A Washington consulting firm has solicited business from several U.S. Indian housing authorities by saying it has ties to top officials in the Reagan administration and can obtain federal housing grants for its clients, according to Indian officials the firm has approached.
The firm is called Gnau, Carter, Jacobsen & Associates. Its partners include President Reagan's 1980 campaign chairman in Michigan and a former chairman of the District of Columbia Republican Party.
In a letter to one Indian housing authority in Minnesota, the firm cited as references CIA Director William J. Casey; White House counselor Edwin Meese III and deputy chief of staff Michael K. Deaver; Housing and Urban Development Secretary Samuel R. Pierce Jr.; Air Force Secretary Verne Orr, and U.S. Information Agency Director Charles Z. Wick.
Gnau, Carter did not ask the Indian tribes for a fee. Instead, several Indian housing officials said, the firm urged them to hire one of its clients, the John Cooley Construction Co., to build the federally financed housing.
In one case, HUD officials in Washington awarded $600,000 in supplemental grants to a Michigan reservation, Keweenaw Bay, that had retained Gnau, Carter. The consulting firm later took credit for this in its letter to the Minnesota reservation, saying that "the firm has directed housing units from HUD to the Keweenaw Bay Indian Community."
The General Accounting Office is investigating Gnau, Carter's involvement with the Indian housing program, according to officials familiar with the case.
A senior HUD official said last week that it was "absolutely untrue" that the firm had ever "directed housing units" to any tribe; he said the company had nothing to do with awarding Indian housing grants.
Gnau, Carter officials said last week that they never meant to imply that their firm had special influence with HUD and that they never promised Indian authorities that they could deliver federal grants.
Casey, Meese, Deaver, Pierce, Orr and Wick said through spokesmen that they had not given permission for the firm to use them as references.
The Indian agency in Minnesota, the Fond du Lac housing authority, was first contacted by Gnau, Carter last spring. Minnie Porter, its executive director, said she was called by Gerry Blanchard, then a vice president of Gnau, Carter.
Blanchard said "he could get me 25 homes if I would come down to Washington to see him," Porter said in an interview. She recalled that Blanchard said his firm "had been given this allotment of 400 homes . . . by HUD in Washington."
In an April 18 letter to Porter, Blanchard said his firm was formed in March 1981, and that "the partners and associates have advised and assisted presidents of the United States, Cabinet secretaries, senators and members of the House of Representatives, governors, foreign governments, national trade associations and major Fortune 500 companies."
An attached resume said that company chairman John R. Gnau "has enjoyed a personal relationship and friendship with the president of the United States and his key aides and advisors for many years." It said Gnau chaired Reagan's 1976 campaign in Michigan; he also was chairman in 1980.
Roy T. Jacobsen, company president, was described as a political consultant who "drafted the original strategy for President Reagan's campaign in Michigan."
Robert S. Carter was described in the letter as manager of the 1980 Republican convention, chairman of Reagan's transition team on the arts, head of the 1981 Presidential Inaugural Concert Committee, and the current secretary of the President's Advisory Committee on the Arts. He is a former chairman of the D.C. Republican Party.
Blanchard is an Indian from Michigan who was formerly on the staff of Rep. Robert W. Davis (R-Mich.).
Blanchard's letter said the firm worked with federal agencies and Congress for clients ranging from Continental Airlines to the Haitian government to John Cooley Construction.
Cooley Construction also sent Porter a letter that included "an agreement and letter of intent" for the firm "to assist in the procurement of housing units" and to build the housing. The letter from Cooley vice president Dale N. Scrace said that "working with the Department of Housing and Urban Development I believe we can be of great assistance to your tribe in your effort to secure housing units."
Jeffrey T. Wallace, an attorney for Fond du Lac, told HUD in a letter last April that Gnau, Carter had proposed to "acquire additional housing units for Fond du Lac Reservation above and beyond the normal allocation . . . . As I am sure you are aware, federal law prohibits Fond du Lac Reservation Housing Authority from entering into any contract of which a fee, gratuity or other consideration is being paid for in return for the delivery of federal funds.
"This linking . . . of a contract with John Cooley Construction Co. and the receipt of additional 20 units by the Fond du Lac Reservation Housing Authority is in violation of the federal law."
Wallace's letter also noted that Cooley Construction had asked the authority to sign a contract that had not been put up for competitive bids, as HUD regulations require.
Wallace said in an interview that when the reservation insisted its own construction company should handle the job instead -- HUD regulations allow reservations to give preference to their own firms -- Gnau, Carter suggested that Cooley Construction and the reservations could enter into a joint venture.
Despite this dispute, Porter later agreed to meet with Blanchard and Jacobsen in Washington. She said Blanchard told her that "I'd better hurry because the homes were being given away."
At the July 17 meeting, Porter said, the executives pressed her to sign a contract and did not satisfactorily answer some of her questions about the arrangement. She said she left the meeting and had no further contact with the firm.
HUD neither began an investigation nor took any other action against Gnau, Carter on the basis of Wallace's letter, department officials said last week.
Officials at four other Indian housing authorities say they received similar letters in which Gnau, Carter offered to help them obtain federal housing grants and urged them to hire John Cooley Construction as their developer. Only one, Keweenaw Bay, said it has retained Gnau, Carter.
The $600,000 in grants for Keweenaw Bay came from a special discretionary fund controlled by the HUD secretary. The department has set aside 400 of the program's 2,000 housing units for discretionary awards this year, more than twice as many as in 1982.
Gnau, Carter officials said they made no improper representations to the Indian authorities.
Jacobsen said it had been "bad judgment" to use administration officials as references and the practice had been stopped.
He said that although Blanchard handled most of the discussions with Indian officials, "We never promised anybody anything. You can't guarantee anything in Washington." The firm's role, he said, was "to bring people together . . . to do the paperwork, to find out if there was a problem -- the normal representation that one would do if one is in Washington."
Jacobsen said the firm never charged the Indians and that "as far as I'm concerned, it's a marketing effort that didn't take off." He said the firm is being dissolved.
Blanchard said he never promised Indian authorities that he could deliver HUD housing. He said he told them that he had "been successful in the past" and that it was "logical" to assume that he could succeed again, but that he "can't guarantee anything."
Blanchard said it was "unfortunate" that he had claimed in writing to have directed housing units from HUD, and that he was disturbed to hear that several Indian officials believed that he had promised he could deliver the grants.
"I will take the blame that obviously something was interpreted that way," said Blanchard. "Obviously it must have come across a certain way that I didn't mean . . . I didn't explain it clearly."
Blanchard also said he told John Cooley Construction to send proposed contracts to Indian authorities because he mistakenly believed that the housing could be built without competitive bidding. "It's an honest mistake that anybody can make," he said.
After learning of his error, Blanchard said, he asked Indian officials only that Cooley Construction's bids be carefully considered. "It was never a condition" that Cooley be hired, Blanchard said, although he hoped that his efforts would make it more likely that Cooley would "be favorably looked at."
Scrace of Michigan-based Cooley Construction declined to be interviewed.
Other Indian officials said they also had received letters in which Gnau, Carter offered to help them obtain federal housing grants and asked that they hire John Cooley Construction:
* Nate Young, formerly counsel to the Cherokee housing authority in Oklahoma, said: "They made some strong allegations that they could do some things for you, that they had a special pipeline in with the secretary [of HUD]. They alleged that they're strongly wired in with the administration." Young said he threw the letter away.
* George Nolan, director of the Sault St. Marie Tribal Housing Authority in Michigan, said the firm appeared to suggest "that they could guarantee discretionary housing funds, that they could guarantee you 25 units . . . . It looked like they were circumventing the process the rest of us have to go through." Nolan said the firm "backed off" after he questioned Blanchard extensively.
Brenda Welsh, executive director of Keweenaw Bay Housing Authority in Michigan, said her agency retained Gnau, Carter about a year ago. HUD officials in Washington later awarded her agency 15 discretionary housing units.
Welsh said Blanchard told her that "if it wasn't for him, we wouldn't be getting this money . . . . I can't understand how come we had never been able to get into this program, and all of a sudden 15 units were placed in our lap."
Welsh said that local firms did not have much information about the project and that Cooley Construction submitted the winning bid. But she said Gnau, Carter "was being so pushy" that key HUD requirements were not met, and that HUD has directed her agency to seek new bids.
* William Deragon, executive director of the Bad River housing authority in Wisconsin, said Blanchard told him that through the firm's "political maneuvering in Washington, they had 300 units at their discretion." Blanchard said "We can help you out in getting the units" and "offered us 40 to 50 units," according to Deragon.
After receiving a proposed contract from Cooley Construction, Deragon said, he felt that he "was being pressured. They were dangling the carrot in front of the rabbit, saying we can get you 50 units if you hire Cooley."
Deragon said he met twice with Blanchard last spring. HUD later awarded the authority 50 discretionary housing units.
Deragon said he does not credit Gnau, Carter for the funding, but that Blanchard told him, "Just remember who got the units for you when it comes time to pick a contractor." According to Deragon, Blanchard also said that "if Reagan gets reelected, this could be an ongoing thing. We will always have these discretionary units at our hands."
Blanchard said he did not try to take full credit for the Bad River and Keweenaw Bay awards.
Warren T. Lindquist, HUD's assistant secretary for public and Indian housing, said the discretionary awards are based on such factors as special needs and cost-cutting efforts.
"Nobody has any kind of an inside track," Lindquist said. "The allegation that some consultant could produce HUD units . . . is just absolutely untrue. I can unequivocally say that nobody has any kind of an arrangement at all to peddle units that might be available from my reserve fund."