In The News › Memo provides rare look at N.O.‘s City Hall

Feb 5, 2007

Source: Times-Picayune

Memo provides rare look at N.O.‘s City Hall

Memo provides rare look at N.O.‘s City Hall
Energy firm lays out its playbook
Monday, February 05, 2007
By Gordon Russell
Staff writer

Much like a football coach draws up a scheme for exploiting the enemy defense, Johnson Controls Inc. came to New Orleans armed with a game plan as the energy-management giant positioned itself to land a major City Hall contract in 1999.

To pull off its big play, a corporate strategy sheet obtained by The Times-Picayune shows, the energy firm was counting on businessman Robert Tucker and Metairie financier Rafael Valdes, political insiders who company officials believed would give them access to New Orleans decision makers.

The strategy worked: Johnson Controls got the contract, a huge 20-year deal that would cost New Orleans upward of $80 million — although it also would trigger a sprawling federal corruption probe that has led to at least 11 guilty pleas so far.

Tucker, according to the Johnson Controls memo, was to be the company’s “heavy hitter for this project.” The memo described Tucker as a “longtime family friend of (then-Mayor) Marc Morial and his father, Dutch” and said that he would play a “dual role” that included “lobbying the mayor” and helping with project management.

Tucker vigorously denies having lobbied the mayor.

The same memo indicates the company counted on Valdes to connect it to another key city official: Marlin Gusman, then Morial’s chief administrative officer and now Orleans Parish criminal sheriff. Of Valdes, the memo’s unidentified author wrote: “He brought Bob (Tucker) to the party and is very good friends with Marlin Gusman. . . . He has been invaluable in the sales process — getting us meetings with (Gusman) at key points.”

The memo provides a fascinating, if unflattering, look at a City Hall contracting process during the Morial years, when it could be a lucrative haven for politically active contract brokers. While Mayor Ray Nagin’s administration has not been plagued by the sort of contracting scandals that now cloud the reputation of his predecessor, he has done little in the way of systemic reform.

“If you’ve got a game plan that calls for politically connected individuals to lobby city officials, you know the procurement process is broken,” said Janet Howard, president of the Bureau of Governmental Research, a nonprofit watchdog agency that has long called for awarding city contracts on merit rather than political relationships. “This is just like in the movies.”

‘The way business is done’

The memo was to have been offered as evidence in the trial of three Morial associates and a fourth, less well-connected contractor. The trial, scheduled for Jan. 16, was called off two days earlier, following guilty pleas tendered by defendants Stan “Pampy” Barré, a restaurateur; Reginald Walker, owner of a construction company; and Kerry DeCay, the city’s director of property management under Morial.

The trio acknowledged playing leading roles in a bribery, mail-fraud and kickback scheme through which they had skimmed more than $1 million from the Johnson Controls energy-savings contract inked by Morial in the twilight of his two terms as mayor.

The memo probably says more about the political landscape of New Orleans than it does about the business practices of Johnson Controls, a Fortune 100 company based in Milwaukee, although federal prosecutors named two Johnson Controls sales representatives as unindicted co-conspirators along with Tucker and Valdes.

Company spokesman Darryll Fortune described the strategizing outlined in the document as unremarkable.

“This is the way business is done,” he said. “It’s standard fare for the way any major company analyzes a potential customer and the opportunities that might exist. We look at what the opportunities are and who the players are.”

Steve Kelman, a professor at Harvard University’s Kennedy School of Government and an expert on procurement practices, generally agreed with Fortune. “I think this happens a lot,” he said. “Big contracting companies develop a strategy about who the key players are, who they like and who they don’t like.”

Kelman added, however, that “in the federal government, almost all of the time these decisions are left to civil servants, not elected officials. That political stuff does open up for more corruption.”

The opportunities Johnson Controls saw in New Orleans — the memo speaks of a project “wish list” — included retrofitting 27 city-owned buildings with new light fixtures, chillers and boilers. The price tag, the author of the memo wrote optimistically, could be as large as $10 million over 15 years.

Control over contract

In the end, things worked out far better than that for Johnson Controls: The company wound up with contracts covering nearly every building the city owned and lasting 20 years. The work cost the city $34 million up front, a figure that rises to $81 million over 20 years when maintenance agreements and interest are factored in.

The company’s coup owes in part to its success in getting its primary competitor, Honeywell International, another giant in the field, to withdraw from the contract. How Johnson Controls was able to do that remains a mystery.

When the memo was written, the city’s energy-efficiency work was to be split between the two firms — and Honeywell was top dog, perhaps because a Honeywell salesman had “pitched the concept a couple of years ago,” according to the memo.

Johnson Controls was determined to overcome that handicap. “We are lobbying to cut Honeywell out of the project so we can have all the city facilities,” the memo declares.

Exactly what form that lobbying took is unclear, but there are some clues in the memo. At the time it was written, some City Hall officials had hitched their wagons to Honeywell, the memo asserts. Cedric Grant, then Gusman’s deputy, for instance, is described as “slightly pro-Honeywell.”

And DeCay is characterized as “extremely pro-Honeywell,” a description that may owe to his “close” friendship with a company salesman who is not identified in the memo.

The memo also asserts that DeCay has “questionable ethics” and calls him “one of Morial’s favorites.”

DeCay’s loyalty to Honeywell was presumably reinforced by the firm’s decision to give a consulting contract to Barré, a close friend of DeCay’s with no known expertise in energy efficiency. Barré is not mentioned in the memo.

Sometime after the memo was written, Honeywell was out of the picture and Barré had been signed up as a consultant to Johnson Controls in a deal that mirrored its arrangements with Tucker and Valdes.

Some of the people involved in the energy-savings contract have said Honeywell backed out because at the time it was the target of an unsuccessful takeover bid by General Electric and had decided to get out of the business. When the merger failed to materialize, they said, the company got into energy management.

But the company never announced a departure from one of its primary lines of work, and Honeywell spokesman Mark Hamel said only that Honeywell “walked away because it didn’t appear at the time we would be able to get an acceptable contract.” He would not elaborate.

Under fire

The memo’s assertions contradict earlier statements made by Gusman, who has said in the past that he knew little about the Johnson Controls contract. The first of the contract’s three phases was signed in October 2000, several months after Gusman took a leave of absence to stage an ultimately successful bid for a City Council seat.

The contract was signed by both Morial and Grant, who succeeded Gusman as CAO.

When the Johnson Controls contract came under fire more than two years after Gusman left the Morial administration, Gusman told The Times-Picayune he had little or no involvement in negotiating the deal. He added that he knew almost nothing about its details, and said that Morial had never briefed the council about it.

The six-page memo indicates that Johnson Controls viewed Gusman as a key player with a “high level of involvement.” They hired Valdes — whom Gusman has previously described as a “political supporter” rather than a friend — primarily to influence him.

Grant, meanwhile, is described as having a “moderate level of involvement” in the deal, despite being “uneducated” on the contracting process. Grant, now deputy secretary of the state Department of Transportation and Development, did not return a phone message.

Through his spokeswoman at the Sheriff’s Office, Renee Lapeyrolerie, Gusman declined to comment for this story.

Tucker, meanwhile, strongly denies ever lobbying Morial, even though the memo says the company hired him to do precisely that. The memo credits the lobbying team — Tucker and Valdes — with arranging meetings with Morial and Gusman.

Morial is now president of the National Urban League. His spokeswoman, Michele Moore, did not return a phone call.

Consulting work

Tucker, who got his start in politics as an executive assistant to former Mayor Moon Landrieu, called the document “a little bit of an imaginative leap.” He said he never spoke to Morial about the contract. He said he was unsure whether Morial was even aware he had been retained by Johnson Controls.

“Whoever wrote that was pretty imaginative,” Tucker said when shown a copy of the unsigned memo. “I made it clear (to Johnson Controls) that I don’t do introductions, and I don’t tell the mayor what to do.”

Tucker said he believes the company hired him because of “my professional qualifications, my resume.”

“I was not some schmuck that just fell off the consulting truck,” he said. “I had some ideas and some guidance, and some understanding about how to do this stuff.”

Some of the work he did for Johnson Controls was in other cities, including Mobile, Ala., and Milwaukee, Tucker said. On the New Orleans work, Tucker said he performed a variety of tasks.

“I made content and literary suggestions on their technical proposal,” he said. “I provided them with a review of tracking and monitoring procedures. I looked at their methods for controlling deliverables, and I reviewed their project management — what they presented for how they would monitor and govern the project management.

“I helped ensure that all terms and conditions were being addressed. What I was providing to them was simply technical assistance, using my government background to ensure they were compliant with everything they were supposed to do operationally.”

Though Johnson Controls has signed hundreds of huge contracts with large public entities, Tucker said the company needed help navigating the world of government work.

“Big companies don’t understand the government process,” Tucker said. “You have to array all your numbers. You have to show, for example, your cost of money, your internal rate of return. Big companies are not used to giving up that kind of information. There’s a new level of transparency imposed on you.

“What people have to understand is that if a guy has an MBA and 30 years in the public arena and government services, he brings a skill set that goes beyond politics,” Tucker said.

. . . . . . .

Gordon Russell can be reached at grussell@timespicayune.com or (504) 826-3347.

Feb 5, 2007

Source: Times-Picayune

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