HUD Cites Years of Mismanagement and Fraud Risks. Governor Denies Claims
The U.S. Department of Housing and Urban Development has suspended the Virgin Islands Housing Finance Authority (VIHFA) from receiving additional federal funding and barred it from future procurement awards, citing slow disaster-recovery progress, weak financial controls, and the criminal conviction of the agency’s former chief operating officer.
The information was provided by Fox News and the Virgin Islands Consortium.
HUD Deputy Secretary Andrew Hughes issued the suspension in a 13‑page notice to VIHFA official Dayna Clendinen, outlining what the department described as substantial evidence of mismanagement, inadequate fraud safeguards, conflicts of interest and repeated failures to meet federal requirements. VIHFA has 30 days to request a hearing before the suspension becomes final. HUD Secretary Scott Turner said the action took effect immediately.
The suspension targets an agency that has received nearly $2 billion in federal disaster‑recovery funding since Hurricanes Irma and Maria devastated the territory in 2017—an amount HUD calculated as roughly $20,000 per Virgin Islands resident. Yet nine years later, HUD said, many residents still lack permanent housing and reliable electrical service. The department pointed to lingering blue‑tarp roofs and persistent infrastructure failures as evidence that promised recovery has not materialized.
HUD described the pace of recovery as “glacial,” noting that VIHFA has completed only 2 percent of planned single-family rental projects, 16 percent of single-family homeowner projects, and 19 percent of multifamily rental projects. None of the authority’s 329 mitigation projects have been completed. The department also highlighted what it called a “yawning gap” between administrative spending and direct assistance to residents, reporting that VIHFA spent $52.6 million on administrative costs. Its divisions “operate in silos,” limiting communication and the ability to detect fraud.
HUD cited a decade of audits that questioned millions of dollars in costs and identified persistent weaknesses in financial oversight, reporting accuracy and fraud‑risk management. A 2026 audit found that VIHFA had never established a structured fraud‑prevention framework despite managing roughly $1.9 billion in federal recovery funds. The department said VIHFA repeatedly certified to HUD that it had strong financial controls and conflict‑of‑interest safeguards—certifications HUD now says were false.
HUD also relied heavily on the criminal conviction of former VIHFA Chief Operating Officer Darin Richardson, who was sentenced in March to 36 months in prison for bank fraud, money laundering, false statements and criminal conflict of interest. Prosecutors said Richardson accepted $107,000 from a contractor involved in a VIHFA agreement that later increased from $3 million to $4.5 million. HUD said much of the lumber purchased under the contract was left to rot outdoors. The department concluded that Richardson’s conduct alone raised serious questions about VIHFA’s eligibility for future federal funding.
HUD further reported that employees had personal knowledge of suspected fraud, but the authority failed to investigate or escalate the concerns. According to HUD’s summary of a 2023 inspector general probe, division directors were notified of potential fraud and “sat on” the findings, prompting HUD to cite those failures, combined with Richardson’s misconduct, as justification for the immediate suspension.
Secretary Turner, who also serves on the White House Task Force to Eliminate Fraud, said the administration is intensifying oversight of federal grant recipients after several high-profile fraud cases nationwide. He said organizations marked by corruption and mismanagement would no longer be allowed to “squander billions,” and added that HUD intends to be a “faithful steward” of taxpayer dollars.
The suspension of VIHFA comes amid a broader federal anti-fraud campaign that has included the Feeding Our Future prosecution in Minnesota.
VIHFA may request a hearing within 30 days. Without one, the suspension becomes final.
Gov. Albert Bryan Jr. acknowledged receipt of HUD’s suspension letter during his weekly Government House briefing on Monday, calling the action both “a very serious allegation” and “an overreach.” He suggested HUD’s decision was based on inspector‑general findings “completed over two, three years ago,” and said the weaknesses identified in those reports “have been addressed or corrected,” according to the St. Croix Source.
Bryan said he was surprised by the suspension, noting that neither he nor his administration had received any advance warning. He described the tone of HUD’s letter as “very unprofessional” and said the reporting surrounding the suspension appeared “sensationalized.” He questioned whether the action might be politically motivated, adding that he had not met with HUD or FEMA officials during recent visits to Washington “because we don’t have any problems.”
The governor said the administration will appeal the suspension within the 30‑day window and intends to “get to the bottom of what exactly is generating these kinds of harsh motives in the Virgin Islands.” He also said he plans to travel to Washington to speak directly with HUD officials.
When asked whether the suspension affects already‑obligated funds, Bryan said the letter was unclear and that he needed additional information from VIHFA.
