"Everything we ever did was approved by our local HUD officials," Mr. Goodyear said.

"Those transactions took place five years ago, local HUD officials knew all about them, and they never complained until now," he said.

The report said former HUD officials and employees "actively sought and participated in the program as developers, consultants or lender representatives."

He said HUD officials had "put politics ahead of sound policy."

And senior HUD officials say it is unfair to condemn the entire program because of infrequent mistakes.

The waiver "says that the rules and regulations of the public housing law generally don't apply," said Rod Solomon, a senior HUD official.

A senior HUD official said 72,000 families were participating this year, almost three times the number three years ago.

Bill Chong, a HUD official, said, "We are taking a multipronged approach to put a plan in place to insure that social services will continue."

"They were awarded something like a 91, and they deserved a 71," said the former HUD official, who is familiar with the reports.

Empire State officials laid the responsibility for those decisions at the feet of HUD officials.