New Orleans is poised to award a lucrative tax collections contract to a firm recently accused of failing to pay a minority-owned subcontractor. The decision comes three months after Mayor Mitch Landrieu signed a law strengthening the city’s disadvantaged business enterprise program by increasing local minority and women-owned business participation.
On Monday, a committee evaluating bids on a contract to administer delinquent property tax collections and online tax sales voted to move forward on negotiations with incumbent contractor Archon Information Systems. The city’s Office of Supplier Diversity, which oversees the disadvantaged business enterprise program, opened an investigation into Archon in July after a subcontractor complained that it hadn’t been paid.
The committee’s decision comes after the New Orleans City Council on June 20 passed an ordinance strengthening the program by calling for stiffer penalties for contractors who don’t comply. A press release from the Mayor’s Office said the law “significantly reforms the City’s disadvantaged business enterprise (DBE) program.” The city’s goal is that 35 percent of all contract revenues should go to companies based in New Orleans and owned by women or minorities.
The report said the company cost more than $3 million per year, 10 times what the watchdog office said its services were worth.
Days later, GT Asset Management, a New Orleans-based collections firm founded by two women, told the city that Archon hadn’t paid the firm. GT Asset Management co-founder Nada Schmidt said Archon owed nearly a month of back pay.
“We are supposed to be paid on the 1st and 15th of each month. Our last check was received on June 3rd for June 1st payment,” Schmidt wrote to the Office of Supplier Diversity on June 27. “This is not the first time our check has been delayed.”
Schmidt filed the formal complaint on July 2, which The Lens obtained through a public-records request. According to a subsequent GT Asset Management email to the city, Archon owed the company $18,000 for work it performed in June.
Archon severed its relationship with the subcontractor in July.
“They have been paid in full,” Archon Chief Executive Officer Bryan Barrios told The Lens on Monday. Schmidt said the firm has only been paid $9,000, half of what she says it is owed.
Barrios said he withheld payments because GT Asset Management had partnered with another firm, Wayne James and Associates, to compete with Archon for the current tax collection contract, which expires at the end of September. He said he believes GT Asset Management employees were logging into Archon’s tax-sale system, CivicSource, to steal proprietary information about its website.
Wayne James and Associates did submit a competing bid for the work, using GT Asset Management as its collections subcontractor.* Schmidt called Barrios’ charge “absurd,” adding that the company’s partner, SRI Inc., has plenty of experience working with local taxing authorities.
Members of the contractor collection committee, which includes Landrieu’s Chief Administrative Officer Andy Kopplin and Chief Financial Officer Norman Foster, cited Archon’s experience as the main reason it received the highest rating among three bidders. It is currently the main collections subcontractor under Strategic Alliance Partners, which has been doing delinquent collections and tax sales for the city since 2005.
The expiring Strategic Alliance Partners contract was the subject of a highly critical report by the Office of the Inspector General in March. The report said the company cost more than $3 million per year, 10 times what the watchdog office said its services were worth. According to the report, Strategic Alliance Partners was an umbrella partnership that didn’t actually provide any collections or related legal services, instead using Archon for collections and the Scheuermann & Jones law firm for legal work.
Archon now hopes to become the prime contractor, using Scheuermann & Jones associate Errol Conley and the law firm’s managing partner, Lawrence Blake Jones, as its legal subcontractors. Jones is one of the developers behind the Blake Hotel in the Central Business District and was a member of Landrieu’s transition team after his election in 2010.
Wayne James, the head of Wayne James and Associates, said at Monday’s meeting that the investigation should preclude Archon from competing for the contract. Mary Kay Kleinpeter-Zamora, the city’s chief procurement officer, said her office would consult the City Attorney’s Office.
Office of Supplier Diversity Director Arkebia Matthews told The Lens on Monday that investigation was open and referred further inquiries to mayoral spokesman Tyler Gamble. However, Gamble told The Lens in an email: “There is not an open investigation at this time.”
He did not respond to the Lens’ follow-up questions about when the investigation had ended, what the outcome was and whether the allegation of nonpayment would affect the contract.
James and Schmidt both said on Monday and Tuesday that they believed the investigation was still open.
Wednesday afternoon, Gamble sent The Lens a copy of a letter from the Office of Supplier Diversity to GT Asset Management indicating that the office had closed the matter. The letter was dated Tuesday, the day after the contract selection meeting.
In the letter, Matthews writes that though the complaint was filed against Strategic Alliance Partners and Archon, the city has a contract only with Strategic Alliance Partners. The city found no problems with that firm’s handling of Disadvantaged Business Enterprise rules.
Archon’s bid price — a percentage of delinquent collections — was higher than Wayne James and Associates’ price. On Monday, the selection committee noted that if Archon is unwilling to bring its price down, the city will move on to negotiations with Wayne James.
*Correction: This story originally stated that Wayne James and Associates’ bid included GT Asset Management as its online tax sales subcontractor. GT Asset Management is its collections subcontractor. (Sept. 11, 2013)
This story was updated after publication to note that the city sent GT Asset Management a letter Tuesday to say the matter had been closed.
