Chronology of Selected Events
Regarding
Hamilton, HUD Loan Sales, HUD Loan Sales Qui Tam and Clinton-Gore
Administration
(As of February 13, 2001)
1990-1991
Hamilton is founded.
Prior to incorporation, principals at NHP, Inc. (formerly known
as National Housing Partnership) had asked Catherine Austin Fitts
to form an investment bank to provide NHP with dedicated investment
banking services and advice. NHP abrogates its deal at the day of
closing, after Harvard Endowment, a major stockholder of NHP, announces
with no advance warning that it has decided to change the terms
of the deal such that NHP would receive 20% of Hamilton’s equity.
Fitts decides to proceed without NHP and Harvard. The vision for
Hamilton’s creation is explained in a Fitts memo on "The Dream
Machine." The Dream Machine was envisioned as a relational
database and software tool operation that could revolutionize communities’
access to capital and facilitate a transformation to collaborative
learning organizations and communities.
1992-1993
Hamilton builds numerous
relational databases and tools that bring early success to the new
company. The tools include what Hamilton believed to be the most
extensive database on institutional equity investment in real estate.
Upon reading about Hamilton’s research with the database Alan Greenspan
makes a special request for a briefing to the Federal Reserve Staff
on Hamilton’s findings. Another tool, developed as part of a complete
pricing and simulation model of Battery Park City Authority, was
a simulation of New York real estate valuations for tax purposes.
Hamilton’s work is widely credited with providing the basis for
a recapitalization of the Battery Park City Authority and the first
ratings upgrade of a New York State authority in over 20 years by
Standard & Poor’s.
1993
Al Gore names Jack Quinn
as his Chief of Staff. Clinton nominates Andrew Cuomo as Assistant
Secretary of Community Planning and Development at the United States
Department of Housing. Eric Holder is nominated as DC US Attorney.
Frank Hunger is nominated as Assistant Attorney General, Civil
Division, U.S. Department
of Justice.
30-Sep-93
Hamilton is awarded its
first advisory contract with the United States Department of Housing
and Urban Development and its insurance arm, Federal Housing Administration
("HUD") through a competitive bidding process in response
to an RFP issued by HUD in late 1992.
Oct-93
HUD conducts a "reflector"
sale of performing Single Family Section 221(g)(4) mortgages (that
is, mortgages guaranteed by HUD and subsequently "put back"
to the government by the lender pursuant to statutory provisions
allowing the lenders to put them back) that had a $90 million Unpaid
Principal Balance ("UPB"). The aggregate purchase price
of the loans was over $84 million, equal to 85% of UPB, providing
the government with savings of $1.7 million (calculated as the excess
purchase price over the "value to government"). The winners
of this sale were First Boston, United Mortgage, and Kidder Peabody.
1994
The Digital Telephony
and Communications Privacy Improvement Act of 1994 is
passed.
1994
Robert Rubin becomes
Secretary of Treasury, resigning from Goldman Sachs.
1994
Howard Glaser joins HUD
in 1994 as Deputy Assistant Secretary of Community Planning and
Development. After Andrew Cuomo becomes Secretary in late 1996,
he then serve as Deputy General Counsel. His resume describes his
responsibilities as "acting as the Secretary’s chief legal
advisor on regulations, legislation, and programs."
Feb-94
Operation Safe Home,
a program run by the HUD Office of Inspector General ("OIG)
to "combat violent crime in public and assisted housing," is begun.
As part of this program, the HUD OIG coordinates with various federal,
state and local enforcement task forces. Federal agencies that partner
with HUD include FBI, Drug Enforcement Agency, Bureau of Alcohol,
Tobacco and Firearms,, IRS, Secret Service, US Marshall's Service,
Postal Inspection Service, US Customs Service, Immigration and Naturalization
Service and Department of Justice. The primary performance measures
reported in the HUD OIG Semi-Annual Performance Report to Congress
for this program are the total number of asset forfeitures/seizures,
equity skimming collections and arrests. Subsequent intra agency
efforts such as the "ACE" program sponsored by the Department
of Justice are initiated by US Attorney’s Offices, working with
the DOJ Asset Forfeiture Fund, HUD OIG and HUD Office of General
Counsel. The Operation Safe Home program is unusual in that it moves
the agency auditor into the role of running a program and competing
for program resources. The HUD loan sales program staff receive
complaints from HUD OIG staff about the inclusion in the HUD loan
sales of loans with respect to which the enforcement arms of HUD
are conducting investigations. These complaints underscore the fact
that the HUD-held mortgage portfolio provide enforcement opportunities
for DOJ/US Attorney and HUD OIG and HUD General Counsel, and that
the sale of loans from HUD’s portfolio reduces the opportunities
for enforcement staff to increase their performance measures (i.e.,
number of arrests, seizures and equity skimming collections). HUD
OIG and General Counsel later request that loans be held out of
sale, even though this would cost taxpayers more. The enforcement
position, reported to Catherine Austin Fitts by one of the loan
staff involved, is that their goal is maximization of enforcement
revenues, not maximization of total government revenues.
Mar-94
Issuance of "A Guide
to Equitable Sharing of Federally Forfeited Property for State and
Local Law Enforcement Agencies."
14-Mar-94
Webster Hubbell resigns
from his post at the Justice Department and later pleads guilty
to over-billing at the Rose Law Firm.
26-Mar-94
A series of emails is
exchanged between Hamilton and HUD loan asset sale team members
regarding HUD’s work-out policy for loans that may be subject to
future sale in HUD loan sales. Al Sullivan, the Director of Asset
Management in the Office of Housing, suggests one alternative is
to halt all workouts of loans identified for sale. The policy subsequently
is adopted.
Aug-94
HUD decides to implement
a new loss mitigation program to be known as Special Workout Assistance
Teams or "SWAT" Program. The purpose of the initiative
is to identify troubled multifamily properties with physical and
financial problems that require special attention and expertise
and to bring in a team selected by HUD comprised of legal, accounting,
management and other specialists to solve these problems.
Aug-94
HUD reassigns about $90
million UPB of performing HUD-held multifamily loans to Fannie Mae
with assistance of Hamilton as financial advisor.
1994
Donald Smaltz is named
Independent Counsel to investigate Agriculture Secretary Mike Espy’s
alleged acceptance of gifts from individuals with business before
his Department.
Oct-94
HUD sells over $150 million
in performing multifamily section 221(d)(4) loans with
Hamilton’s assistance
as financial advisor.
Nov-94
George W. Bush is elected
Governor of Texas, defeating Ann Richards with 53% of the vote compared
to her 46%.
Dec-94
The Kerry Company is
awarded the first HUD SWAT contract.
Dec-94
Secretary Rubin leads
effort to put together Mexican bail-out package that saves numerous
US investment houses and investors from losses on their investments
in Mexican bonds during early 1995.
1995
Goldman Sachs agrees
to pay the Maxwell pension funds $253 million in the settlement
of a lawsuit over Goldman’s role in Robert’s Maxwell’s illegal use
of pension fund assets.
1995
An HUD Office of Inspector
General ("OIG") staff member reports to Catherine Fitts
that he was present at a meeting with Community Planning and Development
Assistant Secretary Andrew Cuomo and the HUD Inspector General ("IG")
at which Cuomo reported that he intended to "get rid of Hamilton
and Fitts."
1995
Helen Dunlap (Deputy
Assistant Secretary for Housing and head of the loan sales program)
and Kathy Rock (FHA Comptroller) report to Catherine Fitts that
the HUD IG has personally complained to them about the political
pressure she has been receiving about HUD’s continued use of Hamilton
as financial advisor. The complaints had no apparent relationship
to the quality of Hamilton’s work.
1995
In late 1994/early 1995,
Hamilton agrees to assist NHP in doing a valuation for tax purposes
to assist NHP in dividing the company into two parts, one designed
to perform management functions and one for the purpose of holding
real estate, so that it can take the management company public.
As a condition to Hamilton’s agreement to perform the task, Hamilton
requires that NHP agree that all work must be completed before Hamilton’s
HUD contract requires it to deal in any way with Section 8 assisted
mortgages. The condition is imposed by Hamilton in order to eliminate
the possibility of any conflict of interest in its performance of
the government contract. Hamilton proceeds to build an extensive
software tool that replicates NHP’s portfolio, including all of
NHP’s properties, partnerships, and corporations. The valuation
process teaches Harvard, NHP and Hamilton many things about the
HUD Section 8 portfolio and about the Section 8 program industry
stakeholders that were not known before. The simulation program
that performed this task was made possible by the use of flexible
software tools and detailed relational databases. NHP once again
abrogates its word with Hamilton, insisting that Hamilton provide
additional advisory support past the deadline. During the negotiation,
Rod Heller becomes threatening in his statements before using another
company.
1995
Charles Ruff leaves private
practice as a partner at Covington & Burling to become DC Corporation
Counsel.
Feb-95
HUD finally issues a
request for proposals (referred to in government contracting circles
as an "RFP") for additional financial advisors to advise
FHA on handling the burgeoning portfolio of defaulted HUD-held mortgage
loans. Hamilton had recommended since 1994 that HUD hire additional
financial advisors.
Feb-95
GAO puts HUD on its high-risk
list.
Mar-95
HUD sells over $900 million
UPB in multifamily unsubsidized non-performing loans in HUD's first
public loan sale in recent memory, termed the "Southeast Loan
Sale" because of the location of the underlying properties.
The aggregate purchase price of the loans was over $700 million,
equal to 79.82% of UPB, providing the government with savings of
$437.62 million ("savings" in this case referring to "credit
subsidy" savings, which is calculated by comparison to the
expected yield on this portfolio if it were held by HUD – HUD could
expect a recovery rate of about 35% of UPB if the loans were not
sold). There were 104 bidders and 12 winners in this auction, with
GE Capital being the largest. The recovery rate and success of the
sale astonished HUD, OMB, and the market and was widely attributed
to the financial software innovations in the sale, including the
design book, Internet and Bloomberg accessible low cost, high quality
disclosure and the optimization model that permits buyers to self-stratify
the portfolio. This allows many markets to compete against each
other, driving prices way up on the sale. Harvard Endowment’s Mike
Eisenson complains about the sale to Catherine Austin Fitts before
the bid, saying, "I don’t like this [Hamilton’s use of Bell Labs
optimization technology to auction HUD mortgages] because the only
way we can win is by paying more than our competitors. We prefer
a bid process where we can win by 'gaming' it because we are 'smarter'."
The Southeast sale also introduces the concept of "design books"
in which software development procedures are applied to produce
detailed documentation of all the steps in conducting a loan sale.
The design book process enables staff from numerous HUD offices
and field offices, as well as experts retained by Hamilton, to collaborate
on-line in a final product owned by HUD. The process of creating
design book permits the loan sale team to simulate the loan sale
in a way that resolves tensions and provides documentation for decisions
made. The final design book produced for the Southeast sale is approximately
2,000 pages long. The design book is one of the key steps to building
trust within the team conducting a highly complex transaction in
an organization infamous for not being able to collaborate. It is
one of the reasons that HUD was able to complete a sale that was
not considered feasible by the industry and to execute it nearly
flawlessly, producing astonishing performance in the marketplace
at transactions costs substantially below those incurred by RTC
and other government agencies for comparable transactions. The HUD
loan sale design books are converted to HTML in 1996 and 1997 and
posted on the web. For an example, see http://www.solari.com/gideon/legal/background/DesidnBk/Home.htm.
10-Apr-95
Barron's publishes
an article about the Southeast Loan Sale, "Believe it or Not, HUD
Finally Does Something Right for Taxpayers" by Jim McTague.
24-May-95
David M. Barrett is appointed
Independent Counsel to investigate Henry Cisneros for lying to the
FBI in connection with his appointment as HUD Secretary. It is reported
in the press at a later date that Barrett is providing these services
at $50 per hour.
Summer 1995
Secretary Cisneros proposes
legislation to implement the controversial "mark-to-market"
program into Congress at the instigation of the DAS for Multifamily
Housing, Helen Dunlap, with Hamilton’s support as financial advisor.
The response of the enforcement operations to the notion of on-line
training that decreases default rates and losses on HUD’s portfolio
is typified by the response of one member of the HUD OIG staff:
"Why should we give niggers computers when my kids don’t even have
them yet?"
Summer 1995
Hamilton starts a computer
learning center at Edgewood (a Washington, DC neighborhood) and
begins training for the first class to seed Edgewood Technology
Services in the fall. Fitts uses the early results to persuade HUD
in August to initiate the Neighborhood Networks Program by issuing
an administrative letter to HUD field offices that expands the definition
of "multifamily housing" to include computer learning
centers. (While loan sales improves the recovery rate on defaulted
mortgages, the greatest savings will result from lowering the default
rates that are occurring as a result of homeowners and tenants not
being able to pay their mortgage and rents). This makes many billions
of dollars of housing subsidy eligible to pay for computer learning
centers in privately owned apartment buildings. A highly capable
and innovative team in the Seattle Field Office takes charge of
the program, running the program from the field.
Jun-95
Clinton nominates John
D. Hawke, Jr. as Under Secretary for Domestic Finance at the US
Treasury. Hawke is a former Senior Partner at Arnold & Porter,
where he headed the financial institutions practice and served as
Chairman of the firm from 1987 to 1995. He served as General Counsel
of the Federal Reserve from 1975-78. As Under Secretary, Hawke’s
role is to oversee policy and legislation in the areas of financial
institutions, Treasury securities and pubic debt management, capital
markets, government financial management services, federal lending,
and government-sponsored enterprises.
17-Jun-95
"Blueprint for Reinvention
of HUD," issued by Secretary Henry Cisneros, proposes sweeping changes
in public housing, reform of FHA and consolidation of other programs
into three block grants.
Jul-95
Sally Denton's and Roger
Morris’s story on Mena, Arkansas, drawing from documents in Barry
Seal’s papers, is published in Penthouse after having been
axed by the Washington Post in January, shortly before publication.
A detailed report on Mena had run in The Nation in early
1992.
6-Jul-95
Daniel Pearson is appointed
Independent Counsel to investigate questionable business transactions
by Commerce Secretary Ron Brown.
August - October -
95
The HUD Denver (Rocky
Mountain) Field Office Inspector General's Office team puts together
audit objectives for the upcoming audit of the HUD loan sales program.
18-Aug-95
National Housing Partnership
("NHP"), the second largest HUD property manager and assisted
housing landlord, completes its initial public offering ("IPO")
and then draws on its credit facility. The IPO proceeds are used:
(1) to repay indebtedness from a previous credit facility, (2) to
repay a note to a former institutional shareholder of NHP, (3) to
repay a debt to Demeter Holdings (a Harvard Endowment - affiliated
investment vehicle that owned approximately ---% of NHP stock),
Capricorn (NHP’s second largest stockholder) and Roderick Heller
(Chairman of NHP), (4) the remainder added to NHP working capital.
In consideration of the sale of certain NHP - affiliated "Real
Estate Companies", Demeter, Capricorn and Heller canceled $9.1
million in debt. Effective with the IPO, NHP granted NHP Chairman
Rod Heller non-qualified performance vesting options to purchase
120,000 shares of NHP common stock @ $16 – the options would vest
in 10 years but are subject to accelerated vesting under certain
circumstances, including change in control of NHP. [Source: SEC
EDGAR filings] The Chairman of Capricorn is Pug Winokur, Chairman
of DynCorp, which serves as the lead contractor for DOJ’s Asset
Forfeiture Fund and provides numerous other IT, data and security-related
services at DOJ, HUD and throughout the Federal Government and the
War on Drugs in South America. Winokur is also a member of the board
of Harvard Endowment, the lead investor in NHP. The Center for Public
Integrity reports that Winokur was a $100,000 donor at the Clinton
Inauguration and that Harvard employees are the tenth-largest supporter
of Bill Clinton throughout his career.
Fall 1995
Jack Quinn, Al Gore’s
Chief of Staff and former partner at Arnold & Porter, becomes
White House Counsel. Lloyd Cutler, board member of NHP, whose firm,
Wilmer Cutler & Pickering, handled much of NHP's’ legal work,
had gone over to the White House Counsel’s office after Vince Foster’s
death.
Summer/Fall 1995
The Neighborhood Networks
letter to HUD field offices circulates. Adelson Entertainment makes
a video about ETS (an e.villages data services training site) which
does an excellent job of describing the on-line training and business
incubation idea. Dave Derecola, head of FHA audits in the HUD OIG’s
office, warns Fitts that Greer’s support of the neighborhood networks
concept could cause him serious trouble within HUD OIG. Greer and
Derecola are both recused from auditing the loan sales or Hamilton
as a result of their assistance in helping to design and build the
loan sales program.
Sep-95
HUD holds the National
Performing Sale in which Bankers Trust was the winning bidder for
all but one mortgage at almost 89% of UPB of the loans. Proceeds
of the sale aggregated $254.7 million. The program improvements
incorporated in this sale included the provision of a pre-auction
rating of the portfolio in the form of "comfort letters"
to bidders.
Sep-95
Catherine Austin Fitts,
President of Hamilton Securities, is on sabbatical to attend classes
at MIT in Boston until December of 1995. Hamilton moves into its
new offices over a CVS drugstore on DuPont Circle. The space is
designed to be an open office, with 35 desks that integrate computer
and telephony off of a central server, with swing capacity to 75
seats in kitchen and conference spaces to handle outsourcing and
visitors. The space is quite beautiful but has a lower per employee
cost than for the Washington, DC space occupied by HUD. In 1997,
the space is awarded an advance technology design award by the American
Institute of Architecture.
http://www.e-architect.com/conted/advntech/projcts/proj10.asp
Sep-95
HUD holds the National
Performing Loan Sale and auctions $282.25 million UPB in performing
multifamily loans. The National Performing Sale yielded proceeds
of $250.19 million, equal to 88.64% of UPB and resulting in savings
to the government of $25.63 million. As part of this auction, HUD
obtained comfort letters from rating agencies for these loans, resulting
in a "partial securitization" that increased proceeds over what
would have been otherwise possible. There were 25 bidders and two
winners in this auction.
Sep-95
HUD auctions $26 million
UPB in Title I (home improvement and manufactured housing) loans,
with Hamilton as financial advisor. The Title I Loan Sale yielded
proceeds of $.17 million, equal to 66% of UPB and resulted in savings
to the government of $.08 million.
Sep-95
The Washington Times
publishes an article "Capturing Billions in the Balance Sheet"
by Bill Diefenderfer, the Deputy Director of OMB during the Bush
Administration. Highlights: "In this case [the Southeast auction],
dedicated government servants saved the taxpayers $424 million…
This is not just shuffling paper. In this one transaction, HUD reduced
the federal deficit by more than $400 million."
3-Sep-95
Asset Strategies Group,
a due diligence subcontractor to Hamilton, stopped its work on the
HUD Single Family Loan Sale #1, refusing to continue unless HUD
immediately makes a series of changes in due diligence procedures
for the sale. HUD, upon Hamilton’s advice, decides to proceed with
the sale and, when Asset Strategies refuses to continue work, Hamilton
replaces Asset Strategies with Utendahl Capital. Subsequently, Asset
Strategies’ lawyer, Karen Burstein, writes a letter of complaint
against Hamilton to Andrew Cuomo who, at that time, is Assistant
Secretary for Community Planning and Development (with no role in
the loan sales). This letter of complaint finds its way into the
Ervin complaint filed in Ervin v. Dunlap and the qui tam
case naming Hamilton via Bill Richbourg, one of Hamilton's contract
GTRs.
6-Sep-95
Letter from Karen Burstein,
counsel for Asset Strategies, to Assistant Secretary for Community
Planning and Development Cuomo detailing "significant irregularities
in HUD's Note Sale Program" under the direction of Nicolas Retsinas.
The letter begins "Dear Andrew" and ends "Affectionately,
Karen."
25-Oct-95
HUD holds the Single
Family Loan Sale #1 for $523.23 million UPB in single family loans.
The Single Family Loan Sale #1 yielded proceeds of $392.77 million,
equal to 75.07% of UPB and resulting in savings to the government
of $7.89 million. There were 6 bidders in the auction held on the
originally scheduled date of October 25, as a result of which auction
HUD awarded 10,000 loans to three winners. A reoffering of 3,000
loans from this sale took place on November 6, 1995. The reoffering
was necessitated when the maximum bids received on the original
bid date for this portion of the portfolio fell short of the undisclosed
value of the portfolio to the government, making a sale at the first
maximum bid price undesirable. Soon after HUD’s failure to award
the full portfolio at the initial bid date, BlackRock Capital writes
an excoriating letter of complaint about Hamilton to HUD.
30-Oct-95
Bloomberg Information
Services publishes a story "HUD Earns Unexpected $1.3 Billion from
Sale of Multifamily Mortgage Loans."
Nov-95
Patrick Knowlton testifies
before the Whitewater Grand Jury regarding Vincent Foster’s death.
Nov-95
The Single Family Loan
Sale re-offering takes place – four bidders participated and 3,000
of the originally offered 10,000 loans are awarded to BlackRock
Capital, the winning bidder at a respectable 75% of unpaid principal
balance. In its post-auction review process, Hamilton determined
that two enhancements could increase proceeds in sales of this type:
(1) provision of detailed 36-month payment histories to bidders
and (2) a revision of post-sale servicing requirements. These improvements
were incorporated in subsequent sales.
Nov-95
Housing Affairs Newsletter
reports that the HUD IG is doing an investigation of irregularities
on the HUD loan sale bids.
1-Nov-95
HUD holds the West of
Mississippi Loan Sale auction. HUD offered $622.34 million UPB in
non-performing multifamily loans in the West of Mississippi Sale
with Hamilton as financial advisor. The West of Mississippi Sale
yielded proceeds of $385.2 million, equal to 61.9 % of UPB and resulted
in savings to the government of $107.82 million. There were 73 bidders
and 26 winners in this auction.
4-Nov-95
Prime Minister Rabin
assassinated; Peres succeeds him.
8-Nov-95
Colin Powell announces
he will not seek the Presidency.
Nov-95
The House of Representatives
bans gifts to Members. The ex-White House Travel Office official
is acquitted.
Nov-95
Edgewood Technology Services
(ETS), a subsidiary of e.villages (a Hamilton/Adelson Entertainment
joint venture for the creation of computer learning centers in government-assisted
housing projects that was designed with an ESOP and employee stock
options to employees) begins work on a proprietary Hamilton database
by calling and filing Freedom of Information Act ("FOIA")
requests with all the HUD field offices for information with which
to build a definitive database of the HUD multifamily portfolio.
The database integrates information Hamilton had obtained from other
sources and publicly available data with incomplete, publicly available
information from HUD to produce a much more complete record of ownership
of HUD properties than had heretofore been available. The work on
this database proceeds throughout the next two years. Hamilton also
arranges for ETS to learn how to use GIS (Geographic Information
Systems) software.
29-Nov-95
Legislation regulating
lobbyists becomes law.
Sept- Dec-95
Numerous Members of Congress
resign.
Dec-95
Chris Greer, then Chief
Auditor for HUD’s Office of Inspector General, is named Deputy Assistant
Secretary for the Multifamily Housing Division of HUD, which has
responsibility for the FHA Fund, replacing Helen Dunlap in that
position. Helen Dunlap is moved to the position of Deputy Assistant
Secretary for operations and retains regulatory responsibility for
HUD loan sales. Greer is seen as an adversary by groups in Denver
and Boston who were targeted by HUD for "mod rehab" program
scandals of the early ‘90s and various instances of financial fraud
during the S&L scandals of the 1980’s/Iran Contra period. Before
moving from IG’s Office, Greer reports to Fitts that an IG investigation
of what appear to be Burstein and associated bid rigging allegations
of HUD loan sale bidder collusion on the Single Family Sale #1 concludes
that the charges are unfounded.
Dec-95
Numerous Whitewater events
from December 5th – 25th, 1995; White House releases subpoena notes,
which D’Amato calls a "smoking gun."
6-Dec-95
Clinton vetoes the GOP’s
7 - year budget bill.
6-Dec-95
The House Committee on
Ethics votes unanimously to have an independent counsel investigate
allegations that Gingrich had violated tax laws [relating to campaign
financing through use of his "PAC."
16-Dec-95
A partial government
shut-down begins.
21-Dec-95
Congress passes welfare
reform legislation.
31-Dec-95
Neal R. Pierce, a member
of The Washington Post Writers Group, releases a column entitled,
"Computers in Subsidized Housing: More Important Than Welfare Reform?"
1995-1996
The Clinton Administration
beings its investigation of Nazi gold and assets seized from Holocaust
victims held by Swiss banks.
1996
Late January 1996 HUD
selects four financial advisory contractors in connection with its
FHA portfolio and mortgage loan sales program: Merrill Lynch, Hamilton
Securities, CS First Boston and Cushman & Wakefield. Subsequently,
Ervin and Ernst & Young protest the award and First Boston declines
to serve as financial advisor, purportedly because the remuneration
under the contract is not sufficient. First Boston is replaced by
E&Y. Ervin’s protest is denied.
Early 1996
Oscar Wyatt, Chairman
of Coastal Energy, headquartered in Houston, contacts Secretary
Cisneros and the White House insisting that Hamilton be fired by
HUD. Assistant Secretary Nicholas Retsinas is asked to call Wyatt
to solicit an accounting of his concerns. Retsinas later reports
to the Deputy Assistant Secretary in charge of loan sales that Wyatt’s
objection to Hamilton’s appointment as loan sale advisor is that
Catherine Austin Fitts, the President of Hamilton, is a woman. HUD
and Hamilton later learn that his son, Steve Wyatt, is providing
consulting services to NHP. The Center for Public Integrity reports
that Wyatt was a $100,000 donor for the Clinton inauguration fund.
Jan-96
Hillary Clinton testifies
before the Whitewater grand jury.
Jan-96
The HUD Denver (Rocky
Mountain) field office audit team begins the HUD loan sales audit,
which it completes in September.
6-Jan-96
The Government shutdown
ends after a three-week work stoppage.
9-Jan-96
Clinton vetoes legislation
that would shift welfare to states.
9-Jan-96
The Paula Jones suit
against William Jefferson Clinton is allowed to proceed.
31-Jan-96
Clinton supports a $9
billion loan to Russia.
Jan-Mar 1996
Assistant Secretary Retinas
convenes a series of three industry "portfolio reengineering
forums" in an effort to garner support for the "mark to
market" proposal, which is re-named "portfolio reengineering."
The unintended result of the forums is to coalesce previously separate
interest groups into a united opposition against HUD’s proposed
"mark to market" legislation. Industry opposition focused
on the pending "partially assisted" loan sale being conducted
by HUD with Hamilton as financial advisor. Industry critics perceive
that if the partially assisted sale is successful, opposition to
the "mark to market" proposal will be weakened.
Jan - 96
The HUD Denver (Rocky
Mountain) field office audit team begins the HUD loan sales audit.
The draft report is circulated in the summer and the audit is shut
down in September.
Jan-April 1996
HUD conducts briefings
with a multitude of stakeholding groups to explain the results of
a study conducted by Ernst & Young ("E&Y") on
the "mark to market" portfolio of FHA insured loans on
Section 8 subsidized properties. With strategic communications assistance
from Hamilton, HUD engages in a public relations campaign to gain
support for the proposed "mark to market" program. The
E&Y study’s results indicate that most of the portfolio needs
an average of about $10,000 per unit in rehabilitation and/or can
be supported only by rents in excess of market rates. Some 13% of
the portfolio is deemed unsustainable at market rents, even if the
FHA insured debt is written off. Only 13% of the portfolio properties
can support existing FHA insured debt at market rents and after
needed rehabilitation is undertaken with funds generated by the
project. Industry members led by the National Association of Homebuilders
assert to their congressional representative that E&Y’s methods
are flawed and the results incorrect. E&Y stands firm.
9-Feb-96
Ervin & Associates
files objections to HUD's failure to select the company as a financial
advisor despite its lack of qualifications.
Feb-96
David Schipper’s book
Sell Out on the impeachment of Clinton illuminates efforts
by Henry Cisneros in February 1996 to assist Clinton and Gore with
the use of the INS to increase the number of Democratic voters (through
the expedited grant of citizenship to traditionally Democratic immigrants)
in time for the 1996 elections. Shipper’s book includes a memo from
Cisneros to Clinton-Gore focusing on the Los Angeles area. He also
describes the investigation of political interference at INS by
Gore and Elaine Kamark of Gore’s Office of Government Reengineering
as part of the impeachment. This raises questions in Solari’s mind
regarding whether or not the "TRACS" HUD tenant database
and other HUD databases were involved in the election efforts and
whether that could explain some of the problems that Hamilton had
dealing with the TRACS staff and Lockheed Martin, the major TRACS
contractor.
Spring 1996
A member of the Board
of Directors of Hamilton is told by an acquaintance that the Housing
Affairs Letter had reported that the House HUD Appropriations
Subcommittee had put pressure on the HUD IG to initiate an investigation
of Hamilton and threatened to cut appropriations to the OIG if no
investigation was initiated. Additional reports indicate that large
increases in appropriations for Operation Safe Home are offered
in exchange for the OIG's cooperation.
Mar-96
Ervin files a second
bid protest of HUD contract awards. GAO reports that all told, before
the complaint is resolved, Ervin has filed approximately 37 bid
protests.
Mar-96
GAO announces that DOJ
and Treasury Asset Forfeiture Funds are on the high risk list. DynCorp
serves and lead contractor on the DOJ Asset Forfeiture Fund, having
won a second five year option to their initial $60MM contract in
1993. In this month, DynCorp wins the Justice Office Consolidated
Network, the primary computer system for the DOJ Civil Division.
22-Mar-96
Hearings are held before
the Senate Permanent Subcommittee on Government Affairs.
20-Mar-96
HUD sells $758.43 million
UPB in single family nonperforming mortgage loans in the Single
Family Loan Sale #2. As part of the sale, HUD requests that bidders
for loans on properties located in New Orleans, Washington, DC and
Los Angeles voluntarily answer "place based questionnaires," which
are intended to provide HUD with valuable information about possible
place-based auctions in the future. This includes a copy of the
early prototypes of a Community Wizard "money map" of
homeowner defaults in South-Central LA. The Single Family #2 Sale
yielded proceeds of $633.82 million, equal to 83.57% of UPB and
resulting in savings to the government of $143.6 million. There
were 31 bidders and one winner in this auction.
27-Mar-96
Susan Gaffney, HUD Inspector
General, testifies before the House Committee on Appropriations,
Subcommittee on VA, HUD and Independent Agencies about the "Reinvention
of HUD."
1-Apr-96
The effective date of
NHP’s acquisition of all of the outstanding capital stock of WMF
Holdings Ltd. ("WMF Holdings"), the owner of Washington Mortgage
Investors Group, Ltd., for consideration of approximately $21 million
in the form of $16,800,000 in cash and 210,000 shares of the Company's
unregistered common stock ("NHP Stock"). Washington Mortgage Financial,
according to an 8-K [current report] filed with the SEC, has "had
mortgage servicing contracts aggregating approximately $4.5 billion
as of February 29, 1996, and originated approximately $805 million
in multifamily and other commercial mortgages in 1995."
3-Apr-96
Commerce Secretary Ron
Brown and 32 others died after an Air Force jet carrying a U.S.
trade delegation slammed into a coastal mountain as it approached
the airport at Dubrovnik, Croatia.
10-Apr-96
Ervin & Associates
files another bid protest with HUD.
17-Apr-96
A $30,000 transfer is
made from a Hamilton Securities account at to Catherine Fitts’ personal
checking account at Morgan Guaranty. It is the size of this transfer
and the fact that the account was not recognized by the OIG to be
a Hamilton account upon which the Office of Inspector General later
bases its subpoena duces tecum issued to Morgan Guaranty for Fitts’
account information. Fitts funded Hamilton with $1,000,000 of preferred
stock, which she purchased with her personal funds raised from liquidating
her savings, selling her home and borrowing against her 401K. At
various points when Hamilton income permitted, Hamilton paid Fitts
a below-market dividend on the preferred stock and retired portions
of the preferred stock. At the point of the $30,000 transfer, Fitts
still had approximately $1MM of her savings invested in the firm.
23-Apr-96
Ervin’s counsel sends
a letter to the HUD Deputy General Counsel requesting a meeting
to discuss allegations of corruption, favoritism and misconduct.
On April 26, Ervin threatens litigation.
25-Apr-96
Hamilton is awarded the
Crosscutting Task Order by HUD. Fitts is informed by Assistant Secretary
Retsinas that the White House had ordered him not to award one of
the four new contracts to Hamilton and he has chosen to ignore that
order.
26-Apr-96
Ervin's attorney calls
HUD's Office of General Counsel to request a meeting to discuss
Ervin's grievances and to inform them that Ervin intended to file
suit. (Source for this and other entries re: Ervin & Associates:
Second Amended Complaint in Bivens action).
26-Apr-96
Legislation is passed
creating a one-year "mark to market" demonstration program.
FHA views the legislation as counter to its efforts to pass its
version of mark to market. The legislation requires (1) owner consent
to restructuring of FHA insured notes, (2) owner protection from
adverse tax liabilities due to cancellation of indebtedness by the
creation of cash flow second mortgages, (3) protection of the taxpayers’
and residents’ interests, (4) renewal of section 8 contracts (instead
of replacing the contracts with tenant-based vouchers, as proposed
by HUD), and (5) permission to replace existing project financing
with new FHA insured debt. Hamilton declines to serve as HUD’s financial
advisor in implementing the demonstration.
May-96
HUD sells $11.09 million
UPB in Title X land development loans and $161.85 million UPB in
Title I (home improvement and manufactured housing) loans with Hamilton’s
assistance. The Title X Loan Sale yielded proceeds of $2 million,
equal to 18.03% of UPB and resulted in savings to the government
of $2.64 million. The Title I Loan Sale yielded proceeds of $1.54
million, equal to .95% of UPB and resulted in savings to the government
of $.88 million.
Spring-96
Controversy erupts with
NHP, Gene Ford, Scott Nordheimer and selected members of the multifamily
industry in connection with the proposed negotiated sale of the
Maryland portfolio of multifamily nonperforming mortgage loans in
the HUD portfolio to the Maryland housing finance agency ("HFA").
Objections include complaints regarding the success of the BlackRock/Goldman
team (which had proposed to partner with the Maryland HFA) in marketing
to state HFAs. An explosive meeting occurs on the day of Jim Rouse’s
funeral in Baltimore between Dunlap, the Maryland agency with Fitts
present. Fitts is blamed for a Retsinas decision that the choice
of private partners be subject to disclosure and competitive bidding
process. At a dinner in New Orleans for the National Multihousing
Council, Rod Heller, CEO, insists to Catherine Austin Fitts that
the Section 8 owners are owed a rollover of their HUD Section 8
subsidies on a non-competitive and non-performance basis. The head
of Multihousing Council had earlier asked Fitts to step back in
the leadership so as not be Vice Chairman when Randy Hawthorne,
Boston Financial, was Chairman.
May-96
Ernst & Young releases
its final report on the "mark to market" multifamily mortgage
loan portfolio, which supports FHA’s proposal to mark the portfolio
to market and introduce competition and tenant choice.
May-96
Al Gore’s former administrative
assistant, Peter Knight, becomes Clinton’s campaign manager.
1-May-96
Ervin’s counsel meets
with HUD Deputy General Counsel for Program and Regulations to discuss
contracting corruption and favoritism.
31-May-96
Ervin & Associates
protests the awarding of the Crosscutting Task Order to Hamilton.
Jun-96
Inquiries by Congress
result in the White House disclosing that it has kept substantial
FBI files, including on former Republican government officials.
Jun-96
HUD closes the structured
sale of debt and 90% of the equity in a pool of 158 "partially assisted"
multifamily loans with UPB of $883.63 million with Hamilton as financial
advisor and BlackRock Capital assisting with placement of the offering.
The Partially Assisted Sale yielded proceeds of $645.47 million,
equal to 73.05% of UPB and resulted in savings to the government
of $213.01 million. HUD retained a $60.5 million UPB share of the
equity. There were 7 bidders and two winners (one for the debt portion
and one for the equity portion) in this auction. Similarly structured
"N" series sales by RTC averaged 2 bidders.
5-Jun-96
Ervin files complaint
for preliminary and permanent injunctive relief, declaratory relief
and for money damages against HUD, Helen Dunlap, Henry Cisneros,
SBA, and Philip Lader (253 pages + exhibits), signed by Wayne Travell
of Tucker, Flyer and Lewis (this is referred to as the "Bivens"
action). Ervin continues to inundate HUD with FOIA requests and
incur substantial legal costs to harass HUD and Helen Dunlap, who
is named personally in the suit and forced to seek counsel at her
own expense. Helen Dunlap had day-to-day responsibility for the
HUD loan sales program. The Ervin complaint states the case involves
seven categories of unlawful, unethical and generally outrageous
conduct: (1) contracting corruption and favoritism, (2) racial,
gender and age discrimination, (3) retaliation through breach of
contract, (4) theft of Ervin’s intellectual property, (5) insider
trading, (6) cover-ups and (7) retaliation through defamation, rumor,
innuendo, cancellation of existing work and blackballing.
6-Jun-96
Qui tam filed under seal
[Ervin & Assoc, et al v. Hamilton Sec Group, et al (1:96-CV-1258)
SEALED, United States District Court for the District of Columbia].
Also filed is a certificate of disclosure of corporate affiliations
and financial interests by plaintiff Ervin & Assoc Inc. Allegations
related to insider trading and bid rigging on $4.7 billion of loan
sales won by Goldman Sachs and its bid partners, including BlackRock/PNC.
Hamilton was not informed that it was named as a defendant in the
qui tam action until December of 1997, one year and a half after
the suit was filed, and received no other information, such as the
plaintiff’s identify and the precise allegations, until the case
was unsealed in 2000.
7-Jun-96
Order by Judge Charles
R. Richey directing that the counsel for the parties in the qui
tam lawsuit shall appear before the court on 6/20/00 for a status
conference and that counsel for the plaintiffs shall give notice
to the Chief of the Civil Division, Office of the US Attorney for
DC and effect service of process on the named defendants by 4:00
on 6/14/96.
13-Jun-96
Motion filed by Non-Party
USA in the qui tam lawsuit for reconsideration of the June 7 order
by Judge Richey (Ervin joins).
17-Jun-96
The Washington Post
publishes a front page story on e.villages, a residential community
data servicing business that is a joint venture partnership between
Hamilton and Adelson Entertainment. This data servicing operation
is an out-sourced component of Hamilton’s money mapping and website
database operation designed to promote community database and web
access to software tools (such as "Community Wizard")
that illuminate how money works in communities. Later in the month,
Hamilton is told that the HUD IG, upon reading the Washington
Post article, stated "that’s the last straw" and that
she had "had it" with Hamilton and was going to "get her
[Fitts]."
17-Jul-96
Daniel Hawke of Tucker,
Flyer & Lewis sends a confidential letter to Barbara Van Gelder,
Assistant US Attorney, that starts "Dear Biz." The letter
relates the discovery by Ervin, Hawke’s client, of the existence
of the Karen Burstein letter to Andrew Cuomo.
18-Jun-96
Homeownership totals
66.3 million American households, the largest number ever.
20-Jun-96
A hearing is held in
the qui tam case. An order is issued by Judge Richey granting the
June 13 motion by the Non Party USA in the qui tam lawsuit for more
time and to maintain the seal. Transcripts of the hearing that were
sealed and, therefore, not available to Hamilton until December,
2000, indicate that the hearing was focused on determining whether
Ervin had delivered "substantially all" the evidence supporting
the allegations of the complaint to the Department of Justice. Mark
Nagle, Assistant US Attorney, appeared for the government and Wayne
Travell and Daniel Hawk appeared on behalf of Ervin, the relator.
Travell tells the judge there are several thousands of pages involved,
including an anonymous package apparently sent out from the Office
of General Counsel of HUD. This package, he says supports allegations
in both the qui tam and Bivens cases. [Note: Lucy Du, a former key
employee of Ervin and Associates, was married to Jeff Patton an
attorney employed in enforcement activities the HUD Office of General
Counsel.] The judge makes it clear that he is not interested in
the government being buried in paperwork, and that the relator should
pull out the critical pieces of information and highlight them.
He also emphatically says that he does not intend that this case
will clog the docket for any significant period of time. The next
hearing is scheduled for July 1, at which Judge Richey is to get
an "informed report" of progress.
Jun/Jul-96
The Hamilton project
manager for loan sales and HUD officials meet with the HUD IG Denver
office audit team leader assigned to audit the mortgage loan sales
program and is told that the HUD OIG audit will be highly complimentary
and that all complaints, including any complaints about bid rigging
and insider trading, have been reviewed and found to be unfounded.
Jun/Jul-96
Gene Ford and Conrad
Egan repeatedly approach Gary Squier at HUD in connection with including
in the "mark-to-market" program (for the renegotiation of FHA guaranteed
debt) a Mt. Pleasant (Washington, DC) property that was being considered
for an e.villages site. This action is in direct contradiction of
e.villages' position (because of its connection with Hamilton) that
it will not be involved in HUD mark-to-market projects and the express
promise of Gene Ford (owner of the property) to Hamilton that the
property would not be entered into this program. E-mails to Hamilton
from Squier reporting these approaches result in repeated confrontations
with Gene Ford and Scott Nordheimer, Ford's partner, who lie to
Fitts about their approaches to Squier and take actions that are
contradictory to their assurances to her. Fitts finally decides
that something is intentionally amiss.
Jul-96
A team of reporters from
US News and World Report start working on a story about a
"HUD scandal."
Jul-96
An appropriations deal
for the multifamily industry, led by NHP and New York and Boston
owners and managers and originators, is reached in House of Representatives.
The Boston and New York delegations play an essential role on both
sides of the aisle. Rumors circulate that "negative credit
subsidy" (the Credit Reform Act term for savings to the government)
generated by the HUD loan sales has been "moved" in order
to back a multi-year increase in Congressionally authorized multifamily
insurance. This new insurance authority is designed to give affordable
housing owners lots of time to exit the tax shelters that originally
financed the "mark-to-market" portfolio of Section 8 properties
by refinancing the properties with new HUD mortgage insurance, cashing
out the equity, moving the properties out of the Section 8 program
into the conventional rental market, or selling to the not-for-profit
organizations favored in the recent "mark-to-market" legislation.
With the negative credit subsidy reallocation assured and an agreement
by OMB that Congress may use the high loan sale recovery rate assumptions
derived from loan sales experience in calculating the required appropriations
for new FHA mortgage insurance originations, meaningful portfolio
reengineering is stopped. Various parties report to Hamilton that
the HUD OIG agrees with key congressional representatives to target
the loan sale program and Hamilton in exchange for appropriations
increases for Operation Safe Home, which support increased DOJ-OIG
enforcement and seizure efforts.
Jul-96
Hamilton learns that
US News & World Report is working on a loan sale scandal article
that sounds as though it is targeted at HUD Secretary Cisneros and
Catherine Austin Fitts (who worked for Jack Kemp as Assistant Secretary
of Housing/FHA Commissioner when he was Secretary of HUD). A pre-interview
letter from USNWR reporters to Henry Cisneros refers to the Department
as "scandal tarred." Fitts sends a letter to many friends
and David Gergen, the new Editor of USNWR, accusing USNWR (Ed Pound
and Jim Ito) of drawing conclusions before doing the research and
of conducting a rigged investigation. USNWR agrees to listen to
a Hamilton presentation explaining how
loan sales work. Pound
subsequently resigns and goes to USA Today; Ito goes to the Washington
Post (he subsequently leaves) claiming that Mort Zuckerman improperly
sabotaged the article.
Jul-96
Gary Squier, who is on
loan to HUD from the Los Angeles Housing Authority to lead implementation
of the mark to market "demonstration," requests that Hamilton,
in addition to E&Y, the financial advisor hired for this program,
assist in the implementation. Hamilton had not wished to serve in
this role, encourage HUD to hire other contractors. The following
month, Squier’s request is muted as a result of the investigation
begun in August. By January 1997, not a single loan has been worked
out under the 1996 demonstration program and the 1997 program is
bogged down hopelessly.
Jul-96
At the annual National
Housing Conference dinner held at Union Station in Washington, DC,
Scott Nordheimer, Gene Ford’s partner (Gene Ford being NHP’s partner
and the owner of the HUD assisted housing at which Hamilton’s e.villages
site is located) assures Fitts that the industry efforts to have
Fitts fired through the White House have failed, so now they have
rigged it so that she is going to jail.
Jul-96
HUD requests certain
information be provided by Ervin and Associates to HUD under the
company's Audited Financial Statement Contract. A dispute arises
between Ervin and HUD as to whether the information Ervin has collected
is proprietary or covered under the contract, and Ervin refuses
to provide it unless HUD makes additional payments to Ervin, which
HUD refuses to do.
Jul-96
The second Neighborhood
Networks Conference of the year is held in Seattle. Seattle was
the home of Diana Goodwin-Shavey, the program coordinator for Neighborhood
Networks nationwide. This is one of the few times that a major new
FHA initiative was been developed and run from outside Washington.
Jul-96
Vice President Gore's
National Performance Review Committee announces that the HUD mortgage
sale team has been awarded a Hammer Award for cutting red tape,
empowering employees to improve service to the Department's customers
and lifting the burden of managing and servicing HUD owned mortgages
from Headquarters and field staff.
1-Jul-96
Order by Judge Richey
directing that counsel for the plaintiff in the qui tam lawsuit
and the government shall appear on 8/19/96 for a status conference
and directing the matter remain under seal until further order of
the Court. At the hearing held on this date, attended by AUSA Barbara
Van Gelder and Ervin attorneys Hawke and Travell, Van Gelder says
"Your Honor, the matters that are before this Court are very strong,
perhaps criminal, allegations that there has been collusion, bid
rigging and kickbacks." Her plan is "We will have HUD IG investigators
doing some rapid interviews of unrelated parties who may or may
not have information. So we can determine in this next 60 days…
whether or not [to intervene in the case]." She says there are people
alleged to have "been in the [bid] room who should know." She said
she stopped counting the number to be interviewed at 12. When Van
Gelder suggests that the government may need a stay of the case
pending a criminal investigation, Richey says "If you have to do
that, I don't stay cases. I dismiss them without prejudice with
leave to reopen upon the conclusion of whatever event…"
26-Jul-96
Ervin files a protest
of the SWAT procurement awarded by HUD to Kerry Company with the
General Accounting Office.
28-Jul-96
Congress enacts Welfare
Reform.
29-Jul-96
Publication of "Loans
on the Cheap: Auctions Help HUD Ditch Troubled Mortgages",
in Barron’s.
30-Jul-96
Susan Gaffney, HUD Inspector
General, states in her testimony before the Subcommittee on Human
Resources, and Intergovernmental Relations on Restructuring of HUD’s
Assisted/Insured Multifamily Housing Portfolio, "Several successful
mortgage sales by HUD offer some hope that FHA could complete portfolio
reengineering if it was patterned after the sales program." She
makes no reference in her written testimony to the effects of Welfare
Reform on the HUD portfolio, but she does take the opportunity to
tout the benefits of the HUD OIG Operation Safe Home program, "In
the first two years, 10 criminal convictions and over $37 million
in judgments, settlements and fines involving project owners and
managers have taken place. Another 105 cases are in process involving
$105 million in misused project funds."
Aug-96
Democratic National Convention
is held.
Aug-96
Republican National Convention
is held.
Aug-October 96
Hamilton spends approximately
$350,000 in time and expenses addressing issues raised by a four-reporter
team from US News & World Report. The thrust of the article
is that Cisneros is running the agency in a very corrupt way. Much
of Hamilton’s initial efforts are spent disproving accusations against
Cisneros. The effort than focuses on loan sales. The lead reporter,
Ed Pound, insists that he "has been assured at the highest
level of the HUD IG’s office that Hamilton and Fitts are guilty
of criminal offenses and will be indicted." Deputy Assistant
Secretary Greer writes a powerful letter to Pound after numerous
meetings insisting that Pound’s allegations are not true.
Aug-96
HUD sells $847.2 million
UPB in nonperforming unsubsidized multifamily loans in the North
and Central Loan Sale. The North and Central Sale yielded proceeds
of $847.2 million, equal to 73.38 % of UPB and resulted in savings
to the government of $235 million. There were 82 bidders and 13
winners in this auction.
1-Aug-96
Ervin & Associates
files the First Amended Complaint in the Bivens action. The descriptions
of insider trading allegations are more elaborate and imaginative
than in the first filing.
3-Aug-96
Fitts makes a keynote
speech on money maps and community access to technology at a Neighborhood
Networks conference held in Boston, highlighting Hamilton's partnership
with Adelson Entertainment (an LA-based movie production company
known for documentaries on government abuse) and the "money map"
of LA. The money map shown during her speech focuses on South Central
LA, and she relates that it has been prepared by Edgewood Technology
Services, a Section 8 project-based data servicing company that
performs money mapping services illustrating government investment
and real estate in low income communities. The money map shows the
correlation between HUD defaults and CIA drug dealing in South-
Central LA that came at great loss to homeowners and taxpayers alike.
At the conference the
HUD Neighborhood Networks Program is presented with a Hammer Award.
Aug-96
Meeting between the HUD
staff and Lockheed staff under contract to manage HUD’s TRACS database
system regarding repeated problems experienced by Hamilton and loan
sales team with access to data.
Aug-96
According to a Declaration
of HUD IG Investigator James M. Martin filed in Support of Office
of Inspector General’s petition for Summary Enforcement of Subpoenas
on March 3, 1998, under seal, in August, 1996, shortly after the
OIG investigation began, the Civil Division of the US Attorney’s
Office sought the involvement of the Criminal Division of that Office
in the investigation.
6-Aug-96
Hamilton receives the
first subpoena from the HUD OIG in connection with an investigation
of Hamilton. The HUD OIG later asserts that the investigation was
begun at the request of DOJ in response to John Ervin’s qui tam
(whistleblower) suit naming Hamilton, among others. [Delegation
by DOJ to HUD OIG is statutorily prohibited under the False Claims
Act and the subpoena has illegally circumvented DOJ’s False Claims
Act requirement to disclose the filing of and nature of charges
under a qui tam suit to the target of the suit. Hamilton’s efforts
to argue the illegality of this were lost before Sporkin and a later
appeal.]
16-Aug-96
Motion filed by Non Party
USA in the qui tam lawsuit to extend time to 11/18/96 within which
to make intervention decision and maintain seal on the case.
10-Aug-96
Dole announces that Jack
Kemp will be his Vice Presidential running mate. Jack Kemp had been
Secretary of HUD for the Bush Administration, and had hired and
fired Catherine Austin Fitts as Assistant Secretary of Housing/FHA
Commissioner.
15-Aug-96
Federal defendants in
Bivens case file a Motion to Dismiss.
14-Aug-96
Ervin & Associates
files an action in the US Court of Federal Claims seeking relief
related to certain HUD contracts. Ervin & Assoc., Inc., v.
United States, No.96-504 C (Fed. Cl).
16-Aug-96
DOJ files a Motion for
Extension of Time within which to Make Intervention Decision and
Maintain Seal in the qui tam action by Ervin and Associates against
Hamilton. According to a later filing by the government on November
14, it states that based upon the relator's statement of material
evidence supplied to the government with the qui tam complaint and
the allegations in the related Bivens action, the Inspector General
of HUD opened an investigation and, as a result of that investigation,
a referral of the allegations in the Bivens complaint was made to
the Criminal Division of the US Attorney's Office for DC, which
opened a criminal investigation in the matter. The government says
in this motion that the lifting of the seal in the qui tam action
would hamper, injure and compromise the criminal investigation and
for this reason the US Attorney (Barbara Van Gelder) moves to stay
the intervention period.
18-Aug-96
Gary Webb’s series, upon
which the Dark Alliance book is based, begins in the San
Jose Mercury News, with the Mercury News website providing access
to substantial amounts of underlying documentation. The story appears
at approximately the same time as the Republican National Convention,
where Jack Kemp, Bob Dole's running mate, begins touting his accomplishments
as Secretary of HUD and his ability to attract women and minorities
to the Republican Party. The allegations in the Dark Alliance
series address Iran-Contra drug dealing. Iran Contra allegations
that were submitted to the Starr investigation included various
allegations raised regarding one of the largest drug operations
during Iran Contra, in Mena Arkansas, that include George H. W.
Bush and the Clintons and the Rose Law Firm.
19-Aug-96
Ervin and Associates
files a complaint against HUD in the US District Court in Colorado
seeking declaratory and injunctive relief related to four HUD contracts
that were to be awarded in the near future. Ervin also files a Memorandum
of Points and Authorities in support of the motion for temporary
restraining order and motion for preliminary injunction. Ervin
& Assoc., Inc. v. Cisneros, et al. No. 96-1954 (D. Colo.).
Ervin is represented by Stanley Garnett, Stephen Gurr and Patrick
Carrigan of Brownstein, Hyatt, Farber & Strickland in Denver
and Wayne Travell of Tucker, Flyer and Lewis in Washington. Judge
Walker Miller is assigned to the case. Raymond Larizza, who is under
Frank Hunger at the Department of Justice, represents the defendant.
19-Aug-96
A hearing is held before
Judge Richey, during which he gives the government until November
18 to make a determination whether it will adopt the qui tam case.
"No more extensions except for extraordinary good cause," he says.
In attendance at this hearing are AUSA Barbara Van Gelder, OIG counsel
Judith Hetherton and Ervin counsel Wayne Travell. Van Gelder says
she has brought in Hetherton because she knew the judge would ask
her whether the relator has any objections to giving the government
additional time. Richey says that since Ms. Hetherton was there,
he would grant the request without objection from the plaintiff
(and Travell says he has no objection). Richey says he will expect
to hear from the government "by pleading" at the next hearing.
20-Aug-96
Ervin files a Supplemental
Certificate of Compliance and Information Sheet in the TRO case
in Denver.
22-Aug-96
Hamilton receives a second
subpoena from the HUD OIG shortly after C A Fitts talks to the IG
and asks her whether she plans to "bury" the Denver audit of the
loan sale program. Gaffney said, "how dare you suggest such a thing.
That would be unethical."
22-Aug-96
Ervin files a Motion
to Expedite Discovery in the TRO case against HUD in Denver. HUD
files a motion to dismiss for improper venue before Judge Walker
D. Miller or to transfer for improper venue or convenience before
Judge Miller. HUD also files a brief in opposition to the motion
for TRO.
23-Aug-96
The government files
a motion to substitute original attachments regarding its motion
to dismiss in the TRO case by Ervin. Judge John Kane grants a motion
for Wayne Travell to appear pro hac vice, sets a hearing on the
motion for September 12, grants the motion to expedite discovery
and grants the government’s motion to substitute original attachments.
There appears to have been a hearing on these matters – a 38-page
transcript of proceedings is prepared by Federal Reporting Service.
23-Aug-96
US District Court for
the District of Columbia gives the government approximately 90 additional
days within which to make its election whether to adopt the qui
tam action by Ervin & Associates against Hamilton.
29-Aug-96
The government files
a motion to vacate hearing on preliminary injunction and to stay
discovery pending a ruling on jurisdiction and venue and a certificate
of compliance in the Ervin TRO case in Denver.
Aug/Sept-96
Kansas City Neighborhood
Networks Conference is held.
Sep-96
HUD sells $804.5 million
UPB in single family loans in the Single Family Loan Sale #3. The
Single Family #3 Sale yielded proceeds of $730.2 million, equal
to 90.76 % of UPB and resulted in savings to the government of $164
million. There were 25 bidders and three winners in this auction.
This bid includes the first "place based" bid, a pool
of loans in Albuquerque.
Sep-96
The HFA negotiated sale
of $14.52 million of HUD-held multifamily mortgage loans is closed
with the Missouri Housing Finance Agency. Although the sale price
is nominal, HUD achieves its objectives of providing for rehabilitation
of the projects, retention of important tenant protections that
are required under regulatory agreements, and resident initiatives
programs while divesting itself of liability for future tenant subsidies.
HUD also gains valuable information about how to value loans in
neighborhoods where there are no market–based housing projects.
The values of moving to market based solutions are much more attractive
than were previously assumed. Subsidy for housing is far more expensive
than job training, jobs and market based housing with vouchers.
4-Sept-96
The government files
a motion for protective order re: discovery requests and a certificate
of compliance in the Denver TRO case. Ervin files an opposition
to motion to dismiss for improper venue before Judge Walker D. Miller
and a Declaration of John J. Ervin.
5-Sept-96
Minute order by Judge
John Kane in the Ervin TRO case in Denver granting motion for protective
order re: discovery requests, granting motion to vacate hearing
on preliminary injunction granting motion to stay discovery, setting
hearing on motion to transfer for improper venue or transfer for
convenience, setting hearing for 9/12/96, denying motion to expedite
discovery.
6-Sept-96
Ervin files a reply to
response to motion for TRO in the Denver TRO case. The government
files a motion to dismiss for lack of jurisdiction and a reply to
response to motion to dismiss for improper venue.
11-Sept-96
A Notice of Submission
of Declaration of Kathleen Trygstad by HUD re: disbursements is
filed in the Ervin TRO case against HUD.
12-Sept-96
Judge John Kane denies
the government’s motion to dismiss the Ervin TRO case filed in Denver
for improper venue. Judge Walker Miller grants the motion to transfer
for improper venue and for convenience and transfers the case to
US District Court for DC (Docket No. 96-2164).
19-Sept-96
Ervin files an Emergency
Motion for a hearing on its application for preliminary injunction
and for expedited discover in his TRO case against HUD. Ervin also
files an amended complaint.
20-Sep-96
Ervin's asset management
contract with HUD expires and a one-year renewal option is not exercised.
26-Sept-96
By direction of the Calendar
Committee, the Ervin TRO case against HUD is reassigned from Judge
Lamberth to Judge Bryant. The attorneys representing the government
include Raymond Larizza, Joe Benedict Garcia and Douglas James Hughes.
30-Sep-96
Declaration by Chris
Greer regarding Ervin contracts takes place.
3-Oct-96
A status hearing is scheduled
for October 21 before Judge Bryant in the Ervin TRO case.
7-Oct-96
Ervin files Second Amended
Complaint for Preliminary and Permanent Injunctive Relief, Declaratory
Judgment and Other Relief in Ervin and Associates, Inc. v.Helen
Dunlap, et al. (1:96-CV-001253) in US District Court. Wayne
Travell and Daniel Hawke of Tucker Flyer and Lewis sign as counsel.
The complaint says Ervin has filed over 60 FOIA requests with HUD
during the past two years.
10-Oct-96
Ervin files a Renewed
Motion for expedited discovery in the TRO case against HUD. The
government files a motion to dismiss or in the alternative for summary
judgment.
11-Oct-96
The government files
a response to Ervin’s opposition to motion for expedited discovery
in the Ervin TRO case.
11-Oct-96
Helen Dunlap leaves HUD
to join the Low Income Housing Coalition as its Director.
16-Oct-96
Substitution of counsel
for the federal defendant in the Ervin TRO case; substituting Raymond
Michael Larizza, Douglas and James Hughes for J. Benedict Garcia.
17-Oct-96
Ervin files a memorandum
in opposition to the government’s motion to dismiss or for summary
judgment in the Ervin TRO case against HUD.
17-Oct-96
Hamilton's counsel at
Morrison & Foerster sends letter to US News and World Report
describing conversation with HUD OIG, which told him OIG was conducting
a routine audit and there was no reason to think there was any criminal
investigation.
18-Oct-96
The government files
a motion to quash subpoenas in the Ervin TRO case.
21-Oct-96
Lauch Faircloth, Chairman,
Senate Subcommittee on HUD Oversight and Structure, writes a letter
to Henry Cisneros (then Secretary of Housing) regarding charges
made by Ervin & Associates against HUD.
21-Oct-96
A motion hearing is held
before Judge Bryant in the Ervin TRO case against HUD. Daniel Matthew
Hawke makes an appearance.
22-Oct-96
Judge Bryant issues an
order denying the renewed motion for expedited discovery.
25-Oct-96
Reply by the government
to response to motion to dismiss and to motion for summary judgment
is filed in the Ervin TRO case against HUD. Notice of voluntary
dismissal of case by plaintiff without prejudice pursuant to Rule
41(a)(i) is filed.
28-Oct-96
Federal Register publication
of 24 CFR Part 291 Disposition of HUD-Acquired Single Family Property;
Streamlining Final Rule; SUMMARY: This final rule amends HUD's regulations
for the disposition of HUD-acquired single family property. In an
effort to comply with the President's regulatory reform initiatives,
this rule will streamline these regulations by eliminating provisions
that are redundant or are otherwise unnecessary. This final rule
will make the single family property disposition program regulations
clearer and more concise.
29-Oct-96
Stipulation of dismissal
is entered for the Ervin TRO case. Later, on January 24, 1997, a
transcript of the 10/21/96 hearing is filed. On February 27, 1997
an Administrative Record is filed by the government.
Nov-96
John Deutch attends Town
Hall Meeting in the Watts neighborhood of LA. He meets Mike Ruppert
(see, www.copvcia.com)
and promises a full CIA IG investigation of Gary Webb’s allegations
in the Dark Alliance series in the San Jose Mercury News.
The CIA Inspector General later publishes a two-volume report and
the DOJ Inspector General also publishes a report.
Nov-96
Campaign fundraising
is an issue of concern; soft money donations set substantial new
records; largest "hard" money or direct donors were law
firms (#1 largest to Clinton and #2 largest to Dole); top contributors
included Ernst &Young and Goldman Sachs donating to both Clinton
and Dole.
1-Nov-96
The date that Ervin's
Bivens complaint speculates the company will be forced to lay off
half of its employees if Ervin & Associates is not given HUD
contracts or paid $2.5 million allegedly owed by HUD.
2-Nov-96
Publication of "White
Male Over 40 Sues HUD, and the Department’s Big Loan Sale Is in
Peril", by Jim McTague, in Barron’s.
5-Nov-96
Clinton is re-elected
and the GOP retains its majority in both houses of Congress. Clinton
wins the women’s vote overwhelmingly, with majorities of black,
Hispanic, labor union and young voters. The GOP holds House and
Senate 227-207 and 55-45, respectively. The Democrats win New York,
California, Illinois, Michigan, Ohio and lose Texas and Georgia;
labor spends approximately $35mm in soft money; E&Y, a large
HUD contractor and financial advisor is largest contributor to Clinton
and Dole in 1996 campaign. Goldman Sachs also is large contributor.
11-Nov-96
US News and Word Report
publishes an article "Of Contacts and Confidence" that
reported allegations of irregular contracting practices at HUD involving
Hamilton and aired accusations that Hamilton had steered some of
the HUD note sale business to favored Wall Street firms. In pre-publication
conference, Ed Pound, the principal reporter, tells Hamilton that
the HUD OIG "at the highest level" had assured him that
Hamilton is guilty of criminal acts.
12-Nov-96
Ervin files Plaintiffs’
Opposition to Federal Defendants’ Motion to Dismiss – Hollis, Larizza
and Sitcov of DOJ are listed as counsel for HUD.
13-17-Nov-96
Resignations of Cisneros
(11/21), Leon Paneta, Warren Christopher Perry. Erskin Bowles is
appointed as White House Chief of Staff. The DNC returns $1.4 million
in questionable campaign contributions.
14-Nov-96
Frank Hunger,
Assistant Attorney General, and Barbara Van Gelder, Assistant US
Attorney, move the District Court for the District of Columbia for
an extension of time during which to provide the Court with notice
of its election whether to intervene in the qui tam action by Ervin
& Associates against Hamilton until thirty days after the completion
of an ongoing criminal investigation in the matter and any resulting
criminal proceedings. The motion is unopposed by the relator (Ervin).
14-Nov-96
By letter of this date,
according to later testimony by the HUD Inspector General, Senators
Bond (Chairman of the Subcommittee on VA/HUD Appropriations) and
Faircloth (Chairman of the Subcommittee on HUD Oversight and Structure)
request that the HUD OIG conduct a comprehensive review of HUD’s
use of its contracting authority. In response, a team of 26 auditors
reviewed HUD contracting from 1992 – 1996. While the OIG audit was
under way, HUD contracted with the National Academy of Public Administration
for a review of FHA contracting.
18-Nov-96
The US District Court
for the District of Columbia, Judge Richey, grants the government's
motion to extend time in the qui tam action by Ervin & Associates
against Hamilton seeking a stay until 30 days after the completion
of the criminal investigation and any resulting criminal proceedings
or to notify the Court that it declines to adopt and directs that
the filings shall remain under seal until further order of the Court.
(Sporkin hears the case in the future while Richey is sick and then
the case is reassigned to Sporkin on March 10, 1997 Hamilton has
not been able to obtain transcripts of this hearing either because
the hearing did not occur or because tapes of the hearing are not
available. For this and other dates, Hamilton is trying to ascertain
if tapes are "missing.")
22-Nov-96
Hal DeCell, Assistant
Secretary of HUD for Congressional Relations, responds point by
point to Lauch Faircloth’s initial letter saying HUD believes that
Ervin’s charges are baseless complaints of a disgruntled contractor.
The letter also notes that this will "turn the clock back" and adversely
affect a successful loan sale program. HUD assured Senator Faircloth
that it is investigating the matter to see if there is any substance
to Ervin's charges.
22-Nov-96
DOJ awards four indefinite delivery/indefinite quantity contracts
for
Automated Litigation Support Services for services to the DOJ Civil
Division, Antitrust Division, Civil Rights Division and Criminal
Division
with a five year expenditure ceiling of $375MM. The four contractors
are
Aspen Systems Corp, CACI, Inc. Commercial, DynCorp and Rust Federal
Systems, L. C. The Civil Division is designated the lead contractor.
22-Nov-96
Judge Charles Richey
of the US District Court for the District of Columbia grants the
motion of relator Ervin & Associates for a limited lifting of
the seal to permit Ervin to make an ex parte in camera notification
of the pendancy of the qui tam claim to Judge William Bryant of
the same court, who was hearing the Bivens action by Ervin against
the US. The order states that Ervin claims that the federal defendants
in the Bivens action, represented by DOJ, are asserting that Ervin's
claims in that case are "incredible and unsupportable" while
at the same time "their colleagues at DOJ, whose work is being screened
from government counsel in the Bivens action, are investigating
criminal allegations" arising from both the qui tam and Bivens actions.
The order states that it is being issued "to avoid penalizing Ervin
in its case before Judge Bryant as the result of the Court's generosity
to the government in this case, and because the government has failed
to demonstrate in its Response to Relator's Motion how the ex parte
in camera disclosure to Judge Bryant resulting from the limited
lifting of the seal in this case will hamper, injure or otherwise
compromise the government's criminal investigation relating to this
case and to Ervin."
25-Nov-96
Lauch Faircloth, Chairman
of the Senate Subcommittee on HUD Oversight and
Structure, sends a letter
to Henry Cisneros, Secretary of HUD, responding to HUD’s response
to his earlier letter re: the Ervin litigation. He says charges
that Hamilton improperly prepared congressional testimony seem to
have merit and inquires about the Secretary’s progress in his promised
independent investigation of HUD procurement process.
Nov/Dec-96
The leading, minority
candidate for HUD Secretary, the Mayor of Seattle, is dropped from
consideration for the HUD Secretary position as a result of a sudden
HUD OIG "criminal" investigation into a HUD Community
Development Block Grant to Seattle, the charges in which investigation
much later are said to be unsubstantiated. Cuomo is announced as
the new Secretary of HUD after rumors that Alfonse D’Amato informed
the White House that his Banking Committee would confirm no other
nominee. Cuomo is the son of Mario Cuomo, the former Governor of
the State of New York. New York is a critical state in terms of
both votes and campaign fund raising for the Democrats in the 1998
and 2000 presidential election.
Dec-96
Jack Quinn resigns as
White House Counsel and is replaced in 1997 by Charles Ruff, the
DC Corporation Counsel who is a former DC US Attorney, partner of
Covington & Burling, and Iran Contra prosecutor.
Dec-96
HUD sells $873.2 million
UPB in nonperforming multifamily family loans in the Midwest Loan
Sale with Hamilton as crosscutting financial advisor. The Single
Family #2 Sale yielded proceeds of $762.7 million, equal to 87.35
% of UPB and results in savings to the government of $360 million.
There were 62 bidders and 13 winners in this auction.
Dec-96
DOJ creates a Campaign
Finance Task Force.
4-Dec-96
Hamilton reports to HUD
regarding the results of an internal investigation into a discrepancy
between the bidders' information packages and optimization instructions
to Lucent Technologies during three previous loan sales. This anomaly
had been discovered by Hamilton while it was in the process of preparing
for the next loan sale. A number of high level Hamilton employees
and contractors hired for this purpose spend countless hours researching
the problem. Hamilton's report to HUD explains that this discrepancy
has resulted in a potential four tenths of one percent reduction
in gross sale proceeds to HUD. Hamilton assures HUD that it has
taken steps to ensure that this discrepancy will not be repeated.
HUD accepts these assurances and retains Hamilton for another three
loan sales over the next ten months. Hamilton notifies its counsel
and insurer of this development. A later study by the Policy Development
& Research division at HUD is said to concur that the discrepancy
is not statistically significant and falls within industry quality
control standards for accuracy.
19-Dec-96
Status conference in
the qui tam lawsuit before Judge Sporkin. An order is issued by
Judge Richey directing that the US and the relator shall appear
on 3/10/97 and be prepared to discuss the status of the criminal
investigation and when the government will be prepared to intervene
or notify the Court that it declines to do so. At the hearing, attended
by AUSA Barb
