Utah Housing Director Faces Fraud Allegations

The local director of a federal low-income housing program in Salt Lake City has been suspended pending an investigation into allegations of questionable hiring practices and insurance fraud.

Rosemary Kappes was placed on paid leave from the Salt Lake City office of the U.S. Department of Housing and Urban Development on Wednesday. The department and the U.S. attorney’s office will investigate.

Kappes is under scrutiny for keeping her husband on her insurance after the couple divorced and for hiring her son and other relatives of housing authority employees, her attorney Max Wheeler said.

The allegations arose following a HUD audit.

The housing authority’s board has also hired an attorney to conduct a separate investigation, chairman Dave Mansell said.

Wheeler said the insurance issue is a technical problem. Kappes and her husband did divorce, but reconciled within six months.

“Technically, she should have filed the papers taking him off the policy. But their living situation didn’t change,” he said.

Kappes hired her son and the family of other employees because they agreed to conduct inspection work for $50 less per hour than the authority was paying other inspectors, Wheeler said.

HUD does not prohibit the hiring of family members, although the practice requires prior approval, Wheeler said. The amount HUD paid Kappes’ son and others is roughly $20,000, Wheeler said. No one has alleged the work was not done.

“They did the work and then the feds came in and said, ‘This is contrary to our policy.’ So the board decided to pay them out of non-federal funds,” Wheeler said.