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HUD Repeatedly Dismissed Staff Concerns About Contracts

By Carol D. Leonnig
Washington Post Staff Writer
Sunday, May 18, 2008

The small Texas property-management company had no experience overseeing hundreds of defaulted homes across the country. It did have two former Reagan administration officials at the helm and warm relations with senior Republican appointees at the federal housing agency.

During a few weeks in 2004, the three-employee company, Harrington, Moran and Barksdale Inc. (HMBI), went from no government work to landing $71 million in contracts with the U.S. Department of Housing and Urban Development to oversee the upkeep and sale of defaulted homes. It had previously managed a handful of apartment buildings and development projects.

The company's meteoric rise -- and HUD's willingness to bend the rules to accommodate it -- surprised veteran agency contracting specialist Gloria Freeman.

"After you've been in the business awhile, you get to know the signs -- 'This is a friend; let's help him out,' " she said in an interview. Not long after Freeman complained to her supervisors, she was asked to return to her previous policy job.

Federal investigators are still sorting through HUD contract awards to friends of Secretary Alphonso Jackson, who resigned last month amid a criminal probe. But some career staff members and agency observers say problems in the agency's contracting process run much deeper than Jackson and involve officials who promoted certain companies while rebuffing concerns about their performance and qualifications.

The contract awards that staff members questioned took place within programs, heavily promoted by Jackson, to help small, minority-owned businesses get a bigger share of the roughly $1 billion in public contracts HUD awards each year. During Jackson's tenure, the proportion of contracts awarded to small black- and Hispanic-owned businesses, including under the Section 8(a) program, rose from 6 percent to nearly 35 percent. The proportion of contracts open to full competition decreased from 71 percent to 33 percent, federal records show.

HUD spokesman Jereon Brown said limiting competition on some contracts was critical to helping "minnows" in the small-business community grow into "whales."

"Nothing is more American than giving the little guy a chance to shine," he said. "The 8(a) program is good for business, good for innovation, good for the agency and, ultimately, good for America."

A Washington Post examination of HUD's contracts shows that HMBI and two other companies won hundreds of millions of dollars in contracts under Jackson while career contracting staff repeatedly raised questions.

A Miami property-management company, National Housing Group, which contributed to President Bush's reelection and other Republican campaigns, won $50 million in contracts from 2003 to 2007. Now, its second in command has been indicted for allegedly falsifying reimbursement requests to HUD. Regional staff members at the agency had expressed concern about the company's small size and inexperience.

Drayton, Drayton & Lamar, of Georgia, is another minority contractor that has recently had significant success in winning HUD work. Through 2002, the company had received almost $1 million in contracts. But since 2003, it has won $35 million in data-technology and information-management contracts at HUD, despite concerns about its performance. Its president has socialized with a HUD official.

Brown said political clout and internal agency connections do not determine contract decisions. "We don't believe any contractor received special treatment. . . . We look at qualifications," he said.

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.

The company got into a payment dispute with HUD that led to the end of Ed Girovasi's 33-year contracting career.

Girovasi was tasked with reviewing an NHG claim for $8 million in payments. He concluded in December 2005 that the firm had exaggerated its claim and instead owed HUD $250,000, records show. He was reassigned to a policy job weeks later, although agency spokesman Brown said Girovasi took the job voluntarily.

The dispute simmered for another six months. Girovasi's successor reached the same conclusion, and HUD rejected the company's claim.

Girovasi, who retired a year after his transfer, declined to comment. He told investigators in 2006 that "the high-level interest in NHG was peculiar and caused a delay in issuing a final decision on the claim."

This year, after a series of complaints, NHG has no HUD contracts. In February, company principal Wynee Joyner was charged with falsifying claims for HUD reimbursement.

Brown said the firm's contracts were properly awarded, but he added that "not all contractors perform as well as expected."

NHG, which has sued HUD for unpaid claims, did not return calls seeking comment. Joyner's attorney declined to comment.

The contracting success of Drayton, Drayton & Lamar (DDL) fit a similar pattern. Since 2003, it has won $35 million in information-management contracts. In the previous years, it had received just under $1 million in HUD work.

When the inspector general investigated Jackson in 2006, an unidentified HUD employee reported concerns that "DDL continues to get contracts despite its poor performance," according to a report.

The employee alleged that the company had a patron inside HUD's contracting office. DDL President Robert Drayton had socialized with Frank Davis, a close Jackson ally who is now second in command at the office of housing. Davis headed HUD's contract management review board.

Brown said the review board does not make final contract decisions. A review of a sample of DDL's contracts, he said, "did not find any evidence of anything improper."

Drayton said in an interview that his company wins contracts because of its performance.

"I don't think, maybe I'm wrong, that anybody at HUD can just give you a contract," he said. "I don't see how knowing him has been some special help to me."

Research editor Alice Crites and staff researcher Julie Tate contributed to this report.

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