The potential class-action lawsuit is the latest problem for the embattled Philadelphia Housing Authority, already the subject of several federal investigations.
Long-celebrated executive director Carl Greene is on leave after the exposure of secret agreements the agency made to pay $900,000 to a string of female employees who accused him of sexual harassment.
Federal prosecutors, along with the FBI and the U.S. Department of Housing and Urban Development, are reviewing the sex payments along with other spending and management practices under Greene.
The sprawling authority gets most of its $345 million budget from HUD.
Former Greene aide Jenelle Scott charged in her lawsuit Wednesday that about 300 employees were coerced to pay up to $130 a year each toward a slush fund to keep their jobs. Most did so through weekly payroll deductions of about $2.50.
Nearly $100,000 collected from 2006 through this year went to the nonprofit Pennsylvania Institute of Affordable Housing Professionals.
From there, some of the untaxed money went to lobby against HUD budget cuts, and to pay for parties, Philadelphia Phillies baseball games, bowling outings and other events, the suit charged.
Greene never made required disclosures to HUD about any lobbying activities, and there's been no accounting of how the money was spent, according to Scott's lawyer.
"Many employees have come forward saying they were coerced to do this. Some employees specifically stated they didn't want it to be taken out anymore, and they continued" to see it taken out, said Michael Pileggi, a former PHA lawyer.
Pileggi himself settled a 2002 whistle-blower suit he filed against the agency after Greene fired him over a city residency requirement that Pileggi called a pretext for the fact he planned to talk with a HUD auditor about the millions of dollars being spent on outside legal fees.
Kirk Dorn, a former agency spokesman listed as president of the nonprofit, did not immediately return a message Thursday. He acknowledged in news interviews this week that the nonprofit engaged in lobbying but called the donations voluntary.
The payments would still raise questions, Pileggi said.
"Even if it's in the employees' control, (there's the) contention the moneys are going to be used for charitable purposes. But if they're going to the personal enrichment of Carl Greene, that's also impermissible," he said.
Scott was fired in 2008 after she fell from Greene's graces and was banished from her headquarters job as his executive assistant to a remote post handling subsidized housing vouchers, her lawsuit said.
"She crossed him and he shipped her out. That's his M.O.," Pileggi said.
Greene's lawyer, Clifford Haines, did not immediately return a phone message. The housing authority had no comment on Scott's lawsuit, a spokeswoman said.
Greene, beset by financial crises and the sexual harassment claims, took medical leave last month to be treated for undisclosed problems. He was due to return Monday, but remains out of sight - and has since sued the city for seeking to fill his job.
The lawsuit seeks $600,000 for the two years remaining on his contract at a minimum.
Board chairman and former mayor John F. Street admits that Greene ran the agency with "an iron fist," even as he reinvigorated the city's public housing stock.
"Our board probably didn't go far enough in having an independent staff to look at some of this stuff," Street told The Associated Press.
Street said he was in the dark until recently about the sexual harassment claims, Greene's tax lien and mortgage problems, and the payroll deductions.
"There was a coercive kind of environment that existed here, and a lot of people were nervous and afraid," Street said.
Greene ordered public housing officers to follow an aide to Street to a suburban New Jersey home several times in December and copy her computer files, The Philadelphia Inquirer recently reported. Greene apparently wanted to know if lawyer Kafi Lindsay lived in Philadelphia and was doing PHA work. She told the newspaper that she lives in the city while her boyfriend lives in New Jersey, and that she did any outside legal work on her own time.
According to Street, the 34-year-old Lindsay helps him handle agency mail, phone calls, meeting preparation and research.
"The board is entitled to have some measure of independence from the executive director," Street said of the unusual arrangement.
Street calls the surveillance "obnoxious and certainly unreasonable," but he doubts it's illegal.