PHA's legal bills out of line with other cities' agencies

Posted: February 07, 2011

The millions spent annually by the Philadelphia Housing Authority on legal services is far out of line with big housing authorities in the rest of the country, according to a survey by The Inquirer of a dozen agencies.

Unlike most large-scale authorities, PHA farms out virtually all of its legal work, paying local firms $10.3 million in fees in 2010.

Of the housing authorities to respond to questions from The Inquirer, only one - the New York City Housing Authority - spent anywhere near Philadelphia, with $8.6 million in legal fees last year. But that agency is almost nine times the size of PHA in terms of the number of housing units and federal rent subsidies that it manages.

PHA has about 16,700 units of conventional public housing and administers about 14,800 vouchers for rental subsidies. New York has approximately 180,000 units of housing, with 99,000 authorized vouchers, according to the Council of Large Housing Authorities.

PHA's spending on lawyers has become a focus of investigations by the U.S. Department of Housing and Urban Development. Last week, HUD suspended PHA from using any federal funds for legal contracts.

HUD is conducting a forensic audit of the housing agency, while its Office of Inspector General is finishing a probe of outside contractors, focusing on lawyers.

Since 2007, PHA has paid outside lawyers $38.5 million, according to data from the Housing Authority.

The highest amount - more than $11.7 million - went to Ballard Spahr, the law firm where Gov. Ed Rendell worked before and after Harrisburg.

The firm's chairman, Arthur Makadon, did not reply to an e-mail seeking comment.

As mayor, Rendell recruited Carl R. Greene to run the Philadelphia authority 13 years ago. Greene was fired last September after disclosures that PHA secretly settled three sexual-harassment complaints against him.

Nichole Tillman, a PHA spokeswoman, said it was "impossible to accurately compare" the use of outside legal services by housing authorities. Agencies, she said, differ greatly due to the type of housing stock, resident populations, and economic conditions.

"As a result, they make very different decisions about what functions are best provided by in-house staff and what functions are best provided by outside entities," she said.

On Friday, the agency's interim executive director, Michael P. Kelly, appointed a new general counsel to oversee in-house legal work. He has made it a public goal to reduce legal fees.

According to HUD information, PHA plans on spending $40 million in the next five years on labor and employment legal services alone.

That's equal to what it would cost to renovate 400 units of housing from PHA's vast inventory of vacant properties scattered across the city.

PHA, the nation's fourth-largest housing authority, has 100,000 families and individuals on its waiting list for public housing units or federal rent subsidies - a number equal to one in six households in Philadelphia.

Sister Mary Scullion, cofounder of Project HOME, a nonprofit agency providing services and housing to homeless people, called PHA's legal billings "an indication that something is radically wrong." Partners at some of PHA's law firms bill at a rate of $400 an hour.

"One billable hour could subsidize one person's rent for a month," Sister Mary said. "So much of this could have been prevented if people assumed responsibility and kept things in check."

Orlando Cabrera, a HUD assistant secretary of public and Indian housing from 2005 to 2008, said PHA's legal spending is a red flag.

"While legal representation for housing issues is admittedly expensive," he said, "PHA's legal issues in the ordinary course would not generate these levels of expense."

PHA began to outsource its legal work with the arrival of Greene in 1998. At the time, the agency had about eight lawyers, plus a general counsel who kept track of work assigned to outside firms.

When Greene was fired last September, PHA had only one full-time lawyer in its legal department, as well as three staffers who were lawyers but split their time handling many other matters. The acting general counsel was Frederick Pasour, who was suspended with pay Friday as part of a shake-up of senior management at PHA.

Greene surrounded himself with outside lawyers, not only to litigate difficult cases, but also to handle routine PHA matters.

Patrick Eiding, a PHA board member for eight years, recalls asking Greene about planned layoffs in 2007. Eiding, president of the Philadelphia Council of the AFL-CIO, wanted to know how Greene was going to decide who would be laid off.

Greene called Eiding to his office for a meeting, where he was joined by about a half dozen outside lawyers. "This was his style," Eiding said. "He covered himself with lawyers. Whenever someone asked anything, he had to have his legal protection."

Eiding said he was unaware of just how deeply PHA's in-house legal capability had been gutted in favor of outside counsel. "Did it get by me? Absolutely," Eiding said.

But, he said, HUD can't wash its hands of blame either. "They can't get all Pontius Pilate with us," Eiding said.

Among other big housing authorities, at least two - San Diego and Louisville, Ky. - have outsourced all of their legal work. But their expenditures are a fraction of PHA's: $274,000 last year for Louisville and $537,000 for San Diego.

Timothy Barry, executive director of the Louisville Metro Housing Authority, said it was more economical for his agency to farm out its legal work. The authority's main outside lawyer, he added, gives a steeply discounted rate of $100 an hour.

In New York City, the housing authority employs 90 lawyers and works with 21 outside legal firms: one that handles miscellaneous employment matters; two that work on bond financing; and 18 that represent the agency in personal-injury disputes.

The escalating cost of legal services at PHA has been a source of contention with HUD dating to 2002. Then, a regional attorney for HUD, Ann E. Harrison, took PHA to task for the high cost of litigating employment lawsuits, as well as the agency's lack of oversight in assigning and hiring lawyers.

In a meeting to discuss HUD's concerns with Greene, Michael Pileggi, then PHA's directing counsel, told him he would have to directly answer Harrison. The next day, Pileggi was fired by Greene.

Pileggi subsequently filed a federal lawsuit, claiming his civil rights were violated for speaking out.

The case was ultimately settled for an amount in the low six figures - with PHA spending more than $800,000 to litigate the matter, according to PHA's insurer.


Contact staff writer Jennifer Lin at 215-854-5659 or jlin@phillynews.com.

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