Special Report: Ex-workers say U.S. military landlord falsified records to get bonuses

By M.B. Pell

SAN ANTONIO, Texas (Reuters) – A U.K. company that provides housing to U.S. military families came under official investigation earlier this year, after Reuters disclosed it had faked maintenance records to pocket performance bonuses at an Oklahoma Air Force base.

At the time, Balfour Beatty Communities said it strove to correctly report its maintenance work. It blamed any problems on a sole former employee at the Oklahoma base.

Now, Reuters has found that Balfour Beatty employees systematically doctored records in a similar scheme at a Texas base.

In June, Reuters, working in partnership with CBS News, documented how Balfour Beatty Communities kept two sets of records at Oklahoma’s Tinker Air Force Base. The accurate records, not shared with the military but seen in part by Reuters, showed tardiness in making repairs at homes plagued by asbestos, leaks and mold. The other set – filed with the Air Force – was altered to show near-perfect performance in making repairs, helping the company earn millions in fees for a job well done.

Balfour Beatty has been pursuing a similar practice at the Lackland Air Force Base in San Antonio, Texas. With bosses pressing them to meet repair goals, two former Balfour Beatty employees said they were involved in forging records to make it appear their employer completed maintenance work on time at the Texas base, even as work lagged or was never finished.

Stacy Nelson, Balfour’s Lackland manager from 2013 to 2016, said she felt pressure to manipulate records to make it appear the company consistently hit maintenance goals. She said she went along with the effort because, diagnosed with multiple sclerosis, she needed to keep her job and benefits.

“You either make these numbers match so we can get the incentive fees, or you may not have a job tomorrow,” Nelson said, characterizing the pressure she felt she was under. “We fudged the numbers, and even now it’s not easy to say that. I hate to admit it.”

Another former worker, Teresa Anderson, who created maintenance records, said she doctored the completion dates and times. Balfour Beatty fired both employees, though for reasons unrelated to falsifying records.

Internal company emails and maintenance reports confirm their accounts of being pressured to hit goals. In one case in 2015, reports showed the company completed 69% of repairs on time. After a Balfour Beatty manager called for higher scores, the pair changed the rate to above 95%, records show, triggering the bonus.

Lackland and Tinker aren’t the only bases where Balfour Beatty faces accusations of falsifying its maintenance reports. In Montana, a former manager said her staff regularly doctored records at Malmstrom Air Force Base.

In all, five former Balfour Beatty employees, working at three different bases, have told Reuters they filed false maintenance reports to help the company pocket millions in bonuses.

In a statement, Balfour Beatty said it is working to improve the quality of service at all its bases. “We know we have to continue to demonstrate progress in order to rebuild confidence in our service, and we are determined to do so,” the statement said.

The company did not directly respond to specific questions about the falsification of maintenance and work-order records documented by Reuters in Texas and elsewhere.

Since the initial Reuters-CBS report from Oklahoma, Balfour Beatty says it has started an investigation into the fraud allegations, led by its outside counsel Hunton Andrews Kurth LLP. It has also sought an independent audit of the incentive fees approved by the Air Force. Auditor PricewaterhouseCoopers and law firm Hunton Andrews declined comment.

The Federal Bureau of Investigation and the Air Force Office of Special Investigations are pursuing fraud investigations at Tinker and two other Air Force bases where the company serves as landlord, said John Henderson, the Air Force assistant secretary for installations. They are Travis in California and Fairchild in Washington state. OSI is investigating additional allegations at Mountain Home in Idaho.

Henderson said he is “concerned” about the latest Reuters findings at Lackland and has referred the matter to the Office of Special Investigations.

The Army is also investigating “allegations” against Balfour Beatty, said Lieutenant Colonel Crystal Boring. In August, Boring said the service’s Inspector General was examining the company; more recently, she said the IG is not involved in the probe, but that she could not name the investigating authority or discuss the broader inquiry because it is ongoing.

A series of Reuters reports in 2018 exposed slum-like conditions in family housing at many U.S. military bases, sparking action by Congress to crack down on the private landlords who run the facilities. In Washington, the Senate Armed Services Committee is working to upgrade military housing through the defense funding bill or standalone legislation, said committee chair Jim Inhofe. Balfour Beatty must fix substandard housing and, should any inquiries find wrongdoing, return any ill-gotten bonus payments, the Oklahoma Republican said.

“If Balfour Beatty proves they aren’t up to the challenge, we’ll find someone who is — someone who is committed to doing right by our service members and their families,” the senator said.


Service families continue to report squalid conditions in their homes on military bases.

In June, Roxanne Roellchen, her active-duty husband and five children moved into a Lackland house with a leaking roof, mold and bugs. She said she found scorpions hiding among boxes and roaches crawling on the feeding tube of her son, 5, who requires treatment because he’s not growing. “Every day we were in that house, we were risking his health,” she said.

Balfour Beatty said it promptly and effectively addressed the family’s concerns and apologized for the inconvenience. The family said it took four weeks for the landlord to find them new lodging. The company, they added, did not submit work orders to remedy the mold and insects; while they waited, the company placed the family in a hotel and then temporary base housing, which also had roaches.

At the Texas base, Balfour Beatty has a history of maintenance problems. On any given day in 2015 and 2016, it routinely had hundreds of unfinished maintenance requests open, records show.

Persistent leaks plagued residents and workers alike. Staff logs documented the woes: “roof leak thru vent in son’s room,” “kitchen light fixture leaks when it rains” and “water pouring thru smoke detectors.” Other times, homes sat vacant for months or years, magnets for rodents, reports show. The company said it has demolished some homes and is targeting others in “due course.”

When Balfour Beatty filed maintenance reports to the Air Force, any open, late and unfinished jobs most always disappeared from the records. Quarter after quarter, the Air Force bestowed performance bonuses and, many times, praise on the company.

Balfour Beatty Communities, a unit of British infrastructure conglomerate Balfour Beatty plc <BALF.L>, is among the U.S. military’s largest housing providers. The company runs housing at 21 Air Force bases as well as 34 Army and Navy bases.

It and other private real estate firms run 98% of military base housing in the United States. Many can earn “performance incentive fees” by meeting quarterly and annual goals, such as quickly responding to resident repair requests. The fees, based on reports submitted by the landlord, are a major source of income, generally worth about 2% of the total rent payments from base service families. At Lackland, the rate is 2.25%, records show.

There, from 2009 through 2018, Balfour Beatty received up to $3 million in management incentive fees. The Air Force department in charge of base housing oversight gave the company high grades in reports, applauding its “openness of honest communication.”

In reality, Balfour Beatty was cooking the books, Reuters found in a review of company records and emails, and through interviews with former staffers.

Every quarter, company leaders pressed on-base staff to hit the quotas so Balfour could collect incentive fees. Often, management demanded staff take whatever steps necessary to obtain the bonuses, including using loopholes to improve the numbers.

Former manager Nelson said she relayed pressure from above to her own staff. Email correspondence document some of the exchanges. “It’s not only my ass on the line because of these WO’s [work orders], but my boss AND her boss!!!” Nelson wrote to Anderson and other staff in May 2016. “Close the ones that need to be closed – TODAY! I don’t care what it takes.”

Five months later, she was fired. The company said it dismissed Nelson for poor performance and that, since her departure, one metric of success, occupancy numbers, has improved from 89% to 98%. Yet records show the occupancy rate actually ranged from 95-97% under Nelson’s watch in early 2016.

Nelson said she tried to balance the need to make her bosses happy by securing the incentive fees, and residents happy by making fixes. She said she lacked the manpower or budget to fully do either.

“I was devastated when I was fired,” she said. “I thought everything I was doing was right; yes I was falsifying documents, but I was telling them, ‘You need to fix this.’ ”


A former Marine, Nelson took her first job with Balfour Beatty in 2011 at Vandenberg Air Force Base in California. She found Vandenberg housing in good condition, and said Balfour Beatty provided resources to keep it that way. “It was magical,” she said.

In 2013, a Balfour Beatty vice president asked her to take on Lackland, one of the company’s problem bases. She quickly saw a much different picture in Texas. She found unpaid bills, she said, some more than a year old. Local contractors were wary of working for the company, she said. Employees weren’t always qualified to do the work they were assigned, like replacing toxic freon in air conditioners.

Balfour Beatty struggled to convince families to live on base, Nelson told a friend in an email. One in 10 of the 900 homes on base often sat empty, internal occupancy-rate reports say.

“My intention was to fix it,” Nelson said, leading to long days.

The quest to hit maintenance goals never eased. Lackland had eight to nine maintenance technicians, one for every 100 homes. By 2016, each tech was responsible for finishing 15 work orders a day; reports showed as many as 466 open work orders on a given day.

The number of maintenance workers per home is standard for the industry, but the number of open work orders was high, Balfour Beatty said in a statement. Another company base, the Fort Carson Army base in Colorado, had similar rates of open work orders in 2016, internal company records show.

In December 2014, after facing heat from a regional manager asking about unclosed repair requests, Nelson wrote an email to staff: “ARE YA’LL TRYING TO GET ME FIRED?!!!”

Company emails and reports from the first quarter of 2015 show how the records were massaged.

In March 2015, Balfour Beatty was far from hitting its Lackland goals, finishing only 69% of routine work orders on time, according to an internal company maintenance report obtained by Reuters. To pocket the full bonus, it needed to respond to and complete 95% of requests on-time.

Rick Cunefare, a Balfour Beatty area manager, emailed Nelson and others shortly after the close of the quarter. He wanted better numbers.

“We need to get this completed and ensure response and completion scores are over 95%,” Cunefare told Nelson and the managers at four other Air Force bases, including Vandenberg and three bases now under investigation by the FBI – Tinker, Travis and Fairchild.

Cunefare, who is no longer with Balfour Beatty, declined to comment.

Nelson said she knew changing the scores was wrong but was desperate to keep her job and medical benefits. She had just been diagnosed with multiple sclerosis, a potentially disabling disease of the brain and spinal cord for which she was prescribed injections three times a week and routine assessment by neurologists. Her non-verbal, autistic son required costly therapies.

“I had my son’s health to take care of and my own health to take care of,” she said.

Less than two hours after receiving her instructions from Cunefare, Nelson emailed Anderson, the work order clerk, instructing her to change the maintenance records.

“I know you’re really busy, but I’m getting pressure about the Quarterly Maintenance Report and all the results being over 95%,” Nelson wrote. “Will you please take another look at it and make adjustments to ensure we are at 95% response/completion times in all categories.”

After receiving the email, Anderson dived back into the data and changed the completion dates and times to make sure 95% were on time, Anderson told Reuters.

A report submitted by Balfour Beatty to the Air Force states 95.9% of maintenance requests were completed on time during the first quarter of 2015. The Air Force paid the full potential bonus of about $75,000 for the quarter.

The story was similar in other quarters. Earlier, in January 2015, Nelson asked Anderson to change fourth quarter 2014 records, writing, “They need to be 95% or higher.” Later, in June 2015, she told Anderson, “Completion times in April need to be adjusted.”

Nelson was not the first base manager at Lackland to fudge reports, said Anderson, the work order administrator from 2012 until she was let go in October 2016. Anderson said she falsified records every quarter, either under the direction of the community manager or the facility manager, who could not be reached for comment.

Balfour Beatty said it dismissed Anderson for poor performance. Anderson said the company never told her that, telling her instead she was let go for failing to pay rent on the home she was living in at the base. When Reuters first asked the company about the dismissal, it said it was performance and rent-related; later, it changed its response, citing only performance issues.


Across the company, say former managers, the pressure to meet maintenance goals started with Balfour Beatty’s corporate leadership and worked its way down.

Jennifer Benski was Balfour Beatty’s community manager at Malmstrom Air Force Base in Montana from 2011 until 2017. She said regional managers and executives scrutinized maintenance data used to determine bonus payouts: the number of open maintenance requests, the number of late requests and other details. She said her staff regularly closed out maintenance requests as complete before they were finished.

“There’s a lot of pressure from upper management to meet those goals, and I guess you could say it doesn’t matter how they’re met,” Benski said.

For the managers of Balfour Beatty’s 21 Air Force bases and two of the company’s Army bases, the pressure often flowed from the company’s Phoenix regional office.

In June 2015, the administrator in charge of quarterly reports in Phoenix emailed instructions to base managers on how to get “a better completion %” on the reports used by the Air Force to award incentive fees. The instructions suggested base managers make use of so-called exceptions.

When a maintenance request cannot be completed on time because of extenuating circumstances, landlords can file an “exception” so the work order doesn’t count against them. Examples include having to order special parts, jobs requiring multiple stages of labor, or cases in which residents requested a repair slot after a deadline.

In June, Reuters and CBS reported that a regional manager, Rebecka Bailey, directed the former manager at Tinker Air Force Base in Oklahoma to use exceptions to help the company meet its goals in late 2016 and early 2017. Following the report, the Air Force suspended all incentive fees to Balfour Beatty pending the outcome of an independent audit. Bailey, who declined an interview request in May, did not respond to a request for comment for this story.

The Phoenix regional office also told local managers to expect a quarterly report highlighting maintenance numbers they needed to “clean up.”

In October 2015, the Phoenix office sent Nelson one such report, highlighting the response-time metrics that fell short of meeting incentive fee goals. She was asked to “start reviewing/working” them and provide “explanations to increase % complete.”

When base managers hit their goals, the company applauded. “Thank you – well done! All above 95%!!” the Phoenix office wrote Nelson in October 2015.

Work order clerk Anderson said no one at Balfour Beatty or the Air Force inquired to see how the numbers always worked out. “They never questioned me on it,” she said.


The Air Force had been warned of problems with Balfour Beatty’s maintenance documents.

In a 2012 report, the auditing firm JLL, working for the Air Force Civil Engineering Command, said the Lackland housing office had “difficulty validating … the maintenance data submitted by BBC for its quarterly Performance Incentive Fee.” Balfour Beatty staff had entered incorrect or incomplete data, the auditor told AFCEC, which oversees Air Force landlords.

The Air Force continued to pay Balfour Beatty bonuses. From 2012 through 2013, the company received at least a portion of its incentive fees each quarter, the Air Force said. From the fourth quarter of 2013 through 2018, Balfour Beatty received 100% of the bonus fees.

Had the Air Force conducted a relatively simple analysis, it could have spotted how Balfour Beatty was backdating maintenance records, said several former company employees familiar with the maintenance data system. That system allows users to identify when completion times and dates are edited, along with identifying who changed them.

Instead, JLL and AFCEC were generally positive, praising Balfour Beatty for its work order system and its cooperation with the Air Force, site visit reports from 2012, 2013 and 2016 show. JLL declined comment.

All the while, Nelson said she found herself lying to service families to cover up problems. “I cried in front of residents because they showed me the mold,” she said, “and I couldn’t believe I was in charge of the plight they were going through.”

(Reporting by M.B. Pell. Additional reporting by Joshua Schneyer in New York. Editing by Ronnie Greene)

U.S. military families more negative about housing than landlords claim, survey shows

FILE PHOTO: Leanne Bell, 39, checks the air quality of a vent as her husband, Spc. Tevin Mosley, 26, looks on while waiting for a maintenance crew to arrive at the army base housing allocated to the family in Fort Hood, Texas, U.S on May 16, 2019. The family says they began suffering breathing issues, depression, and rashes they attribute to a mold infestation and were forced to vacate the home in March after it was put under quarantine while repairs were made. Despite the repairs, mold can visibly be seen on surfaces throughout the home. REUTERS/Amanda Voisard

By M.B. Pell and Joshua Schneyer

NEW YORK (Reuters) – U.S. military families are expressing far deeper dissatisfaction with their housing conditions than their private landlords claim, according to a granular survey of tenants at more than 100 bases across the country that was recently presented to Congress.

The survey, conducted by the nonprofit Military Family Advisory Network, was initially publicized in February. Three months later, the group has released a more detailed analysis of the results, providing a base-by-base look at the survey findings and a window into the problems most frequently cited.

For more than a year, Reuters has exposed slum-like conditions dogging the Department of Defense housing privatization program, describing how private landlords reap billions in payments even as tenants clamor for repairs. The armed forces began privatizing base housing for military families two decades ago.

The Department of Defense said it couldn’t discuss the survey, but is “confident that privatizing housing was the right thing to do,” a spokeswoman said. “However, we also recognize there has been a lapse in overseeing implementation of DoD’s housing privatization program.”

FILE PHOTO: Leanne Bell, 39, displays mold-lined baseboards at the army base housing allocated to her family in Fort Hood, Texas, U.S. May 16, 2019. Bell and her family say they began suffering breathing issues, depression, hair loss, and rashes while living in the home. They contacted housing maintenance repeatedly, submitting between 2 to 3 dozen work orders related to mold, HVAC, and air issue quality concerns over the course of 3 years. REUTERS/Amanda Voisard

FILE PHOTO: Leanne Bell, 39, displays mold-lined baseboards at the army base housing allocated to her family in Fort Hood, Texas, U.S. May 16, 2019. Bell and her family say they began suffering breathing issues, depression, hair loss, and rashes while living in the home. They contacted housing maintenance repeatedly, submitting between 2 to 3 dozen work orders related to mold, HVAC, and air issue quality concerns over the course of 3 years. REUTERS/Amanda Voisard

The survey results, built from responses by 15,000 families living in 46 states and 158 bases, echo the Reuters reports of widespread concern about housing conditions among military tenants. In all, 55% of families who responded gave a negative view of their base housing. Just 16% gave positive marks, with the rest neutral.

The survey results stand in stark contrast to those reported by private military housing operators, who annually poll a subset of their residents and release results that often list satisfaction rates above 90%. Those annual survey results can help companies earn Defense Department bonuses that, cumulatively, total in the millions of dollars a year.

In all, more than 100 bases had an overall negative satisfaction score, with 6,629 reports of housing-related health problems, 3,342 of mold, 1,564 of pest infestations and 46 of carbon monoxide leaks.

The study turned up deep pockets of discontent:

– At Joint Base Lewis-McChord in Washington State, landlord Lincoln Military Housing reported 70% to 90% of residents were satisfied with housing in 2016. The nonprofit’s survey, by contrast, found 10% of respondents had a positive view, and 58% a negative one. Tenants cited 204 reports of poor maintenance, 92 of excessive filth at move-in, and 78 of structural concerns. Lincoln Military Housing did not respond to an interview request.

– At Kirtland Air Force Base in New Mexico, a survey commissioned by Hunt Military Housing said 90% to 94% of residents were satisfied with housing in 2016. The new survey found just 15% held a positive view, and 59% a negative one. Kirtland families cited 43 reports of mold, 24 of vermin infestations and 3 carbon monoxide leaks. A Hunt spokesperson said a survey conducted earlier this year by base command found 88% of residents were satisfied with their housing at Kirtland. Still, the company said it is working with the Air Force to address concerns and has “further improved our processes and procedures,” including adding a “Hunt Promise Helpline” allowing residents direct contact with corporate management.

FILE PHOTO: Leigh Tuttle uses a 3M instant lead test to check the paint on the laundry room door at the house of Krista Lindholm at Joint Base Lewis-McChord, Washington, U.S. May 13, 2019. REUTERS/Lindsey Wasson

FILE PHOTO: Leigh Tuttle uses a 3M instant lead test to check the paint on the laundry room door at the house of Krista Lindholm at Joint Base Lewis-McChord, Washington, U.S. May 13, 2019. REUTERS/Lindsey Wasson

– At Fort Hood in Texas, 71% to 79% of residents liked their housing in 2016, according to a survey commissioned by the installation’s Australian-based landlord LendLease Group and the Army. The new survey found only 15% of base families had a positive view, and 54% a negative one. Driving these results: 121 reports of poor maintenance, 82 of mold and 67 of dilapidated housing. In a statement to Reuters, LendLease said it has confidence in the results of the surveys it obtained from a third-party research firm. The company said it couldn’t comment on the new report without a better understanding of its methodology.

The three companies are among more than a dozen private real estate developers and property managers operating military housing on bases across the country under a flagship government privatization program that has been expanding since the early 2000s.


The Air Force acknowledged airmen don’t believe privatized housing is meeting their needs, spokesman Mark Kinkade said in a statement to Reuters. “We heard that message loud and clear,” he said.

Following Senate hearings in February, leadership at Air Force bases visited 11,534 homes and found 5,102 health and safety concerns, he said. The Air Force and private landlords have addressed 3,855 and are tracking the remaining 1,247.

Army and Navy officials say they have yet to see the expanded results of the Military Family Advisory Network&rsquo;s survey. The Navy said the new figures may not reflect recent efforts to improve housing.

Last week, Army Secretary Mark Esper, Navy Secretary Richard Spencer and Air Force Secretary Heather Wilson met with senior executives from nine private companies that manage military housing to discuss a proposed tenant bill of rights, modifications to incentive fees paid to the companies and other means of improving living conditions.

“We are taking immediate steps to resolve both individual and systemic issues to provide the quality housing and proactive management we envision,” Wilson said in a statement.

A Reuters reporting team visited 16 federal bases last year and spoke with hundreds of families, finding swaths of housing plagued by hazards that can pose serious health risks to tenants. Residents on military bases often lacked basic rights renters can rely on in civilian communities, such as the ability to withhold rent from derelict landlords.

Prompted by the Reuters reports, the military branches pledged to hire hundreds of new housing staff and have moved to renegotiate the 50-year contracts held by the private real estate firms.

Congress has held multiple hearings to question private landlords and military brass, and has examined the survey results as part of its inquiries.

Military Family Advisory Network is an Alexandria, Virginia, non-profit whose stated mission is to represent the interests of U.S. military families. Its study is subjective, based on opinions provided by participants, rather than on independent inspections. Its survey, conducted online, collected responses from a portion of the approximately 200,000 families living in U.S. military privatized housing. It gathered the responses over a one-week period ending February 6. Since then, the military has put some significant reforms in place.

Earlier this month, the group provided the more detailed results to the Senate Armed Services Committee, where members have sponsored legislation to create a tenant bill of rights, penalize landlords who do not quickly fix hazards and mandate regular and unannounced spot inspections of base homes.

Some who took part in the survey say they have little power in dealing with landlords. “We can’t afford to move off base,” said Megan Konzen, a tenant of Laughlin Air Force Base in Texas, where the vast majority of respondents gave a negative rating. “We are stuck.”

(Editing by Ronnie Greene)

Special Report: As their owner and landlord profits, soldiers battle unsafe Army homes

Chloe Tuttle, 2, drinks from a sippy cup as her brother Weston Tuttle, 5, does a nebulizer treatment while watching "Frosty the Snowman" at their home in Steilacoom, Washington, U.S. November 28, 2018.REUTERS/Lindsey Wasson

By Joshua Schneyer and Andrea Januta

FORT BRAGG, North Carolina (Reuters) – One set of photographs, posted on Instagram, captures a grand, crimson-colored banquet hall at a 100-acre Irish estate with two 18th Century mansions. The owner has redecorated the residence in gilded mirrors and blue damask wallpaper with the help of a renowned interior designer and is having a personal golf course installed on the verdant grounds.

Another set of pictures, taken by tenants, shows homes across the Atlantic in North Carolina, Maryland and Louisiana, plagued by flooding, bursting pipes, mold blooms, collapsed ceilings, exposed lead paint and tap water as brown as tea.

The same man is behind all these dwellings.

Ireland’s historic Capard House is among the vacation properties owned by Rhode Island real estate developer John Picerne. He purchased the estate in 2015 after emerging as one of the largest private landlords on U.S. military bases. The others are the homes of his warrior-tenants, who pay hundreds of millions of dollars a year in rent to live in housing run by Corvias Group, Picerne’s closely held company.

Since 2002, Corvias has acquired control of more than 26,000 houses and apartments across 13 military bases. Picerne’s company runs this lucrative enterprise in partnership with the Army and Air Force through a program that enlists private-sector operators to build new dwellings, upgrade others, and manage the properties for 50 years.

The Corvias homes are among 206,000 now under private management in the 22-year-old U.S. Military Housing Privatization Initiative, the largest-ever corporate takeover of federal housing. The military says the effort has enhanced the lives of service members and their families.

Some of Corvias’ tenants strongly disagree. They accuse Picerne’s company of renting them poorly maintained homes riddled with health hazards that can trigger illness or childhood developmental delays.

Reporters visited three of the largest bases where Corvias operates and interviewed 30 current or recent residents who documented their battles with the landlord. At Fort Bragg, the largest military base in the United States, a tenant petition https://www.change.org/p/fort-bragg-hold-corvias-accountable to “hold Corvias accountable” for neglecting homes has gained more than 2,000 signatures.

John Picerne declined to comment for this story. His company declined to address questions about its earnings or specific tenant complaints at its Army bases.

“While there are always several sides to a story, out of respect for our residents we will not comment on or communicate with our residents through Reuters,” William Culton Jr., the company’s general counsel, wrote in an email.

After Reuters detailed the findings of this article to the Army and Corvias, the company set up a phone hotline for tenants with complaints and pledged to respond within 24 hours. Kelly Douglas, a Corvias spokeswoman, said the company is launching a “comprehensive review” of its service request and resolution process.

“If there’s an area where we can improve or an unmet resident need, we want to make it better,” Douglas said.

The exterior view of a home in a neigbourhood of older worn-down Corvias-managed homes at Fort Polk, Louisiana, U.S. November 14, 2018. REUTERS/Joshua Schneyer

The exterior view of a home in a neigbourhood of older worn-down Corvias-managed homes at Fort Polk, Louisiana, U.S. November 14, 2018. REUTERS/Joshua Schneyer


Nearly a third of U.S. military families, some 700,000 people, live in rented accommodation on bases. Their living conditions have come into the spotlight since Reuters revealed lead poisoning risks  Those reports have prompted Congress and the Department of Defense to order at least three investigations.

Despite that new scrutiny, the finances of privatized military housing have remained hidden. The Pentagon has never disclosed the precise terms offered to developers and property managers such as Picerne, deeming them confidential business transactions.

Reuters has now learned how the arrangements work for one leading private developer, obtaining thousands of pages of proprietary documents that lay out the fees and responsibilities that Picerne’s business negotiated with the Army. These documents show that the landlord received iron-clad assurances of profit, often while putting up little initial cash of his own.

To grow his business, the scion of a wealthy Rhode Island real estate family has cultivated ties with military brass and politicians. Corvias has spent millions on lobbying, and Picerne has enlisted the help of his state’s powerful Democratic senator, Jack Reed, an Army veteran and ranking member of the Senate Armed Services Committee.

The profits have helped afford Picerne, 56, a yacht, private jet travel, and mansions renovated by celebrity decorator Martyn Lawrence Bullard, known for his work with the Kardashian family and fashion designer Tommy Hilfiger.

Reporters reviewed the confidential framework agreements between Corvias and the U.S. Army for six of the 13 military bases where the company operates. These agreements, hundreds of pages each, known as Community Development and Management Plans laid out Corvias’ plans, responsibilities and projected earnings at bases.

Mold covers a kitchen range fan inside a Corvias-managed military housing unit in Fort Polk, Louisiana, U.S. November 14, 2018. REUTERS/Joshua Schneyer

Mold covers a kitchen range fan inside a Corvias-managed military housing unit in Fort Polk, Louisiana, U.S. November 14, 2018. REUTERS/Joshua Schneyer

From those six Army housing partnerships alone, Picerne’s business stood to collect more than $254 million in fees for construction, development and management of the homes during the first decade of the deals, a Reuters analysis of the terms showed. Over the projects’ 50-year duration, the fees were projected to top $1 billion. Nearly all of those fees are pure profit for Corvias, according to people familiar with the deals, because most of the projects’ expenses are covered by rent income from soldiers.

Corvias also stands to earn hundreds of millions more in equity returns, the agreements show: It can share with the Army any cash left over from rental revenues after the projects’ expenses have been covered. And Corvias gets additional fees from thousands of other homes it operates on six Air Force bases and one other Army post. Reuters was unable to review the operating agreements needed to analyze the profitability of those contracts.

The company has been able to enjoy these returns without taking on much risk. The government put hundreds of millions of dollars and thousands of existing homes into the ventures. In all but one of the six Army projects Reuters reviewed, Corvias didn’t have to invest a penny in equity until around a decade later, and the company kicked in less than a fifth of the money the military contributed. The Corvias contributions correspond to about 3 percent of the projects’ planned development costs, which were largely funded by loans.

Corvias is shielded from risk in another way: It isn’t obligated to repay nearly $1.9 billion in bank loans its military housing projects have received. The loans &ndash; like the salaries of most Corvias workers on bases &ndash; are paid off from the housing rental stipends soldiers and airmen receive from the federal government.

The Army declined to comment on Corvias, the projects’ finances or specific tenant complaints. “The Army is committed to providing safe and secure housing for our soldiers and their families,” spokeswoman Colonel Kathleen Turner said in a statement. “We work daily with the privatized housing companies to ensure that residents’ concerns regarding their housing are addressed.”

Corvias said it is committed to quality housing for the troops. “Our core mission at Corvias is clear: put service members and their families first,” wrote spokeswoman Douglas. “That means providing a safe, comfortable home to those in the military who choose our housing.”


Maryland’s Fort George G. Meade, home to the secretive National Security Agency, is where Picerne laid the cornerstone of his military housing empire.

Like most of the Army’s family housing, the nearly 2,900 homes at Meade had fallen into disrepair under decades of government management. In official project documents from 2002, Corvias promised Meade families a better future. It would replace “obsolescent housing and catch-as-catch-can maintenance” with “a nirvana of planned Neighborhoods.” During a 10-year development phase, from 2002 to 2011, Corvias pledged to demolish all but a few hundred of the existing Meade homes and build 2,799 new ones.

Only 856 new homes were built, a nearly 70 percent reduction, Department of Defense figures show. The Army signed off on the skinnied-down target after the developer said construction costs had surged, revised plans from 2006 show.

The Corvias website features gleaming new homes at Meade and promises military families “upscale residential communities, all while saving you money.”

Some units fail to meet these promises. During an October visit to Meade, reporters saw some areas of handsome new and historic homes, but also others filled with eyesores and safety hazards.

Reuters interviewed eight Meade families and reviewed photos and documents from several others. Among the problems in the homes were a ceiling that collapsed onto a child’s bed, roofs riddled with leaks, peeling lead paint, a wasp infestation, mold blooms, waterlogged drywall and a kitchen gas leak.

By the time she left a $2,500-a-month rental home at Fort Meade this year, Emily Swinarski was chronically ill, medical records show. A physician documented her shortness of breath, chest pain and mold allergies and blamed conditions in the home, built in 1959. When Corvias tested the air quality indoors, according to a copy of the results, it showed mold counts up to 350-fold the levels found outside.

Corvias found a partially rotted wooden roof was the likely source of the fungus, Swinarski said, but told her it wasn’t willing to conduct the extensive repairs needed to rid the home of mold.

Following her doctor’s written order to “remove herself” from the home, she and her Air Force major husband moved off post, throwing out nearly $5,000 in personal belongings &ndash; a tainted new bed, a sofa and a closet-full of reeking clothes.

“We chose to just bite the bullet,” she said.

Corvias’ development plan for Fort Meade said residents would be on a “first name basis” with maintenance personnel. Last year, citing tight budgets, Corvias reduced housing staff and shuttered at least one of its five neighborhood community centers at Meade. Residents say they are now referred to a call center to submit work requests.

Maintenance crews are pressured to quickly close residents’ work orders, a Corvias employee told one Meade family in October. The family made an audio recording of the conversation with the employee. Some staff, the worker is heard saying, refer to Meade as “Section 8 behind the gate” a barbed reference to the U.S. federal system of housing projects for the poor. Corvias declined to comment.

In a Meade neighborhood where Picerne’s business pledged to build stylish new housing for officers, debris-strewn concrete foundation pads lie between two schools. An abandoned playground is overgrown with weeds.

The reason: The Army signed off on “re-scoping” the Meade project in 2006, scaling back the improvement plans after Corvias cited lower-than-expected occupancy rates, rising construction costs and costly renovation of historic homes. To save costs, the original plans had already deferred building a $1.2 million bridge over a busy thoroughfare &ndash; viewed as necessary for children’s safety, planning documents say. Children use a crosswalk instead.

Corvias and the Army didn’t address questions about conditions at Meade or the re-scoping of the housing ventures.


At his own homes, Picerne has employed British designer Martyn Lawrence Bullard, a star of the cable TV show Million Dollar Decorators.

In Picerne’s six-bedroom neo-Georgian brick house in Providence, the designer installed black-and-white marble floors. Bullard told Australia’s Belle Magazine the floor design was inspired by Rome’s Pantheon. The home features chrome and jade accents, a Murano-glass chandelier and a faux-zebra rug.

Bullard also redecorated a $6 million Rhode Island beach home across Narragansett Bay from Newport, where Picerne docks his 49-foot Italian-made yacht, the Under My Skin. In the living room, the designer hung a gilded chandelier, sheathed the walls in black seagrass and added chairs clad in turquoise-hued leather. “I took my inspiration from the Victorians,” he told another magazine. On Instagram, John Picerne lauded Bullard’s “genius design.”

Bullard recounted in an essay that he installed an exotic work of taxidermy for Picerne in a Palm Beach villa: an alligator locked in battle with a snake, mounted on a 20-foot vaulted ceiling. He called the family “wonderfully adventurous and highly discerning collectors.”

In Ireland, the designer spent months procuring finishes such as petrol-blue damask silk wallpaper and a mix of Regency and William IV antique furniture for the drawing room of Picerne’s Capard House. In September, Bullard posted a photo of the banquet hall. The long dining table was set with white linen, white roses, crystal goblets and formal place cards for 33 guests. Bullard tagged the photo ‘#Mytablesbiggerthanyours.’

Through his agent, Bullard declined to be interviewed, citing his confidentiality agreement with Picerne.

Corvias said it was unfair to draw attention to Picerne’s homes. “In too many instances, Reuters veers from reporting to tabloid-style inference,” wrote Culton, the general counsel. “Reuters’ use of personal information about someone’s private residence is more of a stunt than actual reporting.”

He added, “We welcome the opportunity to focus on the real issues, like how our nation can provide the best possible home for those who serve in uniform.”


Picerne once told a Rhode Island TV station that his military housing business is “recession-resistant.” As civilian real estate markets sputtered a decade ago amid the U.S. financial crisis, the rental revenue streams on military bases kept flowing steadily. Defense Department rent stipends to families are transferred automatically to base landlords.

The Picerne family has been in real estate for nearly a century, building a national portfolio. By the early 2000s, John Picerne struck out on his own. Known in the industry for his intelligence and deft marketing, he turned Corvias into one of the largest private operators of U.S. military homes.

Many of the dozen-plus other real estate firms with military housing contracts partner together on projects, sharing income. Picerne’s firm takes on all aspects of development, construction and management, avoiding the need to split fees.

In five of the six projects reviewed for this article, Corvias wasn’t required to invest any cash at first. At Fort Polk in Louisiana, for instance, Corvias stood to collect $43 million in fees before having to stump up its share of equity cash, $6 million, and then only 10 years into the venture.

Picerne has also been able to take out cash he hasn’t earned yet. In late 2013, according to Corvias financial statements prepared in 2015, Corvias obtained a$127 million loan from an affiliate of investment bank Guggenheim Partners. As collateral, Corvias pledged future fees from military housing.

Corvias, Guggenheim and the Army declined to comment.


Picerne’s rise into the first rank of Army landlords followed a pivotal trip he made to North Carolina’s Fort Bragg 17 years ago.

Bragg was the crown jewel of the Army’s housing privatization program. The country’s most populous military base, it includes nearly 6,500 family homes.

Picerne set out to pitch his services to Army brass. He chartered a private jet to visit Bragg in August 2001, and brought along a distinguished guest, Democratic Senator Jack Reed. A family acquaintance and fellow Rhode Islander, Reed sat on the Senate Armed Services Committee, which oversees military spending. He is now the committee’s ranking member.

Reed was once a Bragg resident himself, as an officer in the base’s famed 82nd Airborne Division, before entering politics. A spokesman for the senator, Chip Unruh, confirmed that Reed made the trip. Reed flew to Bragg with Picerne because the senator “wanted him to understand the importance of serving soldiers and see firsthand what they do, the challenges they face, the sacrifices they make, and the importance of taking good care of them,” Unruh said.

“Senator Reed respects John Picerne and his work on behalf of military families,” Unruh said. “There is no stronger advocate for military families than Senator Reed.”

Reed reimbursed Picerne for the cost of the flight, Corvias said.

At Bragg, Picerne wooed General Dan K. McNeill, at the time one of the base’s commanding generals.

One night, the two sat in the back of an Army vehicle on a live-fire shooting range during a field exercise, recalled McNeill, a retired four-star general. McNeill says he was doubtful a private developer could manage the housing better than the military. Picerne’s earnest manner and business expertise won him over.

“I was quite the cynic about it, but I basically realized I didn’t know what the hell I was talking about” when it came to managing homes, recalled the general, who retired a decade ago. “I was fairly certain he knew what he was doing and his intentions were good.”

When McNeill asked what was in it for Picerne, the general recalled, the businessman was frank. Automatic, first-of-the-month rent payments for soldiers by the military would eliminate a landlord’s biggest headache: deadbeat tenants.

Over the years, Picerne’s businesses have spent $2.8 million on lobbying, mostly of Congress and the Defense Department on issues related to military housing or Corvias contracts. Picerne has given at least another $500,000 in political contributions, mostly to Democratic politicians or committees, including about $10,000 to Reed.

Picerne has been a generous donor to charitable causes. Corvias said its foundation has awarded more than $13 million in scholarships to more than 400 military children and spouses. The foundation, which also supports other charities, from the YMCA to adopt-a-highway programs, was honored in a 2012 White House ceremony.


Corvias won the Bragg contract and took over housing there in 2003.

The company built most of the new homes it pledged to construct at Bragg. Fifteen years into the venture, however, a growing number of tenants are up in arms.

In October, Army Specialist Rachael Kilpatrick started an online petition decrying Corvias’ home maintenance. A doctor attributed her husband’s worsening health problems to mold in their home, medical documents show Corvias, she says, didn’t fix the problems despite months of requests, and complained to her commander about her maintenance demands. The petition seeks to “Hold Corvias accountable” for serious maintenance lapses in homes base-wide. She hoped it would draw 50 signatures. So far more than 2,000 have signed.

Jennifer Wade says her problems began the day she moved to Fort Bragg in March 2017. Wade, a piano teacher with a soft southern drawl, has Ehlers-Danlos syndrome. The genetic condition afflicts her body’s soft tissue, causing chronic pain. She has needed several major surgeries, spending long periods in a wheelchair.

Corvias had promised Wade a home equipped for her wheelchair, but there was no ramp or bathroom handrails when she moved in, leaving her dependent on her husband, an Army sergeant.”It was pretty degrading,” Wade said.

It took Corvias four months to install the fixtures, she said. Wade’s husband and two small children soon developed breathing problems, which their doctors attributed to mold. The doctors submitted three reports to Corvias, recommending it clean the air ducts and replace the carpet. Corvias let months go by before cleaning the ducts and declined to replace the carpet, according to notes a maintenance employee marked on Wade’s work request.

Wade’s husband now requires inhalers and wears a breathing device to assist him when he sleeps, his medical records show. He no longer meets Army fitness requirements, and is in the process of obtaining a medical discharge. Last month, an Army board recommended him for disability, citing his recent asthma, Army records reviewed by Reuters show.

Corvias and the Army declined to comment about the petition and other tenant complaints.

At Louisiana’s Fort Polk, Corvias took over operations in 2004. It inherited poor housing stock but pledged to transform the base into “state-of-the-art Neighborhoods of Excellence.”

Picerne’s firm committed to building 1,123 new homes within 11 years. Only 678 have been built, Corvias figures show. Many others were renovated.

Today, some Polk areas feature new housing. Others have worn 1970s and 1980s units. One neighborhood contains fenced-off housing foundations that have sat idle for years. A reporter entered several Polk homes, invited in by tenants, and observed mold growths, rodent-gnawed furniture, leaky roofs and brown bath water.

After Reuters informed Corvias of its findings at Polk, the company sent a December 13 holiday email to residents. Corvias told them it strives to serve tenants, but had “fallen short of that promise” in some cases. “We can do better and will make it happen.”

Leigh Tuttle, a major’s wife, said when her family moved into a renovated 1980s duplex in 2016, the place smelled like a “wet dog.” Corvias told her the stains on the floors and the air ducts were “just dust,” she said. After testing confirmed mold, staff replaced carpets but didn’t keep the air ducts clean, Tuttle said.

Her son Weston, now 5, developed breathing difficulties, his medical records show. The family moved across the country last year to a new post and live in civilian housing off base. Weston still needs inhalers and frequent nebulizer treatments.

“The mold was the worst in his room,” Tuttle said. “He wouldn’t have these problems if they’d done things right.”

The family struggles to pay for Weston’s visits to respiratory specialists, some of which aren’t covered by their military health insurance, Tuttle said. When Reuters showed her pictures of John Picerne’s estates, she took a moment to collect herself.

“I find it appalling that he’s able to have that lifestyle while service families are suffering in his homes,” Tuttle said. “I bet he doesn’t have mold growing in those mansions.”

(Editing by Ronnie Greene and Michael Williams)