A city employee accused of living illegally in a state public housing project has been suspended.

Jerome Wallace, a community services specialist in the city's Section 8 housing assistance program, was placed on leave without pay yesterday pending further investigation, Mayor Mufi Hannemann said in an e-mailed statement.

The move came on the day The Advertiser reported that Wallace was indicted by an O'ahu grand jury in October for allegedly defrauding the state's public housing program of more than $20,000 between 1999 and 2007.

"We certainly do not condone and will not tolerate the kind of actions of which Mr. Wallace has been accused," Hannemann said. "Once we learned of the indictment, we took immediate action. Although Mr. Wallace acted outside his position with the city and allegedly did so nearly 10 full years ago, we feel it's important to send the message that this kind of conduct has no place among our employees."

Wallace has pleaded not guilty to the charges.

Because of the nature of the indictment, the city said, Wallace's "presence at the work site is deemed to be detrimental to the proper conduct of the operations of the work place."

Wallace is employed by the city Department of Community Services' Family Self Sufficiency Program, where he helps residents transition out of low-income housing.

A city employee since 1998, he earns between $3,511 and $5,202 a month.

His arrest records show he lives at 1220 'A'ala St., the address of the 151-unit Kalanihuia apartments. The high-rise project for seniors is operated by the Hawai'i Public Housing Authority.

Wallace paid below-market rents because he listed himself as unemployed.

State officials say there are about 9,000 people on the waiting list to get into state low-income housing projects.