Toward the end of his five years as executive director and one-man board of the Housing Authority of New Orleans, federal contractor David Gilmore made a practice of authorizing thousands of dollars in professional-services contracts to companies, some with ties to his private consulting firm, through a little-known nonprofit subsidiary of the authority.
The arrangement allowed HANO to circumvent state and federal public bid and procurement laws.
Records show the subsidiary, Crescent Affordable Housing Corp., wrote checks and completed wire transfers totaling nearly $1 million to five companies between 2012 and 2013 without first soliciting bids for the work. The payments covered a variety of services, including accounting and grant management, according to records obtained by The New Orleans Advocate through a series of public-records requests.
The nonprofit subsidiary also authorized a $1 million contract to a single firm, Urban Strategies Inc., though it’s not clear how much of that has been paid out.
In most cases, HANO was unable to provide copies of contracts outlining the terms of its agreements with the companies, including the length of the commitments, how much the firms would be paid and exactly what they would do.
The transactions are outlined instead in hundreds of pages of bank records, canceled checks and invoices for services, like conference calls, as well as for expenses like air travel, car rental and food. The nonprofit paid the invoices through its own checking account, which is funded primarily with money transferred to it from HANO.
“It kind of reeks of trying to get around something,” said Louisiana Legislative Auditor Daryl Purpera, who was not previously aware of the arrangement.
Crescent Affordable Housing Corp. was created in December 2003 “exclusively for charitable purposes” to “participate in the development of housing that is affordable to persons of low and moderate income,” according its articles of incorporation.
It is common practice for housing authorities to establish nonprofit development arms to receive donations and other contributions and to act as a developer in some situations, said Gregg Fortner, who took over Monday as HANO’s executive director. Fortner said he was not yet familiar with CAHC’s operations.
CAHC is classified by the Internal Revenue Service as a 501(c)(3), for tax purposes, meaning it is not subject to income tax.
The nonprofit is essentially controlled by HANO. Its board of directors is appointed by the Housing Authority, which also must approve any changes to CAHC’s bylaws.
A spurt in spending
The nonprofit’s books show little activity until recently. In 2011, for instance, its largest single expense was $22,265 paid to the Westin New Orleans Canal Place hotel for a holiday party. All told, the agency spent about $40,000 that year, with other recipients including a wholesale printer, trophy maker and the company that conducts CAHC’s annual audits.
However, it spent more than eight times that amount in 2012 on professional services alone. Five consulting firms — EJP Consulting Group LLC, Duvernay + Brooks LLC, MR Recovery LLC, Urban Strategies Inc. and BDO USA LLP — hauled in $340,103 from CAHC that year for services ranging from grant management to financial services. It paid those same firms another $528,303 in 2013.
There is no record of the work ever having been publicly bid, according to documents provided by HANO. HANO is subject to U.S. Department of Housing and Urban Development procurement law as well as Louisiana’s public bid laws. The agency is required to issue a request for proposals or a request for qualifications for professional services and construction, and to consider, at minimum, three vendors.
HANO guidelines allow for exceptions when an item is available only from a single source, based on a good-faith review of available sources; when emergency or public exigency makes competitive solicitation impossible; if HUD authorizes the use of noncompetitive proposals; or if, after solicitation of a number of sources, competition is determined to be inadequate.
Using the nonprofit to award professional services contracts to firms outside those rules appears to violate the spirit of those laws, at minimum, Purpera said.
“If you have to comply with a bid law and you move money to a nonprofit so you don’t have to comply with a bid law, that’s a problem,” Purpera said. “Even if it skims the law, I would say it’s not intended by the law.”
Seeking a consultant
In one eyebrow-raising example of the relationship between HANO and CAHC, HANO issued a request for proposals in September and again in November 2012 for “FEMA Consultant Services.” According to the RFP, the authority was seeking a consultant to assist its staff in managing FEMA grants. The job included reviewing, correcting and monitoring the many documents associated with $71.6 million HANO had left from FEMA to complete about 900 projects related to damage hurricanes Katrina and Isaac caused to its properties.
When the RFP was issued, the grant management function was being performed on a temporary basis by MR Recovery LLC, through a July 2012 contract with CAHC that paid the company $72,500 for two months of work.
MR Recovery was one of five firms to respond to the RFP for the permanent job.
Instead of selecting from the group, HANO twice canceled the procurement without explanation and continued paying MR Recovery through the nonprofit account. Gilmore authorized a contract extension for MR Recovery on four separate occasions. Those extensions, through December 2013, led to $250,200 in work for the New Orleans firm.
A HUD spokesman said the office didn’t have all the information it needed to determine whether the arrangement was proper.
“After we review the funding used and the justification, we will have a better idea of what occurred and, if necessary, assist HANO in adhering to or putting proper contracting policies and procedures in place,” Jerry Brown said.
Messages left for Gilmore at his private consulting firm, Gilmore Kean, were not returned. Gilmore left HANO in April.
The propriety of awarding contracts for HANO work through CAHC was questioned at least once by the nonprofit’s board of directors, which included two HANO staffers, a representative from the citywide tenants association and a Gilmore Kean contractor, who served as HANO’s finance director.
Last September, the board was asked to authorize CAHC to pay St. Louis-based Urban Strategies $1 million to implement HANO Academy, a job training and placement program for 18- to 30-year-olds that was introduced by HANO earlier this year.
A source who was present at the meeting said some board members were concerned that if HANO transferred $1 million into the CAHC account to pay the contract, as it intended to do, the agency would violate the public bid law. The matter was tabled without a vote. The source asked not to be named for fear of retribution.
Bidding not required
The panel reconvened about five hours later and, according to minutes of the meeting provided by HANO, decided the work did not need to be put out for public bid because the money that would be transferred to CAHC to pay for the contract would be “nonfederal funding” and would be used by Urban Strategies only to pay staffers it hired to run the training program. Because the money would not be a fee to Urban Strategies, the board decided, award of the contract did not require a public bid.
The reconvened meeting lasted seven minutes. At its conclusion, Urban Strategies was awarded the $1 million contract.
That company was perhaps the greatest beneficiary of the CAHC arrangement, records show. Apart from giving it that $1 million contract, the nonprofit wrote more than $500,000 in checks to Urban Strategies in 2012 and 2013. HANO did not provide contracts for that work, but according to the Housing Authority’s website, Urban Strategies operates programs that connect public-housing residents to employment and training opportunities as well as case management and educational support.
While CAHC was incorporated 11 years ago, its profile was raised significantly while HANO was under the control of HUD and Gilmore, the federal fix-it man brought on to manage the troubled Housing Authority in 2009. Until this month, owing to decades of local mismanagement, HANO had spent the last 12 years under federal control.
CAHC’s spending is still relatively small compared with the authority as a whole, which paid out about $31 million in contracts authorized through HANO’s procurement process in 2012 and 2013. HANO has an operating budget of $292.6 million for the 2014 fiscal year.
Gilmore, who oversaw HANO through his firm Gilmore Kean, has been credited with finally righting the long-listing agency. When he took over in late 2009, there had been little progress in restoring the city’s flood-damaged affordable-housing stock. None of the so-called Big Four public housing complexes — Lafitte, St. Bernard, B.W. Cooper and C.J. Peete — had reopened. HUD’s inspector general had slammed the organization that year for lax oversight and inefficient operation. Local officials, landlords and current and former tenants all expressed distrust of the agency. Several top officials were prosecuted and convicted of corruption-related crimes.
Gilmore, a veteran public-housing turnaround specialist, found remedies to all of those issues. When Gilmore left HANO at the end of his contract term in April, HUD Secretary Shaun Donovan credited him for the rebirth of an agency free from the troubles that had long plagued it.
In addition to avoiding procurement rules by using CAHC, Gilmore also was often able to steer the work CAHC was handing out to companies with links to his private consulting firm.
Executives with EJP, Duvernay + Brooks and Asher PHA, now called BDO, are listed as “Gilmore Kean team members” in a work plan Gilmore submitted to HUD in 2010. The 250-page report laid out how Gilmore intended to restore HANO to functionality. The report does not specify what, if any, role the firms played in preparing the report or what they would be tasked with doing in the future.
EJP and Duvernay + Brooks also are included in a list of four “partners” on the Gilmore Kean website.
Washington-based EJP, on its own website, says it served as the “development adviser to the Housing Authority receiver overseeing over $1 billion in redevelopment efforts.”
The company received payments from CAHC totaling $37,444 in 2012 and 2013. In response to a request for a contract detailing the work, HANO supplied a one-page memo, signed by Gilmore on March 25, 2013, authorizing CAHC to “immediately engage EJP Consultants to provide oversight of the relocation services for tenants at the Iberville Housing Complex.”
The memo said enlisting EJP would “allow HANO to stabilize its ability to assist Iberville residents” and allow the agency to keep tax credits. The document does not say how much CAHC planned to pay for the company’s services, nor does it give a specific date for the contract’s termination.
Telephone calls to EJP were not returned.
Another Gilmore Kean “partner,” Duvernay + Brooks, was also assigned an open-ended contract. The New York company collected more than $104,000 over two years, under a contract that began in March 2012. The contract, written on Duvernay + Brooks letterhead, said the company would work with CAHC and the Housing Authority to “develop financing structures” related to the B.W. Cooper and Guste Homes developments. The work included advising the agency on the preparation of tax-credit applications and tracking loans and advances.
Duvernay + Brooks also was awarded a $99,000 HANO contract through a competitive bid process in 2012 to perform “project finance consulting services for real estate development.”
The company referred questions about the work it did for HANO and CAHC to the Housing Authority.
HANO is now under local control. A spokesman for Mayor Mitch Landrieu said the agency will be required to follow the mayor’s executive order for contracting, which includes rules regarding disadvantaged business participation and also requires that a selection committee, meeting in public, decides who should get professional-services contracts.
The spokesman had no comment on the authority’s past use of CAHC to award work without such a process.