Government & Politics

Contract negotiations continue with tax collection firm despite DBE complaint

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.

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.

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About Charles Maldonado

Charles Maldonado covers the city of New Orleans and other local government bodies. He previously worked for Gambit, New Orleans’ alternative newsweekly, where he covered city hall, criminal justice and public health. Before moving to New Orleans, he covered state and local government for weekly papers in Nashville and Knoxville, Tenn.

  • Devin Klein

    Let’s look at the facts:

    The IG report said SAP cost more than $3 million per year. 35% of $3,000,000 is $1,050,000 (the amount that was supposed to go to DBEs). The 35% DBE participation goal was in place in 2005 under an executive order by former Mayor Nagin.

    Unless the city waived DBE participation on the contract, SAP/Archon was required to have DBE participation on the contract. The fact that SAP/Archon hired a DBE firm and then replaced that firm with GTAM as a DBE subcontractor is, in part, evidence they knew DBE participation was required.

    Ms. Matthews’ statement that the city found no problems with the SAP contract is absurd. Why?

    The City only signs a contract with the contract awardee and never with a DBE or other subcontractors (standard practice everywhere). That fact does not eliminate DBE compliance responsibilities of the part of SAP/Archon.

    The Supplier Diversity Compliance Officer is supposed to produce reports on DBE participation for all City contracts. Had that been done, the total dollar amount paid to SAP/Archon by the City could have been compared to the total amount paid to GTAM and any other DBEs or subcontractors on the project to determine the actual overall DBE participation percentage on the contract.

    Ms. Matthews was the Compliance Officer before becoming Director. Did she track active DBE participation as the Compliance Officer? Probably not. And according to her report to the City Council earlier this summer that there is a “glitch” in the compliance system, it seems she hasn’t instructed her current Compliance Officers to do so either. Compliance doesn’t seem to be a priority for her, her staff or the administration that is allowing them to continue to not do their jobs.

    How can you perform a complete investigation without DBE compliance information on the contract?

    It is evident that Ms. Matthews closed the matter without any investigation in a half-hearted attempt to cover-up her inability or unwillingness to do her job.

    Back to the same old DBE program.

    Thanks Mitch!

  • Samira

    Devin, you hit the nail on the head. if only you knew the WHOLE story.