City of Buffalo officials misused millions of dollars in federal anti-poverty funds and steered grants to favored real-estate developers, according to a federal lawsuit filed three and a half years ago and kept under seal until a month ago.
The lawsuit was brought by Nona Watson, a former executive director of the Buffalo Urban Renewal Agency, which serves as a pass-through for federal funds intended to fight poverty, blight and substandard housing.
Watson led BURA from September 2015 until she was fired in October 2018 — an act of retaliation, she claimed in the suit, “because she raised concerns about illegal and inappropriate practices, including the misuse of federal funds.”
In November 2019, she filed an action under the Federal False Claims Act, accusing the City of Buffalo of perpetrating “a well-orchestrated fraud upon the Buffalo Urban Renewal Agency … and the U.S. Department of Housing and Urban Development.”
Specifically, she claimed city officials used federal money to pay employees to do work on behalf of the city, rather than BURA or the federally funded program for which the money was intended.
She also accused city officials of bending federal rules to the advantage of a handful of preferred developers — among them Nick Sinatra and David Pawlik — seeking federal anti-poverty funds to help underwrite their projects.
At the end of March, federal prosecutors decided not to pursue Watson’s allegations further, after three and a half years of filing extensions to keep the case active and the investigation into her allegations open. Court papers did not shed light on the investigators’ findings, nor would the U.S. Attorney’s office when contacted for comment.
In a federal false claims action, an individual alleges an entity is defrauding the federal government. If the government finds the allegations compelling, it investigates. At the end of the investigation, the feds decide whether to seek damages, which can include recouping misused funds and levying fines. The individual who brought the misbehavior to the government’s attention gets a share of the proceeds — typically between 15 and 25 percent.
During the investigation, the complaint and all subsequent court filings are sealed.
On March 24, the federal government dropped Watson’s complaint. A spokesperson for U.S. Attorney Trini Ross declined to explain the decision or comment on the matter. Court papers say only that Watson was free to pursue her claims against the city individually. Watson subsequently withdrew her claim.
Through her attorney, Watson — now living and working in Maryland — declined to comment, indicating a desire to leave the matter behind her.
As a result, Watson’s complaint was unsealed.
Among her allegations are numerous examples of federal dollars being used to pay employees for work the city should pay for:
- BURA’s general counsel and his assistant performed work for the city while being paid with federal dollars to work for BURA.
- BURA’s housing specialist worked on grants and negotiated with financial institutions for the city, while billing all her hours to federally funded programs.
- An employee in the city’s information technology department was paid with federal anti-poverty dollars intended for BURA, even though “all of her work is for the City, not BURA.”
- Numerous city employees were paid with anti-poverty funds from HUD, but without the timekeeping and attendance records HUD required.
Administrative fees for the federal Section 8 rental assistance program were “often used to settle City debt,” Watson claimed, or “as a cushion” to deal with unforeseen city expenses.
Watson said real estate developers sought federal funds for affordable housing and mixed-use projects through a request for proposals process administered by BURA. Watson claimed the process was often manipulated to favor certain developers or projects.
“The City orchestrated a ‘steering’ scheme to position developers to receive City-owned land, federal funding, and privileged inside information,” according to the complaint. “Although BURA completed the RFP process and all appears to be valid on paper, the selection process for these projects was anything but competitive.”
Watson provided numerous examples that she said illustrated “favorable treatment and conflicts of interest.” The beneficiaries, she claimed, included developers who had close relationships with Mayor Byron Brown and Brendan Mehaffy, the city’s director of strategic planning, who was also vice president of BURA’s nine-member board during Watson’s tenure.
She singled out Creative Structure Services, headed by David Pawlik, “a close friend of Mayor Brown” and former city employee. She claimed 20 percent of federal HOME funds flowing through BURA between 2006 and 2019 went to projects Pawlik had a part in.
Sinatra Real Estate was also a Brown administration favorite, according to Watson. She described the selling and re-selling of land for apartment buildings on Jefferson Avenue that profited Sinatra and Pawlik to the tune of nearly $600,000 in state money, even before anything was even built. BURA granted the project $500,000 in federal HOME funds after Watson was fired.
She also cited the Northland Corridor project, which involved multiple properties on the city’s East Side. The developer was the Buffalo Urban Development Corp., or BUDC, on whose board of directors Mehaffy and Brown both served. BURA — controlled by Brown and Mehaffy — awarded the project $4 million in federal block grant money, and allowed work to begin on the project “even before an application was submitted and a HUD environmental review took place.”
Michael DeGeorge, spokesperson for Mayor Byron Brown, told Investigative Post the lawsuit did not end as a result of a settlement with the federal government. He provided no further comment on the allegations.
The city’s use of federal anti-poverty funds and BURA itself have been scrutinized before. In 2009, 2011, and 2014, federal investigators identified numerous misuses of federal money. In 2017 — as Watson was calling foul on the Brown administration’s practices from within — a group of East Side residents asked HUD to investigate the city and BURA yet again.
Two weeks before Watson filed her false claims lawsuit, federal agents raided BURA’s offices on the third floor of City Hall, carting out boxes of records. It is unclear whether that raid was related to Watson’s complaint, though several sources told Investigative Post it is improbable, given the timing.
The False Claims Act entitles the government to collect damages up to three times the amount it was defrauded, and to levy civil penalties between $5,000 and $10,000 for each act of fraud.
In addition to those penalties, Watson asked the court to order the City of Buffalo from “harassing or discriminating against” her.