HUD chief said told staff to fund allies

I work for King George, not the American
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Exclusive: HUD staff told to favor allies

Inquiry finds no proof aides heeded Jackson's urgings 07:07 AM CDT on Thursday, September 21, 2006

By TODD J. GILLMAN / The Dallas Morning News

WASHINGTON – Housing Secretary Alphonso Jackson urged top aides to take contractors' politics into account when handing out grants and deals, an internal department review has found, though there is no "direct evidence" that favoritism actually occurred.

The department's inspector general began investigating Mr. Jackson after he boasted in a Dallas speech that he'd once scuttled a deal because the would-be contractor disparaged President Bush.

The 340-page report – issued so far only to Mr. Jackson and a handful of lawmakers but shown Wednesday to The Dallas Morning News – revealed no hard proof of favoritism at the Department of Housing and Urban Development.

Mr. Jackson, former head of the Dallas Housing Authority, claimed full exoneration. But detractors called it a scathing portrait of cronyism that cast doubts on his judgment and integrity.

"We found no direct evidence that political favoritism played any role in awarding grants or contracts from the Secretary of HUD or any of his subordinates," said the report from the inspector general, who reports to Congress, not the agency.

Several top HUD officials – themselves political appointees – testified that Mr. Jackson told senior staff at a meeting a few months before the April 28 speech in Dallas that they should consider contractors' political leanings. He urged them to give contracts to Bush supporters and voiced concerns about any going to active Democratic donors, the aides said.

"I have never touched a contract," Mr. Jackson said Wednesday, in his first interview about the furor his Dallas speech sparked. "I just ad-libbed a little more than I should have, and I regret that."

Soon after the Dallas speech, Mr. Jackson apologized, saying he had made up the story to liven up a talk to minority real estate executives.

He and aides variously described it as "anecdotal," "hypothetical" and a "joke." But the investigation revealed that key elements were true.

HUD's chief procurement officer, Assistant Deputy Secretary Aronetta "Jo" Baylor, told investigators she'd jolted awake at 4:30 one morning, 12 days after the Dallas speech, recalling an incident that fit Mr. Jackson's description, except that the contractor had suffered no penalties for his impertinence.

They'd been in the lobby at HUD headquarters, and bumped into W. Brian Maillian, head of Whitestone Capital Group, a minority-owned firm that sells assets for government agencies. He had written a proposal and won a contract after 10 years of effort – all part of the description Mr. Jackson used in his Dallas speech.

Mr. Maillian expressed thanks for a $3.7 million contract and pointedly said he didn't care for the president.

"Mr. Jackson rolled his eyes," Ms. Baylor testified, and a bit later, "Mr. Jackson said to me that it really bothered him that people [expletive] dog-out the president but still want contracts and money from the administration, that it drives him nuts."

Mr. Jackson told investigators he didn't recall the incident. Mr. Maillian said he's well known around HUD as a Democrat but didn't recall making the remark, and had no complaints – "Not even close."

His contract was extended in January and is now worth $6.1 million.

Mr. Jackson, told investigators the story he'd told in Dallas was "clearly false."

"I've gotten to be 60 years old. I've never done anything illegal or unethical, and I didn't do it this time, other than shoot off my mouth. That's what I did and I made a serious mistake doing it," he testified. "I lied and I regret having done that, and my family and I have paid a price, but I can tell you that it did not happen."

Mr. Jackson, a longtime Bush friend, spent three years in HUD's No. 2 job before being sworn in to lead the $32 billion agency in April 2004. He and scores of underlings testified that political considerations have played no role in contract decisions.

The investigation found a few instances of delayed or curtailed contracts involving Democratic vendors but no proof that politics was to blame.

Such considerations were discussed among top HUD officials – though they were not quick to admit that to investigators.

In an initial interview on May 17, for instance, HUD Chief of Staff Camille Pierce said there was no political litmus test and she never heard Mr. Jackson express sentiments akin to those he expressed in his Dallas speech.

"He doesn't care whether it [a contractor] is a Democrat or a Republican. That doesn't matter," she told investigators.

In a follow-up interview on June 8, investigators confronted her with testimony from Cathy MacFarlane, who resigned that month as HUD's assistant secretary for public affairs. Ms. MacFarlane told investigators that at a senior staff meeting, Mr. Jackson "made a statement to the effect that it was important to consider presidential supporters when you are considering the selected candidates for discretionary contracts."

And Ms. MacFarlane told investigators, "I think it was a political [appointee] talking to a political, saying if all things are equal, you're giving out a contract, give it out to the family, you know."

The testimony stirred Ms. Pierce's memory.

"He did say that he did not want contracts awarded – he did say something about political groups, maybe to Democrats or something like that," she said in the follow-up interview, though she added that "if I had thought he was serious, I would have gone in and said, sir, that's ridiculous."