Black Chamber of Commerce to Demand Scrutiny of Bailout Contracts
‘It’s Katrina All Over Again’
New America Media, News Report, Khalil Abdullah Posted: Oct 29, 2008
Editor's Note: Two prominent accounting firms received federal contracts last week to help monitor the $700 billion bank bailout. Stripped out of the legislation, NAM editor Khalil Abdullah reports, are provisions to ensure access for minority contractors.
WASHINGTON, D.C. -- When PricewaterhouseCoopers and Ernst & Young, two of America’s most renowned accounting firms, get their next phone calls from Harry C. Alford, Jr., the subject won’t be about providing financial consulting for the National Black Chamber of Commerce (NBCC).
Alford, NBCC president and CEO, will instead be asking which minority-owned firms will be subcontracted to assist in the auditing and general accounting work the two companies will perform for the U.S. Treasury Department in monitoring the $700 billion bank bailout.
The Treasury’s announced selection of the firms on Oct. 21 received little attention beyond coverage by the financial news media. But to Alford, the no-bid contracts that Secretary of the Treasury Henry Paulson approved resounded loudly of unfairness,exclusion, and highlight the potential for conflict of interest.
“That $700 billion is U.S. taxpayer money,” Alford told New America Media last week. “We at the NBCC want to make sure black firms get some of the work, so we’re putting together our list of accountants and financial service firms.”
Alford specifically objects to the language of Section 107, Contracting Procedures in the bailout legislation that allows the Treasury secretary to waive Federal Acquisition Regulation (FAR) provisions pertaining to government contracting with minority businesses. The new legislation calls for the secretary to “develop and implement standards and procedures to ensure, to the maximum extent practicable,” the use of minority- and women-owned firms.
Alford thinks the FAR provisions should have remained in force.
Let there be no confusion about Alford’s position on the bailout itself, or, more formally, the Emergency Economic Stabilization Act of 2008. He is a vociferous critic.
“It is a waste of taxpayers’ money,” he said, adding that he is appalled that Federal Reserve Chairman Ben Bernanke is talking about the need for a second economic stimulus package as a follow-up to the tax rebates Congress approved earlier this year.
“The American public is getting ready to be ripped off again,” Alford said. Our children and grandchildren, he maintained, will inherit a national debt on a scale that will endanger the economic viability of several generations of Americans.
But if funds are going to be available for American firms to do the financial work associated with the bailout, then a principle of fairness – and law – should prevail.
“Let’s do what’s right,” Alford said, referring to contracting procedures. He insisted that it is important to pressure “the major companies and demand that they subcontract.”
A contract that a large company considers minor, Alford explained, could be of immense value to a lesser firm’s bottom line. “Let’s throw some bones out there to small and minority businesses,” he said.
Alford’s reaction to the bailout and Section 107 went out in an e-mail to NBCC members and supporters on Wednesday, Oct. 1.
“We applaud the 21 of the 39 voting Congressional Black Caucus (CBC) members who voted against it,” Alford wrote of the bill’s initial defeat in the House two days earlier. “The NBCC demands that Section 107 be stripped from this proposed legislation.”
But Wednesday evening, just hours after Alford sent his e-mail, the Senate passed a bailout package loaded with an estimated $150 billion of pork, sweeteners added to win over House opponents of the left and right. By Friday, Oct. 3, the bi-partisan, anti-bailout cohort had dissolved, and the CBC’s “no bloc” was reduced to a mere eight. The House passed the measure, with Section 107 intact, by a 262 to 171 vote.
The margin of victory was large enough to have overcome even a unified CBC anti-bailout stand. Nonetheless, Alford said he was “very disappointed” that 13 CBC members “capitulated.” In his assessment, pork – the funding of pet projects in legislators’ districts – was not the only reason they changed their votes.
“There was arm-twisting” as well, Alford contended, citing the potential loss of committee assignments or other perks dispensed by Congressional leaders to keep their troops in line. And some CBC members admit to being swayed to back the bailout after receiving phone calls from the Democratic presidential nominee, Sen. Barack Obama, according to Alford and news reports.
On Oct. 8, Alford fired off another e-blast, one especially scornful that Section 107 had been allowed to stand.
“Inflated, racist and seriously ironic is the way this is going to go down unless we fight,” Alford wrote. “No-Bids will make it inflated and the Good Old Boy system is void of diversity. It is indeed ironic in that many of the money managers who will be anointed by these contracts will be the same ones who got us in this mess. It's crazy!”
During the interview with New America Media, Alford said any such patronage would be challenged first by a safeguard designed to prevent the total exclusion of minority-owned businesses from securing bailout contracts.
Under Section 107, Alford said, the Treasury secretary has to submit his decision on exercising his waiver authority within seven days to several Congressional committees, among them the Committee on Homeland Security. In the House, that committee is chaired by CBC member Rep. Bennie Thompson, D-Miss.
“Bennie Thompson gets the message,” Alford said. “He got it during [Hurricane] Katrina when the no-bid contracts were being let in Louisiana and Mississippi.”
As an example of how no-bid contracts can be manipulated, Alford cited the practice of large companies reportedly skimming a layer of profit at each level as they subcontracted.
“They would charge $40 a yard for waste removal, keep $10 a yard profit and subcontract to the next firm that charged $30, which took $10 and then subcontracted again to a firm that charged less…. What a waste of American taxpayer money!”
Thompson was instrumental in securing post-Katrina contract work for minority and local firms, Alford said. He also credits Rep. Edolphus Towns, D-N.Y., and former Rep. Al Wynn, D-Md., for writing to President Bush to express concerns about the exclusion of minority firms from the Gulf cleanup process.
“That letter got me into the White House,” Alford said, “and when I had the opportunity to tell the president what was going on, he said, ‘Harry, you’re right, and it’s going to change.’ And it did.”
Alford estimated that minority-owned companies were able to procure about $2 billion in contracts as a result of Thompson's efforts and Bush’s pressure behind the scenes. Congress’ passage of the bank bailout -- and Section 107 -- could lead to abuses similar to the post-Katrina contracting fiasco, Alford said. “Now, it’s Katrina all over again,” he warned.
Alford said he will be calling on all of his Congressional allies -- the CBC and beyond -- to demand that House Speaker Nancy Pelosi insist on a weekly updated list of all of the firms contracted by bailout revenue.
As for charges of conflict of interest, Alford said that the
American public should be vigilant as an administration with less than 90 days left in office heads for the door with authority to grant no-bid contracts to former and possibly future employers and stock holders. “We need to press them right now,” Alford insisted.
Now More Than Ever New Orleans Rebuilding Open to Blacks
Congressional Dems Probe the State of Minority Owned Business
The Two Faces of America's Economic Collapse
Page 1 of 1