Legal Issues and Commercial Real Estate and Carl Brizzi and Government & Economic Development and Government and Law and Real Estate & Retail and John Bales

Federal government asking questions about lease deals

July 22, 2010

The federal government is asking questions about how the Indiana Family and Social Services Administration handles office leasing after an IBJ investigation raised questions about potential conflicts of interest.

A regional program manager with the U.S. Department of Health and Human Services asked in a July 14 letter for information on whether the FSSA followed state and federal rules as it leased office space across Indiana.

The federal agency also wants to know whether Venture Cos. owner John M. Bales of Indianapolis has any ownership interest in properties being leased through his contract for services with FSSA or subrecipients under the Temporary Assistance for Needy Families, or TANF, program.

"If so, how does that ownership relationship comport with the state's standards of conduct regarding real or apparent conflicts of interest?" wrote the manager, Steven Krasner.

Bales, a politically connected real estate broker who represents several state agencies in lease deals, orchestrated deals to put the company that runs Indiana’s welfare-to-work program into at least two buildings he owns in Indianapolis, IBJ found. The parents of a Bales partner at Venture own a third building, in Kokomo, that landed the same tenant.

The rare federal inquiry is the first time the FSSA has received questions about its leasing practices, said spokesman Marcus Barlow.

Barlow said the "current political environment creates a situation where everything is under higher scrutiny, which we invite.”

“We’re putting together a response to show them that what we’ve done is well within established leasing practices,” Barlow said. “The prices that we paid were actually better than market rates.”

Indiana House Speaker Pat Bauer requested in June that the Department of Health and Human Services investigate real estate leases Bales brokered with state agencies.

Bauer, D-South Bend, sent a formal request letter to HHS Secretary Kathleen Sebelius with a copy of IBJ’s April 24 article, headlined “Politically connected broker’s deals raise conflict questions.”

Bauer cited the IBJ article as the impetus for his request.

Bales is a friend and business partner of Marion County Prosecutor Carl Brizzi, the subject of a series of IBJ investigative articles over the past several months.

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