The Philadelphia Housing Authority will have to reimburse the federal government for about $1 million it spent on legal fees, including more than $150,000 as a retainer for former City Controller Jonathan Saidel, unless it can come up with a better explanation for those bills by next Friday.
The U.S. Department of Housing and Urban Development, which provides most of PHA's budget, is seeking the money because the local agency has "failed to provide any evidence of bona fide services rendered" by Saidel, according to a letter sent to PHA by HUD's top local lawyer, Sheryl L. Johnson.
Saidel was paid the money indirectly in monthly increments of $5,000 through the prominent local law firm Schnader Harrison Segal & Lewis L.L.P., according to billing records obtained by The Inquirer.
Saidel said in an e-mail that Schnader hired him to help PHA "achieve its goals of serving Philadelphia residents. The PHA is aware of the work I performed. As I do with all of my clients, I treat all communications confidentially."
Several politicians - U.S. Rep. Bob Brady, the Democratic Party chief in Philadelphia, and City Councilwomen Joan Krajewski and Anna C. Verna - said Saidel had helped them with PHA matters or to facilitate meetings with Carl R. Greene, who was ousted as executive director last year.
Mayor Nutter had no dealings with Saidel regarding PHA, but spoke directly with Greene, said Nutter's spokesman, Mark McDonald.
The July 13 letter from Johnson, obtained by The Inquirer under the Freedom of Information Act, also said PHA had failed to show why it had been "necessary and reasonable" to pay Schnader $768,000 for work on audits by the HUD inspector general. If any federal money was used to cover those fees, HUD wants it back, too, unless the bills are adequately documented.
Johnson also cited $7,884.50 PHA paid for Schnader attorneys to attend an anniversary dinner party for Greene, an antiviolence rally, and three ribbon-cuttings.
James Eisenhower, the Schnader partner who manages the PHA account, has agreed that his firm will waive fees for the dinner party, special events, and the antiviolence rally, where he was a guest speaker.
Eisenhower said Greene and Greene's chief of staff, Shelley James, had directed Schnader attorneys to attend the events, where they consulted with authority officials on pending matters.
"We believe we properly billed for attendance at those events," Eisenhower said. "However, as an accommodation to our client, we have agreed to repay those events."
In the case of the anniversary dinner party bill of $1,417.50, Eisenhower said, a junior associate mistakenly sent an invoice to PHA.
Michael P. Kelly, PHA's administrative receiver, said he was glad that Eisenhower had volunteered to refund the money. He said paying attorneys to attend a party or special event "is not an appropriate use of government funds, and this type of billing will not be tolerated at PHA."
On Saidel's work for PHA, Kelly said, it would "take a little bit of homework on our part" to determine what he had done.
Saidel sent an e-mail June 28 to PHA's acting general counsel, Helen Ferris, detailing his work. PHA declined to release that e-mail, citing attorney-client confidentiality. Nichole Tillman, a PHA spokeswoman, added that the "Schnader/Saidel bills may be subject to litigation."
Brady - a longtime Saidel ally whose wife, Debra, was a PHA board member originally appointed by Saidel - described how Saidel had acted as an intermediary because "there's no secret I didn't get along with Carl Greene." A year ago, he said, Saidel arranged a meeting with Greene about neighborhood opposition to a new PHA project in Southwest Center City.
Brady said he had not gone to his wife for help with Greene because she was a board member, not a lobbyist. "I never went to my wife for anything, and she never came to me," Brady said.
Krajewski said Saidel had helped her staff get through to PHA with complaints about Section 8 low-income housing properties in the Mayfair section.
Verna said she was in frequent contract with him in 2008 and early 2009 during the planning of PHA's Paschall Village in her Southwest Philadelphia district.
HUD began scrutinizing PHA's spending on legal bills in August. PHA has disclosed that it spent $38.5 million on outside lawyers from 2007 to 2010 - far more than other public housing agencies. Schnader's share during the last four years was $4.4 million.
Eisenhower strongly defended Schnader's work and his own. "For over 25 years, as both a federal prosecutor and in private practice, I have ethically and aggressively represented the interests of my clients," he said.
"I've sometimes been involved in controversial cases and represented unpopular clients. This is not the first time I would take a hit for aggressively representing those clients' interests. It's common practice to go after the adttorney in those kinds of cases."
Johnson said documents provided by PHA regarding the audit work that Schnader had performed "do not demonstrate the reasonableness or necessity of engaging lawyers at an average cost of $310 to $325 an hour for work that appears not to require legal services and that PHA should have been able to handle in-house by program staff."
While Greene may have approved the fees, "such an excuse does not absolve PHA from documenting and justifying the use of federal funds," she said.
Johnson noted that James, Greene's chief of staff and a lawyer who continues to work at PHA, "was aware of and should be familiar with many of the activities" in question.
Kelly said the authority was looking into the items raised in the HUD letter and beefing up its legal staff.
PHA has hired a new general counsel, Barbara Adams, who held the same job for the state under Gov. Ed Rendell. One of her first jobs, Kelly said, will be to "assess and evaluate the use of outside lawyers."
Kelly said that with HUD audits, the use of outside counsel was "essential to ensure Philadelphia's interests are protected."
During these audits, Schnader attorneys arranged interviews, held conferences with auditors and PHA officials, and prepared responses to the audits, Eisenhower said.
His firm represents housing authorities around the country in HUD and inspector general matters.
"Neither HUD nor the inspector general have ever objected to our representation and, in fact, have worked with us for over a decade," he said. "Schnader is nationally recognized for this type of work, and we have achieved fair and positive results for our clients."
See invoices sent to HUD for consultant work by Jonathan Saidel, and HUD's request for information justifying those invoices, at www.philly.com/phabills EndText