oversight

                                                  U. S. Department of Housing and Urban Development
                                                  Southwest District
                                                  1600 Throckmorton
                                                  P.O. Box 2905
                                                  Fort Worth, Texas 76113-2905
                                                  (817) 885-5551 Fax (817) 885-2725



October 16, 1996                                   97-FW-222-1802


MEMORANDUM FOR:              Norma Cannon, Director, Contracting Division, 4AAC
                             Keith Surber, Director, Contracting Division, 8AAC


FROM:         D. Michael Beard, District Inspector General for Audit, 6AGA


SUBJECT:      Hotline Complaint - HM00-18622
              Golden Feather Realty Services, Inc./REAM Inc.
              Real Estate Asset Manager (REAM) Contractor
              HUD Offices - Fort Worth, Texas, San Antonio, Texas, and Phoenix, AZ


        The Office of Inspector General received a Hotline Complaint alleging that: (1) Golden
Feather Realty Services, Inc., a San Antonio-based company, subcontracted work to a company
that it owned and (2) a HUD employee provided contracting information to Golden Feathe r
relative to their bid for the Fort Worth HUD Office Real Estate Asset Management (REAM )
contract. The anonymous complainant also noted that Golden Feather currently had REA M
contracts with HUD in the Fort Worth, San Antonio, Phoenix, and New Orleans Offices.

       To review the allegations, we interviewed Property Disposition staff in HUD's Sa n
Antonio, New Orleans, and Phoenix Offices and interviewed contracting staff in HUD's For t
Worth Office. We also reviewed contract files maintained by the San Antonio HUD Office and
obtained contract payment information from HUD's Fort Worth, San Antonio, and Phoeni x
Offices. We contacted third parties the complainant had identified as being able to provid e
information to substantiate the complainant's allegations. We also contacted a representative of
the Small Business Administration (SBA) regarding SBA small business set-aside thresholds.

       Based on our inquiries and review, there are two related companies:

              Golden Feather Realty Services, Inc. contracts with HUD's Fort Worth Office to
              provide REAM services. Bob Kolitz, San Antonio, Texas, is president.

              Real Estate Asset Management, Inc. contracts with HUD's San Antonio an d
              Phoenix Offices to provide REAM services. Bob Kolitz, San Antonio, Texas, is
              president.

HUD Property Disposition staff in New Orleans stated that neither compan y had REAM contracts
for their area. Neither the HUD Property Disposition staff nor the third parties could
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provide any information that would substantiate the allegations. Therefore, we plan no further
review of the allegations.

        However, our inquiries did raise an issue as to whether Golden Feather Realty Services,
Inc. and Real Estate Asset Management, Inc. were circumventing the intent of HUD's restriction
of contract awards to qualified small businesses. These two corporations appear to be relate d
companies that, when revenues of both companies are considered, would not qualify for contract
award as small businesses. Since the San Antonio and Phoenix contracts were designated a s
small business set-asides, it appears that the principles of Golden Feather Realty Services, Inc.
created Real Estate Management Services, Inc. as a separate corporation to qualify for contract
award. The information provided for the San Antonio contract shows that at the time Real Estate
Asset Management Services, Inc. bid on the 1994 contract, Bob Kolitz was president of th e
Corporation. Further, the top or proposed top management of Real Estate Management Services,
Inc. were, at the time, current employees of Golden Feather Realty Services, Inc.

        According to San Antonio's request for proposal (RFP), the size standard to be considered
a small business was $1,000,000 in average annual sales or receipts for the preceding 3 year s
(effective at the time the RFP was issued). The HUD Fort Worth Office shows the followin g
REAM contract payment history for Golden Feather's contract, which began on September 1 ,
1992:


                                Period                             Amount

               October 1, 1992 - September 30, 1993               $2,250,279.42
               October 1, 1993 - September 30, 1994               $2,512,084.85
               October 1, 1994 - September 30, 1995               $1,836,449.79
               October 1, 1995 - June 13, 1996                    $1,256,519.30

         The San Antonio and Phoenix contracts with REAM Inc., began on August 1, 1994, and
July 1, 1994, respectively. Based on this information, there is an indication that Golden Feather's
3-year average annual receipts may have exceeded "small business set-aside" requirements. As
a result, it appears that a separate company was formed to by-pass these requirements. Based on
available information, Golden Feather began operations in December 1991 and Real Estate Asset
Management, Inc. was formed in the first half of 1994.

        Therefore, we are providing this information to you for any follow-up you dee m
necessary. We request that you provide us, within 45 days, the results of your review of thi s
issue along with a description of any actions planned or taken. If you have any questions, please
contact Darrel M. Vaught, Assistant District Inspector General for Audit, at 817-885-5551 o r
(817-978-9309 after October 25, 1996).
cc:
Chief, Contracting Operations Branch, 6AAC
Chief, Contracting Operations Branch, 9AAC
Chief, Real Estate Owned Branch, 6AHSR
Chief, Real Estate Owned Branch, 6JHSR
Chief, Real Estate Owned Branch, 9EHSR
Williams, GIS
Albright, 9AGA