NEW ORLEANS - Federal investigators on
Monday raided the downtown offices of a city-chartered nonprofit agency
accused of abusing a federally financed program that was created to
clean up houses damaged by Hurricane Katrina.

The agents carted large boxes of files away from the agency, which had been hired by the city to run the $3.6 million program.

The
program was intended to help elderly and poor New Orleans residents gut
and board up their storm-damaged houses, and to mow their lawns.

Instead,
as a series of news reports by WWL-TV and the New Orleans daily, The
Times-Picayune, have revealed, money appears to have gone to
politically connected contractors who did little or no work on the
houses. In some instances, the contractors were paid even when it was
volunteers who did the gutting work, according to the reports.

The
scandal has dominated headlines and television news reports here for
weeks. Mayor C. Ray Nagin at first angrily denied that there were
problems at the nonprofit agency, the New Orleans Affordable
Homeownership Corporation, created in 1989 and known as NOAH. Last
Thursday, however, Mr. Nagin, summoned to appear before the City
Council, acknowledged for the first time that there were
"discrepancies" in the agency's records and said some houses supposedly
worked on had in fact not been.

The next day, the United States
attorney here, Jim Letten, said a federal investigation into NOAH was
under way. It was an unusual statement for a federal prosecutor. Mr.
Letten made it, he said in a brief interview Monday, because he thought
it would have "value in terms of public confidence," a remark
underscoring the weakened level of public trust in municipal
undertakings here.

On Monday, agents of the Federal Bureau of Investigation and the Department of Housing and Urban Development
appeared at an office building opposite City Hall to seize the agency's
records. Robert W. Brown, a member of NOAH's part-time oversight board,
said in an interview that he had been subpoenaed for additional
documents and to appear before a federal grand jury on Aug. 21. Mr.
Brown added, however, that he had had no involvement with the housing
remediation program.

City Attorney Penya Moses-Fields said in a
statement last week, "The city's position has always been to be fully
cooperative with any investigative body, and we are continuing to do so
as it relates to NOAH." But Ms. Moses-Fields said it would be
inappropriate to comment on any subpoenas. Russ M. Herman, the City
Council's lawyer, was quoted by The Associated Press as saying on
Monday that he believed all seven members of the Council had been
subpoenaed.

Stacy S. Head, a councilwoman who first uncovered problems at the agency, said the management lapses were "horrible."

"Unfortunately," Ms. Head said, "it appears the city gives money to agencies without much oversight."

In
the case of NOAH, she said, "it appears that, one, contractors who had
close connections to people in decision-making positions received
contracts they wouldn't have gotten otherwise, and two, they got money
for work that wasn't done."

One contractor was Mr. Nagin's brother-in-law. The mayor has said he was not aware of his brother-in-law's being hired.

According
to Ms. Head's initial research, based on a list of the houses on NOAH's
remediation list, a large number were owned not by the elderly or the
poor but by limited liability corporations. Many others were not even
owner-occupied, she said. When she presented that information to city
officials, she said, they "basically rebuked my inquiry."

Several
housing activists, however, undertook their own research, uncovering
many more houses where no work had been done. Two activists, Karen
Gadbois and Sarah Lewis, shared their findings with a television
reporter, and the scandal grew.

• 21 Reconstruction