#LinaCarvajal As Foreclosurepedia reported upon yesterday, Innotion Enterprises was dropped by the US Department of Housing and Urban Development (HUD) on the Management and Marketing (M&M) Field Service Manager (FSM) 3.10 Contract in the State of Illinois. They were also awarded the M&M FSM 3.10 Best Assets Contract. In combination with their Joint Venture Award, PK Management is rapidly approaching award levels we have not seen since the BLM Companies days. Wait a minute, though. Wasn’t part of the goal to get away from HUD awarding massive swaths of M&M FSM contracts to sole providers?
It is not looking good. Volumes are at all time lows with no assets on the horizon. HUD has been selling of massive volumes in bulk sales. And while it may be good to get these rapid cash infusions, the long term effects of pennies on the dollar, which guarantees a perpetual shortage of assets for brokers, most assuredly cements the bottom of the barrel misclassified employees whom have been unable to perform for the scraps paid by these monopolist firms.
Cathy Baker’s first months in office have seen the largest full scale, multi region blanket award process — WITH ZERO COMPETITION — in the history of the HUD M&M program. Granted, these are one year awards, the fact of the matter is that Baker has arbitrarily and capriciously allocated with options, nearly a quarter of a billion dollars to PK Management unilaterally. Oh, sure, the justification is going to be that PK Management is already up and running. My problem with that is PK Management is run by a Gestapo of questionable practices such as the illegal electrical backfeeding demands on ALL PK MANAGEMENT CONTRACTS. Even more disconcerting are the tentacles of connections which Pedro Kolychkine, PK Management’s owner, has injected into HUD Contracting.
Kolychkine is no stranger to strong arming an Industry nor paying to play the game. Initially partnering with Boris Whiteside, a former HUD official, both began tapping the government faucet for hundreds of millions of dollars. Whiteside began his government Career in 1988 with the U.S. Department of Housing an Urban Development, HUD, in it’s Real Estate Owned Division. In 1998 Whiteside was appointed Chief, Real Estate Owned (the equivalent of Director of the M&M Program) in the Atlanta Home Ownership Center. After sixteen years with HUD, Whiteside transitioned into the private sector , in 2004, forming Capitol Asset Management, LLC. It was during this period that Whiteside was named a Principal of PK Management.
Hiring former US Government personnel for access to the HUD Award process is nothing new. Foreclosurepedia well documented how John Bravacos directly intervened on behalf of Milan Thompson and ASONS, several years before ASONS sold out due to financial insolvency.
Why, though, re-award PK Management a contract for an area which the HUD Office of the Inspector General (OIG) stated they completely botched? Here is what HUD OIG had to say about PK Management’s performance in Illinois,
PKMG did not always provide property preservation and protection services in accordance with its contract and its own requirements. Specifically, it did not ensure that (1) 82 HUD-owned vacant properties were in ready-to-show condition and (2) 23 custodial properties were free of health and safety hazards and the exteriors were clean, safe, sanitary, and secured. In addition, PKMG billed HUD for properties for which it had not provided property preservation and protection services. As a result, PKMG inappropriately received more than $19,000 in property management fees for properties that were not adequately maintained. In addition, it inappropriately received more than $2,300 in property management fees for properties that it had not serviced. If PKMG does not improve its process for performing property preservation and protection services, we estimate that HUD could inappropriately pay more than $2.5 million in management fees for properties that are not maintained in accordance with its contract requirements over the next year.
Here is the entire report,
Sources within HUD, speaking on condition of anonymity, stated that the above HUD OIG Report was part of the reason that the contracts handed to PK Management were only for a year.
The OIG report was discussed, and was one of the reasons the contracts were limited to a year. P.K. certainly had their issues under 3.6, which hopefully are remedied at this point, as it will otherwise be costing them in Liquidated Damages. As you can probably tell, the Pre-Conveyance Conflict of Interest (COI) language is really starting to hurt HUD REO in terms of available contractors. Pretty much all of the Small Businesses are aligned with Large Businesses, and we’re unfortunately lacking any stellar performers at the moment. Everyone assumes FSM should be an easy service to perform, but few actually understand how many moving parts are at stake, especially when there is such a heavy reliance on subcontract labor!
The statement about the COI language is most interesting. And it is also most ironic. The question which presents is whether or not we are going to see one or two powerhouses emerge with respect to the HUD post conveyance market space. First, I am glad to see, provided that true and authentic auditing takes place, a separation between the pre and post conveyance landscape. Second, the fines which HUD is levying are well deserved and have a tendency to keep the compass pointed true north. Finally — and this is critically important — in light of the recent Dynamex ruling in California, will HUD get behind the law of the land? I ask this as it could be the next step towards a Union in the Mortgage Field Services Industry.
And a shout out to Lina Carvajal! At twenty plus years the junior, those awards will be greatly appreciated!
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