HUD Repeatedly Dismissed Staff Concerns About Contracts

Jackson faced criticism in 2006 after acknowledging that he took note of political loyalties. He bragged in a Dallas speech that he had canceled a contract with a business owner who said he didn't like Bush. "Why should I reward someone who doesn't like the president, so they can use funds to try to campaign against the president?" Jackson said. "Logic says they don't get the contract."

A subsequent investigation by the HUD inspector general uncovered no proof that Jackson had canceled the contract but found some instances in which he had privately urged staff members to help pro-Republican businesses. Federal procurement laws forbid basing decisions on political views.

Jo Baylor, then head of the office of procurement and contracts, testified that Jackson complained about a contractor who openly criticized Bush and that he expressed hostility toward hiring contractors who were Democratic contributors. Jackson's chief of staff, Camille Pierce, and Deputy Secretary Roy Bernardi also said they had heard Jackson tell political appointees to help Republican-owned businesses.

HMBI, of Fort Worth, was led by Republicans with significant HUD experience. Chief executive Maurice Barksdale was an assistant secretary to Reagan-era HUD Secretary Samuel R. Pierce Jr. and became a minor figure in a 1980s political favoritism scandal. Its vice president, Albert Moran, also worked at the agency during the Reagan years.

Listed as having three employees in 2004 when it won its first contract, HMBI has accumulated $282 million in HUD work, all but $18.8 million of it in small-business awards. Former and current contract officials said staff members questioned HMBI's qualifications.

Contract specialist Freeman said she first ran into trouble when she insisted that the company follow procedures and post a required bond. She said her supervisor proposed waiving the requirement. Freeman prevailed, and HMBI posted the money.

Tensions mounted again when Freeman objected to a fifth contract award that HMBI was seeking. She and others at HUD feared that the company could not handle more work. Her bosses did not want HMBI to fail or to trigger a Small Business Administration review of the company's abilities, she said. Freeman opposed her bosses' rule-bending efforts to try to avoid that review. Later, she said, she and another official persuaded Barksdale to withdraw the bid.

"At that point, the top procurement people -- Jo Baylor and Annette Hancock -- decided my services would no longer be needed because I was a pain in their neck," she said. After moving back to the policy job, she retired in 2005.

HUD officials called Freeman a respected expert but said the agency's handling of HMBI contracts was proper. The Government Accountability Office rejected a competitor's allegations that HUD was biased toward HMBI, and six other protests involving the company were rejected.

Questions and phone messages relayed to Barksdale were not returned.

Miami's National Housing Group (NHG), whose employees and their spouses gave $32,500 to Republican candidates, grew from a 10-employee firm with $490,000 in sales in 1997 to a multimillion-dollar HUD contractor by 2003. Since then, it has won HUD contracts worth $50 million to manage multifamily properties in default, with $41 million of that amount closed to any competition.

Before the company's selection, HUD staff members questioned its ability to manage such a sizable project, according to records and interviews. After the company's work began, agency staffers in Atlanta and Fort Worth reported they believed that NHG was billing for unexplained work and breaking rules. Jackson defended the company, telling investigators in 2006 that the criticisms were unfounded.