Back in the mid-1990s, Hudson citizens blew the whistle on the City of Hudson’s Federal grant programs. A lesson from that incident speaks to certain claims about Eric Galloway’s Lantern Group by the director of his new Galvan Initiatives Foundation.
David Kermani (who then operated a high-end Warren Street rug shop) and other compatriots alleged that the City had made an improper side deal with L&B Contract Industries, later known as LB Furniture. Prompted by citizen complaints, HUD’s inspector general indeed found major “irregularities” in the City’s handling of a $556,000 grant to L&B, plus a host of problems within Hudson’s development agencies. [PDF of the report] Those irregularities included not just the company’s failure to make interest payments, but also the connivance of Hudson Development Corporation (HDC) staff in allowing L&B to make just one repayment of $4,998.25. Nice deal, if you can get it: $551,000 in free government money.
In addition, HUD discoverd that HDC had “subordinated” the grant lien to obtain a further $3,000,000 bank loan. All the while, the report said, local leadership never alerted HUD that it was making any of these arrangements. HUD’s Inspector General was not pleased, and reprimanded both L&B and the City. Moreover, HUD identified apparent “conflicts of interest” and “procurement weaknesses” at HDC and the Hudson Community Development and Planning Agency (HCDPA). For example, the wife of a Board member was getting paid up to $170 per hour “without competition.” Meanwhile, the agency’s “Rehabilitation Specialist” awarded over $27,000 in work “to a company owned by his brother,” again without giving anyone else a chance to compete for the contract.
The Inspector General’s scathing report was issued to 13 Federal, State and local officials.
And then: HUD continued to award the City of Hudson more development grants from these same pool of funds. And City agencies continued to help the perpetually-failing L&B. Despite years of public largesse, the company finally closed up shop a few years ago, throwing some 150 people out of work.
Through it all, the City was given more grant money to play with; and still it continued to botch projects... For example, issuing $1.8 million in bonds to lure a mysterious Californian corporation called Wittcomm, which disappeared and according to inside sources never repaid its obligations. That’s just to name one among many of the chronic failures of these agencies to manage public funding to achieve real economic development, or alleviate poverty.
In short: HUD knew and acknowledged that the City of Hudson had a lousy track record of managing grants—and yet kept coughing up more grants, often in the face of public concern and opposition.
So, how does all of this relate to the latest controversy instigated by Eric Galloway’s local activities? In response to the detailed exposure of numerous complaints and violations on record for Galloway’s Lantern Group in New York City, Galvan director Tom Swope offered the following dodge:
“That the Lantern Group continues to get funding for their projects should be a testament to the high quality of their management.”
Based on the above examples of HUD and the City, can anyone say that continued funding is a testament to anything except bureaucratic ineptitude? We’ve just seen how the City had made an illegal side deal with a grantee, and its development agencies were found to be rife with problems. And yet HUD continued to give the City grant money to play with, and failed in many cases to monitor its use, in spite of past debacles. Continued funding is no proof of even mediocre performance, let alone success.
Yet based on Swope’s fallacious logic, one would also have to conclude that:
- Sustained City support of (the now-bankrupt) L&B was a rousing success;
- The ever-increasing budgets of FEMA and the Army Corps reflect the heck of a job they did in dealing with Hurricane Katrina in New Orleans;
- The Kardashian sisters’ continued popularity is reflective of their immense talents; and
- George W. Bush’s re-election in 2004 served as a clear testament that he was a terrific President.
In making such flimsy arguments, Swope is asking people to believe that bureaucrats are stewards of excellence, and never act to protect their own buddies (or rumps). Someone please furnish Galvan’s director with a copy of The Peter Principle, posthaste.
