Housing Agency Spent Thousands of Dollars on Belly Dancers, Luxury Bags

Sandra Henriquez, assistant secretary at the Department of Housing and Urban Development, told ABC News that HUD officials were unaware of the problems in Philadelphia until local newspapers broke the scandal. She added that Greene's problems should not detract from the accomplishments made during his tenure.

"I would say the Philadelphia Housing Authority did a good job. I want to make that a separate conversation, and not overshadowed by whatever someone's personal problems might be," said Henriquez in a Nightline interview.

HUD announced it would launch a forensic audit of the agency in November.

"If we discover during the audit that PHA has inappropriately used taxpayer dollars to fund other such activities at the expense of those greatly in need of housing, HUD will respond to the full extent permitted by law," said Melanie Roussell, a HUD spokeswoman, in a statement.

Longstanding Problems At PHA

Greene had been widely heralded for his leadership in revitalizing many of the city's crime-ridden public housing projects, but former employees and housing residents say that Greene's highly-publicized success masked longstanding internal problems at the agency.

A 2007 lawsuit brought by McKinney exposed deficiencies within the housing authority's program to help low-income families afford safe and sanitary housing in the private rental market.

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In Philadelphia, under the leadership of... View Full Caption

In Philadelphia, under the leadership of former executive director Carl Greene (left), the local housing authority spent $17,000 for a 2006 event, including $1,200 for a troupe of belly dancers. Close

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Her 12-year-old daughter, Ebony Gage, suffered severe brain damage from an asthma attack while living in a home under the program, commonly known as Section 8.

McKinney says that poorly trained housing authority inspectors failed to detect dangerous mold that had built up from years of unrepaired water leaks throughout the house. She says that the housing authority employees handling her case were unresponsive to her pleas for help.

"Nobody cared. The representatives down there, they look at you like, 'Oh well, it's not our problem,'" said McKinney.

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Deposition testimony in the case revealed that several housing inspectors and other Section 8 program employees were largely unaware of the harmful effects of mold.

"They weren't trained on how to identify mold. They didn't know what mold looks like. Many of the inspectors actually say that they didn't know there was testing available to test a home for mold," said Mike Trunk, an attorney for the family.

Philadelphia Housing Authority Paid $9.6 Million

The housing authority settled the case for $9.6 million last May, but did not admit any wrongdoing.

"There were no judicial findings or admissions supporting the allegations," said PHA spokeswoman Nichole Tillman. "PHA continues to be concerned about the health of its residents and goes above and beyond what is legally required. PHA has long had mold inspection and remediation procedures in place."

In another pair of lawsuits filed this fall, former employees and Section 8 landlords claimed that they were coerced into making payments to non-profit "slush funds" set up by Greene and top aides to fund parties and lobbying.

"He had a lot of power. He was able to spend a lot of money in the right places and maintain that power base," said Pileggi, who is among a group of ten former and current employees who say they were demoted or fired after going up against Greene.