Hindsight is always 20/20 as they say. It is a common and revolving theme at Housing and Urban Development (HUD), though. For over a decade now, the face of this has been the HUD Management and Marketing (M&M) contract which has been nothing more than a revolving door of failure, followed by HUD Inspector General Reports, and then yet another failure. There are two Houses at HUD when it comes to distressed assets. The first is the FHA side which is controlled by the SF Housing Gang of 13 and then there is the M&M side which controls post-conveyance assets and broken up into the Asset Manager (AM) channel and the Field Service Manager (FSM) channel. The former deals with real estate transactions and the latter with field services. Throwing into this mix is the over a decade and a half long conservatorship of Fannie Mae and Freddie Mac by HUD which is considered by many to be unconstitutional.
There never has been nor will there ever be any excuse to protect those committing fraud and illegally pocketing US taxpayer and Labor’s hard earned dollars while US government officials watch on. And while there may not be a smoking gun yet, the reality is that the perception is Senior HUD officials are becoming enriched as US taxpayers and Labor are made victims.
While Cathy Baker is at the helm of the HUD M&M program today, with Nicole Jackson and Jimmy Fleming-Scott as her foot soldiers — all during the collapse of National Field Network — Craig Karnes was firmly at the helm. Karnes, today, is the Acting Deputy Chief Procurement Officer, Office of the Chief Procurement Officer. In fact, through nearly $100 Million in fraud, waste, and abuse that Craig Karnes has overseen, the reality is that there has not been a single occasion during which Karnes ever stepped forward to bring a solution.
In 2014, when National Management and Preservation Services LLC d/b/a National Field Network came up on our radar, we knew it was going to be bad. We advised Karnes of such with countless emails, spreadsheets, and affidavits. NFN was in bed with everyone. In fact, NFN had forced the collapse of Buczek Enterprises, one of the original attendees of the 2003 HUD Conference which had set in motion the rubber stamping of fraud between the National Association of Mortgage Field Services (NAMFS) and HUD itself. This collapse was well documented by a large array of in house personnel including both the IT director himself — co-operator of ACA Asset Management — as well as C Level personnel whom came over after the sale of Field Asset Services.
The problem is that when you wish for what you want, sometimes you end up getting it. In the case of NFN, owned outright by Jack Jaffa, brother to Safeguard Properties’ CEO Jack Jaffa, NFN ended up getting too much of what they wanted including the command and control over Reverse Mortgage Services (RMS) by and through their placement of Amanda Buczek there. And by late January 2014, the NFN fraud was in high gear causing the toppling of Heather Berghorst, former NAMFS Secretary, and triggering her second bankruptcy. That last part should be troubling as while NAMFS Executive Director Eric Miller refused to remove Berghorst from office and Berghorst’s lawyers came after me, she ended up defrauding yet another million dollars from Labor. Yes, all under the watchful eye of Craig Karnes.
By February 2014, everyone within the Mortgage Field Services Industry knew there was a problem. Not just a regular problem like a middleman going under, but a serious problem as RMS was providing direct access to their portfolio along with other Prime Vendors including Altisource and Ocwen whom split up back in 2009 due to financial improprieties. Foreclosurepedia’s rolodex was fairly deep, even back then, and we had brought this mess to the attention of the then Altisource Associate General Counsel. Dozens of emails forwarded over to Karnes typically read like this,
I have a minority female whom National Field Network is stiffing for around $40,000+ in payments on Reverse Mortgage Contracts. Joe Guerno, Operations Manager at NFN, stated that they would not pay this lady as HUD “…refused to pay NFN.”
I bring this up because reverse mortgages are the sole territory of HUD not to mention the fact that when companies are illegally pretending to be the agent or employee of HUD and operating under the mantle of HUD, under color of state law, it would seem that Karnes might have an interest. He did not. In fact, for over three consecutive years, Karnes continued to protect these firms and conjure, out of thin air, contrivances through verbal gymnastics that would make Trump’s lawyers jealous. By 2016, though, HUD knew they had a real problem. Antitrust had firmly attached itself by and through the consolidations of Asset Management Specialists (AMS) by Mortgage Contracting Services (MCS) whom is now owned by Littlejohn & Co. Here is how that mess was put,
We are not new to Preservation. We have been doing P&P since 2002. We originally started doing work for MCS when they bought out Corelogic, Formerly First American. We switched from Corelogic to MCS late in 2014. At first all seemed good with MCS (Not as good as Corelogic) but still good. That is until we started disputing unpaid orders and dramatically cut Bid Approvals. We followed there dispute process to the letter. After initially filing disputes and following up with no response for months on end and the amount of disputes piling on each month, we turned to our RVM. We were told he would look into it and get it resolved. Finally he told us that the dispute forms and process laid out on their internal site had been changed and not yet announced. He instructed us how and where to send our disputes.
After doing so and not hearing back for weeks, we started calling again. We were put off again until they cleared out all MCS orders from our cue. When we called our RVM, we were told that work had dried up and to be patient. After the next due deposit for payment was skipped entirely and we called to find out why, we were told by the same manager that they had decided to go another direction. When asked why we were told it was due to processing errors and the fact that we had caused harm to their system by submitting so many disputes at the same time. When asked about the money owed, we were told that they would let us know after 90 days if we have any money coming or not.
The sugar highs from the 2008 Financial Crisis had faded and the Pay When Paid, illegal in US government contracting, had become the status quo in the Industry, all once again, under the watchful eye of Karnes. There was also another problem. While HUD knew, all along, that the Industry was built upon Employee Misclassification — the Hurst v Buczek — Hurst v. Buczek Enters., LLC, 2012 U.S. Dist. LEXIS 61624 (N.D. Cal. May 2, 2012) settlement and then the Vinson v AMS, et al. multi-million dollar settlement — the orders came down from on high to keep a lid on it. It was par for the course.
By late 2017, the wheels had fallen off. President elect Barack Obama was sailing in as the first ever African American President of the United States. And while many like Craig Karnes thought it would be business as usual, after all Obama was a Democrat, the reality is that there were not going to be massive injections of funds to cover up the mess HUD had created. And while there were offenders up and down the pike and blame to spread around including against Information Systems Networks (ISN), the then HUD Mortgagee Compliance Manager (MCM), whom refused to investigate anything other than why the Reuben on Rye was dry, Karnes was moving onward and upward. What Karnes did not know was that back in 2014, a Sealed Qui Tam had been filed alleging billions of dollars of fraud by Kelly Brown. The sweeping indictment was massive in both scope and its ability to pinpoint, precisely, what was wrong with HUD’s improper relationships with its Prime Vendors — both through FHA and the M&M contract. It came on the heels, in 2016, of the La Rosa protest, where no bones were made about the criminal corruption at HUD.
I’m truly bothered that an incumbent could be granted a private, pre award debrief were allegedly, prices and standings were discussed and then let back in the competitive range allowing him to drop his prices in BAFO. Real government contracting rules and quite possibly, laws were broken. These two wining companies are more than just large companies and unfair players. We’ve known one of them up close and personal and we know how he operates.
Fannie Mae and Freddie Mac were approaching their first decade as being fully controlled by HUD. Half a dozen high level Prime Vendors and middlemen had collapsed. At the highest levels Buczek Enterprises had been a cohesive glue that deteriorated when Shari Nott and Amanda Buczek hooked up as BFF’s, Buczek’s thin skin brother aside. It was ironic, really. With one brother in and out of FBI custody, bank fraud schemes based upon an incredulous supposition that they could manufacture money out of thin air — really not that preposterous I suppose if you study Modern Money Mechanics — and Beers Housing, it was a pool of fraud that hit #Epic proportions. Buczek was gone, SEAS was gone, PrimeStar was gone, Berghorst Enterprises and a half dozen other fraudulent firms owned by the Buczek’s including nearly half a million dollars in SBA loans were gone. Tens of millions of dollars were stolen from US taxpayers and Labor with virtually each and every dollar tracked by Foreclosurepedia and submitted to Karnes — all to no avail.
Whether Karnes was waxing poetically or simply playing Kabuki theater with his bosses didn’t really matter as Foreclosurepedia’s olfactory grind of sniffing out the fraud was shifting into high gear. And Karnes did not like it. He didn’t like being questioned or told that my tax dollars helped pay his salary in addition to those which were funneled down the Karnes Maze. The reality was that Karnes was churning out the typical bureaucracy technique. It is amazing for those whom are unaccustomed to the Beltway Two Step. Reply to an innocuous email after three serious emails proceed. Then, stay focused on this line of communications with a staccato beat much like a Sten gun in a B rate war movie. It gives the recipient a belief that perhaps, at some point after death, there will be an answer that brings it all into perspective. It never does and it a complete and total waste of time calculated to bleed the oxygen out of all but the most dedicated few.
A lot of things were happening between when I first brought the NFN fraud forward to Karnes. To highlight a few, which we have covered in the past, Karnes oversaw the spinning up of the A2Z Field Services Investigations Unit. It is important to remember that not only was A2Z Field Services a HUD M&M FSM Awardee, they were also Prime Vendors on multiple contracts. Karnes initially allowed A2Z Field Services to state the following,
“Members of the Investigation Unit will have: Free and unrestricted access to all Company records and premises, whether owned or rented; and The authority to examine, copy, and/or remove all or any portion of the contents of files, desks, cabinets, and other storage facilities on the premises without the prior knowledge or consent of any individual who might use or have custody of any such items or facilities when it is within the scope of their investigation.”
Here is the policy which attempted to get Labor to rat on each other, scare them to never discuss it with anyone, including law enforcement, and was one of the single most dangerous documents ever issued in the history of the Industry. And Karnes stoody by and watched it all go down.
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Who headed up this madness? Who ever thought that a HUD Awardee could break and enter into a Contractor’s property? Paul Moe, the former HUD Project Manager for Contract Area 2P employee had absolutely no issues with it. Nor did Amie Sparks, Sara Hadley or Chris Slaughenhoupt. The four page memo read like a Nazi Gestapo document and Karnes had absolutely no issues with it lest HUD would have made a public example out of these people. And they all knew that the protection racket that Craig Karnes had cast out upon themselves and others would keep them safe. When they realized they could not pull off the militarization of the HUD, Sparks was forced to fall upon her sword as seen below.
I wanted to simply set the stage upon which many of the previous 2,100+ articles have rolled out, to understand how the Involuntary Bankruptcy of National Field Network came about. Tomorrow, we begin to peel the layers of the onion apart and the smell is more rancid that you might imagine!
