NEW ORLEANS -- A major developer and government contractor with ties to Gov. Bobby Jindal may be headed to prison a year after his scheme to steal public funds was exposed by WWL-TV. But his guilty plea in federal court last month raises a whole new set of questions.
And they all boil down to this: Why does Praveen Kailas seem to get special treatment at every turn?
The City Council granted Kailas special dispensation in 2011 to triple the height and value of the historic Woolworth Building on Canal and North Rampart Street as part of a critical downtown construction project he was championing – a project now under the cloud of his legal troubles. Critics are wondering aloud whether the city took sufficient steps to protect itself in the event Kailas ran into trouble.
There are also questions about the way the state responded after WWL-TV showed Kailas and his employees at Lago Construction billing the Road Home Small Rental Property Program for hours when they were actually working on other projects – as well as adding extra property inspectors to the billings without any significant increase in the number of inspections.
The governor’s office promised an internal probe but ended up deferring to federal investigators.
And finally, there are concerns about how the federal case against Kailas has been handled, with prosecutors keeping the charges against him under seal for two months. His guilty plea and arraignment stayed secret for nearly a month, and more than half of the records filed in federal court so far are still inaccessible to the public.
Woolworth Building project
Kailas went to the City Council in 2011 asking for a variance to go beyond the 70-foot zoning limit on the old Woolworth’s department store, famous for the September 1960 sit-in at the whites-only lunch counter. He wanted to build it up to 200 feet, promising high-end retail at street level and top-quality residential above.
Preservationists and neighborhood groups opposed the project, saying it looked like a cereal box and was out of step with the area. Councilwoman Stacy Head also opposed any concessions for the project, questioning why a building the Kailas family purchased for $3.6 million in 2007 got its tax assessment reduced in 2010 by former district assessor Claude Mauberret.
But with Councilwoman Kristin Gisleson Palmer leading the way, the City Council passed an ordinance granting Kailas the height variance, although with special provisos mandating certain architectural features be preserved and forbidding T-shirt shops.
That immediately increased the value of the property, but the lower assessment remained on the tax rolls until this year, when Assessor Errol Williams raised it back to $3.3 million.
While Praveen Kailas was the face of the deal, his father, Mohan, was the actual owner of the development company, 1031 Canal LLC. So, even though Kailas faces up to 10 years in prison for the theft of public funds from the Road Home program, Palmer has been assured the project is continuing on schedule with Mohan Kailas at the helm.
She said the provisos in her ordinance protect the city in case the Kailases fail.
“There was a lot of concern that potentially a developer might want to just demolish it and flip it after they made money and they passed this, so what we did too was said you have to have a building permit ready to go before you can even start any kind of demolition process,” Palmer said.”
But Meg Lousteau, executive director of Vieux Carre Property Owners, Residents and Associates Inc., said the city ordinance does very little to hold the Kailases accountable.
“We don’t think the provisos are enough to ensure that the project gets built,” she said. “There was talk of a two-year time limit in which the property owner had to begin construction, had to break ground, but when we re-read the ordinance, it’s not enshrined in the ordinance.”
Lousteau and others, including Jack Davis, a board member of the National Trust for Historic Preservation, were concerned from the start about the Kailases’ ability to deliver, given the family’s involvement in other stalled projects.
For example, the Lake Forest Plaza shopping center promised by Mohan’s brother, Gowri, never came to fruition, while the New Orleans Redevelopment Authority in 2008 found it necessary to outbid Praveen Kailas and his brother Naveen for the old Gentilly Woods Shopping Mall site.
“At the time it was approved there were plenty of questions about whether this group of would-be developers were actually going to develop it, whether they had the capabilities,” Davis said. “And I think … (Praveen Kailas’) conviction, if anything, underscores the question of whether this project will be executed by these people.”
The Kailases would not respond to requests for comment. Neither did the attorney of record for the project, Denis Vega.
Last year, they were granted a yearlong delay to provide the City Planning Commission with a final development plan for the Woolworth building. Emails from the project architect, Harry Baker Smith Architects II, to the City Planning Commission said the plan would be in by Aug. 21, but later indicated they were waiting on approvals from the Historic District Landmarks Commission and Department of Public Works first.
The plan is due to City Planning by Nov. 10, three days before Praveen Kailas is to be sentenced in federal court.
State and federal investigations
The federal investigators who pursued the case against Kailas after the WWL report were focused on criminal activity. But there were also questions about mismanagement in the state rebuilding program, and those were only confirmed when Kailas admitted that he overbilled $236,000 for six employees and added new inspectors to the bill without additional work.
Shaw Group got the prime contract for the Small Rental program by touting the experience of its manager, Mark Maier, and his team, which included Kailas’ Lago Construction. Maier reviewed the allegations against Lago in the WWL report and wrote a letter clearing the firm of any wrongdoing.
But since then, WWL also found similar billing irregularities in the same Small Rental program by former state Rep. Girod Jackson, who, like Kailas, worked as a subcontractor’s manager, pushing paperwork and monitoring the progress of construction on mom-and-pop rental units – and also billed for full days when records indicated he was also voting for as much as 16 hours on the House floor.
The state Office of Community Development did not allow WWL to interview Maier and has yet to produce the results of the state’s internal investigation. Sean Lansing, a spokesman for Jindal, and Angela Vanveckhoven, OCD’s spokeswoman, sent similar statements Wednesday saying that state Inspector General Stephen Street was still “looking into the program.”
Vanveckhoven also said the office would audit the program more often and noted that its contracts “allow the state to recoup losses in instances like these.”
Eyewitness News Legal Analyst Jason Williams said the state appears to have looked the other way in the Kailas case.
“I feel very comfortable saying this is not an oversight on the state level. This is willful ignoring of misconduct by connected individuals,” he said. “The evidence is just too clear, this is not a complicated case. ... And anybody working for the governor should have been able to pick it up – either … after listening to (WWL’s) story, or after looking at the documentation.”
And while Williams gave federal prosecutors credit for charging Kailas, he wondered why the case remained under seal for so long and still remains half-hidden.
“The proof is going to be in the pudding when we see what sentence he gets,” Williams said. “If his sentence is super-light, I think there’s cause for concern here. Especially with someone … whose family has given so much money (to Jindal) over time, I hope this isn’t a situation of just having high connections.”
Mohan Kailas, his brother, Gowri, and companies owned by them donated more than $15,000 to Jindal’s congressional campaigns and the equivalent of $23,000 for his three runs for governor, including free office space and food and drinks for campaign parties.
The governor’s office has repeatedly said that it welcomed the federal investigation of the Kailases, and that the family’s support of the governor would not deter them from trying to root out fraud.
Chief U.S. District Judge Sarah Vance granted the government’s requests to keep the case under seal, and she’ll preside over Kailas’ sentencing Nov. 13. Interim U.S. Attorney Dana Boente said Kailas got no special treatment or favoritism.
Kailas’ defense attorney, Walter Becker, has said his client is cooperating with the feds. Williams said that some criminal charges are kept under seal if the defendant is actively helping the government collar other crooks.