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The manager of a Buffalo housing rehabilitation program targeted for criticism by federal auditors is lashing back by saying, through a lawyer, that "only minor peccadilloes" existed in the program.

"The audit report greatly exaggerates program deficiencies" at the Buffalo Neighborhood Revitalization Corp.'s City Properties Rehabilitation program, attorney David J. Seeger said in one of two letters criticizing the federal audit and The Buffalo News coverage of the audit. "Indeed, the BNRC program was highly successful and productive and responsible."

Seeger, who represents the revitalization corporation's residential rehabilitation manager, Michael L. Muscarella, noted that the program returned a large number of renovated houses to the city's tax rolls.

"No waste of homeowner, private or taxpayer funds has occurred," he said.

Seeger's comments stand in sharp contrast to those of auditors at the U.S. Department of Housing and Urban Development's Office of Inspector General. A. Paul Kane, district inspector general for audit, said there is no way to tell how much money was wasted in the program.

The audit criticized the city for acquiring some houses that were beyond repair and will have to be demolished. In addition, auditors said the city spent too lavishly on some of the houses -- installing track lighting and a fireplace in one of them -- and failed to follow federal guidelines requiring competitive bidding on the program.

After The News renewed its request to discuss the audit with Muscarella, Seeger said his client would not discuss the matter and was intending to pursue legal action against The News in response to its coverage.

"Mr. Muscarella did not run the program and bears no responsibility for alleged waste of public or private monies," Seeger wrote in the first of his two letters to The News.

Muscarella worked under Deputy Housing Commissioner Anthony M. Marconi, who Mayor
Masiello fired last February. Masiello said the rehab program's problems were not the reason for Marconi's firing.

Jay B. Duderwick, the new president of the Buffalo Neighborhood Revitalization Corp., said there were problems with the program's structure at the time of the audit.

"He (Muscarella) was in charge of the program, but he was led to believe by Mr. Marconi that he'd have a staff," Duderwick said. "But essentially, it was a one-man program."

According to a job description provided by the city's Division of Neighborhoods, the residential rehabilitation manager "ensures that the developments operate in a cost-effective manner while providing satisfactory housing to the residents." Duties "include, but are not limited to, planning, design, financing and marketing."

The inspector general also criticized Muscarella for personally collecting $3,050 in inappropriate inspection fees. Those fees, which the mortgage company backing the housing rehab program paid by check to Muscarella, were never cashed and were eventually returned.

"Our review disclosed that the inspections were part of the residential rehabilitation manager's normal duties as an employee of the BNRC; therefore the official should not have received additional payment for the inspections," auditors wrote.

According to the job description, the residential rehabilitation manager "inspects construction activities for compliance with approved materials and specifications and coordinates inspections with city code compliance inspectors."

In his letter to The News, Seeger stressed that Muscarella never actually received any money for those inspection fees. Instead, Muscarella collected the 47 checks -- which were dated from May 16 through Nov. 1, 1996 -- and did not cash them.

Both Duderwick and Tom DeMartino, who is an attorney for the BNRC, said those checks remained in the program's offices until Muscarella gave them to Seeger for a couple of days last year.

Seeger returned the checks to the city after Allen H. DeLisle, the city's director of community development, asked for them. DeMartino said the city, not Muscarella or his attorney, should have the checks.

"My legal opinion was that they were the property of the BNRC," DeMartino said. The city then returned the uncashed checks to Bank United Mortgage of Houston, which was involved in financing the housing rehab program.

Masiello put the program under DeLisle's and Duderwick's supervision late last year, after the HUD auditors began uncovering problems in the program.

Duderwick noted that while only five houses were sold under the program at the time of the audit, 22 have been sold now.

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