The contracting practices of the Department of Housing and Urban Development (HUD) are under investigation by at least four federal law enforcement bodies as charges continue to surface about corruption and favoritism in contracting decisions.
In October, National Journal magazine reported that the FBI, a federal grand jury in Washington, and the Justice Department’s Public Integrity Section are exploring whether HUD Secretary Alphonso Jackson lined up a contract at the HUD-controlled Housing Authority of New Orleans (HANO) for William Hairston, a friend of Jackson’s, who received a $485,000 no-bid contract for working at HANO.
But Affordable Housing Finance has learned that the contract at issue in those news reports is a very small part of a larger picture of alleged corruption and favoritism in contracting decisions. Sources within HUD confirmed that HUD Inspector General (IG) Kenneth Donohue has initiated at least two and possibly three new investigations into HUD contracting.
Donohue’s investigations focused on a wide range of allegations about contracting at HUD, including charges of corruption, favoritism, and harassment, according to a HUD staffer and a former HUD contractor, both of whom declined to be named for fear of retaliation.
One of those investigations focused on complaints by O’Neal Technologies, Inc., a Maryland-based information technology company, that HUD unfairly canceled a contract it had. The investigation reportedly has expanded since then to look at other contracting issues.
AHF’s sources said O’Neal had a $600,000 contract with HUD’s Office of Single-Family Housing, but that it was canceled in August. The firm complained to the IG that it was canceled as retaliation for the fact that the contractor complained about HUD officials harassing its employees with abusive language and asking them to perform personal services such as picking up lunch or running errands.
A contract between HUD and O’Neal was signed in December 2006, according to FedSpending.org, which obtains data from the Federal Procurement Data System. The database described the contract as for “single-family program and project management support services.”
AHF’s sources alleged that O’Neal and possibly other firms lost favor with HUD’s Office of Single Family Housing because of competition for work there from Government Technology and Business Services (GTBS), an Alexandria, Va.-based company, which entered the Small Business Administration’s Sec. 8(a) program in 2005. The firm is headed by Adrian Bell, a former HUD employee who worked with the current management of the single family housing programs.
The Federal Procurement Data System shows that two contracts were awarded to GTBS for work on single-family housing programs. One was signed in September and has a total value of $680,444. Another contract was signed in August, with a total value of $299,030. Neither was awarded competitively under federal exemptions from bidding requirements for small, minority-owned firms. Bell did not respond to a request for comment.
Another company that continues to do very well in landing HUD contracts is Drayton, Drayton & Lamar, Inc. (DDL). In June, AHF reported that DDL had received close to $24 million in contracts from 2003 to 2006 from HUD, none of that through competitive bidding. (See “HUD Contracting Out of Control,”)
Newly released data for the first two quarters of fiscal 2007 show the firm received $3.9 million in 19 contract transactions for just those two quarters. Only one transaction, for $166,027, involved any degree of competition, according to the federal database.
AHF’s sources alleged that, despite questions about the quality of the firm’s work by HUD staff, DDL keeps getting contracts because of a personal connection at a high level within HUD. “Everyone knows DDL has a patron. They do lousy work,” said a project manager with a former HUD contractor who is familiar with DDL’s work.
AHF found indications that DDL’s success may be due to a personal relationship between its president, Robert L. Drayton, and Frank L. Davis, the general deputy assistant secretary for housing.
AHF’s source within HUD says Davis is the only HUD official who actively supports continued contracting with DDL. This source and the former HUD contractor both reported that Drayton and Davis regularly meet for drinks at the L’Enfant Plaza Hotel next to the HUD headquarters building.
DDL’s Web site quotes Davis as saying: “We congratulate you and your company for developing and delivering a high quality product to HUD.” Davis received a draft of this story for comment but declined to make a statement.
A former senior HUD executive who did not want to be quoted for fear of retaliation explained that HUD contracts are worded vaguely to allow the contract to be extended or added on to at the discretion of HUD staff. He said this also makes it very hard for anyone to objectively judge whether the contractor has delivered the services for which it has been paid.
In 2006, the IG reviewed one DDL sole-source contract with a minimum value of $196,779 and a maximum value of $1,018,851 for “hospital mortgage insurance management information support.”
The IG looked at the hospital mortgage insurance contract when he investigated the question of whether HUD Secretary Jackson made politics a factor in deciding who should get HUD contracts, as Jackson said publicly was his practice in a Dallas speech in April 2006.
Poor performance alleged
In the IG report on that investigation, dated September 2006, there was a statement by a witness that “DDL continues to get contracts despite its poor performance on several contracts.”
The witness, whose identity was withheld by the IG, told the investigators that DDL “had a relationship” with an unidentified HUD executive within the Office of Departmental Operations and that in 2006, that executive moved to the Office of Housing and DDL started “to get a bunch of contracts over in housing too.” Another source confirmed that DDL started getting contracts from the Office of Housing roughly two years ago.
Davis had been head of the powerful Office of Departmental Operations and Coordination, where he worked closely with Jackson when Jackson was deputy secretary. In that post, Davis had a major role in contracting decisions as a member of the Contract Management Review Board.
Despite the fact that he is a career employee with no housing experience, Davis moved to the Office of Housing roughly two years ago, where he is now second in command after Assistant Secretary Brian Montgomery.
According to the IG report, the witness said DDL was “not delivering what they needed to on a contract, but they wanted to get paid. She wouldn’t sign off on the invoices because HUD had not gotten what it was being invoiced for. She stated that she was not going to lie, cheat, or steal for them when they tried to get money for work they didn’t do.”
Roy L. Scales, DDL senior vice president, responded to the IG report and the allegations contained in this article, saying “DDL is not the company portrayed by the IG witness” and does quality work. He said DDL “competes for and wins a lot of contracts at HUD and other agencies.” He declined to furnish documentation about the extent of competition for contracts the firm has won or to furnish information on any of the work products DDL has produced for HUD or to give any references from among the firm’s clients.
Jackson’s Stake in HOPE VI Questioned
Alphonso Jackson, Secretary of the U.S. Department of Housing and Urban Development (HUD), holds a stake valued at as much as $500,000 in a company that has been a sponsor of several major public housing redevelopment projects funded by HUD, Affordable Housing Finance has learned.
That secretary’s ties to Atlanta-based Columbia Residential, LLC, appear to create a conflict of interest, said two directors of public housing agencies contacted by AHF.
Although Jackson said he would recuse himself from decisions involving the company, he still supervises and can fire other staffers who actually make HOPE VI grant decisions, noted the directors, who did not want to be identified due to fear of retaliation by HUD. Therefore, his recusal from personal involvement in decisions affecting Columbia Residential provides no assurance that his ownership does not affect decision-making, the directors said.
Nothing has been found to indicate that Jackson actively intervened on Columbia’s behalf with HUD staff who make HOPE VI funding decisions. However, even as the pot of HOPE VI grants is shrinking drastically under the Bush administration, Columbia has been one of the few private developers to do well with HUD-financed public housing redevelopment.
Columbia has been a key player in one major Atlanta public housing redevelopment that was funded after Jackson took office. The firm is the private partner in four projects that are part of McDaniel Glenn, a 44-acre New Urbanist project near the Georgia Capitol building financed with HOPE VI funds.
Columbia is also a part of team that recently won a $127 million competitive contract to redevelop a public housing project in New Orleans that was damaged by Hurricane Katrina.
Jackson owns a stake valued at $250,000 to $500,000 in Columbia, according to his Public Financial Disclosure Reports for 2005 and 2006, which were filed with the U.S. Office of Government Ethics (OGE).
Jackson’s official government disclosure also states that, “pursuant to a partnership separation agreement (Jackson) will receive periodic payments over the next two years for past services (prior to government service) with Columbia Residential, LLC.”
Shortly after taking office as HUD deputy secretary, Jackson signed a letter saying he would “recuse” himself from decisions affecting Columbia. However, decisions about awarding grants and subsidy contracts normally would not reach Jackson’s level.
In addition, Jackson appeared with Columbia President Noel Khalil at the opening of the West Highlands project in Atlanta in June 2004. The OGE did not require that Jackson liquidate his holding in Columbia before he took office over an agency with which Columbia does business. OGE Director Robert Cusick would not respond to a request for comment on why divestiture was not required.
AHF made repeated attempts to contact Columbia Residential but received no response.
In response to AHF’s reporting on this subject, HUD’s public relations staff made the following statement:
“Secretary Jackson was a partner/consultant for Columbia Residential LLC prior to beginning his current Federal service. He was a consultant on two projects. One was in Dallas and the other was in Houston. Jackson followed all legal and ethical obligations on May 1, 2001 when he recused himself from participating personally and substantially in any particular matter that would have a direct and predictable effect on the ability or willingness of Columbia Residential to satisfy its obligations to compensate him for prior service rendered. HUD’s ethics attorneys review Secretary Jackson’s financial disclosure forms on an annual basis and are aware of the partial payment he has received from Columbia Residential. The partial payment received by Secretary Jackson in 2003, and reflected on his financial statement, was for services rendered prior to his employment at HUD. Secretary Jackson’s recusal remains in effect.”