PHA Can Terminate Benefits for False Statements

Facts: A resident was terminated from the Section 8 program after the PHA investigated her marital status. The resulting report concluded that she was married and didn’t provide true and correct information about her marital status on two annual questionnaires. The PHA notified her that it was terminating her from the Section 8 program on the grounds of fraud and failure to report her marriage to an individual who “was residing at the Section 8 unit.”

The resident requested a hearing. The hearing officer found that she breached her family obligations under the Section 8 program by failing to disclose her true marital status on the eligibility questionnaires. The hearing officer found that this was a willful failure that “constitutes fraud.” Applying the sanctions for fraudulent conduct set out in the PHA’s administrative plan, the hearing officer ordered the resident to repay the PHA $21,378, representing the benefits she received from Dec. 10, 2014, through the “end of participation.” He also banned the resident from participating in any federally funded housing program for 10 years.

The resident appealed. The trial court concluded that the weight of the evidence didn’t support the hearing officer’s fraud finding. The court found that the evidence didn’t show that she “had an intent to deceive” the PHA. However, the court also concluded that her “failure to disclose her marital status” provided a separate ground for her termination from the Section 8 program because it constituted a violation of a reporting obligation imposed by the governing regulations. The court therefore upheld her termination.

Because the evidence didn’t support a finding of fraud, the trial court set aside the hearing officer’s 10-year participation ban and his order that the resident repay the benefits she had received. The court sent the case back to the PHA to determine what amounts, if any, the PHA overpaid as a result of her failure to disclose her change in marital status. The resident appealed the trial court’s decision, arguing that the PHA abused its discretion in terminating her participation in the Section 8 program in the absence of any fraud.

Ruling: A California appeals court ruled there were adequate grounds to terminate the resident from the program. But the court sent the case back to the PHA to consider all relevant circumstances.

Reasoning: The court stated that the PHA may not terminate a participant from the program for an immaterial misreport. But, according to the court, a false answer to a question about marital status doesn’t fall within that category.

The court agreed with the trial court’s finding that the resident’s false statements support her termination from the program even in the absence of fraudulent intent. The facts show that the resident made a knowingly false statement about her marital status. A program participant’s marital status has a direct and logical relationship to questions of income and occupancy, which are key issues in assessing eligibility for a subsidy.

However, the court identified another procedural step to consider before her benefits under the program are actually terminated. The governing regulations provide that, in determining whether to terminate assistance, public housing agencies such as the PHA “may” consider all relevant circumstances, including the seriousness of the case and the effect of termination on other family members [24 C.F.R. § 982.552(c)(2)(i)]. The hearing officer’s written ruling didn’t contain any indication that he made a decision whether to exercise this discretion. And by reversing the hearing officer’s fraud finding, the trial court’s decision significantly affected the seriousness of the resident’s violations. The appeals court therefore directed the trial court to send the case back to the PHA to consider whether to exercise its discretion to take into account other circumstances in determining the appropriate remedy for the resident’s violations.

• ·         Crooks v. Housing Authority of the City of Los Angeles, October 2019