Over the past several months, any conversation with Housing and Urban Development (HUD) has been forced through the Freedom of Information Act (FOIA), 5 U.S.C. § 552. For over a decade there never has been a problem and then when Foreclosurepedia requested information about to whom Craig Karnes was forwarding our emails to, the switch was thrown. Karnes, HUD’s Acting Deputy Chief Procurement Officer, Office of the Chief Procurement Officer, has specifically targeted Foreclosurepedia with a complete media blackout which forces undue burden upon the HUD FOIA department and staff. Karnes doesn’t care, though. And as the Foreclosurepedia Nation will continue to learn over the coming weeks, Karnes is a man whom has financially insulated himself from the daily grind and perpetuated the lie far better than Trump when it comes to government operations. And while the Harley riding façade on the weekends may look good to his colleagues, many are wondering whether or not investigations are in order with respect to how Karnes has operated over the past decade.
Early on in Karnes’ capacity as Director of the HUD Management and Marketing (M&M) Directorship, the problems were apparent. And coming off the hangover of the 2008 Financial Crisis with millions of foreclosures happening each year, hundreds of thousands of these were pumped through the HUD post conveyance channel, all under the watchful eye of Karnes.
In late 2012, when Foreclosurepedia first encountered Craig Karnes he was a man on a mission and that mission was to get paid. Rising up the ranks of the GS Scale, 
today, Karnes is a GS-15 and took home $170,739 as of last fiscal year. To put that into perspective, Karnes is paid 51% more than any other HUD employee and 94% more than any HUD employee in his department at the Office of the Chief Procurement Officer in Atlanta, Georgia. That is a hell of a lot of money especially considering he has presided over some of the largest wholesale fraud in the history of the HUD M&M contract. Karnes began working at the Office of the Chief Procurement Officer in 2015 with a starting salary of $141,442. It was also around this time that Karnes began expanding his extra-cirricular interests such as the cover photo to this article reveals from the HUD Archives, located here. Karnes was then the Acting Contracting Director Northern and Southern Field Operations and sat down with the Empire Board is the Atlanta Chapter of the National Association of Real Estate Brokers (NAREB). And as we have begun covering the enormous scandals within the National Association of Realtors (NAR), lately, it comes as no surprise.
Parlay was the name of the game when it came to the HUD Field Operations which Karnes controlled. And the Olympic level verbal gymnastics which Karnes performed, in order to keep firms like Asset Management Specialists (AMS), CWIS, Innotion Field Services, and PK Management afloat and protected by HUD, was #Epic. It should be noted that PK Management’s website is labeled Not Secure by Google. It should be further noted that Innotion continues to publish the confidential key codes which former HUD Secretary Ben Carson ordered to both be removed and rotated. We will get into that later including the extreme lengths Karnes went to in order to stall these efforts.
A decade piles up a lot of bodies and victims whom want justice. Take, for example, the reporting of Foreclosurepedia to Karnes about former AMS kingpin Lee Mertins, now running the defunct Assero Services, a 24 Asset Management controlled entity headed up by Eduardo San Roman, a HUD M&M Field Service Manager (FSM) Awardee. Foreclosurepedia sent clear and decisive evidence that Mertins had hired temporary workers to photoshop thousands of photos submitted as completed inspections on the HUD M&M FSM. Karnes’ response was that there were not enough staff to investigate the fraud. Sounds a hell of a lot like how Alphonso Jackson ran HUD. And if the first paragraph sounds like how Guardian Asset Management began, you might be right! Here is how the Washington Post put it,
During a few weeks in 2004, the three-employee company, Harrington, Moran and Barksdale Inc. (HMBI), went from no government work to landing $71 million in contracts with the U.S. Department of Housing and Urban Development to oversee the upkeep and sale of defaulted homes. It had previously managed a handful of apartment buildings and development projects.
The company’s meteoric rise — and HUD’s willingness to bend the rules to accommodate it — surprised veteran agency contracting specialist Gloria Freeman.”After you’ve been in the business awhile, you get to know the signs — ‘This is a friend; let’s help him out,’ ” she said in an interview. Not long after Freeman complained to her supervisors, she was asked to return to her previous policy job.
Federal investigators are still sorting through HUD contract awards to friends of Secretary Alphonso Jackson, who resigned last month amid a criminal probe.
And when it comes to HUD and Karnes’ former Directorship in the Field Service Operations department, veteran agency contracting specialist Gloria Freeman will tell you exactly what happens when you bucked in that office. Freeman was sacked for opening her mouth about improprieties in the HUD M&M FSM. It went deeper, though,
Miami’s National Housing Group (NHG), whose employees and their spouses gave $32,500 to Republican candidates, grew from a 10-employee firm with $490,000 in sales in 1997 to a multimillion-dollar HUD contractor by 2003. Since then, it has won HUD contracts worth $50 million to manage multifamily properties in default, with $41 million of that amount closed to any competition.
Before the company’s selection, HUD staff members questioned its ability to manage such a sizable project, according to records and interviews. After the company’s work began, agency staffers in Atlanta and Fort Worth reported they believed that NHG was billing for unexplained work and breaking rules.
And like a page ripped out of the ongoing 6 year extension of the current HUD M&M FSM contract,
[NHG] got into a payment dispute with HUD that led to the end of Ed Girovasi’s 33-year contracting career.
Girovasi was tasked with reviewing an NHG claim for $8 million in payments. He concluded in December 2005 that the firm had exaggerated its claim and instead owed HUD $250,000, records show. He was reassigned to a policy job weeks later, although agency spokesman Brown said Girovasi took the job voluntarily.
It wasn’t simply HUD officials whom had a problem with what was going on. Here is how a 40+year Procurement Specialists put it,
According to the HUD FY 2016 Contracting Opportunities Forecast, HUD intends to issue an RFP for FSM 3.9 (APP-HU-2016-172) during the second quarter of this year. The FSM 3.8 RFP was issued using the “lowest priced, technically acceptable” (LPTA) procurement model which is not appropriate for the type of services required to maintain HUD properties. The FSM 3.8 contracts being procured under LPTA has resulted in the prices paid to field
subcontractors being driven so low that it creates an impossibility of performance. HUD has high expectations for the quality of services it expects from its FSM contractors but they have driven the prices so low no field subs would agree to do the work for what the FSM contractors can afford to pay them. I predict that many FSM 3.8 contractors will find it so difficult to find subs willing to do inspections, clean outs etc. that HUD will have to re-compete these contracts. The answer to the FSM mess is for HUD to use the “best value” model and conduct Cost Realism Analysis to evaluate specific elements of each offeror’s proposed cost estimate to determine whether the estimated cost elements are realistic for the work to be performed. This would solve the problem for the FSM contractors as well as the field subcontractors who would be paid a fair price for their services. Furthermore, this would enable FSM contractors to comply with the requirements of the Service Contract Act which. Mr. Craig Karnes who is in charge of the HUD M&M process should consider issuing the FSM 3.9 RFP under the “best value” procurement model.
Nothing new under the sun when it comes to the Karnes Regime. No matter how they whitewash it, the reality is that Karnes oversees a massively corrupt enterprise. Take, for example, the $100,000 owed by CWIS, a former HUD M&M FSM Awardee based out of Colorado. Karnes fought as hard as he could, to keep the money out of the hands of L&B Management, to whom CWIS owed. Karnes dug in deep refusing to intervene, but after lawyers became involved, the Puerto Rican based firm was finally paid by CWIS — no thanks to Karnes. During the course of the CWIS protection racket, several other firms came forward, including myself who, in full disclosure had been defrauded by CWIS and AMS. With Karnes backed up into a corner, CWIS decided to lay it all at his feet. Here is what CWIS’ accountant Hessert had to say,
At this moment our payment from HUD is taking a lot longer then normal to be processed(which is out of our control entirely), please understand this is just as frustrating for us as you. I currently do not have a estimated payment date.
Karnes rebutted by saying,
Thank you Mr. Williams. I am confirming receipt, and I have forwarded the attached to the Contracting Officer for CWIS, Lewis Boggan, who I will be speaking with on Monday. Per our previous discussion, Mr. Boggan will be reaching out to CWIS directly for proof of compliance with the Prompt Payment Act.
It was total and complete bullshit. In fact, CWIS only began making payments after the lawyers lined up. Moreover, though, a whistleblower came forward about CWIS whom described some of the most heinous fraud ever vetted by Foreclosurepedia. It was a similar story to a multi-billion dollar official Qui Tam whistleblower lawsuit brought a few years later. It was the first time that Karnes had been confronted with an internal employee who wanted to do the right thing. Here was Karnes response,
[T]he gist of what I wanted you to know is that HUD OIG is actively taking up the CWIS investigation. They’ve assigned two criminal investigators, and I’ve talked to them both for about an hour on Wednesday. I’d appreciate it if you would keep it under wraps for the time being, as I don’t want CWIS to be tipped off! They will be reaching out to [Redacted] directly, if they haven’t already done so.
It went nowhere. In fact, Special Agent Jamila Davis, US-HUDOIG, Tampa Field Office buried it like a mob hit. The whistleblower experienced a run around that made NASCAR look like a joke. That was the interesting thing. HUD OIG had officers in Colorado Springs, at the time, and wanted Tampa to handle it. Didn’t make sense, really, and then wanted to sneak the whistleblower in at the Cheyenne Mountain Resort and Country Club. Makes perfect sense, now.
We continue with our multi-part Series tomorrow. And for those of you whom asked about the recent FOIA filing, the fact of the matter is that they have refused to acknowledge it, thus far, which is a shame for education. It is simply yet another roadblock put in by Karnes to ensure legitimacy never enters into the Industry.
