The U.S. government announced Monday it suspended funding for the U.S. Virgin Islands’ housing authority after an investigation found widespread corruption, as residents still struggle to recover from two major hurricanes that hit nearly a decade ago. The Department of Housing and Urban Development cited years of alleged financial mismanagement, weak fraud controls, and the conviction of a former executive in a disaster-recovery contracting scheme as reasons for the immediate suspension.
U.S. Housing Secretary Scott Turner said that nine years after the territory received $1.9 billion in disaster recovery funding following Hurricanes Irma and Maria in 2017, the Virgin Islands Housing Finance Authority has spent only $570 million, less than a third of the funds. A HUD investigation found widespread financial mismanagement, inadequate fraud controls, false certifications and improper payments. The federal government estimates this failure has deprived Virgin Islanders of roughly $1.3 billion worth of assistance that Congress intended for recovery efforts.
The findings paint a stark picture of mismanagement that has left the territory’s infrastructure largely in disrepair. HUD’s investigation determined that the housing authority completed only two of 95 planned single-family rental rehabilitation projects and zero of 329 intended single and multifamily housing projects. As of May, the authority had spent only 2 percent of its electrical grid recovery funding. Meanwhile, the authority spent more than half of its grant funds designated for administrative costs, amounting to $52.6 million.
The suspension follows the criminal case against the authority’s former chief operating officer, Darin Richardson. Richardson was sentenced in March to 36 months in federal prison after being convicted of criminal conflict of interest, bank fraud, making false statements to federal agents, false statements on loan applications, and money laundering. According to trial evidence, Richardson used his senior executive position to engage in fraudulent and self-dealing transactions for personal financial gain.
One scheme involved a lumber contract meant to rebuild hurricane-damaged homes. Richardson participated in awarding a multi-million-dollar contract to Island Services Group and later increased the contract’s value by 50 percent, from $3 million to $4.5 million. Richardson then accepted a $107,000 kickback from a company co-owner under the guise of a business investment. According to prosecutors, after receiving the kickback, the lumber was allowed to rot in the tropical sun, rendering it completely unusable and representing a total waste of taxpayer funds.
HUD Secretary Turner wrote that the Trump administration is taking a harder line on federal grant recipients. “The Trump administration is changing the game when it comes to who we entrust with taxpayer dollars. Organizations riddled with corruption, mismanagement, and crime will no longer be allowed to squander billions,” Turner said. He added that “Virgin Islands Housing Finance Authority officials cannot be allowed to prioritize kickbacks over helping families recover from disasters.”
Turner, a former NFL cornerback and member of the White House Task Force to Eliminate Fraud, said the suspension is part of a broader effort to increase scrutiny of federal grant recipients following high-profile investigations nationwide. HUD Deputy Secretary Andrew Hughes sent a 13-page letter to VIHFA Chief Operating Officer and Chief Disaster Recovery Officer Dayna Clendinen on July 20 outlining the findings and barring the authority from future federal procurement while an investigation continues.
The authority faces additional allegations beyond Richardson’s criminal conduct. HUD said the authority made false certifications to the agency that it had proficient financial controls, safeguards to prevent conflicts of interest, and compliance with applicable laws. The authority also sought $6.2 million in disaster-related funds that the Federal Emergency Management Agency had already paid, according to government investigators. HUD’s Office of Inspector General found the authority’s fraud risk management processes were “at or below the lowest desired goal state,” indicating virtually no meaningful fraud prevention framework despite overseeing nearly $2 billion in federal disaster recovery funds.
Multiple audits spanning over a decade raised significant concerns about the authority’s handling of federal funding. These audits found weak financial controls, inadequate project oversight, poor fraud-risk management and inaccurate reporting. In February, the executive director of the housing authority resigned as local legislators questioned why some $4.2 million remained idle as a deadline to use the funds approached. At that time, a territorial senator accused the former director of “just sitting there with a smug look,” noting that “The Housing Finance Authority is not building.”
HUD said it was “not in the public interest” to allow the authority to continue receiving additional millions of dollars in federal funds. The agency described the pace of recovery as “glacial to practically nonexistent” given the minimal progress on housing projects after nearly a decade of federal support.
The Virgin Islands has 30 days to request a hearing on the matter or the funding suspension will become final. Governor Albert Bryan Jr. announced that the territorial government intends to appeal the suspension. Some local officials have questioned the timing of the announcement, noting it came at the start of early voting in local elections.