McCabe says Navajo Nation may have to repay ZenniHome funds

DÁ’DEESTŁ’IN HÓTSAA

Controller Sean McCabe testified under oath Wednesday that he refused instructions to override financial controls in an earlier effort to send $24 million directly to ZenniHome and said the Navajo Nation faces a significant risk of having to repay federal ARPA money.

McCabe appeared voluntarily on the third day of the Budget and Finance Committee’s investigatory hearing into ARPA housing funds and related contracts. He told the committee he appeared because he was under subpoena and because his professional duties as a certified public accountant required him to disclose material financial facts.

“My intention today (June 10) is not to undermine a DOJ advisement,” McCabe said. “My intention is to fulfill my professional duties as a certified public accountant.”

The committee’s questions centered on procurement, the ZenniHome-related housing contract and whether standard financial procedures were followed as the Navajo Nation moved ARPA money into housing projects.

The fourth hearing is underway today, June 12, in Window Rock.

McCabe said there is no direct contract between the Navajo Nation and ZenniHome. He said the contract at issue is between the Navajo Nation and IDS+A, or Indigenous Design Studio + Architecture.

He said officials first attempted to move the ZenniHome-related work through a sole-source procurement, but the Office of the Controller objected and stopped that effort. The later IDS+A contract went through an advertised bid process, he said.

Delegate Cherilyn Yazzie asked who attempted to sole-source the contract and why McCabe believed that process was not proper.

McCabe said several meetings took place through the Office of the President and Vice President, including then-Chief of Staff Patrick Sandoval and then-Deputy Chief of Staff Kris Beecher, to move a sole-source contract forward.

McCabe said the U.S. Department of the Treasury rules emphasize fair and open competition. He said he did not believe ZenniHome was the only vendor that could provide the homes, pointing to a later $75 million award to Homes Direct for housing work.

The first proposed contract would have sent about $24 million directly to ZenniHome to build a housing manufacturing facility, McCabe testified. He said the company had disclosed financial information that raised cash-flow concerns.

McCabe said he raised those concerns directly with President Buu Nygren and advised him not to move forward because the contract was too risky. He said Nygren stopped the first contract after that meeting.

Procurement questions

Delegate Lester Yazzie questioned McCabe about procurement files, scoring sheets, conflict-of-interest disclosures and SAM.gov verification.

McCabe said required documents should be present when bids are opened if the request for proposals requires them. If required documents are missing, he said, the bid should generally be treated as nonresponsive.

McCabe said he did not know whether all required documents were present when the bids were opened because he was not in the room. He said the documents appeared to be present later during the 164 Review Process, an internal Navajo Nation contract review process, before the contract was ready for signature.

Delegate Norman Begay asked McCabe whether he had been instructed to expedite or override standard procurement steps. McCabe said yes.

McCabe said he refused instructions tied to the first ZenniHome proposal and told his team not to release money unless he personally authorized it.

McCabe said there were concerns about the IDS+A award because IDS+A is an architecture firm and was not a licensed contractor. He said officials were told the intent was to award the contract to IDS+A, which would then subcontract to a licensed contractor.

At the time of the award, McCabe said, the licensed contractor was not identified. ZenniHome was later listed as the subcontractor when the contract was signed, he said.

Yazzie later asked McCabe who asked him to expedite or override standard procedures.

McCabe said oral discussions took place with Sandoval and Beecher after a Budget and Finance Committee meeting. He said he could not prove those conversations happened, but said emails and text messages may show related discussions among officials.

Repayment risk

Yazzie also asked who would repay the money if the Treasury determines the costs were not allowed.

McCabe said he did not know what the Treasury will decide, but said the risk is significant.

“I will say the Navajo Nation is at very significant risk of this being a completely unallowable cost,” McCabe said.

McCabe said the Navajo Nation would likely be responsible for repayment unless officials recover money from vendors. ZenniHome has liquidated.

“That money’s gone,” McCabe said.

BFC Vice Chair Carl Slater asked McCabe when he first became aware of ZenniHome.

McCabe said the first contact came in March 2024 while he was at the Reservation Economic Summit in Las Vegas. He said Beecher, who was deputy chief of staff at the time, called him about a potential sole-source contract with ZenniHome.

McCabe said the call led to a conference call involving Sandoval, Beecher, then-Acting Attorney General Heather Claw, Jorge “George” Cordova and possibly Mike Halona, the executive director of the Division of Natural Resources. McCabe said he was not sure whether Halona was part of the call.

The discussion involved the first proposed grant, not the later contract that was signed, said McCabe. He said officials wanted to send $24 million to ZenniHome to build a facility after what he described as a falling out involving the OPVP and IDS+A.

McCabe said he told officials they could not award a contract to one vendor and pay another.

“So you’re going to have to unravel the whole thing and you can’t sole source, so you’re going to have to RFP it again,” McCabe said.

McCabe said Claw agreed during that call and said the contract should probably be redone.

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