America's military housing disaster: A whistle-blower awaits vindication
She was a bankrupt pal of several U.S. presidents. His firm had been suspended from government-financed housing projects for repeatedly violating regulations.
This change order, approved by the Navy in August 2007, forgave $14 million in cost overruns and delays on the Navy privatized housing project in the Pacific Northwest.
Together, they and others formed a company that won billion-dollar Defense Department contracts and took ownership of 8,000 military homes, including 3,000 in Washington. The result was a spectacular failure that has cost taxpayers millions and delayed new home construction and renovations.
In Snohomish County, land sits empty where 141 Navy homes were scheduled to be finished by the end of September. Elsewhere in Western Washington, most of the 464 homes for military families on Whidbey Island and at Bangor came in five months to a year behind the original construction schedule.
Projects at Air Force bases in Florida, Georgia, Arkansas and Massachusetts and at an Army base in Missouri failed. Many houses simply weren't built. At Moody Air Force Base in Georgia, only two of 400 homes were built. Lenders withdrew, costs skyrocketed, and some delays are being measured in years. The projects have either been sold to other companies or are being offered for sale.
The company in charge, American Eagle, was a newly formed consortium of the Shaw Group, a government contracting giant, and Carabetta Enterprises Inc., led by Salvatore Carabetta of Connecticut. American Eagle was managed by Kathryn Thompson of Dallas.
Thompson, a major fundraiser for President George H.W. Bush, counted as friends a long list of political luminaries, from Newt Gingrich, Barry Goldwater and Ronald Reagan to Bill Clinton and Ross Perot. Carabetta's real estate company had once filed for bankruptcy protection and had been suspended from government housing programs for two years in the 1990s because it improperly diverted millions from federal housing projects, drawing a public apology.
Also in the mix was an influential retired Air Force general and a lieutenant colonel, who signed a deal with American Eagle that would pay $200,000 if the company's first project at Patrick Air Force Base in Florida was signed, which it was.
And there was even an argument over an expensive toilet.
A Seattle P-I investigation of American Eagle's independent transactions with the Army, Navy and Air Force revealed a flawed military selection process – driven by a desire to privatize government functions, prestigious connections and smart marketing.
The military officials charged with overseeing the contracts did only limited background checks or ignored public documents that raised questions about the individuals involved. They said they focused on the applicant company's "past business performance."
"A full background investigation on participants is just not something we have done in the past," said Scott Forrest, director of the Navy's special venture acquisition office. Carabetta lawyer William Baldiga said the company provided extensive background documents on its officers to the military. The heads of each military privatization office said he was aware of Carabetta's bankruptcy problems and didn't consider them relevant.
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