Government & Politics
 

Recipient of controversial nonprofit loan working for Inspector General's Office

By Ariella Cohen, The Lens staff writer |

A business that came under public scrutiny for taking loans from a taxpayer-subsidized nonprofit controlled by its president’s brother has moved on to work for the Office of the Inspector General.

In July, that office signed a $75,000 technical-support contract with Ultimate Technical Solutions Inc. Though based in Harvey, the company name may ring a bell with New Orleanians who recall the abrupt resignation of a deputy mayor appointed by Mayor Mitch Landrieu. That former official, Gregory St. Etienne, quit after a state audit revealed that the federally supported nonprofit financing agency he led before taking his City Hall post, Citizens United for Economic Equality, had directed more than $400,000 in loans to businesses owned by family members – including Ultimate Technical Solutions.

That company is owned by David St. Etienne, Gregory’s brother.

Nearly all of the loan money that went to family — $351,959 — went to companies located in the same Harvey office building as Ultimate. The building is owned by a corporation operated by David St. Etienne. The co-location arrangement also included Citizens United itself, which paid $26,250 in rent to St. Etienne in 2009, according to the audit, which also documented one instance of double payment on the monthly rent of $3,625.

The company’s history did not escape the notice of the Office of the Inspector General, which has a mission to root out corruption and abuse from government.

“I was aware of it and I wouldn’t say it wasn’t a concern,” said Greg Fahrenholt, a staff attorney for the Inspector General.

While perhaps not smiled upon, neither the auditors nor the city ever alleged criminal wrongdoing on the part of anyone involved in the loans to Ultimate. Therefore, it wasn’t a factor in evaluating the company’s proposal, Fahrenholt said.

“I didn’t think there was anything that rose to the occasion to disallowing consideration of the proposal,” Fahrenholt said.

“The evaluation committee takes into account the company’s performance, its qualifications and that’s it.”

Selected through the city’s standard professional-services public bidding process, Ultimate Technical Solutions beat six other companies for the Inspector General job.  The way the process works is that agency employees score all bidders into tiers based on clearly defined criteria for expertise, experience and qualifications, with a fourth scoring category giving preference to registered Local Disadvantaged Business Enterprises.

While price is a factor in evaluating high-scoring proposals, agencies are not required to go with the lowest bid.  In this case, Ultimate Technical Solutions won with a combination of demonstrable expertise and hourly rates that were 50 percent lower than three other companies ranked as “highly advantageous.”

In its proposal, the company described more than 20 years of experience providing high-quality services to local government institutions and private businesses including Entergy Corporation, ExxonMobil, Whitney National Bank, the Port of New Orleans and New Orleans Public Schools.

And while three contenders, including St. Etienne’s company, scored high in the experience and expertise categories, Ultimate Technical was the only to win points for being a Local Disadvantaged Business Enterprise, and the only company to have a bricks-and-mortar office in the region.

With its mandate to investigate allegations of wrongdoing, the Inspector General’s computer networks are chock full of confidential and highly sensitive information. And while Ultimate Technical Solutions has a long history of providing technical service to other institutions with sensitive information, Fahrenholt said the IG’s office took special precautions to ensure that their data would be safe with the contractor.

“After the selection committee selected the company we met with (David St. Etienne) to discuss security concerns and had them sign a very intensive security agreement,” he said. “We are going to have in-house monitoring too and at this time, we feel like we have our bases covered.”

The audit that raised questions about Citizen’s United was enough to make the Landrieu administration uncomfortable with having Gregory St. Etienne continue as a top staffer. As deputy mayor of operations, St. Etienne’s duties included overseeing city services, procurement and budgeting.

Citizens United’s stated goal is to “support economic parity” by providing access to capital to businesses “locating in, or serving low-income populations,” and managed by traditionally underserved populations.”  In 2008, the state hired the nonprofit finance agency, with Gregory St. Etienne serving as CEO, to distribute more than $9 million in low-interest federal recovery loans for businesses. The infusion of capital was intended to spark recovery in disadvantaged communities disproportionately affected by Hurricanes Katrina and Rita. The aid had a ripple effect – it generated money the nonprofit put towards a secondary round of loans. It was loans from this secondary round that went to businesses operated by family members, Gregory St. Etienne told The Times-Picayune at the time of his resignation.

Reached by telephone this week, David St. Etienne denied that he or his brother had done anything wrong.  “This was no special money,” he said.

“You’re not getting any sweetheart deal when you are talking about 7 percent interest rate,” David St. Etienne said.

Regardless of David St. Etienne’s contention that nothing shady had gone on, the loans raised eyebrows in Baton Rouge.  In a Jan. 19 letter to the taxpayer-supported nonprofit, state officials expressed concerns about multiple loans “made to related parties with little to no justification”

CUEE must create and adhere to a Conflict of Interest Policy immediately,” state compliance officer Theresa Brennan wrote. The letter also noted that David St. Etienne had failed to sign a promissory note on a loan from the nonprofit, violating reporting standards.

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  • Morg Jones

    What’s the news here? A minority vendor responded to a city agency’s RFP and then through that agency’s selection process won. I get the fact that Greg St Etienne violated conflict of interest issues and did not seek permission from the board to make those loans based on those conflicts. However didn’t Greg St. Etienne pay the price already or does he need to pay more?

    Additional punishment appears to be what The Lens and Fox 8 objectives are. Greg St. Etienne’s resignation wasn’t enough and they want more from him or his brother.

    If Greg St. Etienne hadn’t been the brother, would Ultimate Technology Group have qualified for those loans anyway? Are those loans in default or are they getting paid back? Please provide all the information so your readers can determine if this is real news or just The Lens and Fox 8 trying to sensationalize an old story.

  • Bro Keith “X” Hudson

    I’ve noticed the Lens only do “selective reporting” as always in this stinky-corrupted city. What about Barbara Majors who was controlling the money? Oh, You can’t talk about that, huh? We already know Etienne is a crook, let’s label all of them, FRIENDS and RELATIVES alike.