It's hard to improve on the Oregonian's headline in today's print edition: "$11.5M city contract awarded to executive with history of fraud." (The story is available online to subscribers, here.) The reporter, Shane Dixon Kavanaugh, writes that the directors of the Portland Clean Energy Community Benefits Fund, a city office of some sort, awarded a $11.5 million contract to a newish nonprofit corporation called Diversifying Energy to buy and install portable heat pumps and cooling units inside 15,000 homes and apartments. (That's about $750 per heat pump or cooling unit.)
The story points out three oddities in the city's choice of a contractor. First is that Diversifying Energy is not even two years old. Its president, secretary, and executive director Linda Woodley formed the corporation in July 2020, and originally named "Energizing Diversity." Its 2020 tax return indicates that it received less than $50,000 from all sources in 2020. Mr. Kavanaugh reports that the City of Portland did award Diversifying Energy a $198,000 contract in April 2021 to upgrade three buildings for air quality.
Second is that Ms. Woodley is subject to an IRS tax lien for not paying income taxes in 2015, 2016, and 2017, and had been convicted of bankruptcy fraud and tax fraud in 1997.
Third is that city staff who evaluated the applications for the grant had concerns about Diversifying Energy's high personnel costs and recommended that the city accept the competing bid. The city's grants committee rejected the staff recommendation and recommended that the city offer the contract to Diversifying Energy. The city council unanimously approved the committee's recommendation, also rejecting the staff advice.
Not mentioned in the story, but odd, is that the IRS determination letter for Diversifying Energy was issued not to Diversifying Energy or its prior name when it was formed, but to "Shades of Green" the month before Energizing Diversity was incorporated. (A "determination letter" is the letter from the IRS that says that a nonprofit organization qualifies as a 501(c)(3) and that contributions to the organization will be tax-deductible.) The state had two businesses using the name "Shades of Green." One was in Klamath County and has been in existence for 20 years. The other was a for-profit corporation called Prisma Point Incorporated, formed by Ms. Woodley in 2014 and still arounds today, operating from the same office as the nonprofit. It's extremely unusual for a non-profit to have a determination letter that had been issued to a for-profit corporation; in fact, it's not supposed to happen.
Mr. Kavanaugh's story contains the obligatory disclaimer by city officials (there should be a hotkey for that phrase), that "neither city staffers nor grants committee members knew of Woodley's troubling past, Portland officials told The Oregonian / OregonLive, when the news outlet informed them of reams of public records documenting her financial fraud and unpaid taxes. Nor were they aware of a series of mischaracterizations and possible outright fabrications in her firm's proposal that The Oregonian / OregonLive found during fact-checking, they said."
What conclusion can we draw from The Oregonian and Mr. Kavanaugh finding information that the city missed? The obvious one is that when city management determines to award someone a contract, it shuts its collective eye to warning signs. The less obvious one is that the grants committee, part of the Bureau of Planning and Sustainability, awarded the contract on something other than business history, financial qualification, track record, and economic efficiency. The City Council should insist that the members of the committee explain their thinking before the city allows them to award any other contracts.