What did you think when you saw the millions of dollars in kickback money . It was amazing. I mean, this is a huge amount of money. If you werent following the money, how do you know that the lowincome housing tax credit is working . Narrator tonight, frontline and npr take a hard look at poverty, politics and profit. Frontlinis made possible by contributions to your pbs station from viewers like you. Thank you. And by the corporation for public broadcasting. Major support for frontliis provided by the john d. And catherine t. Macarthur foundation. Committed to building a more just, verdant, and peaceful world. More information is available at macfound. Org. Additional support is provided by ford foundation, working with visionaries on the front lines of social change worldwide at fordfoundation. Org. The park foundation. Dedicated to heightening Public Awareness of critical issues. The john and Helen Glessner family trust. Supporting trustworthy journalism that informs and inspires. And by the frontline journalism fund. With major support from jon and jo ann hagler. And Additional Support from the charina endowment fund. Laura sullivan i never imagined that a story about lowincome housing would lead me here, to an upscale resort in costa rica. Los suenos is a dream world, with fancy condominiums and private villas, a firstclass hotel, golf course, and its own private marina. Id come here because our investigation into the money spent to house the poor had taken us into a hidden world of secret Bank Accounts and shell companies. But im getting ahead of myself. To understand what brought me to costa rica, i have to take you back nine months earlier, to where our story begins. As our city grows, the number of Affordable Homes is doing the opposite. Its shrinking. Some are calling it the worst affordability crisis in u. S. History. Sullivan last year, we started spending time in dallas, in neighborhoods like this, where making rent has been getting more and more difficult. The struggle is real out here. I mean, you know, this is, this is every day for me. Itll wear you down, you know, because youre seeing it every day. Peoples rent checks have just been going up and up and up, and i dont see any end in sight. These are people who have jobs and children. How yall doing . Theyre saying that no matter how hard they work, they still cant find enough here to put a roof over their head. Well, this is the eviction. All right. Sullivan there are more than 40,000 evictions in dallas every year. Shes supposed to pay 400. Sullivan an estimated 2 1 2 million across the country. Yeah, get, get a couple of more people here. You can go ahead and start moving this. Sullivan over the past decade, average Household Incomes have declined while rents have been rising. And thats pushing more and more people, like carla powers, to the edge. So what happened to you today . I was at work. I work two fulltime jobs. Im trying. Its a struggle, and its real and its, and its hard. Seriously, yes. Sullivan how hard has it been to find housing out here that you can afford . Horrible, its freaking horrible. And thats how i ended up in this slum. I didnt want to be here. I didnt want to be here. I dont have horrible credit, you know what im saying . But its just hard. Its just hard. Sullivan like millions of americans, carla and her family are caught in the long wake of the 2008 financial crisis. What happened when we hit the foreclosure crisis is that all of a sudden, millions of families lost their homes. They became renters, competing in the same rental housing market, and at the same time, incomes were going down even if you could keep your job. And that led to a rental affordability crisis in this country thats as bad as its ever been in our history. Did he come with a dolly . We have over 11 million renter households that are paying more than half of their income towards their rent each month. That means that they are, you know, one emergency, one brokendown car, one illness, one missed day of work away from not being able to pay the rent. They are really at risk of losing their homes altogether and becoming homeless. Sullivan every year, the federal government spends nearly 50 billion to help the poor with rent and get them on the road to better lives. Over the past year, weve been investigating the two key programs that try to do that to see whether theyre working the way they should and why so many people are struggling. In dallas, and elsewhere, we kept hearing how the largest of the programs, section 8 vouchers, covers just a fraction of those in need. Section 8 applications. Thousands of residents have been fighting for a chance to get Public Housing assistance. Sullivan when the vouchers are handed out, the response is overwhelming. Chaos this morning in the parking lot as tempers flared over the citys plan to hand out the section 8 applications. There are some people been here since sunday morning, monday morning. Its ridiculous. Sullivan the voucher pays the difference between the monthly rent and what renters can afford. More than two million households use them, but wait lists can be years long. Well, how big a deal is it to get a section 8 voucher . Only one in every four households that are eligible for and in need of Housing Assistance get it. It was a dangerous scene. Thousands of people hoping for section 8 vouchers ran for a spot in line. Theyre hoping to win what is essentially a housing lottery. So its the 25 who have the vouchers that are the lucky ones within this kind of a system. Sullivan we wanted to see how section 8 would work out for three of the lucky ones in dallas, which, like many cities, has a tight rental market. They should pick up that mess. Sullivan farryn giles and her son have been staying at her exhusbands apartment for the past two months. We got to walk kind of fast, too, because youre not going to get to school in time for breakfast. You got to keep up. Sullivan shes held a variety of jobs since moving to dallas seven years ago. Ive been a cashier, ive been a stocker, ive been a caregiver, ive been a welder, ive done clerical work, stuff like that. Oh, mom made cupcakes last night. Sullivan but even when working, she says its been hard to find a place she can afford. What did you think when you got the voucher . I thought. This is freaking awesome i felt like it was an opportunity for me to gain more stability. This area in general i would like to get away from. Sullivan what is it about getting out of this neighborhood . Work. Work. I want to live near a place where there are better job opportunities. You know, it took me six years to get my voucher, but i got it. You can best believe im going to utilize it. Yeah, hi, do you guys accept the section 8 vouchers . Sullivan Linda Higgins says one unexpected event upended her life, leaving her so distraught that keeping jobs has been difficult. I was working at jc penney, and my son died in 2002. I started living with different people in the family, not able to afford to pay rent. Sullivan it sounds like a section 8 voucher means a lot to you. It does. I havent had a place of my own for, since 2002. Sullivan is it scary that it can all fall apart . Thats why im heading up to the shelter. Sullivan i met Cartis Harris in a walmart parking lot in south dallas. Cartis has seven kids and was living in a shelter, but before that, she says they often lived here, in her van. Sullivan you slept in here with seven kids for a couple of months . It wasnt, like, all the time, all of them, but yeah. At some point in time, we was. Like, in between, like, trying to find a motel, or other peoples houses to sleep in. If it wasnt, like, panning out, we would, you know, go find somewhere to park and sleep in my van. Sullivan what do you say to the kids . They understand . Because they know. Yeah. Sullivan they know youre trying. Do you have an area you dont want to live in . The hood, like, the hood. Sullivan why not . Why . Because i dont feel like dealing with it. I dont want nobody breaking into my house or, like, trying to beat up my children or break into my car. You get into it with somebody, you got to deal with that. Sullivan you want out. Yeah. Like, im tired of it. Like, why wouldnt i want better . In fact, i went from an apartment to living in my van to living in a shelter, like. Yeah, im not going to go backwards. Id rather go forward, you know . You going to press the button, carla . Youre going to press the button for mama. Sullivan we kept in touch with farryn, linda, and cartis as they tried to find a place that would take their vouchers. They have up to 90 days or theyll lose them. And what theyre hoping for is one of the main goals of the section 8 Voucher Program the chance to move to neighborhoods with better opportunities. Researchers from harvard and stanford took a look at this and found conclusively, for the younger kids, theyre significantly more likely to finish school, go to college, finish college, get better jobs, earn more money, not have teen pregnancies, not get involved in crime and drugs, and the younger the kids are when the families make the move, the bigger the impact. Zip code is destiny. Thats no joke. Sullivan one of the hottest zip codes in dallas is the northern suburb of mckinney. Three years ago, it was ranked the best place to live in america by money magazine. Today, the area is booming. New apartments are popping up everywhere. I was meeting a developer whos trying to bring more lowincome housing to the community. Hi sullivan hi, im laura. Hi, Terri Anderson. Sullivan Terri Anderson has spent her career in the field of Affordable Housing. Please, if you could put this on. Sullivan shes building an apartment complex here, between mckinney and the neighboring city of frisco. Can we see it . Yes, lets go. Sullivan all right, so tell me, whats this going to look like . Therell be two very large buildings and. Sullivan andersons plan is to build 132 apartments. Its classa construction and were really excited about it. Sullivan some marketrate, some at reduced or affordable rates, and some units set aside for section 8 vouchers. But her plan hit a roadblock with the Frisco City Council. We thought we were going to have support, and instead, the city actually called a public hearing for our property, and about 250 angry residents showed up. Sullivan some residents voiced concerns about traffic, others about overcrowding in their schools. Hi, nice to meet you. Sullivan and some were just opposed to having lowincome housing in their neighborhood. Well, why did you pick this spot . Nicole humphrey is a local opponent of the development. What is your concern when it comes to section 8 and lowincome . The lifestyle i feel, like, that is, goes with section 8 is usually working single, maybe single moms or people who are struggling to keep their heads above water. And its not. I feel so bad saying that, but its not. Its just not people who are, i guess, of the same class as us, which sounds bad, but i dont mean that in a bad way. Sullivan some people would say, you know, look, they maybe not, have not had the opportunities, their kids are not going to have the opportunities that your kids are going to have in this neighborhood. Can they share in that . The, the problem with that is, i hear a lot of the unfair, of, oh, we havent been given this or that, or we havent been afforded things that you might have been afforded. I dont look at multimillionaires and think, why dont i have a yacht . Why dont i have a private jet . Its, its a mindset, i feel like. Sullivan do you think that you maybe are stereotyping the folks. Oh, i totally am, 100 . Its not. It works both ways. I, im definitely not a racist and im not bigot, but i, i think i hold a little bit of a stigma against people who are different. We dont want nomads. We dont want people who dont have roots. I just dont want that to be what my community is about. Sullivan a vote on whether to help anderson get the money she needed was brought before the Frisco City Council in march of 2015. Sullivan the opponents won the day. attendees applaud sullivan but even without local support, anderson was able to line up loans and grants to move forward with construction. Then, more problems. Our superintendent has been threatened, issued a warning, a criminal trespass warning. The police have actually blocked our entrance. Sullivan have you ever seen anything like this in the years that youve been developing . I have not. Theres an issue with some building on the easement and the right of way. Sullivan frisco city Officials Say they support Affordable Housing and arent trying to stop andersons project. They just want her to comply with the citys building rules. Anderson complained to the department of housing and urban development, which is now investigating whether her project is being discriminated against. It is a concerted effort to shut down development of a property they do not want in their neighborhood. Move move sullivan two years ago, just miles away. Get on the ground. Sullivan a confrontation between Mckinney Police and black youth went viral. That girl right there, running. Sullivan the incident became another flashpoint over policing and race. yelling sullivan but behind this confrontation were tensions over housing. What was happening at that pool party was, you had white patrons of the pool shouting at black patrons, go back to your section 8 housing. Then they started verbally abusing, telling me i need to go back to my section 8 home and stuff like that. On your face yelling sullivan the Mckinney Pool Party was a reminder of how inseparable housing and race have been, and of federal policies that divided our cities more than 80 years ago. In 1933, the Public Works Administration began to build Public Housing. And the important thing to know about is that they built segregated Public Housing in cities across the country that had never known segregation before. Sullivan then, in the 1940s and 50s, the government bankrolled a mass migration to the suburbs. The federal Housing Administration subsidized singlefamily homes outside central cities for white families only. Twothirds of the people in our country now live in a metropolitan area. Mostly the growth is in the suburbs. At the same time, industry left urban areas. So poverty became even more concentrated, making lowincome segregated neighborhoods even more desperate economically than they had been previously. Are we going to sock it to them now . protesters respond are you ready . Sullivan by the 1960s, the segregation and desperation boiled over. chanting race riots swept the country. yelling, sirens blaring segregation was something that was eating us away. Most of the focus of civil rights work had been in the south. But by the mid 60s, we were making that turn towards the north, and in the north, segregation was the issue, housing segregation in particular. We want a strong fair housing bill, and thats the only thing thats going to make this stop. people cheering and so its no mistake that the Fair Housing Act, which had been stalled in congress, is passed just days after Martin Luther king is assassinated. Sullivan the act outlawed all discrimination in housing and went further. The Fair Housing Act was now saying, were going to aggressively and affirmatively look for ways to create opportunities for integrated housing and to encourage local jurisdictions to do so. Sullivan within years, as conditions in Public Housing deteriorated, new alternatives were enacted, like section 8 vouchers. So the section 8 Voucher Program was created to continue assisting lowincome people with their housing cost needs, right . So a household could take their voucher and move to a higherincome, higheropportunity neighborhood. Sullivan vouchers would help some of the poor pay their rent. But as old Public Housing projects came down, new affordable options were needed. And by the early 1990s, the government had launched a new construction program, relying on the private sector. It was called the lowincome housing tax credit. And so the idea of the lowincome housing tax credit emerged as a way to create a new Publicprivate Partnership that would allow more Affordable Housing to get built. Sullivan the program would spur billions of dollars in private investment to remake the image of Public Housing. It would also open the door to a whole new set of players and politics. So you both were interested in the same thing. Back in dallas, i met developers who were among the earliest to see opportunity in the new Tax Credit Program. Together, brian and Cheryl Potashnik became some of the most successful Affordable Housing developers in the country. I think at one time we were ranked in the top ten and the largest in the state. Sullivan they got their start in the neglected neighborhoods of south dallas, areas where the demand for Affordable Housing was greatest and the Tax Credit Program was set up to help. The potashniks showed me how the program works. The i. R. S. Gives billions in tax credits to the states. Then the states award the credits to developers. And this is you guys. Yes. Sullivan who sell them for cash to investors, mostly banks. The developers use the cash to help build apartment buildings. And because taxpayer money pays for most of it, they can charge the lower rents that are required. Its like when you buy a house, you have to put a down payment. Thats your equity. Thats. The tax credits give us the equity to build the apartment complex. Sullivan could you build these properties without tax credits . No. No. And it wouldnt be possible to build the quality of housing without the tax credits. Dallas mayor laura miller cut the ribbon. Sullivan by the early 2000s, the potashniks were making millions off their developments and looking for new opportunities beyond the inner cities. You know, we didnt have a very scientific process for how we found land. Wed get in the car and drive around. But we started driving north and, and west instead of south. Sullivan and what did you find when you got north . We found a good site. Sullivan that site was in the northern suburb of mckinney. What kind of pushback did they get . Just, uh. Hell, no, you cant come. Sullivan many argued that there was already enough lowincome housing in the community. But betsy julian, a leading dallas civil rights attorney, says she heard other reasons at a public hearing in mckinney in 2003. I went to the ladies room, and if you want to hear really ugly racial stuff, go into the ladies room at one of those hearings. Sullivan what were they saying . Oh, im not going to repeat what they were saying, but they were talking about how the tax credit deal would have to have section 8. Because thats what they really were afraid of, sullivan the potashniks tried to get around the opposition and negotiate a political deal. We had hired a consultant who was a state senator, who was also a lawyer. And a consultant. And a consultant, and he got us an appointment with the lieutenant governor, but then we were told that we needed to hire another consultant, but we couldnt know who that consultant was. Sullivan you had to hire somebody whose name you were not allowed to know. To lobby the governor. We would get calls from consultants. Look, i know the governor, i know the senator, i know this one, and i can help you here. I mean, it, just rampant. Sullivan its just, pay me this amount and dont worry about how i do it. Right, dont ask. Sullivan dont ask. Their deal fell through. And their Development Plans to build in other communities that didnt want lowincome housing generated broader opposition. Soon, texas began requiring letters of support from local and state officials to help get tax credit deals done. What did that mean for the projects, when you had to get a letter of support . It basically meant that if the neighborhood didnt want it, that property was not going to get built. Sullivan the letters of support gave politicians more power to determine the fate of developments, so the potashniks doubled down to try to get the political buyin they needed. Developer Brian Potashnik has the mayors ear when it comes to meeting the citys need for 30,000 Affordable Housing units. So i found myself spending a lot of time at city hall talking to a lot of politicians. It all began years ago. Sullivan getting those letters of support became a highstakes political game, and in 2007, 14 people, including the potashniks, were charged in a bribery and Corruption Scandal, the largest in Dallas City Hall history. Experts say it suggests the potashniks funneled bribes through a conspiracy for apartment construction approval. Sullivan it was a corruption case. You were accused of being in a paytoplay situation. Why did you do it . If you want to use that term, then it becomes about access, and especially when the system itself is set up so that you need those people to approve what it is that youre doing in order to do business. There was a lot of pressure coming from a lot of different places. Certain decisions were made, certain things happened, and. We should have walked away at some point, from that pressure. We, and we should have sacrificed those, those projects that were in question and just gone in a different direction. But, you know, we didnt. Sullivan they pleaded guilty to conspiracy to bribe local officials. Brian potashnik dashed away after receiving his sentence of 14 months in prison. His wife, cheryl, was given two years of probation as this Dallas City HallCorruption Scandal draws to a close. Sullivan nearly 20 states now rely on letters of support to help decide which projects to give tax credits to. Civil rights lawyers, mike daniel and betsy julien, say thats a major reason why so many projects end up in lowincome neighborhoods. Why were the tax credit projects being put in lowincome areas . They were being put there because its easier to do. There wont be any opposition to it and you dont have everybody mad at you. You get your deals done. Sullivan after examining the Tax Credit Program, they calculated that more than 90 of family developments in dallas had been built in highpoverty areas over a 25year period. They filed a lawsuit against the state that went all the way to the Supreme Court and helped set standards for fair housing nationwide. And in 2014, they sued the department of treasury, claiming the Tax Credit Program perpetuates racial segregation. Our case was about the fact that Tax Credit Properties were only going into lowincome minority areas in the city of dallas. And we were looking to get tax credit housing into some higheropportunity areas, as well, which were predominantly whiter areas. Sullivan the case is still ongoing, but it highlights the challenges to Affordable Housing around the country and raises questions about whether the Tax Credit Program is working as its supposed to. Thank you. Last november, i went to chicago for an annual gathering of the tax credit industry. It takes a lot of players bankers, brokers, law firms, consultants, developers to put Affordable Housing deals together. Over the past 30 years, housing tax credits have helped build more than 2 1 2 million affordable units. The Program Costs about 8 billion a year, an amount thats been growing. But that hasnt kept up with the need for Affordable Housing, and that lack of housing makes for a booming market. Stacie nekus is a Vice President for one of the largest brokers, or syndicators. Well, the Affordable Housing market has been very robust, and so investors really like it. Sullivan why do the investors like it so much . Well, i think youre giving back to the community, but youre also able to get a good aftertax yield. Sullivan hows business right now . Very strong. Yeah, demand is off the charts. Sullivan the program is often described as a winwin. Poor people get good quality Affordable Housing and the private sector makes money. Rick lazio, a former congressman, now lobbies for the industry. People ought not to be getting rich off of this, but they ought to be incentivized to put their capital at risk. And to feel as though they can get a reasonable return. Sullivan is this the most Efficient Program . This 100 the most efficient way to do it. It gets the most amount of units built which is what is required. You have a lot of different eyes on it. Because again you have the public and private partnerships so everyones looking at it. Sullivan we were looking at it too. With so many people struggling to find housing, we wanted to see how well the programs been working. We analyzed available data about the primary tax credits given out over the last 20 years. And heres what we found from 1997 through 2014, the number of units produced has fallen from more than 70,000 to less than 59,000. But the program is costing taxpayers 66 more in tax credits, thats after adjusting for inflation. The estimated rise in Construction Costs only accounts for about half of that. We asked representatives of the tax credit industry about what we found, and reached out to more than 20 top investor and syndicator firms. None would agree to an interview. But in written responses, the industry said that several factors have affected tax credit production, such as the loss of other federal funding, or soft subsidies, and the increased costs of trying to help the poorest renters. They also claim the business is less profitable than it used to be. So these are just our numbers. We took our findings to the group that represents the state housing agencies that oversee the program. I think there are good reasons that the programs produced fewer units. And some of those is that were trying to produce more units in areas of opportunity; areas that are perhaps more expensive. Were also trying to do things like ending homelessness. So the lowincome housing Tax Credit Program has a 30year proven track record and its produced good housing thats very well run. Sullivan but not everyone is convinced. Republican senator Charles Grassley is investigating the program. My suspicion is that theres a lot of things wrong with the program. It may not be serving all of the people it should serve. There may be people in the middle getting more than they should. But you would think that this would be something the irs would be looking into, because they have to police to see whether the money is serving the purpose its supposed to serve. Sullivan and are they policing . No, they arent. Theres only been seven audits in 29 years. Well, if you arent following the money, how do you know that the lowincome housing tax credit is working . Sullivan thats what we were doing and that took us to miami, where we found a troubling story about the Tax Credit Program. This is it. This is nice. I met up with michael cox. He spent 15 years as an Affordable Housing developer. He showed me one of his prized projects, labre place. Hey mike. How are you . Sullivan hi. Its a 25 Million Development with 90 units. Half of them for formerly homeless, like mike fleunery. You would never know where the people came from in this building. Sullivan where did they come from . Well, like myself, they was just about to be on the street. Sullivan south florida is one of the tightest housing markets in the country, and developments like labre are much in demand. Its approximately two to three years waiting list. Sullivan to get into the building . Yes. Sullivan it has a community room, a small gym. This is a great room its own laundry. We leave it open 24 hours because of the residents that work. Supportive housing actually saves taxpayers money every year because it costs more to have people on the streets using Services Like emergency rooms, police. And so in the long run it actually will save taxpayers money over the lifetime of this project. Sullivan but there was more behind the story of labre. Cox had a partner in the project, the Carlisle Development group. Carlisle was founded by lloyd boggio, a leader in floridas Affordable Housing industry. And it was run by his partners son, matt greer. Together carlisle and coxs company, biscayne housing, became a powerhouse. Between 2006 and 2009, the two companies had more than a quarter billion dollars under development. Biscayne housing went from nothing to the number 12 Affordable Housing developer in the country. Sullivan wow. And, and carlisle became the, the number three developer in the country. Sullivan in the country at that time. And, it was exciting. Sullivan but the partnership had problems. Cox says he suspected carlisle was cooking the books. He discovered documents about secret accounts. They showed about 6 million in Construction Funds that had been kept secret. Sullivan how could they have 6 million in extra funds . I had no idea. Sullivan carlisles secret accounts would soon get the attention of federal prosecutors. This was a Carlisle Development that involved lloyd boggio and matthew greer. Sullivan assistant u. S. Attorney Michael Sherwin has spent nearly five years investigating the tax credit industry in south florida. As sherwin and his team dug into carlisle and biscaynes construction contracts, they discovered a kickback scheme. This is the actual contract. Sullivan this is how it worked on one carlisle deal. Florida housing wants to know how much is it going to cost you, carlisle, to actually build this thing . They tell Florida Housing, weve signed this contract and its going to cost 14,866,000 to build. Now, theres an email between carlisle and the contractor and they negotiated this the day before that were only going to pay you, contractor, 12,750,000 to build; were telling the state were going to pay you 14,866,000. Sullivan one day later. Exactly. Sullivan so they knew a day before they submitted that, that the actual Construction Cost was 2 million less. Correct. Sullivan carlisle used the inflated cost estimate to win more tax credits from the florida finance agency. Its not a very complicated scheme. Its a lie for money. The contract is inflated. So this lie enabled them to get excess of 2 million just on this one deal. Sullivan by the time they were done, investigators discovered the two companies stole 34 million from 14 projects. What did you think when you saw millions of dollars in kickback money . It was amazing. This is a huge amount of money. And this is all on top of the tens of millions that was made in legitimate fees and profits. This is the apartment. Sullivan and prosecutors discovered something else. Nearly 2 million had been stolen from labre, the apartments for the homeless, and michael cox was a part of it. They were extorting me, saying we will kill these projects unless you agree to this kickback scheme. Unfortunately, this is where good people make bad decisions. Michael cox does not go to Florida Housing. Michael cox does not go to the fbi. Michael cox says nothing and accepts the money. Sullivan you spent the next several years taking the money. And a lot of people are going to wonder why you did that. Why did you take it . I convinced myself that this was okay and that i was building amazing projects in the community. I went from fighting monsters to becoming a monster. Sullivan i tried to reach the other partners in these developments. Hi, mr. Boggio. But none would talk. I wanted to ask them about where that 34 million went. Some of it was tracked back to boggios personal accounts. One was called caesar and cleopatra. Caesar and cleopatra, those are the names of his two dogs. Over 12 million flowed through that one account. Sullivan through that account that was named after his dogs. Correct. Correct. Sullivan other kickbacks to boggio, greer and cox came through a cutout called sshh construction. This is a fake construction company; they set up sshh construction. Sullivan its literally sshh construction like sshh, like be quiet construction. It was just used to hide the money. And prosecutors traced some of the money back to boggios house. I believe his house is valued at 11 to 14 million his mansion in coconut grove. He liked to live a good lifestyle. Sullivan ultimately, boggio, greer and cox pleaded guilty to crimes related to the kickback scheme. A scheme that had gone unnoticed by state housing officials for years. These housing agencies dont have a lot of funding. They dont have a lot of manpower. Looking at Florida Housing, its a small office with a limited staff that is in charge of managing hundreds of millions of dollars in state, local and federal money. Sullivan so the irs is relying on the housing authorities to ferret out problems and corruption. Correct. Sullivan in tallahassee, i went to see the man who was running the agency that oversees the Tax Credit Program in florida. What was your reaction when you first heard about this investigation . Um, certainly disappointment that anybody would, you know, would do that with programs that, you know, are designed to serve folks in need. Sullivan the prosecutor in the case described the agency as a bit outmatched when it came to developers with millions of dollars and lots of resources. Do you think thats accurate . Outmatched. Most of the folks that we deal with are good folks that do good work, you know. Presumably thats similar in all states. Thats why youve got few foreclosures and, you know, and relatively few scandalous incidents. Sullivan im trying to figure out if there are so few scandalous incidents because theyre not happening or because theyre so difficult to catch. Theres a lot of financial risk to a lot of folks, you know, for playing that game. Sullivan so you feel like this is kind of a oneoff, or a bad apple . Yes. Absolutely. Sullivan some of the officials at Florida Housing say that this was a onetime thing, this was an aberration. Do you think thats true . No, i dont think its true. Well see what the future holds, but theres a lot that needs to be looked at and theres a lot of people that need to be held accountable for whats been going on and whats to come, i think, in the future. Sullivan soon, the head of the Florida Housing agency we interviewed would resign in scandal. And as we kept looking into the Tax Credit Program here, we heard about allegations involving another major Affordable Housing developer. My name is david deutch and im one of the cofounders of pinnacle housing group. Sullivan we discovered a Company Called daxc was owned by the principals of pinnacle. And bring something new to Affordable Housing. Sullivan a source in the Development Industry told us that daxc was being used to hide extra profits from pinnacle projects. So one of the other ones that were looking at is this daxc company, which is, has the same address as another really large florida developer, pinnacle, down here in florida. Okay. Sullivan weve been told, through a source, that this was a company that didnt actually do any work. I cant comment on this, i dont know. Maybe later, but not now. Sullivan because you know this one. I cant say i know it, but its probably best if i dont say anything about this. Sullivan turns out, sherwin did know about pinnacle and daxc. Three months after our interview, he charged daxc with stealing federal tax credits. The company signed an agreement with prosecutors, admitting it inflated costs by more than 4 million on four projects. It returned the money and paid a 1 million fine. Under the deal the charges will be dropped if the Company Continues to cooperate with prosecutors. But we still had questions about daxc. Its definitely the name of a company, i agree. Im just wondering if its possible that daxc is a person in costa rica . Thats the rumor. The leadership in the company was going down there. And thats what took our investigation to costa rica to see what pinnacle was doing there. Hola. Como estas . Buscando daxc jimenez. Later that night, just outside the los suenos resort, we found daxc at a beachside restaurant. Gracias. Yes, i am daxc. Sullivan hola. Me llamo laura. Laura, nice to meet you. Sullivan daxc said he wasnt a Pinnacle Business partner, he said he was just a guide and a driver, and that they named the Shell Company after him. They named a company after you. Yes. They told me that. Sullivan they told you. Yes, they told me but, excuse me, i didnt believe. Sullivan you didnt . No, i didnt. Sullivan he said he had no idea what the company had done. Let me show you what happened. But he did know the partners had been coming to los suenos for years. One of the principal managers. Principal managers, right. Sullivan and we found out why. They have a costa rican Company Called casa oasis. That company turned out to be a property right here in the secluded area of los suenos. At the top of the resort, i found casa oasis. Its their multimillion dollar private villa where they take vacations. And, we learned, have taken bankers and syndicators. Last week, floridas Housing Agency went to court to ban pinnacle from Affordable Housing projects for 2 years, saying the company had used daxc to engage in fraud. Pinnacle declined our request for an interview, but told us it would contest the ban. And said it did not violate any state rules. Three developers in florida were charged with stealing from the program. How can the Housing Finance authorities make sure that thats not happening in their backyards, in their states . We really encourage our publics, people who are out in the community, people who are working with developers, to really come to us if they see issues that they think are not right with a project. We just encourage people that if they see something, say something. Sullivan okay. The other things that we do we have architects who get the final say when the cost certifications are filed; to check the reasonableness of those costs. Theres not a lot of documentation provided to the housing agencies and the underwriters other than basic Building Block documents. The application, contracts, affirmation letters. So, its a really a program of trust. Sullivan did you just call an 8 billion tax program a program of trust . Yes. It is a program of trust. Sullivan the u. S. Attorney in florida called this a program of trust. Do you think thats true . This is a program where communities, states, developers and investors work together. And certainly, there is an element of trust in any development project. I think the vast majority of projects really come through pretty well. Sullivan the tax credit industry told us that it supports more stringent auditing, and doesnt tolerate fraud of any kind. The developments are phenomenal and people need it. Theres no need to extract extra money. Its like killing the golden goose. Thats what theyre doing. Sullivan how widespread do you think the corruption is . Look, i dont have the metrics to tell you, but i know that this fraud doesnt just reside in south florida. Theres too much money involved and, you know, based upon information weve looked at, this fraud exists in other jurisdictions. Sullivan sherwin says hes now investigating other national developers, as well as bankers and syndicators. Last december, the carlisle executives were sentenced lloyd boggio received nearly five years in prison, matt greer three years in prison, michael cox had to repay the millions he stole and received probation because of his work with the homeless and cooperation with prosecutors. When costs are inflated, the number of Housing Units actually produced decreases, and we are building less housing. I get it. Im not against you making a profit, and this case isnt a case against capitalism or rich people. But this is money that was going to build lowincome housing in florida. And it didnt. The money that they took could have built hundreds of additional extra units, especially at this time. Look, theres a housing crisis across the united states. Sullivan and you were hurting the Homeless People on the street because you were taking money that belonged to them. Absolutely. We ended up really, really hurting the people we serve, and betraying their trust. Sullivan after digging into the Tax Credit Program, this much is clear there are a number of reasons why its producing less Affordable Housing and costing more. But, without strong oversight of the billions flowing through the private sector, its hard to know exactly where its all going. Youve got a bunch of developers, and youve got people in between. Nobodys saying they shouldnt benefit some but are they doing it in the most efficient way to provide the best housing for low income people . Thats what we as policy makers are trying to get out of the Government Accountability office. Should this program be continued under the same circumstances, or to what extent should it be changed . Sullivan we wanted to ask officials at the Treasury Department about the Tax Credit Program it runs. They wouldnt agree to an interview. And officials at the department of housing and urban development, which runs the section 8 Voucher Program, also declined. Hi. Sullivan we returned to dallas one last time. Can you spend five minutes talking . It had been three months since wed met the women who had just received section 8 vouchers. Theyre talking about moving you up . Farryn giles had started a new job in north dallas. Hearing talks about my third promotion. Sullivan and had hoped to move to a neighborhood near work. But she wasnt having any luck using her voucher anywhere. Ive been to oakcliff, ive been to south dallas, ive been to pleasant grove. Ive been way down south. Nobody wants my voucher. Sullivan in january, farryn ran out of time to use the voucher and gave it up, but she did find a place in dallas Public Housing. Weve been following families down in dallas whove really struggled to use these vouchers. Why are they having such a hard time . Well, this is a good example of why the affordability challenges that we have are a crisis. There is some discrimination against families who want to use these vouchers. We need to figure out ways to make sure that those families, when they have a voucher, can be successful in using it. But vouchers arent a silver bullet. We need a housing policy that focuses on building more Affordable Housing. Thats why the tax credit is important. So that more housing is built and that its more affordable. Application fee is how much, sir . Sullivan after searching for months, Linda Higgins was unable to find a place that would take her voucher. Shes back on the section 8 waiting list again. Where do you think you would be if you werent here in your uncles house . Oh gosh, probably id be going from shelter to shelter, to, just, who knows. Its really not good. And i dont want to see the voucher, section 8, go away. You know, i know we have a new president and i dont want to see it go away, because well have more people out in the street than we do now. This is really a very, very dire emergency. For whole swaths of the population in this country, they are lifelong renters, and yet we dont talk about them, and we dont talk about the challenges they face. And it almost is behind the veil. Its just simply not part of our national conversation. What happens to the millions of people who need to be able to find affordable rental housing to raise their families. Sullivan when i caught up with Cartis Harris, she and her kids had gotten out of the shelter. Hi but they still werent in a place of their own. They were temporarily staying at a friends apartment. Cartis had been given extra time to use her voucher, but had given up on the prospect of moving out of her neighborhood. Maybe its meant for me to live in the hood. Sullivan why do you think that . But like in the hood, i guess im acceptable, so like they dont, you know, they dont discriminate basically. Theyre more open. Sullivan because everybody else is judging you. Yes. Sullivan as we were talking there was an interruption. And life on the margins suddenly became even more difficult for her. engine starting they just towed my car away. What . No, for real for real. Sullivan shed fallen behind on payments, and her van was repossessed. Oh my god, yes. They was rigging my car up. My purse was in there and everything. They were taking my car away. Oh my god. Why they tow it for . cause i aint pay my car note in about two months. Sullivan without her van, Cartis Harris has lost her last safety net a place to sleep when she and her kids have nowhere else to go. Like millions of americans, she is still trying to find a place she can afford to live. Here comes the federal government, saying that they own the land and everything on it is theirs. But my dad said, hell, no. Narrator how one familys fight against the government. With an armed standoff. This became sort of this rallying cry for antigovernment extremists everywhere. Narrator . Sparked a movement. Antigovernment patriot youth. Bundy is in federal custody now. Narrator and what it means. The bundys defied three court orders and the rule of the law. Go to pbs. Org frontline to explore more of our investigation with our partners at npr. So these are just our numbers. I think there are good reasons that the programs produced fewer units. And are they policing . No they arent, theres only been seven audits in 29 years. Then visit our watch page, where you can view more than 200 frontline documentaries, connect to the Frontline Community on facebook and twitter, and sign up for our newsletter at pbs. Org frontline. Frontlinis made possible by contributions to your pbs station from viewers like you. Thank you. And by the corporation for public broadcasting. Major support for frontliis provided by the john d. And catherine t. Macarthur foundation. Committed to building a more just, verdant, and peaceful world. More information is available at macfound. Org. Additional support is provided by ford foundation, working with visionaries on the front lines of social change worldwide at fordfoundation. Org. The park foundation. Dedicated to heightening Public Awareness of critical issues. The john and Helen Glessner family trust. Supporting trustworthy journalism that informs and inspires. And by the frontline journalism fund. With major support from jon and jo ann hagler. And Additional Support from the charina endowment fund. Captioned by Media Access Group at wgbh access. Wgbh. Org for more on this and other frontline programs, visit our website at pbs. Org frontline. Frontlinepoverty, politics and profit is available on dvd. To order, visit shoppbs. Org or call 1800playpbs. Frontline is also available for download on itunes. Youre watching pbs. Youve said youd favor middleclass tax cuts. The front line is just up here. Thats where the river. She took me out to those wetlands. I think were off to a great start. Female announcer funding for relocation, arkansas aftermath of incarceration has been provided by additional funding by [wind blowing] we were so scared after pearl harbor that we let our fears get the better of us. Sometimes. Thats the ultimate victory in an act of terror. Theyits what they do to your mind and your heart. [stirring orchestral music]