Late last week, a partial settlement was reached in an ongoing qui tam False Claims Act case alleging fraudulent use of federal grants to build affordable housing in Los Angeles.  The specific allegations are that the City of Los Angeles and CRA/LA (an agency of the City) falsely certified their compliance with housing discrimination laws when using federal grants to develop affordable housing.  However, according to the allegations in the complaint, the affordable housing developed using the federal grants failed to adhere to accessibility laws, and thus discriminated against potential tenants with disabilities.

The settlement, announced by the Department of Justice on February 6 and worth $3.1 million, only resolved the allegations against the CRA/LA (formerly the Community Redevelopment Agency of the City of Los Angeles).  The litigation is still ongoing against the City of Los Angeles.  The case was initially filed by qui tam relators Mei Ling and the Fair Housing Council of San Fernando Valley on behalf of the government.  Relators, such as Mei Ling, are entitled to a share of any proceeds from False Claims Act cases they bring. However, no immediate information regarding the relator’s share of this settlement was available.

While the settlement amount of $3.1 million may be well below the actual damages caused by the allegedly false claims, litigation is ongoing. This settlement represents only a fraction of the potential recovery against the City of Los Angeles, who had oversight responsibilities for the relevant developments and grant submissions. CRA/LA, the entity involved in the settlement, was created to wind down the business and legal affairs of its predecessor agency, which had allegedly committed the fraud.

The United States Attorney for the Central District of California said, “[t]his settlement resolves only a small portion of this case and we are prepared to litigate additional allegations that the City of Los Angeles covered up its failure to comply with federal laws enacted to protect the civil rights of all citizens.”

This settlement constitutes an important step in ensuring that the local governments in charge of overseeing and applying for federal grants make sure that those taxpayer dollars are spent for their intended purpose and not misused.  The grants at issue here were explicitly for the City of Los Angeles to provide affordable housing to all its citizens.  Instead, it allegedly denied access to its disabled residents, a group among the most vulnerable to housing discrimination.  This case again proves that the False Claims Act and its qui tam provisions can be some of the most effective tools in undoing such harm.