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Published: 11/22/2011 - Updated: 6 months ago

DEPARTMENT OF NEIGHBORHOODS

City favoritism in rehab-work awards alleged

BY TONY COOK
BLADE STAFF WRITER

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Local contractors have grumbled privately about fairness in Toledo’s Department of Neighborhoods, though they’ve avoided taking those concerns public for fear of falling out of favor with city officials who control millions of dollars in federal neighborhood-development funds.

But an investigation by The Blade into the city’s housing programs has spurred several contractors to talk about problems for the first time.

There’s Larry Hinz, a recently retired contractor who watched another company receive a $66,000 contract, even though his bid had been lower. There’s Sam Khalaf, a local contractor who suspects someone gave his competition access to his sealed bids, costing him $150,000 — nearly a year’s work. And there’s Craig Gordy, a second-generation contractor who says a city staff member steered him to a subcontractor who is a convicted felon.

City officials expressed surprise and concern when confronted with the claims. Such accusations never have been brought to their attention, said Kattie Bond, director of the city’s neighborhoods department.

At the same time, she admitted that oversight of Toledo’s federally funded neighborhood-rehabilitation programs is sometimes difficult. For example, she said bid openings often occur out of sight of city officials. “We try to be at every bid opening, but we can’t,” she said.

The result is a fast-and-loose environment where the rules aren’t always clear and suspicions of alleged wrongdoing — even if not expressed publicly — are widely held.

“This business is a dog-eat-dog business,” one local contractor said. “I’ve always done quality work. I’ve always been honest. I can’t say if anybody else has. That might be reason why I haven’t been getting work for a year.”

True or not, beliefs about favoritism, or worse, are a serious deterrent to one of the major goals of the federal dollars distributed by the city each year — to create jobs.

Woodland Avenue is a tree-lined street in the heart of urban Toledo. Its homes are more than 100 years old. Some are boarded up, others gone altogether, with their lots strewn with trash or overgrown with weeds. But many still bear signs of life: lawn ornaments, welcome mats, or flower pots on the porch.

During the past two years, more than two dozen of those homes got a boost from the city: new roofs and other exterior repairs, courtesy of federal housing recovery money awarded to Toledo.

On paper, the Woodland Avenue roofing and repair work went to more than a dozen different general contractors, and from there to many more subcontractors.

But in reality, more than 40 percent of the $175,000 spent on the street flowed to a single individual — Leon Jackson, Jr., an ex-convict with a history of drug trafficking and no contractor’s license.

$7,500 each time

He received that money through subcontracting arrangements with legitimate contractors. Although city estimates of what the roofing jobs should cost range from $6,944 to $7,498, contractors who used Jackson’s services bid $7,500 every time — the maximum amount allowed by the city for each project. And in all of those cases, the contractors paid Jackson $6,500, according to interviews and paperwork submitted to the city.

The contractors who got the bids made $1,000 on each roof for filling out the paperwork and pulling the permits.

Some contractors say they used Jackson because he works hard and does a good job. But at least one contractor, Mr. Gordy of Continental Construction, said a city rehab technician, Toni Thomas, told him to use Jackson as a subcontractor. She also instructed him not to list Jackson or his company, Big Boy Construction, on a required subcontractor list, he said.

“The arrangements were dictated to me across the desk up on the 18th floor,” Mr. Gordy said, referring to the offices of the city’s Department of Neighborhoods at One Government Center. Mr. Gordy’s firm went on to receive 13 roofing contracts, including four on Woodland Avenue. Mr. Gordy said he listed the names of men who worked for Jackson, but not Jackson, to whom he wrote the checks.

City housing officials refused to answer questions about the roofing program. Jen Sorgenfrei, Mayor Mike Bell’s spokesman, issued a statement Monday stating: “The city categorically denies all accusations and/or insinuations of wrong-doing you have leveled through your questions. The form of your questions presupposes wrong-doing, and therefore, since there is no wrong-doing, the questions cannot be answered.”

Lower bid

Another Woodland Avenue project involving Jackson also raises questions. Larry Parker of Pride Painting was awarded a $7,500 roofing contract even though another contractor submitted a bid that was about $1,000 lower. Mr. Parker listed Jackson as a subcontractor on that project.

“I don’t even recall it,” Mr. Parker said when asked how he won the contract. “I wouldn’t have an answer. I didn’t know that until you just told me.”

The contractor who submitted the lower bid said he didn’t want to get involved when contacted by a reporter. “[The city is] 60 to 70 percent of my budget,” he said.

Jackson has a long history of criminal activity. He was sentenced to three years in prison in 1989 for breaking and entering, retaining stolen property of a motor vehicle, and drug abuse. He was sentenced to 18 months in prison in 1993 for aggravated drug trafficking and to six months in 1997 for retaining stolen property. He has also been found guilty of more than 70 misdemeanors, most recently for unauthorized use of property in 2008.

Jackson did not return phone calls.

Federal money

The roof program is just one of many programs the city administers, all of it funded with federal money.

Last year, the city received more than $11 million in HOME and Community Development Block Grant money. In recent years, various federal economic recovery acts intended to combat foreclosures and the economic crisis have resulted in an additional $27 million for the city’s neighborhoods department. The piles of money that flow through the department make it one of the most important spigots of construction money in northwest Ohio.

One city program funded with those federal dollars is the Community Housing Development Organization program, which provides gap financing to community development agencies. Those agencies buy single family homes, hire general contractors to rehab them, and then sell the homes to low-income residents. The goal is to prevent the downhill slide of Toledo neighborhoods, provide affordable housing, expand the capacity of community development agencies, and create jobs.

But several contractors are calling into question the fairness with which those contracting jobs are being awarded.

Friendship New Vision, a community development agency affiliated with Friendship Baptist Church in South Toledo, is the biggest beneficiary of the program. It has received $530,000 in CHDO grants in addition to $866,000 in grants and loans through another federally funded city program, for a total of at least $1.4 million.

In January, it invited Phoenix Custom Builders, CSK Construction, and Toledo Urban Revitalization to bid on rehab work for three single-family homes: 829 Brookley Blvd., near the University of Toledo; 1737 Copley Dr., not far from Inverness Club, and 4652 S. Detroit Ave., a few blocks from the Anthony Wayne Trail.

Phoenix Custom Builders submitted the lowest bid for all three projects, winning contracts worth a total of $157,000. CSK Construction came in second lowest all three times, with bids that were $231, $800, and $4,739 higher.

At the time, CSK Construction owner Mr. Khalaf thought he had lost the jobs fair and square.

‘This is upsetting’

But a closer analysis reveals the two companies’ bids are nearly identical. Both contractors proposed spending $703 to replace carpet in a family room, $805 to replace counter tops in a kitchen, $1,950 to install new vinyl windows, and so on. The three projects contained a total of 230 such line items — all but 12 of which were identical. Those differences gave Phoenix Custom Builders the advantage.

When contacted by The Blade, Mr. Khalaf was deeply disturbed. “This is upsetting,” he said. “This is almost a year’s worth of work.”

He suspects someone allowed Phoenix Custom Builders to view his sealed bids. “It seems like they were copied after I dropped them off,” he said.

Ron Goodall, vice president for Phoenix Custom Builders, couldn’t explain the similarities.

“I have no idea,” he said. “An act of God, maybe.”

He referred questions to the company’s owner, Cletus Phoenix, who said his company was not given access to CSK Construction’s bid. “That’s not the case here,” he said. Contractors learn over time what prices the city is looking for, he said. “We bid on dozens of jobs we didn’t get. You figure out what you need to do.”

But other contractors who do work for the city and did not compete for these jobs said the odds of two companies submitting such similar bids for projects of that size are comparable to the odds of winning the lottery. “One in a million,” said Kevin Washington, who owns Skyreach Construction.

Officials with Friendship New Vision said they handled the bids appropriately, but their accounts conflict with those of Mr. Khalaf, city employees, and public records.

Sealed bids dispute

Mr. Khalaf said he dropped off his sealed bids at the Danberry Realtors office of Tina Butts, a local realty agent who is Friendship New Vision’s housing consultant.

Ms. Butts flatly denied that. “Sam didn’t drop no bids off,” she said, later adding, “He won’t get another bid from us.”

She referred other questions to Don Tisdale, Friendship New Vision’s housing specialist. He confirmed he usually handles bid openings and that he opened the bids in question at the church in the presence of a city staffer. “It was probably Robert Sciplin,” he said.

But Mr. Sciplin, a city rehab technician, said he was not present for the bid openings. Mr. Tisdale’s claim also runs counter to a “Bid Opening Data Sheet,” which is supposed to be signed by those involved in a bid opening. The only signature on those sheets belongs to Patricia Sloan, Friendship New Vision’s executive director. Ms. Sloan could not remember if she was present for the bid openings, but she emphasized that a city employee was present.

“No matter what I did, we don’t do them alone,” she said.

Mr. Tisdale said he didn’t see why the similar bids were a problem. “The process is fair. We take the lowest bid,” he said. “What the contractors do before getting to me I have no control over.”

Ms. Bond, director of the city’s neighborhoods department, said she was not aware of the bids until contacted by The Blade.

“I am concerned,” she said. “We’ve never had anyone accuse anyone of collusion.”

Witness rule

She said two witnesses must be present at all bid openings handled directly by the city; however, third-party developers are not held to the same standard, she said. The city tries to have an employee present for developer’s bid openings, but it isn’t always possible, Ms. Bond said. She also said city staffers review the bids, primarily to make sure the contractor’s math adds up. She wasn’t sure why the similarities between the competing bids didn’t raise red flags.

“I don’t think they would have thought this was an issue,” she said. “They would have thought it was an issue if it was a pattern or something.”

A review of city housing files revealed that a bid opening sheet for another project had no signatures at all on it and many others had only the signature of Jody Prude, the city’s housing manager. That means at least half of the bid openings in the CHDO program were witnessed only by one person.

Of those opened solely by Ms. Prude, four went to Toledo Urban Revitalization. In one of those cases — a Friendship New Vision project on Burke Glen — a bid summary sheet that is supposed to be filled out by the contractor and submitted with the sealed bid contains two different sets of handwriting, raising questions about whether the actual numbers on the sheet were filled in by someone other than the contractor.

The company’s owner, Matt DeWood, emailed a statement in response to The Blade’s inquiries: “The bid proposal summary sheet is supplemental to the itemized bid ‘package.’ A lot of times these are filled out after the bid opening and simply reflect the summary of the information in the itemized bid package.”

Ms. Bond said it’s not supposed to work that way. “The bid proposal summary sheet should never be filled out after the opening,” she said. She noted that Mr. DeWood was a new contractor.

While cooperative at first, city officials refused to answer inquiries about relationships between various city employees and the contractors or developers to whom they award money.

“The city cannot efficiently answer the vague and tabloid-like inquiries you have made into the personal lives of employees as we focus on the important mission of delivering services to our citizens,” said Ms. Sorgenfrei, the mayor’s spokesman.

Friends in 2008

But public records confirm that Ms. Butts of Friendship New Vision and Ms. Prude, the city housing manager who oversees the program through which Friendship New Vision has received much of its federal money, were friends in 2008.

According to police reports, Ms. Prude was drinking with Ms. Butts at the Quality Bar on Cherry Street in 2008 just before Ms. Prude was involved in a car accident. Ms. Prude fled the scene of the accident and later reported her vehicle stolen, telling police she left her keys at the bar with Ms. Butts, who she described as a “girlfriend” in a handwritten statement. But when police interviewed Ms. Butts, her story was inconsistent with Ms. Prude’s, according to police records. Ms. Prude was charged with failure to stop after an accident, but later pleaded guilty to failure to report an accident, a minor misdemeanor.

Other Friendship New Vision projects also raise serious questions. In 2008, two contractors who submitted low bids for a rehab project at 741 Moran Ave. in the Scott Park area were passed up in favor of another contractor.

Harris Builders, which bid $66,427, was awarded the contract even though two other bidders — Bear Construction LLC and Williams Painting — submitted lower bids, at $62,350 and $61,995, respectively.

It’s not uncommon for low bids to be rejected because the city requires bids to be within a certain percentage of its in-house estimate, but in this case the bids were safely within that percentage.

Mr. Hinz, owner of Bear Construction, said he learned he lost the bid only when he saw someone else working on the project. “They didn’t even let me know,” he said.

Ms. Butts told him the agency didn’t have to take the lowest bidder, he said. “She said, ‘Don’t worry about it, we got other jobs coming up,’ “ Mr. Hinz said. Mr. Hinz, who recently retired, said he eventually gave up seeking work from Friendship New Vision.

Church ties alleged

Mike Williams, whose company submitted the lowest bid, said the city told him that community development agencies could pick whichever contractor they wanted if the construction costs are greater than the grant provided by the city.

“That’s spending unnecessary taxpayer money as far as I’m concerned,” said Mr. Williams, who is a member of the Home Improvement and Remodeling Board of Control, a city board that regulates the licensing of city contractors. “What they are doing is picking out their friends and people at that church.”

Gregory Harris, Jr., of Harris Builders put a woman he said was his sister on the phone when contacted by The Blade. She refused to give her name, but said she worked for the company. When asked why the company was awarded the contract, she said, “That’s a good question right there. That sounds fishy to me. I would like you to ask Jody [Prude] down there in the neighborhoods division. We have nothing to do with the city and what decisions they make.”

She said the company later had a falling out with Friendship New Vision and city officials regarding nonpayment for work done.

Friendship New Vision officials did not respond to phone calls about the project. The Blade sought comment from Ms. Prude and other city staffers about the bid documents, but Ms. Sorgenfrei turned down those requests. This came after Ms. Prude previously cut short a scheduled interview with a reporter, abruptly leaving her office without explanation. Her secretary told the reporter she had a meeting.

Prior to that, Ms. Prude said contractors are welcome to sit in on all bid openings. “Also, they are supposed to receive a copy of the opening data sheet, so that’s notification for if they won the bid or not. That’s supposed to be the process.”

But several contractors said they stopped receiving bid opening data sheets a year or two ago. They also questioned whether the city is rotating through its list of licensed contractors in awarding work.

Contact Tony Cook at: acook@theblade.com, or 419-724-6065

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