A dispute over eligibility for housing assistance has turned into a federal case with competing claims of fraud and civil rights violations.
On the surface, it is one of the stranger federal cases, combining families of Russian immigrants, surveillance video and a reference to gangster Al Capone.
But the lawsuit against the Metropolitan Council over its handling of housing subsidies also provides a rare look at a fight over eligibility for public assistance.
At the center of the bitter dispute is a home-care business run by the daughters of two elderly Russian couples who received low-income rent subsidies from the Met Council. The daughters own the properties their parents rent.
After approving the subsidies for several years, housing officials reversed themselves.
"I can understand them being extremely cautious about this kind of situation," Edward Goetz, a professor specializing in housing policy at the University of Minnesota's Humphrey Institute of Public Affairs. "In this kind of fiscal and political environment, housing authorities are stewards of public funds."
About 6,100 renters participate in the Met Council's rent subsidy program known as Section 8.
In their lawsuit, the daughters and their parents say the Met Council's housing officials stripped them of justified benefits after they helped other Russian immigrants fight challenges to their rent subsidies.
The 62-page complaint filed this week in U.S. District Court in Minneapolis alleges defamation and civil rights violations and says one official launched a "personal crusade through a series of investigations" to ruin the daughters' business.
The official accused of conducting a "crusade" is on leave and unavailable for comment. While not commenting on the specific allegations, the Met Council released a statement saying it is an "excellent steward" of $45 million a year in federal rent subsidies and is "committed to assisting low-income seniors, single people, families and persons with disabilities obtain decent and affordable housing."
Attorneys for the Met Council have asked a federal judge to dismiss the suit.
Lawsuit denies fraud
The lawsuit says housing officials wrongly accused the couples of fraud and demanded repayment of assistance, in one case as much as $39,000 in rent subsidies over six years.
According to the suit, the elderly Russians' incomes from Social Security disability insurance are low enough to qualify them for rent assistance. They also suffer from a variety of ailments -- including dementia and heart conditions -- that qualified them for money to support a second bedroom for medical reasons.
"It's very important," said Mikhail Gurman, 81, in Russian translated by his daughter, Svetlana Barskiy. His room in a Minnetonka condo is outfitted with a mechanical hospital bed and a floor-to-ceiling support pole he uses to get in and out of the bed.
Gurman and his wife, Ester Kruglyak, 76, were approved for a two-bedroom rent subsidy in 2003.
Valeriy Babushkin, 68, and his wife, Svetlana Babushkina, 69, also were approved for a two-bedroom subsidy in 2001. They live in a townhouse in Eden Prairie.
The two couples used the subsidies to help pay rent to Barskiy and to Rada Shevtsov, the daughter of the Eden Prairie couple. The daughters, who live in Savage, own Vicro Home Care Inc., which claims 100 clients, mostly Russian immigrants.
They say the federal subsidies paid $456 and $542 on rents of more than $900 a month. The two-bedroom rent subsidies were renewed every year through 2008.
Rejection, Russian proverb
The suit says that pattern changed after Barskiy and Shevtsov challenged a decision by housing officials to rescind benefits for other Russians. In early 2009, the parents were informed that they no longer qualified for their two-bedroom subsidy.
"They decided to get back at me," Barskiy said. "To let us know, 'Back off.'"
Yet the suit also includes a document from one housing official who said the Met Council tightened its requirements after a federal audit of the rent program in 2007 warned against overpayments.
Barskiy said she fired off a letter criticizing top management at the Met Council and using a Russian proverb to warn that "the fish will rot from the head." She said the agency called the remark abusive.
The lawsuit says a Met Council auditor and other housing officials in 2009 expressed suspicions about the daughters' business. It says officials accused the firm of being "a made-up company" and suggested "its owners were comparable to 'Al Capone.'"
In an interview, Barskiy cited an e-mail that she said she obtained from the Met Council. "Some portions of tax returns are sometimes available ... the IRS got Capone, they can get anybody," read the e-mail. "A skilled investigator might even conduct a false request for services from Vicro and see how that goes."
The lawsuit also accused officials of conducting surveillance of the couples by "lurking in their yards and neighborhoods taking pictures and recording videos of them."
In early 2010, the suit said, housing officials told the couples they were moving to cancel their rental assistance "because you collaborated with or caused Vicro Home Care to submit false documentation." Gurman and his wife continue to get assistance for one bedroom, but the other couple has been cut off entirely.
The couples dispute the fraud claims with letters from doctors. "I am frankly extremely surprised and disappointed that I was not consulted about these needs, and that their children have been accused of fraud," wrote Dr. J. Michael Gonzalez-Campoy, according to the suit.
The dispute contrasts sharply with the more typical problems in low-income housing, said Goetz, of the Humphrey Institute.
"Some go to great lengths to recruit landlords and work so hard to assure them that the residents ... will be the kind of tenants they want to have," he said.
Pat Doyle • 651-673-4504