FBI Probes City Contract; Harp Wiretapped, Says Fraudster Tried To Set Her Up

Toni Harp and her top mayoral aides walked out of Jack’s Steakhouse with an envelope filled with thousands of dollars of cash handed over by an accused money launderer.

A city contract followed. Then a federal grand jury investigation.

But it’s unclear who was up to what — and who left whom holding the bag.

The fateful dinner took place at the College Street restaurant on Aug. 24, 2019, in the midst of a hard-fought mayoral election.

Harp, then the city’s mayor, had dinner that night with her top aide, Andrea Scott; city Controller Daryl Jones; and a Sacramento, California entrepreneur named Derek Bluford, who was (and is) under federal indictment for financial fraud and was looking for a way to lessen his prison sentence.

According to Harp, Scott, and Bluford, the group had been discussing two matters. They discussed a contract Bluford wanted the city to give a company with which he was involved, to help collect unpaid parking fines. And they discussed his help in raising money for Harp’s fund-strapped uphill reelection campaign against challenger Justin Elicker.

“The steak was absolutely great. I’m not gonna lie,” Bluford recalled in an interview.

They took photos. Then they walked out — and Bluford handed Harp the fat envelope.

Harp and Scott said they didn’t open the envelope until later, when they were shocked to find $7,000 in cash rather than legitimate individual campaign contribution checks. Harp and Scott said Scott returned the money. They put Bluford in touch with a campaign fundraising consultant as well as the Working Families Party, which was endorsing Harp and which eventually obtained $7,000 from Bluford.

Bluford claimed he was wearing a wire as a government informant in a sting operation. He said he caught Harp in a compromising act; Harp, who has not since been charged with a crime or even questioned about one, said he was trying to lure her into one she did not commit.

Either way, Harp lost the election. Government App Solutions, the company Bluford represented, failed to obtain a contract through normal channels. Transportation chief Doug Hausladen, for one, was objecting.

The day before Harp left office, her administration’s controller signed a contract with Government App Solutions.

But the story didn’t end there.

The FBI called City Hall several months later to report that it was investigating the contract, and Government App Solutions, both Mayor Justin Elicker and his top staff attorney, Corporation Counsel Patricia King, told the Independent Tuesday.

Meanwhile, they said, the administration was already receiving demand letters to pay the company for work it hadn’t done. So it canceled the contract.

That was right as the coronavirus pandemic hit. In Sacramento, California, the U.S. Attorney’s office was subpoenaing documents from Government App Solutions as part of a grand jury investigation, including material related to its business dealings with New Haven, the company’s attorney, Cyrus Zal, confirmed to the Independent Tuesday.

Harp told the Independent Tuesday that the FBI informed her this summer that they were tapping her phone calls.

Since then, no public announcement has been made concerning arrests or an outcome of the investigation.

This week Bluford went public with a self-published book filled with florid details about such alleged dealings in New Haven and in other cities. Toni Harp’s picture appears on the cover.

A lot of the allegations could not be promptly confirmed or refuted. One piece of information could be confirmed: Bluford himself was the target of a federal investigation. And he was indicted. He stands accused in a pending federal court case of illegally obtaining over $400,000 through wire fraud and money laundering. (Read the federal complaint here.)

Toni Harp wasn’t surprised Tuesday to hear about Bluford’s past. And she was adamant that if the government was trying to sting her, it didn’t work.

“It seems to me he’s desperate. He’s evidently a con artist,” Harp said. ​“And I didn’t do anything wrong. Just because he said I did doesn’t make it true.” Looking back, Harp concluded, she’d been the victim of a set-up.

The Connection

In an interview, Bluford acknowledged he had the federal case pending against him. He claimed that’s how he ended up serving as a government agent, wearing a wire to catch mayors allegedly doing dirty deals with his friend and business partner, then-Sacramento Mayor and former NBA Phoenix Suns point guard Kevin Johnson.

That could not be confirmed. What could be confirmed was that he did end up in New Haven, money did change hands, a contract did get signed, and a federal investigation did ensue.

Harp said she first met Bluford two and a half years ago. It was Johnson she already knew. Johnson had served as president of the National Conference of Black Mayors. As he told the Independent during a 2015 visit to town to help Harp raise money, he advocated her advancement in the organization. Harp became the organization’s president in 2017. (The group had by then been renamed the African American Mayors Association.)

“Kevin called me,” Harp recalled. ​“There was no money involved. He said someone who worked with him would be on the East Coast and asked if we would meet with him, because we have a company that helps cities.”

The company was Government App Solutions. Harp said he met with Bluford and explained the bidding process. The city was looking for a company to help collect unpaid parking fines. She said the company bid, and failed to obtain the bid. According to Bluford, he and Johnson are ​“shareholders” in the California-based company.

The Dinner

Fast forward to 2019. Bluford returned to town. He showed up at the Harp mayoral campaign’s Fitch Street headquarters. He had the dinner out at Jack’s with Harp, Scott, and Jones.

Both Harp and Bluford told the Independent that he was seeking a contract again for the company and he was offering to help raise lots of money for the campaign.

“He brought some money to Jack’s, and it was in an envelope. We didn’t really look at it,” Harp recalled. ​“We didn’t pay much attention to it. We assumed it met all the requirements for donating to campaigns.”

In retrospect, she said, ​“one thing” seemed odd: ​“He wanted to take a picture.”

“When we got back to the office, we saw that there was no paperwork. I didn’t see it; I was told by my staffers,” Harp continued.

Mayoral aide Scott said she opened the envelope.

“He gave me an envelope with what I thought were checks and stuff. [Later] I looked at it. I said, ​‘Oh no! We can’t take this.’”

Scott returned $7,000 to Bluford. Harp and Scott put him in touch with Stephanie Mellinger, a Baltimore-based consultant in charge of fundraising for the Harp campaign; and Lindsay Farrell of the state Working Families Party, which had endorsed Harp’s campaign. Harp and Scott said that was to ensure Bluford followed proper methods for legally raising and donating money; he claimed this was a way to find alternate routes to making payments in order to get a contract down the road.

Harp categorically denied that. She denied any quid pro quo, stated or implicit.

“We didn’t beg him for illegal money. There were certainly no kickbacks,” Harp maintained.

She added, ​“I would never have asked for cash. I know better than that, for crying out loud. The guy is a liar.”

The Working Families Party did receive $7,000 from Bluford. Farrell told the Independent Tuesday that the money went to fund the party’s other statewide campaigns; in fact, she said, none of it went toward Harp’s campaign, because the party decided to focus on different races instead.

However, Farrell said the check the party did deposit is not the same one that Bluford photographed and showed to the Independent. That check, signed by him, was under the account of ​“Midtown Apps Inc.” of Sacramento. ​“The contribution we accepted was from personal funds, as permissible. The photo you have is of a corporate check that we would never have kept,” Farrell said.

Bluford was asked about that Tuesday evening.

“We gave Working Families the business check to buy us time” because ​“we knew they would reject and ask for a personal check,” Bluford claimed. ​“The check I ended up giving them was from [an] FBI set up account. I can’t share that as that is evidence in the actual case.”

Working Families ended up reporting two separate $7,000 contributions from Bluford in its official campaign filings. Farrell said Wednesday that that was an error: He gave ​“only once, by credit card.” She said the party plans to file an amendment to its filing correcting the error.

Meanwhile, Bluford showed the Independent a screenshot of what he claimed was a text conversation with Harp campaign fundraising consultant Mellinger on Aug. 15, 2019. The Independent has independently confirmed that the number listed on screenshot is Mellinger’s cell phone number and the conversation did take place.

“Hi Rick, just checking in to see if you thought $30k would still come in this week for the Mayor’s campaign,” reads a message timed at 2:02 p.m.

“Hi Stephanie. Just trying to figure out how to get it to you guys. I’ll give Mayor Harp a ring tomorrow,” it shows Bluford replying.

To which the reply came: ​“Can you overnight checks?”

A person close to the campaign confirmed that that text exchange indeed happened — and explained it as legal, normal campaign activity: Bluford offered to raise money for the campaign by collecting checks from people, and he didn’t necessarily deliver the full $30,000.

In addition to State Elections Commission records, Maylivia Bluford of Sacramento donated $1,000 to the Harp 2019 campaign committee on Aug. 3, 2019; Sarah Bluford of Folsom, California (part of Sacramento County), donated $1,000 on Aug 22; Rick Bluford donated $1,000 in two checks on Aug. 22; Eric Bluford of New York contributed $1,000 in two checks on Sept. 3. Cyrus Zal, the Government App Solutions attorney, is listed as donating $1,000 to Harp’s campaign on Aug. 22.

The Contract

According to Harp, Government App Solutions did bid again in 2019 on a contract involving parking revenues — and lost.

However, she added, the company that did win ​“had a weak collections program,” which was a part of the contract. So talks commenced about hiring Government App Solutions to help with collections.

Time was running out. Harp lost the election. Her last day in office would be Dec. 31.

And Doug Hausladen, the city’s traffic and parking director, wasn’t on board with hiring Government App Solutions.

In his new self-published book, Bluford writes that Hausladen balked both times he pursued the contract in 2019.

“Doug Hausladen, who served as the parking director, believed there was something fishy about us and the city. I remember Doug saying, ​‘Something is not right here. The mayor shouldn’t be directing me to do something that is my decision,’” Bluford writes. He quotes his business partner complaining about how ​“fuckin’ Doug” kept holding up the contract.

Hausladen Tuesday confirmed to the Independent that he had opposed giving a contract to the company.

“The references would never pan out,” he said.

Then, on Dec. 30, the contract was signed. Mayor Harp signed it for the city. Hausladen and his department did not appear on the contract. The contract was effective … Nov. 21, 2019. It stated that Daryl Jones would oversee the contract. Government App Solutions opened a downtown office through which it undertook the contract.

The contract called for the city to pay the company 18 percent of money it collects ​“from outstanding citations” that are at least a year old and not under appeal. It also stated the city ​“may pay certain out-of-pocket expenses in advance” including ​“court costs” and ​“up to three mailings per citation at a rate of $0.90 per mailing, plus postage.”

The Bill, & The Phone Call

Not long after Mayor Elicker took office, the city received a bill from Government App Solutions.

The bill, dated Jan. 21, 2020, demanded $150,000 from the city for ​“collection and mailing reimbursements,” according to Cyrus Zal, the company’s lawyer.

City Chief Administrative Officer Sean Matteson responded with a letter terminating the contract with the company. The city didn’t pay a dime.

A month or two later, as the coronavirus pandemic hit, Corporation Counsel Patricia King received a phone call.

It was from the FBI, she said.

“We were advised that there was an investigation into the company” out of California related to the Government App Solutions contract, King said. ​“It was my impression that we were kind of a small part of an investigation they were doing.”

King stressed that FBI offered little information about the investigation and did not issue a subpoena for records. She added that at no time did Mayor Harp’s name come up.

Zal wrote back to city Assistant Corporation Counsel Kevin M. Casini on May 2 demanding the money, because ​“the services had already been provided.”

The letter proceeded to reference the FBI investigation.

“GOV APP [the company] was contacted by the Federal Bureau of Investigation. GOV APP was informed by the FBI that unbeknownst to GOV APP, the FBI was conducting an investigation into the City involving the contract that the City had illegally entered into with GOV APP. The FBI investigation was a total shock and surprise to GOV APP. …

“GOV APP was at a loss as to how to respond to the information revealed to it by the FBI, as GOV APP was totally unaware that the FBI was conducting a covert investigation of the City and its officials. Once the FBI made known to GOV APP the existence of its investigation, GOV APP naturally and legitimately backed away from the situation, and did not want further involvement with the City due to the City’s apparent corruption in entering into the contract with GOV APP. It is the City who is at fault here for using apparently corrupt means to enter into a contract with an innocent and unsuspecting party such as GOV APP. …

“When the FBI’s investigation of the City eventually becomes public, the notoriety of the investigation will cause GOV APP to lose any chance of remaining a viable company, and it will cause GOV APP and its investors to suffer the total loss of their financial investments, time and labor that they have put into GOV APP the past three years.”

So the company is threatening to sue the city.

King said ​“we reviewed the contract” and ​“it didn’t appear that Government App Solutions did any work. So we didn’t pay.”

The Wiretap

Fast forward to this summer. Former Mayor Harp received a letter from the FBI.

“It was the weirdest letter,” she said, ​“saying they were tapping my phones.”

The letter listed her number, as well as another number that she didn’t recognize. She looked up the area code — it was a California number.

So she called the FBI, she said, ​“and asked what was this all about. They stonewalled me and said there wasn’t anything. They wiretapped the line to see if there were calls from my line to that line.” There were no such calls, she said.

Now, Harp said, ​“I’m going to look into suing” Bluford. ​“It didn’t happen the way he said. I’m pretty sure we didn’t break any laws.”

Murky Motive

Something did happen in New Haven that involved campaign contributions, a cash envelope, and a controversial contract that is now under federal investigation. But there are many unanswered questions, including basic ones, that need to be answered before anyone can be determined to have broken laws or considered breaking laws.

Among the unanswered questions in this saga: Why is Bluford coming forward with this alleged story now?

Many details are confirmed facts. But not the crucial ones — such as whether he indeed wore a wire for the FBI.

He provided names and cell numbers for the agents he said he has worked with on these cases. The Independent left messages at those numbers, and at least one of the calls was forwarded to the Sacramento FBI public information officer, Gina B. Swankie. ​“As a matter of longstanding policy, the FBI does not confirm or deny the existence of an investigation, nor do we release information pertaining to interviews or contacts,” Swankie wrote in an email.

Bluford provided some snippets of recordings and receipts. But he said he couldn’t provide the crucial recordings proving payoffs being allegedly discussed in New Haven. That’s because the FBI has those audio recordings along with surreptitiously produced videos, he said. He claimed he double-recorded some interactions, but not all of them, to keep for himself.

He told the Independent he decided to cooperate with the investigation in order to gain a promised reduction in the penalty for his own alleged crimes. He claimed he traveled around the country for two and a half years surreptitiously recording people engaged in alleged corruption in concert with FBI agents.

But no indictments have been issued to date. People familiar with the federal cooperation process question how going public can in any way help a defendant like Bluford in a federal money laundering case; and how he could serve as a credible government witness now that he has gone public with allegations before any arrests could be made in what are already difficult-to-prove campaign finance cases. So why would Bluford go public now when that could not conceivably help his case?

The Independent asked him that question.

He responded that he wants to bring the episode to light because he is concerned that the FBI is choosing not to follow through on some of these cases.

“The challenging thing for me is I’ve given two, two and half years of my life. We’ve been pursuing all of these people,” he said. ​“They don’t think the timing is appropriate.” His alleged targets are all Black and Latino elected officials. (Bluford is African-American.)

“Now some of the agents are upset. The agents and myself have been working nonstop.”

He was asked about the status of his alleged cooperation agreement with the government. He replied that he has ” completed my obligation with U.S. Attorney’s Office.”

Toni Harp offered another explanation: Bluford tried to lure her into committing a crime. And failed.

Tom Breen contributed reporting.