District rent control officials failed to detect the widespread evasion of city rent control law that was an essential ingredient of the Federal Housing Administration mortgage fraud that hit Washington during the 1980s.

Once city officials became aware of a problem, they still took no action, according to the top rent control administrator at that time, who said in a recent interview that he had no legal authority to act.

John Hampton, city rent administrator at the time the fraud occurred, said he knew that investigators from the U.S. Attorney's Office had examined District rent control files as part of the federal probe of the fraud, but he said the findings were not reported to him and he did not pursue the matter.

He said he later became aware of the consequences of the speculators' actions, but that District law requires investigation of improper activity only if a tenant complains. No action was taken, he said, because he had "no legal authority" to act.

"The District's rent control law does not regulate the sale {of rental properties} and there was no reason to go behind the sale" to determine whether landlords were fraudulently evading rent control, said Hampton, who now is deputy director for research and information for the District's Housing and Community Development Department.

The Department of Housing and Urban Development also failed to detect the fraud until it had damaged several city neighborhoods. Ultimately, however, that agency's inspector general launched the investigation that led to at least 36 successful prosecutions for violations of federal law.

It is "hard to believe" that District officials did not know that investors were abusing loopholes in the rent control law, said Alfred A. DelliBovi, current HUD under secretary. "It's their problem and their fault if they don't monitor buildings being decontrolled," he said. "Those who run the rent control program should have detected it."

The current rent administrator, Howard Lewis, who has held the job since 1987, said he would have investigated the situation if he had been told about it by federal officials. He said that it is difficult for his small staff to investigate suspicions of wrongdoing because it must process 15,000 regulatory documents each year without benefit of computerization.

Lewis said that tenants who were victimized by landlords who purchased their buildings fraudulently may be eligible for reimbursement and treble damages if it can be proved that their rent increases were illegal. "I . . . will take great interest in examining the list {of affected properties} and referring it for investigation," Lewis said.

Lewis criticized HUD officials and federal prosecutors for not informing District officials of what they had learned.

The rent control law, which is administered by the D.C. Rental Accommodations Office, limits rent increases according to a complex formula based on the consumer price index for the Washington area. Under District law, people who have a financial interest in five or more rental units must abide by the rent-increase limits.

Landlords who own four or fewer units can seek exemption from rent control by filing a claim; typically, exemptions are granted immediately. The exemption was intended to minimize the rent control bureaucracy and protect retired "mom and pop" landlords who supplement their pensions with rental income.

In 1977, when the four-or-fewer exemption was added to the 1974 law by the D.C. Council, critics predicted it would be used to evade rent control. Apparently, they were right.

Several large landlords who have pleaded guilty in the FHA real estate fraud cases have admitted to federal officials that they placed newly purchased small apartment buildings in the names of fake buyers or family members to avoid rent limits, according to court documents.

Real estate investor Ndidi Obaze, for example, admitted in federal court documents that he had a financial interest in several four-unit apartment buildings, including 1629, 1631, 1633 and 1635 West Virginia Ave. NE and 2004 Rosedale St. NE.

In at least three cases, despite Obaze's ownership of the properties, rent control exemptions were sought and obtained in the names of Gladys Obaze (1629 West Virginia), Sylvanus Obaze (1631 West Virginia) and Patricia Obaze (1635 West Virginia). With the exemptions in hand, rents at the apartments were raised. Between 1980 and 1987, monthly rents for the modest, one-bedroom apartments increased from about $125 to $313. At least four tenants subsequently were evicted from the properties, with the landlord-tenant court paperwork processed under the various Obaze names.

Staff researcher Bridget Roeber contributed to this report.