Witness: NHA knew of Chilchinbeto woes
By Cindy Yurth
Navajo Times
LAS VEGAS, April 11, 2013
The Navajo Housing Authority had ample warning there were issues with Fort Defiance Housing Corporation's development Chilchinbeto Estates, former NHA Grants manager Louis Shepherd said in two days of testimony before a federal jury here Wednesday and Thursday.
The testimony came in the bribery and conspiracy trial of contractor William Aubrey and former NHA CEO Chester Carl.
Carl, 56, is accused is accepting more than $6,000 in casino gambling tokens in exchange for granting Aubrey's company, Lodgebuilder Inc., sole-source contracts and looking the other way when Lodgebuilder developed an incestuous connection with the non-profit grant recipient managing its contract.
Aubrey is also alleged to have converted $2.2 million in funds from a Housing and Urban Development grant for his personal use.
Shepherd testified that shortly after NHA hired him in June of 2002, he learned that HUD's Southwest Office of Native American Programs had found some irregularities in a $9.4 million grant under the Native American Housing and Self-determination Act that was to be used to build 90 homes in Chilchinbeto, Ariz.
First of all, the SWONAP report stated, grant recipient Fort Defiance Housing Corp. had circumvented prescribed HUD procedures by hiring Lodgebuilder without putting the project out to bid. Then FDHC had turned the management of the grant over to Lodgebuilder by contracting with it as a "consultant," essentially allowing the for-profit company to oversee itself.
FDHC could not produce documents essential to the grant and referred inspectors to Lodgebuilder, which also could not come up with them, Shepherd said.
The concerns came up again when SWONAP investigators visited the site June 10-12, 2002, Shepherd said, and surfaced again in a July 12 letter to Carl.
Carl turned the investigation over to Shepherd's department, which found, Shepherd said, that "Lodgebuilder did have some control and influence over financial management functions at Fort Defiance Housing Corporation."
The grants management department met several times with the FDHC brass, who assured them they were correcting the findings, Shepherd said, but when SWONAP issued its final report Aug. 22, none of its concerns had been fully addressed, according to Shepherd.
Another SWONAP letter dated Dec. 7 showed "the findings were still unresolved," Shepherd testified. The letters were entered into evidence.
Meanwhile, construction was continuing on the homes. By June 2, 2003, HUD finally gave FDHC permission to start drawing down the grant, in increments as different phases were completed.
By late June 2004, 44 subcontractors of Lodgebuilder had come to NHA with complaints they had not been paid for their work. The top eight alone had over $820,000 in claims.
On July 2, Shepherd wrote FDHC President Everett Ross a letter threatening to revoke FDHC's status as a sub-grantee unless it could address the concerns. Carl signed off on it July 13.
That same day, however, Carl signed a sub-recipient agreement with South Shiprock Homes Inc. -- another non-profit that had a consultant agreement with Lodgebuilder.
"By 2004, you thought you had ended this problem," Assistant U.S Attorney Timothy Vasquez told Shepherd as he questioned him. "Why would Chester Carl put Lodgebuilder back in the same place?"
Both defense attorneys objected to the question, sustained by Judge Kent Dawson.
It wasn't long before the Shiprock development, too, started having problems with unpaid contractors, Shepherd testified. Lodgebuilder's contract with South Shiprock Homes was terminated Jan. 27, 2005, but the company had already filed for bankruptcy.
NHA has committed to tearing down the homes, most of which have been burned or vandalized after years of abandonment, and will rebuild them at a cost of $40 million (compared to the $9 million they originally cost).
Under cross-examination by Carl's attorney, Shepherd indicated Carl was not the only one responsible for overseeing the HUD grants. Everyone from Shepherd himself to the Navajo Nation Council's Intergovernmental Relations Committee had some responsibility, Shepherd said.
Posing a hypothetical situation that sounded very much like Aubrey's defense, the contractor's attorney, Michael Kennedy, asked Shepherd if it would have been possible for a contractor to build an entire development using his own money, pay the subs, and then use the grant money to reimburse himself.
"That could have been the case, yes," Shepherd replied.
"If they do all the work before they even have a contract, if they spend a million dollars of their own money and you don't fund them, they're just out?" Kennedy asked.
"They could be," responded Shepherd.
Aubrey said after the court recessed for the evening that's exactly what happened to him.
"Based on lies, the government took all my money and all my property," Aubrey said, referring to Lodgebuilder's 2009 bankruptcy settlement. Aubrey and his partner in Lodgebuilder, Brenda Todd, appealed the ruling but the U.S. 9th Circuit Court refused to hear the appeal -- shortly after, Aubrey pointed out, former bankruptcy trustee Brenda Whinery became a Ninth Circuit judge.
Asked if he knew about the Lodgebuilder irregularities, as Shepherd's testimony indicated, Carl said he did, and there was a reason he didn't press ahead to shut Chilchinbeto and Shiprock down.
"We did everything we could to keep the project going," said Carl, who resigned from the NHA under pressure in 2007. "What could have happened to Chilchinbeto is what happened to Shiprock. Now a $9 million project is going to cost $40 million."
Carl said he and Aubrey are friends, but they never mixed business and pleasure.
"People ask me what Bill Aubrey is like (as a businessman) and I can't even tell them," he said. "We never discussed business."
While Carl was a respected leader in the Indian housing community and former president of the National American Indian Housing Council before the Lodgebuilder scandal, Aubrey has been the subject of scrutiny before.
In 1989, he, told a Senate panel investigating then-Navajo Tribal Chairman Peter MacDonald that he gave MacDonald's son a $6,000-a-month consulting job and loaned him $36,000 in the hopes of landing a contract for a waste disposal site on Navajo land.
Aubrey was not indicted during the subsequent grand jury investigation, but the manager of the construction company he had recently sold was ... and so, of course, was MacDonald.
Then in 1998, Aubrey and 10 others were indicted in Montana for allegedly bribing federal officials to funnel housing grant monies to the Blackfeet tribe, of which Aubrey is a member, and awarding the contract to his construction company.
Aubrey was acquitted and successfully sued to recover his attorney's fees.