"Indeed, the breadth of the graft and greed alleged in the indictment is breathtaking, even by the standards of a city inured to public corruption."
-- The Times-Picayune
4 indicted in probe of Morial-era deal
Contract used to steal cash, Letten says
GORDON RUSSELL and FRANK DONZE
June 17, 2005
In the first major salvo in a years-long federal probe of corruption in former Mayor Marc Morial's administration, a grand jury on Thursday returned indictments against four people, including restaurateur and Morial pal Stan "Pampy" Barré and former city property management director Kerry DeCay, for allegedly skimming hundreds of thousands of dollars from a massive energy-management contract that was quietly let by Morial toward the end of his eight-year tenure.
The others charged in the 37-page indictment are Reginald Walker, a Morial supporter whose firm, Moss Creek Development Inc., was one of the deal's major subcontractors, and Julius Lips Jr., owner of a glass and door company, also a subcontractor.
Barré, DeCay and Walker are each charged with one count of conspiracy to commit mail fraud, three counts of mail fraud, five counts of money laundering and one count of obstruction of justice. DeCay faces an additional eight counts of mail fraud and two counts of extortion. Lips, described as a minor player in the indictment, is charged with one count of conspiracy to commit mail fraud, one count of mail fraud and one count of lying to a federal agent.
With a total value of $81 million over its 20-year life, the city's contract with Johnson Controls Inc. of Milwaukee was the largest signed by the Morial administration, which ended in 2002. And the indictment suggests that Barré, DeCay and Terry Songy, Johnson Controls' project manager, seized upon the energy contract to line their pockets.
Acting U.S. Attorney Jim Letten called the indictment "important," saying it "is laying bare for the citizens, and is hopefully going to bring to justice, individuals who abused their positions of trust with the city and individuals who, I think, place at risk free enterprise."
Indeed, the breadth of the graft and greed alleged in the indictment is breathtaking, even by the standards of a city inured to public corruption. Barré alone grossed more than $800,000 from the deal for little or no work, the indictment says, while it charges that Songy and DeCay each took in at least $100,000 in gratuities, much of it in cash.
All received other goodies as well, it says DeCay, for instance, is alleged to have received a swimming pool pump, a Viking refrigerator and new thermostats at his home in the swanky Eastover subdivision, as well as a ticket to Super Bowl XXXVI in New Orleans, worth $400. Songy got an ice maker and some new appliances, while Barré and his wife got a free stay at an Arizona spa, worth $5,800, it said.
The indictments suggest that the trio helped themselves from gratuities ranging from the massive to the modest.
For instance, DeCay and Songy each got an ice maker worth about $1,400 in November 2001, while Barré received a $242,500 check from Walker a month later, it said.
DeCay also benefited from free home improvements, including Johnson Controls thermostats and an interior paint job courtesy of Walker's Moss Creek firm.
Inflating the bills
Apart from the cash and gifts, the indictment says Barré, DeCay and Songy agreed to change the contract's scope of work to include renovations to Barré's concession stands at the Morris F.X. Jeff Municipal Auditorium and the Mahalia Jackson Theatre of Performing Arts. Those changes and others unrelated to energy efficiency added $1.8 million to the price of work in the two buildings, the indictment said.
Walker's construction company, which received a subcontract worth $2.3 million, was used as a conduit to funnel money from the contract to the other players, according to the indictment. Moss Creek wrote checks totaling $546,000 to firms owned by Barré, it said. On some occasions, Moss Creek submitted inflated invoices that added $50,000 or even $100,000 to the cost of an item to cover the illicit payments the company was making, it said.
In many cases, Moss Creek took billings submitted by its subcontractors and then inflated them before collecting payment from Johnson Controls, the indictment says.
For example, the government charges that around Nov. 30, 2001, after Gootee Services turned in an invoice for $65,000 to Moss Creek for two "high efficiency chillers," Walker added $100,000 to the price.
The next month, the indictment says, Walker added $50,000 to a $34,854 invoice submitted by R.J. Broussard LLC for carpeting that was installed in the Coker Room at the Municipal Auditorium.
While the indictment did not directly link each specific fraudulent invoice with a payment from Walker to Barré, it makes clear that the overbillings, in the government's view, were done to cover payoffs to Barré, DeCay and Songy. Shortly after one of the overbillings, Walker cut one check to Barré for $242,500, another for $140,000.
The indictment also alleges that at least four other subcontractors including R.J. Broussard LLC, Specialty Machine Services, Energy Management Services and National Contractor Services Inc. improperly inflated invoices to cover payments or gifts to DeCay or Songy.
Energy firm 'victimized'
Songy, who was fired by Johnson Controls after the work was completed, was not charged in the indictment. Letten would not disclose whether Songy has been cooperating with the government, saying only that he "has not been charged at this time." Songy has declined to return numerous phone messages left by The Times-Picayune in the past several months.
Lawyers close to the case said they suspect that Songy has been providing evidence to the government at least since February, when the FBI served a search warrant on DeCay's eastern New Orleans home. Agents were looking for the pool pump and refrigerator that DeCay allegedly received through the Johnson Controls deal, gifts that Songy itemized for the government, the lawyers said they assumed.
While the indictment clearly paints Songy as a co-conspirator, Letten said Songy's former employer appears merely to have been the dupe.
"Institutionally, Johnson Controls was in the position of having been victimized," Letten said.
Through their attorneys, three of those indicted Thursday said the charges are bogus and that they intend to fight them in court. Lips, who is accused of buying DeCay a custom glass table worth $2,687 and then lying about it to investigators, could not be reached for comment.
Jack Martzell, Barré's attorney, and Buddy Lemann, DeCay's attorney, said their clients will plead innocent and look forward to defending themselves in court.
"Mr. Walker strongly denies the allegations pertaining to him in the prosecution's lengthy indictment," said Mike Ellis, Walker's attorney. "Mr. Walker looks forward to a speedy trial so that he can vindicate himself with respect to any claims affecting his company."
Money for nothing
The indictment suggests Barré was the largest beneficiary of the Johnson deal. While Songy and DeCay served as overseers of the contract Songy on behalf of Johnson Controls and DeCay on behalf of the city Barré was not a direct supervisor.
Rather, he was a subcontractor to Johnson Controls, collecting about $273,000 for "administration of subcontracts," a job that involved "little or no work" and that Barré was able to complete by submitting "oral reports" to Johnson, the indictment said.
Left unanswered in the indictment is how Barré was able to wield such significant control over the deal. DeCay and Barré are old friends who became close while working for Civil Sheriff Paul Valteau in the late 1980s and early 1990s. DeCay returned to the civil sheriff's office after being let go by Mayor Ray Nagin. He earns $60,000 a year as chief of field operations.
DeCay joined the Morial administration in 1994. Not long after, DeCay came under fire when it surfaced that he had directed city employees to work on his home on city time. Marlin Gusman, who was the city's chief administrative officer at the time and is now criminal sheriff, reprimanded DeCay and ordered him to pay a $76 fine.
The fine was to cover the cost of the one employee DeCay admitted had worked on his house. But another department employee claimed in hearings at the time that at least six other workers were assigned to DeCay's house and that some had collected overtime pay from the city for weekend work. Those charges were never proven.
Barré, meanwhile, was a member of Morial's inner circle. During the Morial administration, he became the concessionaire handling refreshments at the Municipal Auditorium and the Theatre of Performing Arts, as well as a partner in food and beverage concessions at Louis Armstrong International Airport.
Barré also took on an increasingly large role in Morial's LIFE political organization, becoming one of its leaders, and one of the city's most visible political players, after Morial left town to become president of the National Urban League. Barré was elected to the Democratic Party's State Central Committee. More recently, he was named to the board of directors of the New Orleans Chamber.
Morial declines to comment
Letten demurred when asked at a news conference whether he believed the top brass in the Morial administration, or Morial himself, were aware of the shenanigans attributed to Barré and DeCay in the indictment.
"That's a question I'm not prepared to answer," Letten said. "I know where you're going with that, and it's a legitimate question. I simply have to say that I am not in a position to speculate about that or provide any information other than to say that we have no preconceived notions about where any case goes."
He added a few minutes later, with regard to Barré's alleged manipulation of his contract: "I'm troubled every time I see anyone not involved in government exercising any type of control, certainly corrupt control, over anyone who is" involved in government.
Morial, who now lives in New York City, where the Urban League is based, declined through a spokeswoman to comment on the indictments.
In 2002, Morial said the choice of subcontractors "was totally up to Johnson," adding that he "played no role in it" and "didn't even know who the subs were."
Even before Thursday's indictments, the Johnson Controls deal had come under heavy fire.
The agreement was among the largest of thousands of energy contracts landed by the Milwaukee-based Fortune 100 company and far and away the largest signed contract of any kind by the Morial administration. But Morial, ordinarily eager to trumpet the major initiatives of his administration, never mentioned it in public. Likewise, he never briefed the City Council on the contract.
The purpose of the deal was to lower utility costs by installing new, efficient equipment, from new air conditioners to low-energy light fixtures and traffic signals. As is typical of "performance contracts," the improvements were to be financed with the projected savings.
But while Johnson Controls officials have focused on the first-rate equipment and energy savings they say the company has delivered, Nagin aides claimed shortly after they took office that the taxpayers "got fleeced." Letten took up that theme on Thursday, saying the contract didn't deliver the promised savings.
One of the Nagin team's chief criticisms of the deal was that its structure made it impossible to verify whether a lot of the savings promised in the contract were being realized.
Also, Nagin aides noted that so-called performance contracts, though they resemble construction contracts, are exempted from public bid laws. As a result, they said, the deal was larded with noncompetitive subcontracts for Morial supporters including Barré, who was a partner of Nagin's in the New Orleans Brass minor-league hockey franchise at the time further driving up the contract's costs.
The Nagin administration also objected to the terms of the financing, which was arranged by Metairie financier Rafael "Ray" Valdes, a strong supporter of Morial, albeit one who avoided the limelight.
The financing arranged by Valdes won his firm "placement fees" of $2.1 million far higher than industry norms, according to others in the business. Moreover, Valdes was working two sides of the deal: At the same time he was arranging financing for the city, he was also working as a consultant to Johnson Controls, company officials have said.
Valdes has been interviewed by federal investigators on several occasions. But he was not named in the indictments, nor do they refer to the financing he arranged. Letten on Thursday declined to comment on anyone not mentioned in the indictment.
After strenuously complaining about the contract, the Nagin administration was able to make a few improvements to it. First, Johnson Controls agreed to reduce the annual price of the maintenance agreement from $850,000 to $650,000. The company also agreed to lop $700,000 off the upfront cost.
Later, city officials refinanced one of the leases. The changes, taken together, dropped the overall cost of the deal to slightly less than $75 million over 20 years.
Federal authorities praised the Nagin administration for its help in exposing the problems.
"We have received tremendous cooperation from the community and tremendous cooperation from the mayor's office," said James Bernazzani Jr., special agent in charge of the FBI's New Orleans office. "It is a sign that individuals of Orleans Parish are fed up with public corruption."
Nagin spokeswoman Sally Forman said the administration had no comment on the indictment.
Accusations in Ohio
Thursday's indictments mark the second time in less than a week that a high-ranking official in the Morial administration has been accused of taking bribes.
In a public corruption trial that began in Cleveland this week, federal prosecutors played wiretapped phone conversations in which New Orleans businessman Gilbert Jackson and Cleveland consultant Nate Gray discussed paying a $2,500 bribe to Vincent Sylvain, Morial's top housing aide and manager of his political campaigns.
Gray and Jackson were seeking Sylvain's help in landing a performance contract for Honeywell Inc., a competitor of Johnson Controls, with the Housing Authority of New Orleans. The contract never materialized, and Sylvain has denied taking the bribe.
But in an intriguing footnote, in another tape played by the government, Jackson told Gray that Honeywell might have trouble getting work at HANO because Honeywell had angered Barré a few years earlier. That led Barré to steer the City Hall contract to Johnson Controls, Jackson said in the conversation.
As it happens, Honeywell and Johnson Controls were supposed to split the City Hall contract, but Honeywell walked away from the deal for reasons that have never been made clear.
Barré and several other subcontractors were originally part of the Honeywell team. In a 2002 interview, Barré said that after Honeywell dropped out of the competition, Johnson Controls representatives told him, "You guys are good vendors, come on over."
Copyright, 2005, The Times-Picayune Publishing Corporation
From: The Times-Picayune, June 17, 2005, p. A-1. Staff writer Martha Carr and Cleveland Plain Dealer reporter Mike Tobin contributed to this story. Reprinted in accordance with the "fair use" provision of Title 17 U.S.C. § 107 for a non-profit educational purpose.
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- "A disturbing picture" [Editorial], The Times-Picayune, New Orleans, June 19, 2005, p. B-6.
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