Former housing chairman's firm enjoyed lucrative work with agency

Harris County Housing Authority (HCHA) CEO Guy Rankin, right, sits next to chairman Casey Wallace, left, during the HCHA board meeting on Tuesday, Feb. 7, 2012, in Houston. The five-member board went into executive session after taking care of other business to discuss the contract of Guy Rankin, who might step down, be asked to leave or stay on the board. ( Karen Warren / Houston Chronicle ) less Harris County Housing Authority (HCHA) CEO Guy Rankin, right, sits next to chairman Casey Wallace, left, during the HCHA board meeting on Tuesday, Feb. 7, 2012, in Houston. The five-member board went into ... more Photo: Karen Warren Photo: Karen Warren Image 1 of / 1 Caption Close Former housing chairman's firm enjoyed lucrative work with agency 1 / 1 Back to Gallery

The Harris County Housing Authority paid $773,731 through an intermediary in 2009 to the law firm that employed its board chairman, Casey Wallace, and appeared to try to obscure that fact by removing the firm's name from some invoices, documents obtained by the Houston Chronicle show.

State law prohibits housing commissioners from benefiting financially from their agency's actions, and requires conflicts of interest to be disclosed in writing and recorded in the authority's minutes. Violating either provision "knowingly or intentionally" is a third-degree felony. Officials have found no evidence that Wallace, who did some of the legal work on the project, disclosed the conflict in the method required by law, and the authority's minutes reflect no such disclosure.

Wallace, a former litigation partner at Haynes and Boone, served as the authority's unpaid chairman from mid-2007 to February.

Interim housing authority CEO Tom McCasland said he has transmitted his findings to the FBI and the U.S. Department of Housing and Urban Development's Office of Inspector General, which began a criminal investigation of the agency in April. HUD provides most of the authority's funding.

The Harris County District Attorney's office also is aware of the issue, county officials said, although calls for comment to that office were not returned. An FBI spokeswoman, per policy, would not confirm or deny any investigation.

The criminal probe and two audits were launched after a series of Chronicle stories showed sharp increases in HCHA executives' salaries, that the agency poured millions into a defunct development, spent lavishly on statues and grand-opening parties, and hired friends and relatives of employees. Wallace, the board's vice-chair and the agency's CEO were ousted after the revelations.

Invoices track work

Haynes and Boone was hired to do research and analysis for consulting firm McConnell Jones Lanier & Murphy on a project called Texas Rebounds, invoices show. Records describe the job as "a multi-state legislative survey" assisting the governor's office in hurricane recovery efforts.

The MJLM partner who led its work with the authority - efforts that earned the firm $11.3 million, McCasland said - was Odysseus Lanier, Wallace's predecessor as chairman of the authority.

The first of four invoices Haynes and Boone submitted to MJLM, for $499,000 in January 2009, shows Wallace worked on the project 13 times between Dec. 4 and Dec. 16, 2008. An unsigned note attached to the second MJLM invoice says the authority asked that references to Haynes and Boone be removed and replaced with "Legal Research and Analysis."

Wallace did not return repeated calls for comment, but his attorney, Chip Lewis, responded on his behalf.

"Mr. Wallace clearly disclosed his position with the housing authority at the initial meeting with the accounting firm (and) voluntarily excused himself from the negotiations," Lewis said. "Mr. Wallace has and will continue to cooperate with any investigations surrounding his service with the housing authority."

Lewis said his initial review of the statute has not convinced him that the work at issue was done in relation to a "housing project," as defined in the law prohibiting self-dealing and requiring disclosure.

Haynes and Boone spokesman Doug Bedell said the firm takes the allegations seriously. "We cannot comment on matters related to our clients," he said. "How­ever, we are in the process of reviewing our files to better understand the events underlying the current allegations."

Bedell said Wallace decided to leave the firm last week.

Lanier, via email, said he was vacationing abroad and was unable to access the documents he needed to answer questions about the matter.

Repayment at issue

Of top concern to housing authority officials, notwithstanding the criminal probes, is whether any funds paid improperly can be recovered.

McCasland's review of the cash-strapped authority's books after he took over March 21, showed its assets had been overstated by almost $6 million and there was no unrestricted cash on hand.

In a June 23 letter to authority chairman Beto Cardenas, McCasland said the only contract with MJLM he has on file is dated Sept. 8, 2008, for the firm to help administer hurricane evacuee housing. The contract authorizes work up to $25,000, adding, "Additional fees above $25,000 will be negotiated with HCHA."

McCasland wrote he had reviewed meeting minutes from August 2008 to August 2009 and found "no reference to any board action that would have authorized this payment … I recommend we pursue all legal avenues available to recover any funds paid for this Harris County Housing Authority project."

Other vendors' bills

The authority continues to grapple with vendors who are seeking payment for work they say former CEO Guy Rankin IV asked them to do, but which was not approved by the board. When Wallace was chair, Cardenas repeatedly questioned whether Rankin's decisions exceeded his spending authority, and has tightened the agency's spending policies since taking the gavel in March.

The Harris County Attorney's office, with the approval of the Commissioners Court on Tuesday, will help McCasland determine whether any funds can be recovered from vendors, Assistant County Attorney Doug Ray said.

Ray said he has reason to believe money was paid without proper contracts in some cases, and that some payments vendors are seeking could be withheld.

mike.morris@chron.com

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