2 indicted in Smithville housing authority investigation - KYTX CBS 19 Tyler Longview News Weather Sports

BASTROP – A Bastrop County grand jury today issued felony indictments against a mother and son for conspiring to defraud taxpayer-funded public housing programs. Both defendants face felony theft and organized criminal activity charges as a result of their scheme to financially benefit themselves and their family members at the expense of taxpayers and low-income Texans.

Defendant Brenda D. Schroeder, 62, of Smithville, administered the Smithville Housing Authority and served as its executive director from 2006 through May 2012. Schroeder is charged with aggregated first-degree felony theft by a public servant (more than $250,000), submitting fraudulent credit applications and engaging in organized criminal activity. The Smithville Housing Authority's board of directors formally terminated Schroeder's employment on July 1, 2012.

Schroeder's son, defendant Wendall B. Bennett, 43, of Newcastle in Young County, was indicted on felony theft and engaging in organized criminal activity charges. An investigation by the Attorney General's Office revealed that Schroeder illegally disbursed federal housing payments to Bennett by falsely claiming he was a landlord and therefore eligible to receive federal subsidies as a low-income housing provider. The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General referred the case to the Texas Attorney General's Special Investigations Unit in April 2012.

In addition to illegally diverting federal funds to Bennett, Schroeder also illegally falsified documents, forged signatures and violated federal Section 8 housing regulations in order to secure taxpayer-subsidized housing for at least two dozen of her relatives. Evidence obtained by the State indicates that some of Schroeder's relatives actually received illegal benefits as both tenants and landlords. Schroeder's illicit scheme not only defrauded the taxpayers, it also harmed economically disadvantaged Smithville residents who were relegated to the housing authority's waiting list because the defendants' family members were consuming all of the available funding for low-income housing.

The State's investigation also revealed that Schroeder paid Bennett a regular salary as landlord and groundskeeper even though he lived almost 300 miles away from Smithville.

When operating lawfully under ordinary circumstances, the Smithville Housing Authority's public assistance program disburses benefits through a voucher system. Under this approach, individuals seeking public assistance contact the Smithville Housing Authority to apply for benefits. When funding for a rental voucher becomes available, the applicant independently leases a rental property of their choosing. HUD then distributes federal funding to the local housing authority, which pays the landlord directly. Under this system, the low-income beneficiary does not receive a disbursement from HUD because those dollars are instead forwarded directly to the landlord.

In an effort to circumvent HUD's fraud prevention controls, investigators found that Schroeder falsely classified Bennett and other relatives as landlords so that they were eligible to receive the federal payments based upon their purported provision of housing to non-existent renters. To further obscure their illicit scheme, the defendants rotated their family members in and out of the system so that federal disbursements would vary from month-to-month. The scope of the defendants' fraud was so vast that they arranged for relatives who lived as far away as the Wichita Falls area and Needville southwest of Houston to be included on Smithville's public housing rolls.

Assistant Attorney General David Glickler will prosecute the case for the State. A first-degree felony offense can result in five to 99 years or life in prison and a fine not to exceed $10,000.