Team Infidel
Forum Spin Doctor
Seattle Post-Intelligencer
August 13, 2008
240 units on Whidbey Island up in the air
By Eric Nalder, P-I Investigative Reporter
A powerful Washington congressman wants the Navy to say once and for all whether 240 new homes for sailors on Whidbey Island are on the chopping block.
And a Florida senator is asking how a major military housing project got so off track that hundreds of military homes across the country were delayed or never built. He may use the issue to block the appointment of the new Air Force secretary, already under fire for his handling of the air refueling tanker contract.
The questions stem from a failed Pentagon housing privatization scheme. The project went badly awry after the Navy, the Air Force and the Army gave 8,000 military family houses in six states to a company run by people who had good political connections and questionable financial track records.
All six of those projects, handed to the company American Eagle, fell apart. Some planned houses weren't built; others face years of delays. Lenders pulled out in Arkansas, and subcontractors were not paid in several Southern states. American Eagle, based in Dallas, has sold, or is selling, its share in all the projects - in some cases for millions more than its initial investment.
Sometime in the next two months, Pentagon privatization officials will gather to discuss what went wrong with American Eagle, Joe Sikes, director of the Defense Department's Housing and Competitive Sourcing Office, said Tuesday.
A Seattle P-I investigative series, "Demoted to Private," examined the issue last week, and found problems that included the failure to perform background checks on program participants and to oversee the projects.
John Jack, American Eagle's former construction manager in Washington state, told the Navy two years ago that the company was substituting inferior products in the homes and substantially raising the overall cost of the project. He was fired after raising the issues.
The whistle-blower now wonders what has happened to what he calls a"solemn commitment" to build the 240 homes on Whidbey Island.
Rep. Norm Dicks, D-Wash., who is the second-ranking member of the Appropriations defense subcommittee, wants answers, said his chief aide, George Behan.
The project was supposed to use proceeds from the sale of 133 military homes - the majority located in Discovery Park in Seattle - to build 240 homes for sailors on Whidbey Island. But documents and interviews have indicated that a portion of the project might be scrapped or reduced.
On Tuesday, Forest City Military Communities, a Cleveland company that took over the project from American Eagle in November, provided the P-I with a carefully worded statement indicating that no decision has been made on the 240 houses.
Jack said that when he was at American Eagle, the houses "were always going to be built. Period."
Kathryn Thompson of Dallas, the former managing director of American Eagle, also told the P-I that there was always enough money in its budget to build the 240 homes once all the properties were sold.
Forest City's statement provided one ray of hope. The company placed on hold a plan it announced to the P-I last month to begin renovating some Whidbey apartments. Even a top Navy privatization official said that if the renovation project started, that was a clear sign that Forest City didn't plan to build the 240 houses,because there aren't enough renters for both.
Forest City is accelerating its construction of other homes on Whidbey and is ahead of its new schedule, but 141 Navy homes near Everett that were supposed to be completed next month haven't been started.
Sen. Patty Murray, D-Wash., a member of the Democratic leadership, said Tuesday that she will be "asking hard questions about how we get this process on track."
"Our sailors and their families are relying on the Navy and its contractors to deliver the quality housing they deserve. Last week's articles raised serious concerns about how well that process is moving forward," Murray said in an e-mail.
Florida Sen. Bill Nelson, a Democrat on the Armed Services Committee, said he, too, wants answers and indicated that he may take stronger action to get them. Nelson may hold up the confirmation of Acting Air Force Secretary Michael Donley, his press aide said.
"Senator Nelson generally doesn't discuss whether he's placed a hold a presidential nominee," Dan McLaughlin said. "But I will say that he has several concerns regarding the president's pick to head the Air Force, including the housing mess at some of the bases."
American Eagle was given control of military houses in Washington, Arkansas, Missouri, Massachusetts, Florida and Georgia. The deal was part of a larger Pentagon privatization program nationwide that has given control of nearly every military house in the country - 178,000 in total - to two dozen private companies.
Thompson put American Eagle together and signed papers for the deals when she was in the midst of a bankruptcy proceeding between 2002 and 2005.
The managing partner of American Eagle, Carabetta Enterprises Inc., was suspended from federal housing projects for two years in the 1990s because it improperly diverted millions from them. Carabetta hired retired four-star Gen. Merrill McPeak, who was Air Force chief of staff during the Persian Gulf War, to help him get the first American Eagle contract, at Patrick Air Force Base in Florida.
American Eagle used the promise of billions of dollars in rents from the military homes to borrow hundreds of millions to allow it to build or renovate military homes. Michael Defferding, national executive vice president of Forest City Military Communities, told the P-I on July 10 that renovations on the Whidbey apartments were due to begin "in a four- to six-week period." Tuesday's statement changed that.
"Renovations of the Whidbey Apartments and Apache Street homes have not been undertaken at this time and are not scheduled to start in 4-6 weeks," the statement read. "Prior to beginning any renovations, (Forest City and the Navy) will be carefully assessing the current housing situation at NAS Whidbey Island before determining what next steps should be taken."
As for the fate of the 240 houses, the statement read: "The 240 homes that are articulated in the Whidbey Option were not, and are not, included as part of the original design-build contractual scope. The Whidbey Option has always been contemplated by the Navy as an option to consider - an alternative course of action that the Navy could exercise to expand the original scope of work."
Sikes, of the Pentagon's housing office, said that when privatization officials meet to review the American Eagle aftermath, they plan to discuss everything from how to properly vet program participants to methods for ensuring that money is spent properly during the 50-year terms of all privatization contracts. Also a concern, he said, is that lenders' representatives failed to detect the problems.
Sikes said that while the military "presumed" that people who lent hundreds of millions to these projects would be watching them closely, "they seem to have been depending on us more than they should have been."
August 13, 2008
240 units on Whidbey Island up in the air
By Eric Nalder, P-I Investigative Reporter
A powerful Washington congressman wants the Navy to say once and for all whether 240 new homes for sailors on Whidbey Island are on the chopping block.
And a Florida senator is asking how a major military housing project got so off track that hundreds of military homes across the country were delayed or never built. He may use the issue to block the appointment of the new Air Force secretary, already under fire for his handling of the air refueling tanker contract.
The questions stem from a failed Pentagon housing privatization scheme. The project went badly awry after the Navy, the Air Force and the Army gave 8,000 military family houses in six states to a company run by people who had good political connections and questionable financial track records.
All six of those projects, handed to the company American Eagle, fell apart. Some planned houses weren't built; others face years of delays. Lenders pulled out in Arkansas, and subcontractors were not paid in several Southern states. American Eagle, based in Dallas, has sold, or is selling, its share in all the projects - in some cases for millions more than its initial investment.
Sometime in the next two months, Pentagon privatization officials will gather to discuss what went wrong with American Eagle, Joe Sikes, director of the Defense Department's Housing and Competitive Sourcing Office, said Tuesday.
A Seattle P-I investigative series, "Demoted to Private," examined the issue last week, and found problems that included the failure to perform background checks on program participants and to oversee the projects.
John Jack, American Eagle's former construction manager in Washington state, told the Navy two years ago that the company was substituting inferior products in the homes and substantially raising the overall cost of the project. He was fired after raising the issues.
The whistle-blower now wonders what has happened to what he calls a"solemn commitment" to build the 240 homes on Whidbey Island.
Rep. Norm Dicks, D-Wash., who is the second-ranking member of the Appropriations defense subcommittee, wants answers, said his chief aide, George Behan.
The project was supposed to use proceeds from the sale of 133 military homes - the majority located in Discovery Park in Seattle - to build 240 homes for sailors on Whidbey Island. But documents and interviews have indicated that a portion of the project might be scrapped or reduced.
On Tuesday, Forest City Military Communities, a Cleveland company that took over the project from American Eagle in November, provided the P-I with a carefully worded statement indicating that no decision has been made on the 240 houses.
Jack said that when he was at American Eagle, the houses "were always going to be built. Period."
Kathryn Thompson of Dallas, the former managing director of American Eagle, also told the P-I that there was always enough money in its budget to build the 240 homes once all the properties were sold.
Forest City's statement provided one ray of hope. The company placed on hold a plan it announced to the P-I last month to begin renovating some Whidbey apartments. Even a top Navy privatization official said that if the renovation project started, that was a clear sign that Forest City didn't plan to build the 240 houses,because there aren't enough renters for both.
Forest City is accelerating its construction of other homes on Whidbey and is ahead of its new schedule, but 141 Navy homes near Everett that were supposed to be completed next month haven't been started.
Sen. Patty Murray, D-Wash., a member of the Democratic leadership, said Tuesday that she will be "asking hard questions about how we get this process on track."
"Our sailors and their families are relying on the Navy and its contractors to deliver the quality housing they deserve. Last week's articles raised serious concerns about how well that process is moving forward," Murray said in an e-mail.
Florida Sen. Bill Nelson, a Democrat on the Armed Services Committee, said he, too, wants answers and indicated that he may take stronger action to get them. Nelson may hold up the confirmation of Acting Air Force Secretary Michael Donley, his press aide said.
"Senator Nelson generally doesn't discuss whether he's placed a hold a presidential nominee," Dan McLaughlin said. "But I will say that he has several concerns regarding the president's pick to head the Air Force, including the housing mess at some of the bases."
American Eagle was given control of military houses in Washington, Arkansas, Missouri, Massachusetts, Florida and Georgia. The deal was part of a larger Pentagon privatization program nationwide that has given control of nearly every military house in the country - 178,000 in total - to two dozen private companies.
Thompson put American Eagle together and signed papers for the deals when she was in the midst of a bankruptcy proceeding between 2002 and 2005.
The managing partner of American Eagle, Carabetta Enterprises Inc., was suspended from federal housing projects for two years in the 1990s because it improperly diverted millions from them. Carabetta hired retired four-star Gen. Merrill McPeak, who was Air Force chief of staff during the Persian Gulf War, to help him get the first American Eagle contract, at Patrick Air Force Base in Florida.
American Eagle used the promise of billions of dollars in rents from the military homes to borrow hundreds of millions to allow it to build or renovate military homes. Michael Defferding, national executive vice president of Forest City Military Communities, told the P-I on July 10 that renovations on the Whidbey apartments were due to begin "in a four- to six-week period." Tuesday's statement changed that.
"Renovations of the Whidbey Apartments and Apache Street homes have not been undertaken at this time and are not scheduled to start in 4-6 weeks," the statement read. "Prior to beginning any renovations, (Forest City and the Navy) will be carefully assessing the current housing situation at NAS Whidbey Island before determining what next steps should be taken."
As for the fate of the 240 houses, the statement read: "The 240 homes that are articulated in the Whidbey Option were not, and are not, included as part of the original design-build contractual scope. The Whidbey Option has always been contemplated by the Navy as an option to consider - an alternative course of action that the Navy could exercise to expand the original scope of work."
Sikes, of the Pentagon's housing office, said that when privatization officials meet to review the American Eagle aftermath, they plan to discuss everything from how to properly vet program participants to methods for ensuring that money is spent properly during the 50-year terms of all privatization contracts. Also a concern, he said, is that lenders' representatives failed to detect the problems.
Sikes said that while the military "presumed" that people who lent hundreds of millions to these projects would be watching them closely, "they seem to have been depending on us more than they should have been."