Investigators probe whether HUD chief steered contract

In April last year, Housing Secretary Alphonso Jackson traveled to Dallas to deliver a speech to a group of minority real estate executives. The event should have been pretty routine stuff. But Jackson -- and these are his words -- shot off his mouth by describing how he believed contracts should be awarded by the Department of Housing and Urban Development. The secretary recalled, for instance, how he once had killed a contract award because the contractor had disparaged his friend President Bush.

Alfonso Jackson Not too long after his speech, when he was back in Washington, Jackson realized he had blundered. Democratic lawmakers, citing concerns about political favoritism in HUD contract awards, called for an investigation by the department's inspector general. One powerful senator demanded Jackson's resignation. Jackson, meanwhile, issued an apology: HUD contracts, he said, were never "awarded, rejected, or rescinded" because of political influence or bias.

The matter, however, didn't end there. HUD Inspector General Kenneth Donohue launched an investigation. In September 2006, Donohue rendered his verdict in a lengthy report: Although Jackson had, in fact, urged senior aides to consider the political views of contractors in doling out department business, "no direct evidence" linked political favoritism to such awards. Jackson, it seemed, had dodged a bullet.

But perhaps not, because federal investigators are once again on Jackson's trail. And this time, the investigation seems more serious. Donohue's investigators are now working with the FBI, a federal grand jury in Washington, and prosecutors from the Justice Department's Public Integrity Section. The investigation appears to focus, in part, on whether Jackson misled Congress when he testified earlier this year that he had never intervened in awarding HUD contracts. "I don't touch contracts," the HUD boss told a Senate panel on May 3.

Investigators are exploring whether Jackson, despite that testimony, had actually lined up a contract at the HUD-controlled Housing Authority of New Orleans, or HANO, for a golfing buddy and social friend from Hilton Head Island, S.C. The friend, William Hairston, was paid more than $485,000 for working at HANO during an 18-month period, according to figures provided by HUD and a former HANO official. The work was not competitively bid.

In an interview, Hairston, a stucco contractor, said that Jackson had indeed helped him land the job at HANO. He said that the New Orleans housing agency, which HUD manages under receivership, was struggling to repair and rehab its housing units in the wake of Hurricane Katrina, and needed a construction manager. "The secretary asked me if I would go to New Orleans and help them out," Hairston told National Journal.

Jackson declined to be interviewed for this story, but his office put together a written response to questions posed by NJ. In the answers, his spokesman, Jerry Brown, did not respond directly to the question of whether Jackson had asked Hairston to assist the New Orleans housing authority.

Instead, Brown responded that Hairston was one of three construction managers whose names Jackson had passed along, through an aide, to HANO. According to Brown, the secretary suggested the names after a HUD-appointed receiver at HANO approached him and said she was in "desperate need of a construction manager."

Brown also said that Jackson was a friend of Hairston's, that HANO hired the contractor on an "emergency" basis, and that the secretary had not misled Congress. "Secretary Jackson," Brown wrote, "has always been forthright with members of Congress." Asked if Jackson had been questioned by investigators or if his or any other HUD records had been subpoenaed, Brown responded, "HUD cannot comment on IG activities."

The criminal investigation of Jackson was confirmed by Hairston, by others once or currently affiliated with HANO and HUD, and by other government officials. Hairston said he believed that HANO let him go last June because of the federal inquiry. Investigators have seized his computer at the New Orleans housing agency, he said.

According to a HANO employee, who asked not to be identified, FBI and HUD IG agents recently delivered a grand jury subpoena to the housing agency. "The FBI and the IG asked... for everything -- written notes, e-mails, minutes, telephone messages -- in relation to this contract with Hairston Construction Services," the employee told National Journal. "They wanted whatever pertained to William Hairston."

Federal investigators declined to confirm the inquiry. "We do not confirm or deny the existence or nonexistence of a case," said Helen Albert, a senior official in the HUD inspector general's office.

Familiar Path?

Jackson, 62, a Texas native, has a long history of involvement in housing and community development. He directed the operations of public housing authorities in St. Louis, Washington, D.C., and Dallas before becoming president of American Electric Power-Texas, a $13 billion utility in Austin. He joined the Bush administration in June 2001 as HUD's deputy secretary, and he became secretary in March 2004.

Former HUD senior officials described Jackson as a passionate man who frequently threatened to fire employees for disagreeing with him. Supporters say, however, that although Jackson sometimes shoots from the hip, he is dedicated to promoting economic development and providing affordable housing to the poor.

At the same time, the secretary still has financial ties to one housing developer. According to Jackson's financial disclosure reports, an Atlanta-based development company, Columbia Residential, owes him $250,000 to $500,000. Before joining HUD, his spokesman said, Jackson was a "partner/consultant" for the developer.

According to his disclosure reports, Jackson is to receive periodic payments "for past services" under a separation agreement with the company. He has received only one such payment in the past six years -- $35,000 in 2003. HUD officials said that Jackson avoids any dealings with Columbia Residential. They released a memo he wrote in August 2001 in which he recused himself from HUD matters having "a direct and predictable effect on the ability or willingness" of the company "to satisfy its obligation to compensate me for prior service rendered."

Columbia Residential recently was part of a team that won a $127 million competitive contract from HANO to redevelop the St. Bernard public housing project, which has been shuttered since Katrina. In his written responses, HUD spokesman Brown said that Jackson was not part of the selection team and played no "role in the selection of any team members." The four-member selection panel included Scott Keller, who was until recently Jackson's deputy chief of staff and who is often described within HUD as Jackson's "right-hand man." But in an interview, Keller said that because of the press of other HUD business he did not participate in, or influence, the selection of the Columbia Residential team. Keller left HUD in August to become a private consultant.

The Housing and Urban Development Department is certainly no stranger to scandal. President Clinton's former Housing secretary, Henry Cisneros, pleaded guilty in 1999 to a misdemeanor count of lying to the FBI about payments to his former mistress. Clinton later pardoned him.

Much worse was the HUD influence-peddling scandal in the Reagan administration. Although Secretary Samuel Pierce was not charged, 16 people, including some of his closest aides, were convicted in the high-profile scandal that emerged in the spring of 1989, shortly after President Reagan left office.

Whether the investigation of Jackson will follow a similar path remains to be seen. Still, his role in HUD contracting has been a subject of interest to Democrats on Capitol Hill since he stubbed his toe at the Dallas meeting last year. Indeed, Jackson and Sen. Frank Lautenberg, D-N.J., engaged in a verbal shoot-out on May 3 during a hearing of the Senate Appropriations Subcommittee on Transportation, Housing and Urban Development, and Related Agencies.

Lautenberg, who wants Jackson out, asked the secretary if he believed that "contract awards should be based on political favoritism." Jackson responded, "I do not interfere with any contract that is given in HUD -- period." Lautenberg pressed on, prompting Jackson to say, "I don't touch contracts." And a short time later, Jackson threw down the gauntlet: "Senator, I have not touched one contract; not one. Now, if you can prove that I interfered with a contract, then you should do that."

Conflict At HANO

Those words may well come back to haunt Jackson. His friend William Hairston said he went to work at HANO around January 2006, after Jackson had recommended him. Hairston was put on the payroll of NKA Contractors, a company owned by Nadine Jarmon, who was then HUD's appointed receiver at the New Orleans housing authority.

In an interview, Jarmon said she knew nothing at all about Hairston. "He was brought to our attention," Jarmon said, "by the people at headquarters." She said that her deputy, Lori Moon, a close friend of Jackson's who had worked with him at the public housing authorities in St. Louis, Washington, and Dallas, was approached by someone in Jackson's office and asked to hire Hairston. Moon did not return several phone calls seeking comment.

HUD's account differs from Jarmon's. In its written responses to NJ, the department said that it was Moon who approached Jackson and asked for help in finding a construction manager. Hairston, according to HUD, was one of three contractors whom Jackson later suggested to Moon.

Jarmon said that on Moon's recommendation, she put Hairston on her payroll at $175 an hour. She said that Hairston was retained to provide construction management, but she made it clear that she and Hairston did not always see eye-to-eye.

In fact, the differences led HUD to order her and Moon to Washington for a meeting with Jackson's top two aides on March 22, 2006, Jarmon said. "We were called on the carpet," Jarmon said in an interview, describing the meeting. "We got our hands slapped, we got a little spanking; that's what it was." Hairston was also called to the meeting, she said, and "they slapped him around a little bit," too. One person who attended the meeting, but asked not to be identified, said that the subject matter also covered other issues -- including HANO's failure to pay its bills.

Three weeks after the meeting Jarmon's work with HANO ended. HUD decided not to extend her contract, the department said, because it believed that change was needed at HANO, despite Jarmon's "exemplary" work. Jarmon told National Journal that she believed her resistance to "micromanaging by HUD headquarters," along with her differences with Hairston, led to her dismissal. Jarmon also said that a HUD investigator and an FBI agent had interviewed her in August at a New Orleans hotel. "They were very straightforward," she said. "They said, 'We want information on William Hairston.' "

Hairston remained on the job after Jarmon was ousted. HANO's records show that Hairston Construction Services was awarded a "firm fixed price contract" for $167,858 on July 19, 2006. HANO considered no other proposals. Hairston's hiring was described as an "emergency," according to resolution No. 2006-32 of HANO's board of commissioners. The contract was approved by C. Donald Babers, a senior HUD official who serves as the sole member of the HANO board, according to a copy of the board's minutes. Babers, like other HUD officials, did not respond to calls seeking comment.

At the meeting, Donald Vallee, a retired banker and the president of a landlords association in New Orleans, questioned the propriety of the award. The minutes of the board's July 19 meeting described Vallee's concerns: "Mr. Vallee stated years ago HANO had problems with inside deals and things not being done above board. It was hoped that this administration would do things differently."

Donald ValleeWhen another member of the audience complained about HANO's wasting money on contractors, Babers cut her off. The minutes say: "Mr. Babers stated that they could not be second-guessed as they attempted to move forward with getting residents into units, but the urgency of the situation dictated that they move in this direction."

In an interview, Vallee said that Babers "blew me off," but that he was not so easily rebuffed. He called a friend at HUD headquarters in Washington and "raised a stink about" the contract, Vallee said. A week or two later, he said, he discovered that HUD officials had refused to sign Hairston's contract. Vallee said that federal investigators questioned him recently. "They pressed me on how much involvement did the secretary have in the contract," Vallee recalled. He said he told them that he had no information on Jackson.

Hairston was well paid by housing officials. HUD told National Journal that HANO paid Hairston $392,000 for his work, which ended in June 2007. Separately, Jarmon said she paid Hairston $93,777 as a subcontractor from January through April of 2006. In interviews, Hairston confirmed that he never received a signed contract from HANO. "No one signed it," he said, "but they told me to stay."

Hairston said he more than earned his fees, saving HANO millions of dollars by cutting costs on construction projects. He confirmed that federal investigators were looking at his relationship with Jackson, whom he described as the most "righteous man I have ever met in my life." Hairston, who said he had not been questioned by investigators, added, "I have done nothing wrong."

Family Friendship

Hairston said he knows Jackson from the secretary's visits to Hilton Head, where both men have homes. They socialize together, he said, adding that their wives are much closer friends. Jackson and his wife, Marcia, were among the guests at a Christmas party that the Hairstons gave at their Hilton Head home last year.

Hairston also said he never discusses business or politics when he sees Jackson in Hilton Head. "When I am with the secretary," Hairston said, "we don't talk business, we don't talk politics."

But Hairston left no doubt that Jackson aided him in getting the job at HANO. Describing events that led him to HANO, he said he understood that a friend of his in Congress had recommended him to Jackson for work at the New Orleans housing agency. Sometime in 2005, he said, Jackson called him on the phone. From that conversation, he said, he understood that HANO "didn't have any construction experience -- they did not have anyone on their team that knew anything about construction."

Although his business had been slow at times, Hairston said he was working on a big project when Jackson called, and that he did not solicit Jackson's help. Asked if Jackson recommended him for the HANO work, Hairston responded, "It was Mr. Jackson who recommended me."

A few months after Jackson's call, Hairston said, he met with HANO officials and started work at the housing agency. Hairston said that it became clear to him soon after his arrival in New Orleans in January 2006 that HANO was being significantly overcharged on some of its contracts. His efforts to clean up that mess, he said, caused friction both at HANO and at HUD headquarters. But he pressed on, he said, because Jackson had promised to bring home people who had been displaced by Katrina. "I do know that the secretary promised the governor and the mayor that he would put 2,000 [housing] units back on line," Hairston said, "and that was my mission.... I promised the secretary to help out."

Looking at what's happened in the past year, the friction with local and federal housing officials, losing his job at HANO, and the federal inquiry, Hairston expressed amazement that investigators are focused on Jackson's ties to him. Millions of dollars, he said, are being wasted on contracts at HANO, and he wonders, "Why worry about some dumb chump change that I was getting?"

In the coming months, federal investigators may well sort the whole thing out and perhaps provide Hairston some answers.

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