U.S. DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT
OFFICE OF INSPECTOR GENERAL
April 26, 2013
MEMORANDUM NO:
2013-PH-1803
Memorandum
TO: Dane M. Narode
Associate General Counsel for Program Enforcement, CACC
Dennis G. Bellingtier
Director, Office of Public Housing, Pennsylvania State Office, 3APH
//signed//
FROM: John P. Buck
Regional Inspector General for Audit, 3AGA
SUBJECT: Review of the Philadelphia Housing Authority’s Compliance with Federal
Lobbying Disclosure Requirements and Restrictions
INTRODUCTION
We conducted a review of the Philadelphia Housing Authority’s compliance with Federal
lobbying disclosure requirements and restrictions based on concerns noted during our ongoing
internal audit of the U.S. Department of Housing and Urban Development’s (HUD) oversight of
public housing authorities’ compliance with Federal lobbying disclosure requirements and during
the audit resolution of audit report number 2011-PH-1007. 1 Our review objective was to
determine whether the Authority complied with Federal lobbying disclosure requirements and
restrictions.
METHODOLOGY AND SCOPE
To accomplish our objective, we interviewed and held discussions with HUD program officials
and HUD’s Philadelphia Regional Counsel. In addition we obtained and reviewed the following:
• Lobbying certifications and disclosures, and expense records relevant to our review for
the period of January 2006 through September 2012.
1
HUD OIG audit report number 2011-PH-1007, dated March 10, 2011, “The Philadelphia, PA, Housing Authority
Did Not Comply with Several Significant HUD Requirements and Failed To Support Payments for Outside Legal
Services”
Office of Audit Region 3
The Wanamaker Building, Suite 10205
100 Penn Square East, Philadelphia, PA 19107-3380
Visit the Office of Inspector General Website at www.hudoig.gov
• Expense records and payments for lobbying noted for two firms (American Continental
Group, LLC, and Gmerek Government Relations, Inc.).
• Invoices for legal services obtained from the enforcement of an Office of Inspector
General (OIG) subpoena issued to the Authority on December 10, 2010. 2
• Audit resolution documentation from our prior audit of the Authority’s payments for
outside legal services (2011-PH-1007).
• Forensic audit report of the Authority prepared by KPMG, LLP, dated September 26,
2012.
• The U.S. Senate Office of Public Records Lobbying Disclosure Act database.
Our review covered transactions and events that occurred during the period January 1, 2006,
through September 30, 2012. This was a limited scope review. Therefore, it was not performed
in accordance with generally accepted government auditing standards.
BACKGROUND
The U.S. Housing Act of 1937 initiated the Nation’s public housing program. That same year,
the City of Philadelphia established the Philadelphia Housing Authority under Pennsylvania laws
to address housing issues affecting low-income persons. The Authority’s main administrative
office is located at 12 South 23rd Street, Philadelphia, PA. The Authority is the Nation’s fourth
largest public housing authority and owns and operates more than 15,500 affordable housing
units, serving about 80,000 people in Philadelphia. The Authority employs 1,400 people and has
an annual budget of approximately $371 million. It receives most of its funding from HUD. A
small part of the budget ($1.5 million in State and Federal funds) is received in the form of
grants. The Authority reports that it bills approximately $24 million in rents to its residents.
The Authority operates on a March 31 fiscal year.
Before March 4, 2011, a five-member board of commissioners governed the Authority. On
March 4, 2011, the Authority’s board of commissioners resigned, and HUD took control of the
Authority. At that time, HUD Secretary Shaun Donovan appointed HUD’s former Chief
Operating Officer, Estelle Richman, to serve as the sole member of the Authority’s board and
Michael P. Kelly as HUD’s administrative receiver. The cooperative endeavor agreement
formalizing HUD’s takeover of the Authority remains in effect until the HUD Deputy Secretary
and the mayor of Philadelphia mutually determine that the Authority has built sufficient capacity
to be self-supporting. A new nine-member board of commissioners nominated by Philadelphia
Mayor Michael Nutter was appointed in April 2013.
The Authority’s executive director during most of the period we reviewed was Carl R. Greene.
The Authority’s board of commissioners terminated Mr. Greene’s employment, effective
September 23, 2010, and hired Mr. Michael P. Kelly to serve as interim executive director,
2
The OIG derives its subpoena power from 5 U.S.C. App. 3 § 6(a)(4).
2
effective December 6, 2010. On August 8, 2011, Mr. Kelly began serving as the Authority’s
permanent executive director. Between the termination of Mr. Greene’s employment and the
hiring of Mr. Kelly, three assistant executive directors managed the day-to-day operations of the
Authority. On June 15, 2012, Mr. Kelly resigned as the executive director and Mr. Kelvin A.
Jeremiah was appointed as the acting executive director, effective June 16, 2012. Mr. Jeremiah
was subsequently appointed and currently serves as the Authority’s president and chief executive
officer effective March 14, 2013. Mr. Jeremiah is also serving as the Authority’s administrative
receiver until the new nine-member board of commissioners officially begins.
RESULTS OF REVIEW
The Authority engaged in the prohibited practice of using Federal funds for lobbying and Carl R.
Greene, the former executive director, certified that it did not do so. In addition, Mr. Greene
falsely certified on at least five occasions that the Authority did not use non-Federal funds for
lobbying activities.
Lobbying Disclosure Act of 1995
According to the Lobbying Disclosure Act, lobbyists are required to register with both Houses of
Congress and provide quarterly disclosures on lobbying done for each client. In addition,
lobbying firms must provide an estimate of the total income received for each client, including
payments received from other persons or parties for lobbying activities on behalf of the client.
The U.S. Senate Office of Public Records receives, processes, maintains and makes this
information available to the public in its Lobbying Disclosure Act database. The database
currently shows that American Continental Group, LLC, reported it received $660,000 from the
Authority between 2006 and 2010.
The Act defines “lobbying activities” as lobbying contacts and efforts in support of such
contacts, including preparation and planning activities; research and other background work that
is intended at the time it is performed, for use in contacts; and coordination with the lobbying
activities of others.
Lobbying Funding Restrictions and Disclosure Requirements
According to regulations at 24 CFR (Code of Federal Regulations) 87, Federal funds may not be
used for lobbying in connection with any Federal contract, grant, loan, or cooperative agreement;
or the extension, continuation, renewal, amendment, or modification of the same. The
regulations also require recipients of more than $100,000 in Federal funds or more than $150,000
in Federal loans to file a certification that Federal funds will not be used for lobbying, and also to
file a disclosure if lobbying activities have been, or will be done with non-Federal funds.
Report 2011-PH-1007 3 Revealed Federal Funds Paid for Lobbying
In audit report 2011-PH-1007 we reported that the Authority’s payments to outside attorneys did
not comply with HUD regulations and other applicable requirements. Specifically, the Authority
did not adequately support $4.5 million that it paid to outside attorneys during the period April
2007 to August 2010, virtually the entire amount we reviewed, raising questions about the
3
See footnote 1.
3
propriety of the remaining $26 million in payments that we did not review. The Authority made
unreasonable and unnecessary payments of $1.1 million to outside attorneys to obstruct the
progress of HUD OIG audits. During and after this audit the Authority failed to cooperate and
failed to provide adequate, un-redacted invoices despite the fact that we were compelled to serve
the Authority’s former Executive Director and HUD administrative receiver Michael Kelly with
a subpoena on December 10, 2010. 3 The Authority did not originally comply with the subpoena
and refused to provide the majority of the supporting documentation that we demanded in the
subpoena. On March 4, 2011, the Authority and HUD entered into a “Cooperative Endeavor
Agreement.” Under the Cooperative Endeavor Agreement, HUD appointed Estelle Richman,
HUD’s Chief Operating Officer, to serve as the sole member of the Authority’s Board of
Commissioners. On March 24, 2011, Ms. Richman directed Mr. Kelly to release to HUD un-
redacted invoices for any legal services paid for by the Authority from 2005 to the present.
The process of releasing the legal invoices to HUD and the OIG continued to be obstructed
because in response to Ms. Richman’s directive, the Authority’s former executive director Carl
R. Greene filed a motion on April 4, 2011, for a Temporary Restraining Order and Preliminary
Injunction against the Authority, Mr. Kelly, and Ms. Richman to prevent the release of the
invoices. The District Court ordered, however, on June 20, 2011, that the Authority was required
to release the invoices to HUD. Carl R. Greene subsequently appealed that ruling, further
delaying the release of the invoices. On June 7, 2012, the United States Court of Appeals for the
Third Circuit affirmed the District Court’s order that the invoices should be released. On July 3,
2012, 18 months after the subpoena was served, the Authority complied with the subpoena.
Based on our review of invoices that we ultimately obtained from the court order enforcing the
OIG subpoena, we determined that the Authority engaged in lobbying activities with Federal
funds through two law firms (Ballard Spahr, LLP and Wolf Block Schorr and Solis-Cohen,
LLP), and that it spent at least $48,500 in Federal funds on these lobbying activities identified on
nine invoices. The Authority acknowledged that it used Federal funds to pay these nine invoices
and HUD agreed to require the Authority to repay the $48,500 from non-Federal funds. The
Authority paid $47,300 of the $48,500 in lobbying expenses with Federal funds through Ballard
Spahr, LLP. Activities reflected on the invoices typically included research, planning, and
preparation for lobbying. Excerpts from some of the invoices are shown as examples in
appendix A.
OIG Internal Audit Identified False Lobbying Certifications
As part of our ongoing internal audit of HUD’s oversight of public housing authorities’
compliance with Federal lobbying disclosure requirements and restrictions regarding funds used
for lobbying, we selected the Authority (a participant in the Moving to Work Demonstration
program 4) as part of a survey sample of five housing authorities for review. We found that the
4
In 1996, Congress authorized the Moving to Work Demonstration program as a HUD demonstration program.
This program allowed certain housing authorities to design and test ways to promote self-sufficiency among assisted
households, achieve programmatic efficiency, reduce costs, and increase housing choice for low-income households.
Congress exempted participating housing authorities from much of the Housing Act of 1937 and associated
regulations as outlined in the Moving to Work agreements. Participating housing authorities have considerable
flexibility in determining how to use Federal funds. In December 2000, the Authority submitted an application to
HUD to enter the program, and in February 2002, HUD signed a 7-year agreement with the Authority that was
4
Authority’s former executive director, Mr. Greene, falsely certified that it had not, and would not
use Federal funds for lobbying. In addition, Mr. Greene falsely certified that the Authority did
not use non-Federal funds for lobbying activities. 5 Examples of the false certifications are
shown in appendix B. As discussed above, the Authority spent Federal funds on lobbying done
through law firms. Also, to date, expense records and invoices we reviewed have identified that
the Authority paid two consulting firms (American Continental Group, LLC, and Gmerek
Government Relations, Inc.) to lobby on its behalf. Both firms’ Web sites indicate a focus on
government relations/affairs.
Our review of expense records and payments for lobbying noted in relation to the two consulting
firms has identified thus far that the Authority spent $150,000 on lobbying activities identified
on 15 invoices from American Continental Group, LLC, and about $35,000 on lobbying
activities identified on 29 invoices from Gmerek Government Relations, Inc.. Eighteen of the
Gmerek invoices specifically stated that the invoices were for lobbying. Details on the
remaining 11 invoices indicated that they were for “government relations.” In addition to
activities including legislative monitoring; meetings and discussions with congressional
representatives and staff; and research, planning, preparation for lobbying some of the invoices
also detailed lobbying efforts to expand and extend the Authority’s participation in the Moving
to Work program. According to the detail on the invoices, the $185,000 billed by the two firms
should have been paid with non-Federal funds. To date, the Authority has failed to provide
documentation or accounting records to substantiate that it used non-Federal funds to pay these
lobbying services. Examples of these invoices are shown in appendixes C and D.
KPMG Audit
HUD retained KPMG, LLP, on February 21, 2011, to conduct a forensic audit of the
Philadelphia Housing Authority. The KPMG audit identified that the Authority paid at least
$662,183 for lobbying from December 2005 through June 2009 through two law firms and
directly to the lobbying organizations. KPMG also found no evidence that any lobbyists were
noted on the Authority’s “Disclosure of Lobbying Activities” 6 and “Certifications of Payments
to Influence Federal Transactions.” 7
KPMG reported the following lobbying activities at the Authority:
retroactive to April 2001. From April to October 2008, the Authority continued to operate under a HUD-developed
plan to transition back to traditional HUD program regulations because the term of its Moving to Work agreement
had expired. In October 2008, HUD entered into a new 10-year Moving to Work agreement with the Authority.
The expiration date of the Authority’s new agreement is March 2018.
5
Mr. Greene’s certifications were for plan years 6 through 10 (fiscal years 2007 through 2011) under the
Authority’s Moving to Work program.
6
Standard Form LLL
7
Form HUD 50071
5
Owner/ Political PHA amounts
Entity consultant position held paid Description
Amounts paid
directly to
American
Continental
Group, LLC
American Former Chief of from December
Continental Staff for Senator 2005 to
Group, LLC David Urban Arlen Specter $407,638 September 2008
$199K paid to
Wolf Block
Government
Wolf Block Relations, LP
Government and $32K paid
Relations, LP & Former Counsel directly to
Gmerek to PA Gmerek
Government Republican State Government
Relations, Inc. Richard Gmerek Majority Leader $231,864 Relations, Inc.
Three Venn
invoices for
May, June, and
Former July 2009 traced
communications to Philadelphia
director to Housing
Pennsylvania Authority
Governor Ed payments to
Rendell and Ballard Spahr
more recently to for the
Venn Strategies, Senator Harry subcontracted
LLC Penny Lee Reid $22,681 work
RECOMMENDATIONS
We recommend that HUD’s Associate General Counsel for Program Enforcement
1A. Pursue remedies under the Program Fraud Civil Remedies Act against the Authority’s
former executive director Carl R. Greene for falsely certifying to HUD that the Authority
did not participate in lobbying activities.
1B. Take administrative action up to and including debarment against the Authority’s former
executive director Carl R. Greene for falsely certifying to HUD that the Authority did not
participate in lobbying activities.
6
We recommend that the Director of HUD’s Pennsylvania State Office of Public Housing
1C. Ensure that responsible Authority officials are formally trained in lobbying disclosure
requirements and restrictions.
1D. Ensure that all future HUD monitoring of the Authority covers compliance with Federal
lobbying disclosure requirements and restrictions.
7
Appendix A
SAMPLE EXCERPTS FROM LAW FIRMS’INVOICES
8
9
10
11
12
13
14
15
16
17
18
19
20
Appendix B
EXAMPLES OF CERTIFICATIONS AND DISCLOSURES
SIGNED BY CARL R. GREENE
21
22
23
24
Appendix C
GMEREK INVOICE EXAMPLES
25
26
27
28
29
30
31
32
Appendix D
ACG INVOICE EXAMPLES
33
34
35
Philadelphia Housing Authority - Federal Lobbying Disclosure Requirements and Restrictions
Published by the Department of Housing and Urban Development, Office of Inspector General on 2013-04-26.
Below is a raw (and likely hideous) rendition of the original report. (PDF)