After Seven Years of Winning Defensive Battles, a Former HUD Official
Puts the Government on the Defensive Over Fraud,
Slush Funds and Stolen Money

by Michael C. Ruppert

(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)

November 6, 2003, 1100 PDT, (FTW) –For more than seven years former Assistant Secretary of Housing Catherine Austin Fitts has fought a defensive battle against orchestrated attempts to silence her, and keep her revelations of fraud and how money works in the federal government a secret from the American public. She has beaten every attempt to destroy her reputation and she has, in that fight, established conclusively that a “qui tam” whistleblower lawsuit filed against her company, along with government seizures of property, records, money and equity were complete fabrications woven from a whole cloth of no substance other than a desire to conceal crimes. No one, not even her closest friends, believed that Fitts would survive the ordeal and fight the government to a standstill. Yet she did. Fitts and her firm, The Hamilton Securities Group, had almost become an object lesson for the axiom that “no good deed goes unpunished”.

A qui tam is a lawsuit that citizens, also referred to as ” relators” or “whistleblowers,” bring on behalf of the federal government against companies or persons whom they allege use government funds fraudulently. Such lawsuits are authorized by the Federal False Claims Acts. Those who file qui tams are allowed to receive a percentage of the money that the government makes on the lawsuit.

Fitts is now preparing to take the field as an attacker rather than a defender, and the private company that started the whole mess in 1996, Ervin & Associates, has reason to be concerned. Fitts and her lawyers have been able to document repeated wrongdoing by the government that Fitts argues was carried out in collaboration with Ervin. This includes efforts to falsify evidence against Hamilton after investigators seized Hamilton’s offices and destroyed software tools and databases allowing communities — through the Internet — to conform to HUD and government data on mortgage and mortgage-backed securities with street level data in their community.

FTW readers have long been familiar with Fitts who served as Assistant Secretary of Housing in the Bush I administration and previously as a Managing Director of the Wall Street investment bank Dillon Read. She is, in our opinion, an economic Michelangelo whose gift is demystifying the way money works, and allowing ordinary people to see just how corrupt the financial system is. In fact, aside from uncovering massive financial fraud when Hamilton served as a HUD consultant in the mid-nineties, perhaps Fitts’ greatest offense was to develop software tools using single black mothers – judged unemployable and untrainable by Washington and New York elites – to bring transparency to the ways that government credit programs worked in local communities.

All government-initiated investigations and actions against Fitts and Hamilton, including criminal investigations by HUD and the Department of Justice, have been dropped resulting in complete exoneration. No criminal or civil charges were ever filed. HUD’s decision to end its continuing investigation of Hamilton occurred in 2001 after the unexpected resignation of the HUD Inspector General, Susan Gaffney, following an expose of the targeting of Fitts by Paul Rodriguez of Insight Magazine.

On October 29, a suit brought by Fitts against Ervin, a HUD contractor that filed the initial civil suit, begins trial in US district court in Washington, DC. In a move considered advantageous to Fitts and her legal team, the original whistleblower suit (which has already been discredited) has been combined into one case with her suit. Early next year, in the US Court of Claims in Washington, a separate legal action filed by Fitts will begin, to secure the return of $2.5 million in cash, proprietary software and property, and the restoration of as much as $200 million in equity and lost work. Then-HUD Secretary Andrew Cuomo cancelled all HUD contracts with Hamilton following Ervin’s unfounded allegations.

Fitts has compiled evidence, and intends to demonstrate in court, that Ervin – a longtime player in unprofitable (for the taxpayers) servicing of defaulted mortgages — has engaged in an unfounded legal persecution of Fitts. While the HUD mortgage sales conducted by Hamilton were widely considered an award-winning example of government reengineering, those who had previously made money on the transfer and servicing of mortgages and properties at below market prices were upset with the more transparent and competitive way of doing business. It seems that Hamilton’s work uncovered some huge slush-fund operations.

Hamilton ( was widely credited for saving $2.2 billion for the FHA Fund at HUD. Hamilton was also praised for helping HUD generate savings by raising recovery rates on HUD-defaulted mortgages from 35% to 70-90% through innovative and highly successful sales of HUD mortgages. Hamilton had been chosen by competitive contract under Secretary Henry Cisneros during the Clinton Administration.

Instead of being rewarding, Fitts’ work and commitment to transparency made her the target of one of the most insidious and unfounded legal persecutions ever known. She has also endured physical harassment, endless audits, surveillance and intimidation of her staff, and was nearly forced into bankruptcy.

The original presiding judge on Ervin’s qui tam suit during the period when a 60 day investigation period was extended under seal for four years, despite no evidence of any wrongdoing, was Judge Stanley Sporkin, former head of the SEC enforcement division and general counsel of the CIA under William Casey in the Reagan Administration. This allowed the government to keep Fitts records and data under absolute control.

The compelling history of Fitts’ work is located at:

Even after complete exoneration Hamilton still has not been paid the monies it is owed, Fitts has sold most of her personal property and still she continues to fight.

Ervin & Associates

Ervin fought hard to keep its unfounded accusations alive after each new exoneration of Fitts and Hamilton, spinning one allegation after another, evolving and adopting numerous conspiracy theories. Still it was unable to produce any evidence of, or witnesses to, any wrongdoing even as the federal government spent hundreds of thousands of dollars to investigate anything Ervin could think of to allege. Ervin also paid substantial legal bills to keep its prosecution alive with ever-diminishing chances of success.

The source of Ervin’s financing for such significant litigation and lobbying effort remains a mystery. In 1998, Secretary Cuomo awarded two Ginnie Mae contracts to Ervin & Associates that, according to HUD generated $825,000 revenues. Secretary Cuomo also approved a $2MM settlement with Ervin in 2000 on parallel litigation despite Ervin’s failure to produce any evidence of wrongdoing. It appears that these contracts and awards effectively subsidized Ervin’s futile efforts to make something stick against Hamilton.

Recent Developments – Follow The Lawyers!

Recent decisions in pre-trial motions denied Ervin’s efforts to bring the qui tam against Catherine Austin Fitts personally, and to claim a portion of the monies owed to Hamilton by the government. Ervin’s qui tam attorney since 2000, Mark Polston, is a former member of the Department of Justice where he worked on qui tam suits. Polston recently withdrew from the case to accept a job in the enforcement area in the Department of Health and Human Services (HHS). He has been replaced by Joseph Hornyak of Sonnenschein, Nath & Rosenthal’s Washington Office.

Sonnenschein’s website markets significant qui tam experience, including one Washington partner who is a former attorney with the Department of Justice specializing in health care fraud claiming 10% of the recoveries for his cases of the “$6 billion in recoveries collected by the Department of Justice under the qui tam provisions of the False Claims Act in the seventeen years since the 1986 amendments to the statute.”

Ervin & Associates was initially represented by Dan Hawke and Wayne Travell of Tucker, Flyer and Lewis. Mr. Hawke is the son of Jerry Hawke, then the Undersecretary of Domestic Finance at the US Treasury, the official responsible for the integrity of the federal credit and accounts. The FHA and Ginnie Mae mortgage finance programs at HUD represent approximately 30% of federal credit programs. Jerry Hawke currently serves as Comptroller of the Currency at the US Treasury where he recently promulgated regulations that would allow national banks to override efforts by state regulators to stop predatory lending practices.

Dan Hawke resigned from the case in 1999 to join SEC enforcement and Travell moved to Venable,

where he continued to represent Ervin & Associates until the qui tam was dropped. Ervin & Associates then filed it independently, represented by Neil Gettnick of Gettnick & Gettnick in NY. Gettnick then withdrew and was replaced by Mr. Polston. It seems even some lawyers don’t want to be involved with a questionable case.

Ervin & Associates and John Ervin are currently represented by Aaron Handelman and Micheal Freije of Eccleston & Wolf.


Hamilton Securities is represented by Michael McManus and Ken Ryan of Drinker Biddle & Reath and Claude Goddard of Wickwire Gavin.

Litigation Documentation: