SHIPROCK — Dozens of new homes are crumbling in Shiprock as the Navajo Nation continues its probe into a $9 million construction project gone awry.

Shiprock officials and representatives of the Navajo Housing Authority met this week to compare notes on the Shiprock Nonprofit Housing and Development Corporation, which abandoned the 91-home construction project nearly three years ago.

About 50 homes were built, and they stand empty, vandalized and deteriorating near the existing Navajo Housing Authority community in south Shiprock. Their cheerful red, blue and green roofs are a stark contrast to the reality of the situation.

"It was a scam," said Leonard Anthony, Shiprock delegate to the Navajo Tribal Council. "They scammed the Navajo Nation out of $9 million, and we got sucked up really good."

The latest accusations of financial mismanagement come on the heels of two additional failed business endeavors on the Navajo Nation.

BCDS Manufacturing and Diné Poultry Products both went under last year, costing the Navajo Nation a combined $3.5 million when two banks called the Navajo-backed loans.

Construction on the Shiprock housing project began in December 2004 after the Navajo Housing Authority provided federal Housing and Urban Development funding for the project, housing CEO Aneva Yazzie said.

The Navajo Housing Authority halted construction two years later after learning that a subcontractor, Mesquite, Nev.-based Lodgebuilder, was facing a massive lawsuit.

Fort Defiance Housing Corporation, a recipient of HUD funds, filed a lawsuit against Lodgebuilder owner Bill Aubrey, accusing the man of bribery, embezzlement and theft from Indian tribal organizations.

Aubrey and former Navajo housing CEO Chester Carl were suspended from construction projects, including the one in Shiprock, in October 2006 and the Navajo Housing Authority issued a stop-work order shortly thereafter, Yazzie said.

Carl and Aubrey were indicted in May by a federal grand jury on conspiracy, bribery and embezzlement charges relating to the HUD program. The indictment alleges that between June 2002 and November 2006, Aubrey bribed Carl with nearly $200,000 in casino gaming chips in exchange for favorable treatment, according to data provided by the federal Department of Justice.

Between 2002 and 2003, Lodgebuilder benefited from several contracts signed by Carl, totaling more than $38 million, for low-income housing projects in Chilchinbeto, Ariz., Springstead and Shiprock, the indictment states.

The indictment also states Carl wrongfully permitted Aubrey and Lodgebuilder to use Fort Defiance Housing Corporation as a pass-through to receive HUD funds, about $2.2 million of which was supposed to go to vendors, subcontractors and other housing expenses. Instead, Aubrey used the money for personal expenses, including gambling, purchase of furs and jewelry and costs associated with thoroughbred racehorse training.

Aubrey and Carl pleaded not guilty in May and were released on bond pending trial.

But the legal jumble translates into continued delays locally for families seeking low-income housing, Yazzie said.

At the heart of the controversy is a land site lease the Bureau of Indian Affairs issued to Nick Tinnin, property manager of the Shiprock Nonprofit Housing and Development Corporation, and a former Farmington businessman and state representative.

Navajo Housing Authority and Shiprock officials, however, have run into roadblocks in securing a transfer of the land site lease.

"We told Nick Tinnin that once he provided evidence to us that he'd ended the agreement with Chester Carl and Bill Aubrey then we could go forward," Yazzie said. "It has not been rectified. We are trying to unwind the legal process so we can start over."

Phone calls seeking comment at Tinnin's home in Kaysville, Utah, were not returned.

If the Nation is successful in assuming the land site lease, construction may resume as early as January, Anthony said.

In the meantime, the deteriorating homes have become an eyesore for Shiprock, Anthony said. Shiprock officials also are concerned about liability issues with the abandoned buildings, which are located near Tse' Bit' Ai' Middle School.

"Who is liable should anything happen there?" Anthony said. "There is vandalism, some of the buildings have been burned out, there could be gang meetings going on. There's nothing being done, and just talking about it isn't working."

Phone calls and e-mails seeking comment from the federal HUD office were not returned.

Alysa Landry: alandry@daily-times.com