Leader Blues

Wednesday, August 13, 2008

TOP STORY > >Insiders used for contract

By JOHN HOFHEIMER
Leader senior staff writer

The developers who failed to build or rehabilitate the promised 1,200 houses at Little Rock Air Force Base apparently got a foot in the door by promising $200,000 to a retired Air Force general chief of staff and by working with a Republican fundraiser with ties to the Bush family and others.

The housing deal involving insiders was published Thursday by Seattle Post-Intelligencer’s Pulitzer Prize-winning reporter Eric Nalder.

The scandal has prompted Sen. Mark Pryor (D-Ark.) to sponsor a bill that would more closely scrutinize military contracts with private firms. Pryor said Monday that his bill had passed out of the Senate subcommittee and that he expected his bill to be part of the 2009 defense authorization bill.

“We will require a lot of nuts and bolts, monthly site visits and that the military does more due diligence in selecting the contractors,” Pryor said.

In his Post-Intelligencer article, Nalder’s identified Ret. Gen. Merrill McPeak, Air Force chief of staff during the Persian Gulf War, and a former lieutenant colonel from his staff as the consultants who were promised $200,000 for helping secure the first of six military housing contracts around the country.

Pryor said this appeared to be another example of the revolving door between the defense department and companies seeking influence in securing government contracts.

In 2004, American Eagle Com-munities, managed by Kathleen Thompson and otherwise made up of the Carabetta Carabetta Enterprises and Shaw Infras-tructure, entered into a 50-year contract to build, rehabilitate, own and manage air base housing at Little Rock, Moody, Patrick and Hanscom Air Force bases.

They also won the contracts for the sprawling Naval housing at Puget Sound (Washington) and also at the Army’s Ft. Leonard Wood in Missouri.

Thompson, who came to Little Rock Air Force Base for the groundbreaking of the American Eagle Community Center, was a major fundraiser for former President George H.W. Bush and counted Newt Gingrich, Barry Goldwater, Ronald Reagan, Bill Clinton and Ross Perot as friends.

But reports quickly surfaced that American Eagle was paying building contractors and suppliers late or not at all and three-years into the contract, it was already two years behind in the building program, according to Gen. Rowayne Schatz, commander of the 314th Airlift Wing at Little Rock Air Force Base.

Despite Carabetta’s 25-year history of bankruptcy, corruption allegations, unpaid contractors, slowly paid contractors, unfinished projects, unhappy partners, litigation and cross litigation, the Air Force determined that past performance was satisfactory for all four Carabetta/Shaw projects, according to Mike Hawkins. He is a spokesperson for the Air Force Center for Engineering and the Environment at Brooks City-Base, Texas, which manages the Air Force’s housing- privatization program.

Not only had Carabetta’s company filed for bankruptcy, but it had been prohibited in the 1990s from bidding on government housing programs, Nalder said, because it “improperly diverted millions from federal housing projects.”

Work at Little Rock Air Force Base stopped in May 2007, when the banks holding the construction bonds refused to advance American Eagle any more money.

At that time, the company had completed about 25 of the 1,200 houses and slabs had been poured for another 70.

The contract called for 468 new homes and 732 homes remodeled by 2011.

In response to American Eagle’s spectacular failure, Pryor last year introduced in the Senate a bill calling for increased oversight and transparency of those military contracts.

Of the Carabettas and Thomp-son, Pryor said, “I will be disappointed if they are allowed to bid other contracts. I support a death penalty. If you have a contractor that has had trouble before, they should not be able to bid on any contracts for a period of time.”

“I think Gen. Schatz has done a good job of monitoring this,” said Pryor, “as good as anybody in the system. The truth is that we’re going to end up with less housing than we had budgeted for. We’re trying to get a much as we can.

Of Carabetta, Thompson and American Eagle, Pryor said, “They are gaming the system. It’s inexcusable that we allow them to continue to bid.”

Pryor also said the death penalty should apply not only to the company, but to its principals and officers in the company so they can’t just change the name of their companies. The Air Force reportedly is withholding its decision of whether or not to blacklist Carabetta until all negotiations are finished. A new purchase and sales agreement will be signed within the next few months transferring the contract from American Eagle to Hunt-Pinnacle and should close in the fall, according to Hawkins.

That’s in line with Schatz’s estimation earlier this year that the deal could close in October with construction starting back up perhaps in the spring.

Hunt Building Corp. will be responsible for execution of the construction and renovation program and Pinnacle Property Management Services Corp. will provide day-to-day property management services, Hawkins said.

Hunt-Pinnacle, American Eagle and the Air Force all signed a letter of intent in April laying out the parameters of the remaining negotiations, although technically the Air Force is not a party to the negotiations.

Hunt-Pinnacle, which won the 2007 Air Force Professional Housing Management Associa-tion Award for best installation team for its work at Dover Air Force Base in Delaware, has built and manages tens of thousands of such units for the military.