The U.S. Justice Department’s sentencing memorandum for John Emil Kruse and his wife Elaine provided some information on the feds investigation of the federally funded Section 1602, but gives no hint of whether more people will be charged.

The memo does make sure to clarify that the charges against the Kruses are not because they failed to finish their 8-unit project, but for converting federal money for their personal and business use, thereby depriving the “proud people” of American Samoa from these federal benefits.

The U.S. Treasury Department allocated $30.77 million under Section 1602 for the territory and the program was administered by the Development Bank of American Samoa (DBAS), which awarded sub-grants to 132 proposed low-income housing projects.

Most of the projects were relatively small; the largest proposed project called for sixteen units. The total number of Section 1602 housing units in the territory was 512, the memo said, adding that more than a few projects called for the construction of just one or two units.

Since Section 1602’s arrival in American Samoa, “DBAS has been subjected to criticism for its handling of the program. These criticisms vary — DBAS has been accused of everything from favoritism in its awarding of contracts to cutting corners on oversight,” prosecutors said.

They describes DBAS’ administration of the program as “less-than-stellar” saying that “DBAS could have done better”.

A cadre of DBAS employees supervised the program, under the guidance of then-DBAS president — and current Governor of American Samoa — Lolo Moliga, it says, adding that “despite these criticisms, most Section 1602 projects were completed without incident."

According to prosecutors it was in 2012 that the American Samoa Economic Stimulus and Recovery Office (ASESRO) performed an audit which addressed problems in a number of Section 1602 projects.

“The audit found that projects were often unfinished, non-compliant with low-income housing rules, or occupied by their owners,” said prosecutors, and noted that the Federal Bureau of Investigation and the U.S. Treasury’s Office of Inspector General  launched a joint investigation into allegations of theft and fraud related to the program. (No mention in the memo as to when the probe was launched.)

A federal grand jury was convened in Washington D.C. and subsequently opened an investigation into the program, said prosecutors, but didn’t provide any other details, such as when the grand jury convened and if the panel is still working.

Prosecutors also say that while the defendants focus their sentencing memos on their failure to finish the Project, such failure alone would not be the subject of criminal charges. Indeed, other Section 1602 sub-awardees who did not complete their projects have not been charged with criminal offenses.

Furthermore, DBAS has commenced recapture lawsuits against such individuals, including the defendants, but federal government will not pursue criminal charges based solely on the failure to complete a project with a Section 1602 grant.

“It is the conversion of federal monies to personal gain — i.e. the embezzlement of a Section 1602 grant — which is at issue in this case, not the non-completion of the defendants’ project,” they argued. “The Project, useless and far from completion, is not the crime; at this point, it stands merely as a permanent monument to the defendants’ greed, reminding American Samoans of the criminal conduct which the defendants undertook in lieu of legitimate activity.”

Prosecutors also argued that the defendants’ criminal activity undermined confidence in local and national government, and deprived the people of American Samoa of badly needed low-income housing. “Their crime is far more serious than an unfinished building,” they declared.

And here’s what prosecutors have to say about American Samoa: it’s the “poorest place where the American flag flies” and based on 1999 data by the U.S. Government Accountability Officer, an estimated “61% of the territory’s residents live in poverty”.

Additionally, American Samoa relies heavily on federal funds as a source of income and due to the territory’s geographic remoteness, virtually everything must be brought in from elsewhere, leading to a relatively high cost of living.

“A high poverty rate coupled with expensive living conditions has created a harsh economic reality in American Samoa, and this is expressed in the dire need for affordable housing,” said prosectors, who noted that defendants did not merely steal hundreds of thousands of dollars from a faceless government bureaucracy in faraway Washington, D.C.

“They robbed the residents of American Samoa — United States nationals living in difficult economic conditions — of desperately needed affordable housing. They did so without making an honest effort to build that housing, instead using their 1602 sub-grant to further their own personal and commercial interests,” they said and pointed out that the “defendants are part of the elite of American Samoa’s society”.

Additionally, the federal Pre Sentence Report indicates that “defendants are far from destitute, especially when compared to the majority of their fellow American Samoans.”

Prosecutors acknowledged that the vast majority of recipients finished their projects with the allotted DBAS sub-grants.

“The few who did not manage to finish their project generally made a good-faith attempt to do so,” said prosecutors, adding that the defendants’ “crime contributed to the corrosion of public trust in government in American Samoa.”

“American Samoa is a proud place, and rightfully so,” prosecutors declared. “American Samoa has the highest per capita rate of voluntary enlistment in the United States Armed Forces.”

“Despite its remoteness, American Samoa retains deep ties with the United States, while preserving the unique cultural heritage of its ancestors. Its residents deserve better than the defendants’ demeaning assumption that they could steal with impunity,” according to the government and sought a sentence of 24 months for both defendants.

“...deterrence of future criminal conduct in American Samoa is a critical reason to impose a 24-month sentence. Individuals in American Samoa must know that, despite the lack of a federal district court and significant distance from the continental United States, criminal conduct which negatively affects taxpayers and the United States Treasury will be taken seriously,” it says.

The defendants, whose defense attorneys are court appointed, are to be in Washington D.C. no later than Wednesday this week for sentencing on Thursday. Their travel and hotel expenses are paid for by the federal government.