Federal Judge Unseals Suit That Asks: Did Dallas Screw HUD Out of Hundreds of Millions?

On June 10, 2010, I wrote a column for the newspaper about an official complaint brought to the U.S. Department of Housing and Urban Development (HUD) by two Dallas developers alleging a decades-old pattern of racial discrimination and fraud by the city of Dallas, the county and other local entities against the federal government. Just now that complaint has re-emerged publicly in the form of a federal "false claims" lawsuit seeking what could be billions of dollars in damages.

U.S. District Judge Reed O'Connor unsealed the file on this suit -- which follows -- in an order he signed two days ago, even though his own administrator and the U.S. District Clerk were still insisting yesterday the suit was under seal.

Weird. But take a look at this deal, and you can see why even the judge might treat it as a rogue nuclear device.

The lawsuit, developed by the nation's top false claims law firm in D.C., goes straight at the issue of race in the city's history, claiming that officials here have taken hundreds of millions in federal dollars designed to reduce segregation while using the money to achieve the opposite end.

I sent a copy of it to the city, in case they still thought it was sealed too, and asked them to comment. Haven't heard back yet.

It has immediate national implications. If Dallas takes a bullet on this, cities and counties all over the country will probably come into the same cross-hairs.

The complaint is 61 pages of dense reading but not entirely without some chuckles. For example, in filing legally required documentation of local housing patterns by race in local cities and communities over the years, local officials repeatedly forgot to include two communities.

You only get one try at this. In trying to show the feds that racial segregation here isn't all that bad and no great cause for alarm and go ahead and just send us the check, which two Dallas County cities do you think they just oopsed?

You got it. University Park and Highland Park. Highland Park, according to the suit, rings in at 97.27 percent white, while University Park is more diverse at 94.33 percent white. Oops oops.

This is a false claims lawsuit by which the plaintiffs, Curtis Lockey and Craig MacKenzie, who filed the suit on behalf of the federal government, can ask for between 15 and 30 percent of any award. Since damages can entail all of the money local governments have collected from Washington for housing programs over decades -- times three -- the numbers can get into the billions quickly.

In 2009, Westchester County paid $62.5 million to an anti-discrimination center to settle a similar lawsuit. In this kind of false claims suit, the plaintiffs act as freelance agents for the government -- citizens seeking to redress a wrong against their government.

With its emphasis on aggressive federal mandates for desegregation, the suit could be strong medicine for the judge, a former Tarrant county prosecutor nominated to the bench in 2007 by John Cornyn and Kay Bailey Hutchison. But rather than kick it, Judge O'Connor signed an order two days ago granting trial.

If this doesn't settle first, that trial will be a very good show.Curtis Lockey et al v City of Dallas et al

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