HUD sued over Katrina fund diversion

Mike Stuckey Senior news editor • Profile • E-mail

A group of public interest lawyers sued the U.S. Department of Housing and Urban Development on Wednesday, seeking to stop the state of Mississippi from diverting $600 million in federal hurricane-relief funds intended for housing to a massive expansion of the state’s port facilities.

Separately, msnbc.com has obtained a memo from a HUD official that demonstrates concern within the agency over waivers granted by HUD officials and the fund diversions, and raises the specter that they could violate civil rights laws.

The diversion of the grant money is "a tragic misdirection of funds,” said attorney James Wodarski of the Boston-based firm of Mintz Levin. Wodarski is leading a team of lawyers from the Mississippi Center for Justice, the Lawyers’ Committee for Civil Rights Under Law, the Mississippi chapter of the NAACP and Gulf Coast Fair Housing Center that filed the lawsuit.

The groups are vocal critics of how Mississippi has spent much of the $5.5 billion in HUD Community Development Block Grant funds it received in the wake of Hurricane Katrina, which devastated the region in 2005. They hope that if they can persuade the U.S. District Court in Washington to order HUD to review the use of the grant money currently destined for the port, the funding will be returned to its original purpose — rebuilding housing in Mississippi’s hurricane zone.

Blasting Barbour
The plaintiffs maintain that Mississippi Gov. Haley Barbour, a former lobbyist, White House aide and head of the Republican National Committee, is using the federal money to pay for a huge makeover to state port facilities at Gulfport that was planned before the hurricane struck. They point out that spending $600 million on the port, which already received insurance money for damage it suffered in the storm, cannot be considered hurricane-related repair because it is  more than four times the $127.5 million the port was valued at before Katrina.

Barbour and other state officials counter that expansion of the Gulf’s third-busiest port is a vital economic development program that will create new jobs and generate tax revenue. They say the state has allocated nearly $3 billion to programs focused on replacing housing — from grants to homeowners, to programs for small landlords to repair their buildings and direct funding of new public housing units. “When all of these programs have been implemented, the state will not only have replaced lost housing stock, but will have created more affordable housing in South Mississippi than existed before Katrina,” the state said in its recent “Three Years After Katrina” report.

In an e-mail statement to msnbc.com, Barbour maintained that some of the diverted community development money was always intended for port expansion.

“The port project has been part of the recovery plan detailed in November 2005 to the Congress, administration, Mississippi Legislature and news media," he said. "It’s always been in the plan. Restoration of the Port of Gulfport is critical to recovery of the Gulf Coast from the worst natural disaster in American history.”

But, as msnbc.com previously reported, Barbour testified at a Senate committee hearing in March 2006 that the grant money was mostly committed to housing in seeking new funds for  the port. A year later, Gray Swoope, executive director of the Mississippi Development Authority, did not mention port funding in testimony before Congress about the use of grant funds, just a few months before the new port master plan was adopted.