Congressional inquiry into St. Paul housing case widens

A congressional inquiry into an apparent agreement between St. Paul and the Department of Justice is bringing more Washington officials into the alleged circle of who-knew-what.

The city agreed to withdraw a housing case before the U.S. Supreme Court earlier this year. As part of the deal, DOJ declined to intervene in two pending lawsuits against the city. Here’s St. Paul’s statement of what happened.

New details suggest the U.S. Department of Housing and Urban Development was also part of this “quid pro quo” agreement, according to a letter signed Friday by Darrell Issa, chairman of the U.S. House Committee On Oversight & Government Reform. The letter is signed by three other congressional Republicans, including U.S. Sen. Chuck Grassley, ranking member of the judiciary committee. It’s the group’s second letter in about a month documenting the head-spinning situation in St. Paul.

Documents reviewed by the House investigators show HUD initially supported intervening in a false-claims lawsuit filed by Fredrick Newell. The St. Paul business owner alleged the city received millions of federal dollars by falsely claiming it was compliant with rules requiring the training and employment of low-income individuals. Newell himself was a low-income contractor who felt he deserved a piece of the city-backed contracts.

DOJ’s Civil Rights Division recommended that the department intervene in the case after finding the city’s behavior was “particularly egregious” — and HUD agreed, according to the letter.

But HUD’s view changed after DOJ’s civil rights head, Thomas Perez, began negotiating on the quid pro quo, the congressmen allege. The letter also cites documents quoting Minnesota U.S. Attorney B. Todd Jones’ sense that HUD was “abandoning ship.” Jones speculated that the department was lobbied to change its mind, the letter said.

The congressmen say their examination of the documents show HUD’s general counsel, Helen Kanovsky, and another department official, Sara Pratt, were involved in the discussions.

The congressmen contend the arrangement cost federal taxpayers more than $180 million in grant money.

“This quid pro quo raises numerous legal and ethical questions about the Administration’s actions and whether DOJ and HUD elevated its ideological agenda above the taxpayers’ interest in fighting fraud and mismanagement,” the letter reads.

Tom DeVincke, the Minneapolis attorney representing Newell, is using the findings of the House investigation to revisit his client’s case.

Federal judge Donovan Frank in St. Paul dismissed the case in July because it lacked federal intervention. DeVincke is asking Frank to reverse his decision and make public the terms of the “secret settlement” between the federal government and the city of St. Paul.

Here’s how DeVincke breaks down the situation:

“It’s a mess. Even lawyers who do this kind of thing for a living can’t believe what happened in the case,” DeVincke tells MPR News. “If you read the letter, HUD is a victim of massive fraud by St. Paul and instructed the Department of Justice to intervene. That same agency turns around and is secretly helping St. Paul defend the case.”

City Attorney Sara Grewing stands by the city’s contracting procedures. She said even if the government had intervened in the Newell case, “we believe we would have prevailed.”

Grewing said the city is doing its best to comply with the congressmen’s requests for documents, including its communications with DOJ. “We have no desire to be at odds with any congressional committee.”

Expect to hear a deeper explanation from both sides soon. A hearing in the Newell case is scheduled for Friday morning.

10302012 Affidavit and Congressional Letter

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