be constructed in the 1940s, the Partnership, in addition to an approximate $200,000 investment by the partners, executed a $2.4 million note secured by a mortgage insured by HUD and entered into a standard HUD “Regulatory Agreement.” The property was originally managed by defendants, through a managing company they formed for that purpose, but in December 1983, the Partnership contracted with Southland Management Company, Inc. (Southland) to provide management services for the Jackson Apartments. Southland managed the property throughout the period of time covered by the Government’s complaint and, on the owners’ behalf, submitted to HUD each month a HAP voucher which included the certification now claimed by the Government to have been false, namely, that the dwelling units covered by the voucher were in “Decent, Safe, and Sanitary condition.” 2 The Government submits that each of the nineteen HAP vouchers submitted by, or on behalf of the owner defendants from July 1995 to January 1997, constituted a false claim under the False Claims Act, and the certifications thereon as to the condition of the property as “Decent, Safe, and Sanitary” was a false statement made to defendants to get payment of their HAP vouchers approved by HUD.
According to the Government, over the years, defendants had allowed the physical condition of the Jackson Apartments to *633 deteriorate substantially, so that by July 1995, and continuing through January 1997, the Jackson Apartments were in a deplorable condition, as evidenced by the annual physical inspection reports prepared for HUD by its contract inspector, along with tenant affidavits. 3 The Government maintains that the confluence of the numerous defiendes which existed at the apartments rendered them apartments indecent, unsafe and unsanitary, and that defendants’ contrary certifications to HUD were obviously false, were known by defendants to be false, or made with reckless disregard for their truth, and were made for the purpose of getting HUD to approve payment on defendants’ HAP vouchers, so that defendants may properly be held liable for penalties and treble damages under the False Claims Act. 4
In the court’s opinion, as discussed more fully infra, because it is apparent from the undisputed record evidence that HUD was aware of the condition of the property during the time period at issue, and that it did not and/or would have approved payment on the vouchers regardless of the condition of the property, it follows that defendants’ certifications were not “material” to HUD’s decision to continue housing assistance payments to defendants pursuant to their HAP vouchers. Moreover, the fact that HUD knew the condition of the property coupled with the irrefutable fact that defendants, as HUD well knew, themselves were fully cognizant that HUD was aware of the condition of the property, preclude a finding that defendants “knowingly” made a false statement and/or claim to HUD.
Under the False Claims Act (FCA), any person who
(1) knowingly presents ... [to the government] a false or fraudulent claim for payment or ápproval; [or]
(2) knowingly makes ... a false record or statement to get a false or fraudulent claim approved by the Government... is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus three times the amount of damages which the Government sustains because of the act of that person...
In this case, defendants have asserted a variety of grounds upon which they contend that summary judgment is in order. *634 They argue, for example, that the governing standard, “decent, safe and sanitary,” is not defined in the HAP vouchers they submitted or in any of defendants’ contracts with HUD, and that since the standard, left undefined, is plainly ambiguous and susceptible to varying interpretations and subjective judgment, one could not rationally conclude that their statements that the apartments satisfied this standard were “knowingly” “false.” They also argue that, even assuming the proper definition of the phrase “decent, safe, and sanity” is that proffered by the Government, the record proof does not establish that the units did not, in fact, meet this standard; and further, that even if the court deemed the proof sufficient to show that the units were not “decent, safe, and sanitary,” or to create a genuine issue of fact on that point, the Government has not adduced sufficient evidence that defendants knew, or should have known, of those conditions which the Government submits rendered the apartments indecent, unsafe and unsanitary. Defendants’ principal arguments in support of their request for summary judgment, though, relate to HUD’s policies and practices with respect to the payment of HAP vouchers and to HUD’s own knowledge of the condition of the Jackson Apartments during the relevant time period and the effect of such knowledge on the Government’s case against them. In this vein, defendants argue the Government can establish neither the “materiality” of the HAP certifications nor that in signing the certifications, the defendants “knowingly” made a “false” statement .or claim to HUD. The gist of their argument is that even if, as contended by the Government, the property was not “decent, safe, and sanitary” — and defendants do not concede that it was not 6 — ■ nevertheless, it is manifest that their certifications were not “material” to HUD’s decision to pay their HAP vouchers as the undisputed evidence reveals that it is HUD’s policy and practice to make Section 8 housing assistance payments even on properties that might not satisfy HUD’s comprehension of “decent, safe, and sanitary,” since the owners of such properties are typically dependent upon the HUD payments in order to correct deficiencies and HUD expects that such owners will use the housing assistance payments to effect necessary repairs and maintenance. Defendants argue further with respect to the Jackson Apartments in particular, that their allegedly false certifications as to the condition of the property patently were immaterial to HUD’s decision to allow payment on the HAP vouchers in that HUD was actually aware at the time of defendants’ submission of the vouchers of the very conditions which HUD now claims rendered the property indecent, unsafe and unsanitary. In a related vein, defendants argue that they cannot be found to *635 have made “false” claims or to have “knowingly” submitted false claims by certifying that the property in question was “decent, safe and sanitary” since the Government, and specifically HUD, was fully aware of the condition of the Jackson Apartments during the relevant time period as a result of periodic inspections of the property conducted for and on HUD’s behalf, and because defendants themselves always knew that the government, and specifically HUD and the United States Attorney, had full knowledge of the conditions of the property when the HAP vouchers were submitted and thus could not have thought they were hiding anything from the government. In the court’s opinion, defendants are correct on all counts. 7
As an initial matter, the Government argues, in response to defendants’
*636
argument respecting materiality, that in light of the Supreme Court’s decision in
United States v. Wells,
A false statement or claim is “material,” according to the Supreme Court’s definition in
Kungys v. United States,
sarily be material to HUD, given the fact that the purpose of the Section 8 housing programs is to provide affordable “decent, safe, and sanitary” housing to low income tenants, the fact that HUD’s regulations require that Section 8 housing be maintained in a “decent, safe, and sanitary” condition and the fact that the HAP contract between HUD and defendants specifically required defendants’ certification that the Jackson Apartments were so maintained in order to for defendants to be entitled to receive the contracted-for housing assistance payments from HUD. Indeed, one might be inclined to view such a certification as material as a matter of law; but the record, as well as the Government’s own arguments on the motion, reveals the absence of proof of materiality as a matter of fact. 9
Defendants’ contention in the case sub judice that HUD’s decision to pay pursuant to defendants’ HAP vouchers was not linked to their certification as to the condition of the apartments is amply supported by the undisputed evidence. It is clear from the evidence that HUD, in accordance with the terms of its standard *638 HAP contract, may elect to discontinue housing assistance payments if an owner, after notice by HUD that the property is not “decent, safe, and sanitary,” fails to implement a corrective action plan acceptable to HUD. However, it is equally clear not only that that discontinuance of payments is not required but also that even when HUD considers that a property is not “decent, safe, and sanitary,” it is HUD’s normal practice, in keeping with the parties’ respective rights and obligations under the HAP contract, to allow owners to continue to receive subsidies while working to correct deficiencies that HUD has identified. Indeed, it is evident from the proof that HUD makes housing assistance payments with the expectation that the owner/recipients will use those payments to bring their property up to standard. Further, as the Government points out in its own submission, in view of the practical realities of Section 8 housing programs, HUD often elects to continue payments for a particular property despite knowledge that the property, contrary to the owners’ HAP voucher certification, does not meet HUD’s “decent, safe, and sanitary” standard since the alternative— discontinuance of payments — may work to the detriment of the tenants. 10 The point, of course, is that because the evidence reflects that HUD, as a matter of policy and practice, admittedly routinely makes Section 8 housing assistance payments to owners of Section 8 property irrespective of whether the property is in a “decent, safe, and sanitary” condition, then the owners’ certification as to the condition of the property would not be “material” to HUD’s decision to pay.
Though this would seem evident, the Government nevertheless maintains that HUD’s actions or inaction in another case, or in other cases, have no bearing on this case, in which the evidence reflects that defendants’ certifications that the property was in a “decent, safe, and sanitary” condition were material, showing, as it does, that HUD would not have paid the vouchers but for defendants’ signed certifications. In support of its position, the Government points to the deposition testimony of Quinton Lewis, the HUD employee who actually reviewed and approved defendants’ HAP vouchers, who testified that he would not have approved the vouchers for payment had the certifications for payment not been signed by defendants or their management agent. In the court’s opinion, however, Lewis’s testimony does not suffice to create a triable issue of fact as to the substantive materiality of defendants’ HAP certifications. Lewis’s testimony stands as proof only of the fact that HUD required that owners submit to HUD a signed HAP voucher as prerequisite to HUD’s authorization of housing assistance payments — not that the truth or falsity of anything contained therein affected, or had a tendency to influence the decision whether to pay. Simply put, there is nothing in the record to show that Lewis, or anyone else with HUD, took into account the actu *639 al substance of the certifications in deciding whether to approve the vouchers. 11 In fact, the evidence is to the contrary, for the evidence plainly shows that HUD did not consider defendants’ certification — or more pertinently, the truth or falsity of the “decent, safe, and sanitary” certification— in making its decision to approve defendants’ HAP vouchers. In this regard, defendants submit, and the evidence shows, not only that it is HUD’s policy and regular practice to continue HAP payments even when property is not “decent, safe, and sanitary,” but that with respect to the Jackson Apartments in particular, HUD paid defendants’ HAP vouchers knowing that the certifications were false, or rather, knowing of the conditions which the Government now alleges made the certifications false.
On this issue, the evidence positively demonstrates beyond reasonable question that at the time of defendants’ submission of the challenged vouchers and HUD’s approval of those vouchers, HUD, based on its own annual inspections of the property, knew full well of the very conditions of the property which it now claims made the property not “decent, safe, and sanitary.” 12 HUD, through its contract inspector, Management Solutions of America, Inc., conducted annual inspections of the Jackson Apartments for each of the years defendants’ HAP Contract was in effect; and for each of the years from August 1993 to May 1997, based on conditions found to exist at the property by HUD’s inspector, 13 the apartments received “below average” or “unsatisfactory” physical inspection reports from HUD. HUD’s inspector furnished to HUD’s project manager responsible for the apartments a copy of his inspection report in which he detailed his specific findings and indicated repairs which needed to be made in order that the property would satisfy HUD’s minimum housing quality standards. 14 Vicki Gross, the project manager for the time period at issue, in turn, furnished the inspection report to her superiors who, in turn, forwarded the inspection reports to defendants or their managing agent, and advised defendants and/or their agent of those repairs which were required to be made and requested that defendants and/or their agent inform HUD of the actions that would be taken, along with a timetable, to correct the deficiencies which HUD had identified. At her deposition, Vicki Gross, who testified as HUD’s representative, explained that properties receiving “below average” and “unsatisfactory” physical condition ratings in inspection reports are not “decent, safe, and sanitary.” And indeed, the conditions upon which the Government makes its affirmative allegation that the Jackson Apartments were not in a “decent, safe, and sanitary” condition are those same specific deficiencies which HUD’s inspector identified and which led him to assign the apartments the “below average” and “unsatisfactory” ratings. From this evidence, there can be no question but that HUD was fully aware of the conditions of the apartments, and specifically, of those deficiencies which it asserts made the apartments not “decent, safe, and sanitary.” And yet HUD, which was aware that defendants continued to submit HAP vouchers and receive payments throughout this time, allowed those payments to continue. HUD’s knowledge of the true conditions utterly belies HUD’s contention that the certifications were material, 15 confirms HUD’s policy and prac *640 tice of allowing housing assistance payments on properties that it knows are not decent, safe and sanitary, and dooms 'its claim against defendants.
Defendants argue that in addition to the failure of proof of materiality, the Government also cannot demonstrate that there was any “knowing” “false” statement or claim by defendants in view of the fact of HUD’s knowledge of the condition of the property, coupled with the proof of defendants’ contemporaneous awareness of HUD’s knowledge as a result of the communications between HUD and defendants on the subject. While the FCA does not require proof that the defendants acted with a specific intent to defraud, it does requires that the defendants have acted “knowingly,” meaning that they had actual knowledge that the information was false, or acted in deliberate ignorance or reckless disregard of the truth or falsity of the information.
For its part, the Government argues that a conclusion that defendants “knowingly” made false statements/claims and/or that the defendants’ false statements/claims were material is not undermined by HUD’s alleged knowledge about the apartments since HUD’s knowledge was obviously incomplete. There were, the Government notes, only two inspections performed by HUD contractors, and the inspectors only looked at a small percentage of the units. The Government thus concludes that “[t]he ongoing and continuous indecency of the condition of the Jackson Apartments was not fully revealed on the once annual inspection reports performed by independent contractors and eventually submitted to HUD.... [Tjhese reports revealed the deficiencies of a small percentage of the units as of only one day each year.” 18 Yet it is upon these very inspection reports that the Government principally bases its assertion that *642 throughout the relevant time period (the nineteen months from July 1995 through Jaunary 1997), the Jackson Apartments were not decent, safe and sanitary. 19 Suffice it to say, if the Government deems those reports sufficient now to sustain its burden to prove that the apartments were not “decent, safe, and sanitary,” then they were obviously sufficient to inform HUD of the true condition of the apartments at the time defendants were submitting the challenged vouchers. 20
The Government submits that in any event, its claim for the statutory penalty survives defendants’ motion. In this vein, it argues that proof of materiality could only be relevant, if at all, to the Government’s claim for
damages
on account of a violation of the FCA and has no bearing on its claim for recovery of the statutory penalty. It reasons that because the remedies provision of the FCA distinguishes between civil penalties, which are recoverable “solely upon proof that false claims were made, without proof of any damages,” S.Rep. No. 345, 99th Cong., 2d Sess., at *8 (1986),
reprinted in
1986 U.S.C.C.A.N. 5266, 5273, and the treble damages provided by the Act, which the Government may recover only upon proof as to the damages it suffered “because of’ the defendants’ false statements,
Conclusion:
In sum, it is the court’s considered opinion in this case that the Government has presented no evidence that HUD, either in this case or as a matter of policy and/or practice, is influenced by an owner’s HAP certifications as to the condition of property. On the contrary, it is manifest from the evidence that HUD’s decisions to pay or not pay HAP vouchers are not substantively informed by an owner’s certification, but rather are guided by HUD policy, as well as the practical realities of Section 8 housing programs. Moreover, where HUD chooses in a given case, for policy and/or practical reasons, to make housing assistance payments when it knows full well that the property is not “decent, safe, and sanitary” and that the owner’s certification is false, no reasonable argument can be made that the certification was material to HUD’s decision to pay. Finally, because the defendants were fully apprised of HUD’s awareness of the problems at the apartments which now form the basis of the Government’s suit, and in fact, corresponded with HUD with respect to those very same problems, there can simply be no reasonable finding that defendants “knowingly” made a false statement or claim to HUD regarding the condition of the property. And for all these reasons, the court concludes that the defendants’ motion for summary judgment should be granted.
Accordingly, it is ordered that defendants’ motion for summary judgment is granted. A separate judgment will be entered in accordance with
Notes
. There is not one Section 8 "program,” but a number of programs and subprograms. While the specific rules and eligibility requirements for particular programs vary somewhat, all of the Section 8 programs ar.e intended to provide low income tenants with affordable decent, safe and sanitary housing, and all have the same basic attributes.
. Southland was also made a defendant in this suit, but was dismissed after reaching a settlement agreement with the Government.
. The inspection reports describe roach and rodent (raVmouse) infestation; doors on some buildings and individual apartments that would not close; some windows that would not open/close and/or which lacked functioning locks; some damaged/missing/broken receptacles/switches/covers; some damaged exterior lights with exposed wires; inoperable bathroom exhaust fans in some units; lack of charged fire extinguishers in some units and in laundry room; damaged vinyl siding on buildings, including holes and tears; chipped and rusted metal handrails; and some damaged/broken interior doors, as well as other more minor items, such as broken floor tiles, rusted medicine cabinets, rusted oven gaskets and missing light globes in some units. These conditions are confirmed by the tenant affidavits.
. Ultimately, HUD foreclosed and the property was sold at auction in approximately August 1998.
. While defendants' motion indicates that they have been sued only under subsection OX the Government in its response points out that it has alleged violations of both subsec- ' tion (1), covering false claims, and (2), covering false statements made to get false claims paid. The FCA defines a "claim” as "any request or demand, whether under a contract or otherwise, for money or property ... [where] the United States Government provides any portion of the money or property.” Defendants’ "claims” are the monthly HAP vouchers they submitted to HUD; and what the Government alleges makes the defendants' "claims” false is that defendants certified that the property was in a "decent, safe, and sanitary condition,” as required by their HAP contract with HUD and by HUD regulations.
See United States ex rel. Thompson v. Columbia/HCA Healthcare Corp.,
. In its memorandum response to defendants' motion, the Government chastises defendants for having taken contradictory positions in its motion (and asking the court to make contradictory findings), and in particular, for their having argued on the one hand that they knew their certifications were true and yet having also argued that the Government knew the statements were false; for having argued that they never knew what the phrase "decent, safe and sanitaiy” meant while insisting at the same time that the physical condition of the apartments satisfied the definition of those words; and for having argued that HUD did not know what was meant by the phrase "decent, safe and sanitary” while asserting that HUD knew that the "decent, safe and sanitary” standard was not met by the property at the time defendants’ HAP vouchers were submitted. The court, however, understands that defendants have asserted alternative arguments and, notwithstanding the Government's insinuations, perceives nothing untoward or improper in defendants' approach to presenting their positions for the court's consideration.
. In the court’s view, there is at least arguable merit in defendants' position on other points, as well. For example, there is nothing in the contract documents or HAP vouchers, or in the applicable HUD regulations, which specifically states what is meant by the phrase "decent, safe, and sanitary.” The Government has contended that what is “decent, safe, and sanitaiy” is determined by reference to the "minimum Housing Quality Standards” (HQS) set forth by HUD primarily in
Taking another approach to this issue, the Government, citing
Moreover, a number of courts have considered "[t]he [phrase] ‘decent, safe, and sanitary' housing [to be] a subjective term at best.”
Perry v. Housing Auth. of Charleston,
Having said all this, though, the court recognizes that although an assessment of whether property qualifies as "decent, safe, and sanitary may involve subjective judgment, there are cases in which property would not qualify as 'decent, safe and sanitary’ under any conceivable definition of those terms.”
See United States v. Intervest Corp.,
. Defendants apparently have also found the reasoning of these writers persuasive, as in their memorandum, they have quoted extensively from the referenced paper (though without benefit of citation to the authors). The presenters of the paper opine that,
[ajlthough the word "materiality” appears nowhere in the text of the statute, it is implicitly embedded in all four of the principal liability provisions. Section (a)(1) imposes liability on those who submit "false claims” for "payment or approval” by the Government. As a matter of logic, it cannot be that a claim is "false” if it would have been paid or approved notwithstanding the misconduct alleged to have occurred.
Section (a)(2) imposes liability on those who make or use "a false record or statement to get a false or fraudulent claim paid or approved by the Government.”31 U.S.C. § 3729(a)(2) . If a record or statement were not material to the Government's decision to pay or approve a claim, it could not be used "to get” such a claim paid or approved.... Section (a)(3) is subject to the same analysis, since it imposes liability on those who conspire "by getting” a false or fraudulent claim allowed or paid.
Finally, section (a)(7) — the "reverse false claims” provision — also implicitly incorporates a materiality requirement. It imposes liability on those who use false records or statements "to conceal, avoid, or decrease an obligation to pay” the Government.... A false statement cannot be used "to conceal, avoid, or decrease” a financial obligation if it is not material to the Government’s belief as to whether a person owes such an obligation, or to its decision whether to seek payment.
N98CFCB ABA — LGLED B-38-39. The authors recount the history of the FCA, including aspects of the FCA’s legislative history and pertinent judicial decisions, and conclude that the focus of the FCA has always been on conduct or omissions that may cause financial loss to the federal treasury. Id. at B-42. They then address the Wells decision, explaining as follows;
*637 The conclusion that the FCA includes a materiality requirement can be squared with the Supreme Court's decision in [Wells']. In that case, the Supreme Court addressed the question of whether materiality is an element of the crime of "knowingly makfing] any false statement or report ... for the purpose of influencing in any way the action” of a federally insured bank,18 U.S.C. § 1014 . The Court concluded that materiality was not an element of the crime, reasoning that the statute did not mention materiality and that "the term 'false statement’ carries no general suggestion of influential significance.” Id. at 490,117 S.Ct. 921 (citing Kungys v. United States,485 U.S. 759 , 781,108 S.Ct. 1537 ,99 L.Ed.2d 839 (1988)). Turning to the legislative history of§ 1014 , the Court was also swayed by the fact that Congress had expressly included materiality in other false statements provisions in the criminal code, and had deleted materiality from others. Id. at 491-97,117 S.Ct. 921 .
By contrast, the civil provisions of the FCA do imply materiality. While the term "false statement” does not connote materiality, the term "false claim” necessarily does. A “statement” can be determined to be true or false, regardless of whether the statement would have any material (influential) effect on its intended recipient. But a "claim” cannot be determined to be true or false without consideration of whether the decisionmaker should pay the claim — that is, a claim is "false” only if the Government or other customer would not pay the claim if the facts about the misconduct alleged to have occurred were known. Moreover, the FCA is further distinguished by the lengthy history recounted above, which demonstrates that Congress has always understood the FCA to include materiality as an element of liability.
Id. at B-46.
. The question of materiality is a mixed question of law and fact, and is for the court to decide.
See United States ex rel. Berge v. Board of Trustees,
. In its brief, the Government explains that for practical reasons, it is often better to make housing assistance payments (or as it puts it, to not disapprove vouchers) than not, even when HUD knows that the property is not in decent condition, since a decision to withhold payment will rarely harm the owner but can easily cause great detriment to the tenants, i.e., the very persons Section 8 programs are intended to benefit, whose housing conditions will not improve if the owner's cash flow decreases and who ultimately may be altogether deprived of affordable housing of any sort if the owner lacks funds with which to make improvements to the property and to pay the mortgage. The Government takes the position that even if HUD, for these or other policy reasons, were to elect to continue payments for a particular property despite knowledge that the property does not meet HUD's "decent, safe, and sanitary” standard, defendants’ certification would still be "material” and there still would be an unbroken "chain of causation” between the defendants' false certification and damage to the treasury. This contention has no merit, for a statement which is not capable of influencing, or has no tendency to influence HUD’s decision is not material; and a decision guided by the described policy considerations is not affected by the truth or falsity of the owners’ certification as to the condition of the property.
. Lewis himself testified that he had not read the certification in any depth, and had never heard of the phrase “decent, safe, and sanitary” until the date of his deposition.
. The HUD regulations applicable to the Section 8 Substantial Rehabilitation Program provide for annual physical inspections to ensure compliance with the "decent, safe, and sanitary standard,”
. See supra note 3.
. See supra note 7.
. In a case substantially like this one,
United States v. Intervest Corp.,
In Intervest, as here, there was clear, un-controverted proof that while HUD's receipt of a signed HAP voucher was a prerequisite to payment by HUD, the actual condition of the apartments (and defendant's certification of their condition, whether true or false) had no bearing whatsoever on whether payments on the HAP vouchers would be approved. The Government argues that Intervest is distinguishable because there, the individual who approved the voucher payments had personal, first-hand knowledge that Metro Manor was not in a "decent, safe, and sanitary” condition and yet approved the payment. The court considers this a distinction without a difference. The fact is, in this case, responsible HUD officials knew the condition of the apartments, as related to them by HUD’s contract inspector, and knew that in their opinion, the housing provided by defendants was not "decent, safe, and sanitary.” And they had the authority to allow HAP payments to continue despite the condition of the apartments or to discontinue the payments. As in Intervest, they chose to allow the payments to continue.
. The court notes that though HUD now contends that the conditions found by its inspector to exist at the property during these annual inspections rendered it indecent, unsafe, and unsanitary, it is undisputed that at no time in its correspondence and communications with defendants and/or their agent did HUD advise defendants that it considered the property not to be "decent, safe, and sanitary.”
. While the Government now objects, after the fact, that defendants’ responses were cursory and inadequate, HUD did not pursue the matter or advise defendants that it considered their responses, or plans to correct the deficiencies, to be other than sufficient.
.The Government states, disingenuously in the court’s estimation, that "[bjecause these reports revealed deficiencies of a small percentage of the units as of only one day each year, HUD employees made several requests for more information from the owners.” The record clearly shows that HUD did not request more information from the owners regarding the actual condition of the apartments; HUD requested more information about what defendants planned to do to remedy the conditions of the apartments of which HUD was aware.
. The court notes that in addition to the physical inspection reports, the Government has submitted as evidence of the condition of the Jackson Apartments a number of affidavits from tenants of the apartments during the time period at issue in which tenants describe conditions they encountered. With one possible exception, the conditions they identify are precisely the conditions detailed in the physical inspection reports prepared by HUD's contract inspector and thus add nothing of substance to the information imparted to HUD via the physical inspection reports. While there is but a single reference in one of the physical inspection reports to rodent infestation, a number of these tenants describe problems with rats and mice. There is, however, nothing to suggest that the defendants or their agents knew or should have known of this situation. There is nothing to suggest that any tenant ever complained of this problem and, in fact, reports prepared by Ms. Gross during the relevant time period indicate "acceptable tenant satisfaction."
. The court notes that in Intervest, in the face of Brenda Mason’s direct testimony that she did not consider the Metro Manor apartments decent, safe and sanitary, the Government similarly argued that Mason had incomplete information about the conditions at Metro Manor, in that she did not receive all of the physical inspection reports and was only physically present at Metro Manor once a year. Judge Barbour rejected the Government's position, as does the undersigned, and found that in light of Mason’s testimony, the Government had not established a genuine issue of material fact regarding whether Mason had an adequate basis for her belief that Metro Manor was not decent, safe, and sanitary.