Housing and Urban Development Secretary Julian Castro testifies before a House Financial Services Committee hearing on oversight of the Federal Housing Administration on Capitol Hill on Feb. 11. (REUTERS/Joshua Roberts) 
 
 The government is seeking to ban smoking in all of the nation’s 1.2 million public housing units, the latest step in a decades-long crackdown on tobacco products that help kill hundreds of thousands of Americans each year. 
 
 In its proposed rule, announced Thursday, the Department of Housing and Urban Development would require more than 3,100 public housing agencies to go smoke-free within several years. The agencies must design policies prohibiting lit tobacco products in all living units, indoor common areas, administrative offices and in all outdoor areas near housing and administrative office buildings, HUD officials said. 
 
 “We have a responsibility to protect public housing residents from the harmful effects of secondhand smoke, especially the elderly and children who suffer from asthma and other respiratory diseases,” HUD Secretary Julián Castro said in a statement announcing the measure. “This proposed rule will help improve the health of more than 760,000 children and help public housing agencies save $153 million every year in healthcare, repairs and preventable fires.” 
 
 Though HUD will not design a final rule until after it hears public comments over the next two months, there seems little doubt that the government is headed toward the smoking ban, since the Obama administration is already moving in that direction. Since HUD strongly encouraged public housing agencies to design anti-smoking policies in 2009, more than 600 have done so. That means that more than 228,000 of the nation’s public housing units are already smoke-free. 
 
 [Banning smoking in subsidized housing could save millions} 
 
 The latest move escalates even further the anti-smoking crackdown that has unfolded in the five decades since the U.S. surgeon general first linked cigarette smoking to deadly diseases such as lung cancer and heart disease. The campaign has seen some successes: cigarette smoking among adults has been cut more than in half from its 42 percent rate in 1965, and the United States now has more former smokers than current ones. 
 
 But cigarette smoking still kills 480,000 Americans each year, making it the leading preventable cause of death in the United States, according to the Center for Disease Control and Prevention (CDC). Officials primarily cited that health data in justifying the proposed public housing smoking ban, noting especially the risks to children and the elderly people who live in more than 500,000 public housing units. 
 
 “Everyone – no matter where they live – deserves a chance to grow up in a healthy, smoke-free home,” said U.S. Surgeon General Vivek H. Murthy. “There is no safe level of secondhand smoke. So, when 58 million Americans – including 15 million children – are exposed to secondhand smoke, we have an obligation to act.” 
 
 Anti-smoking and health groups on Thursday hailed the proposal. “Secretary Castro has taken an important step to improve public health by eliminating exposure to secondhand smoke and creating an environment that discourages smoking in public housing units,” said Chris Hansen, president of the American Cancer Society Cancer Action Network. 
 
 American Heart Association CEO Nancy Brown said the move would “clear the air in public housing where children and the elderly are especially vulnerable to tobacco smoke exposure. No level of secondhand smoke is safe, and tobacco in any form is a major risk factor for cardiovascular disease.’’ 
 
 But housing authority officials and lawyers, while generally supporting the government’s move, raised a series of concerns, including whether some residents will resist the smoking ban and how it will be enforced. “Obviously, there is a clear public health issue,’’ said Amy M. Glassman, who is of counsel at Ballard Spahr in Washington and represents public housing authorities. “But especially when you’re talking about banning smoking within their housing unit, folks take that as an issue of personal space and freedom, ‘You’re telling me what to do within the confines of my own home.’ That’s the main pushback issue.’’ 
 
 In New York City, home to the country’s largest population of public housing tenants, Housing Authority Chairwoman Shola Olatoye said, “The dangers of second-hand smoke have been clearly documented.” The authority bans smoking in public areas, but not in private apartments. The success of the new ban will depend on “peer support and accountability,” she said. 
 
 A 2012 survey of public housing residents showed a smoking rate of 14 percent, in line with the 13.9 percent rate in the city as a whole. 
 
 Olatoye said it was unclear how the ban would be enforced, in part because “we’re at our lowest staffing levels in many years.” She said it likely the housing authority will designate an area where residents can smoke, although officials have not decided whether it would be inside or outside. 
 
 “Reasonable accommodations [for smokers] are going to have to be made,” she said. 
 
 Timothy Kaiser, executive director of the Public Housing Authorities Directors Association, which represents 1,900 housing authorities, said the smoking ban “addresses an important health issue.” But he said local housing authorities have higher-priority concerns, like a shrinking budget for operating expenses and massive cuts to capital spending that’s resulted in a loss of 10,000 apartments a year to decaying conditions. 
 
 “Your average executive director is trying to figure out how to keep the light on and the doors open and operating in the next three to five years,” Kaiser said in an interview. 
 
 He said housing officials also are concerned that the smoking ban will create hardships for elderly and disabled tenants, many of whom light up in their apartments. “We have elderly residents who are addicted to nicotine,” he said. “They will have a very difficult time. They may not be all that ambulatory. They’ll need adjustments to the new rules.” 
 
 The surgeon general’s office, which famously first called attention to smoking’s health dangers in 1964, has continued that campaign into the digital era. In a report release last year, then-Acting Surgeon General Boris D. Lushniak added liver cancer and colorectal cancer to the list of health problems associated with tobacco use. 
 
 [Report links more diseases to smoking, tobacco] 
 
 And in March, the Centers for Disease Control and Prevention targeted e-cigarettes in its anti-smoking ads for the first time. 
 
 In addition to the health benefits of the smoking ban, the government cited economic gains: officials said it would also help reduce damage and maintenance costs associated with smoking. HUD cited estimates that smoking causes more than 100,000 fires each year, resulting in more than half a billion dollars in property damage, and is the leading cause of fire-related deaths in multifamily buildings. 
 
 The agency also cited a study last year by the CDC that estimated that banning smoking in public housing would save $153 million annually, including $94 million in secondhand smoke-related health care and $43 million in renovation of units where smoking is now permitted. 
 
 Lisa Rein contributed to this post. 
 
 Read more: 
 
 A family in public housing makes $498,000 a year. And HUD wants families like this to stay 
 
 After criticism, HUD says it’s trying give the boot to families who earn too much 
 
 Public housing officials blast Obama administration’s move to oust wealthier tenants from subsidized homes ||||| Last June, HUD drafted a compliance agreement limiting the number of units set aside for deaf residents, which seems to have only stoked the dispute. State officials said the agency at one point threatened to withhold money from the state if it did not continue with the plan. But the state housing director, Michael Trailor, did not back down, saying he had to “stand up for the rights of disabled people.” 
 
 Advocates for the disabled fear that the finding might complicate other projects in which federal money would be used to build housing for adults with special needs. Already, the Southwest Autism Research and Resource Center, based in Phoenix, has scrapped plans to use federal grants to help pay for a development designed for autistic adults, opting instead to pursue private financing. 
 
 Through combative legal correspondence and in emotional meetings, the parties in the Tempe project, working to negotiate a compromise, have argued over the meaning of the federal statute governing fair housing practices and the word “discrimination” as it applies to the deaf. 
 
 John Trasviña, HUD’s assistant secretary for fair housing and equal opportunity, said in a statement that “federal law prohibits facilities that receive HUD funds from providing separate or different housing for one group of individuals with disabilities because this practice denies or limits access to housing for other individuals based on the types of disabilities they have.” (The agency did not make Mr. Trasviña or other officials available for on-the-record interviews.) 
 
 In interviews, Mr. Trailor and the developer, Erich Schwenker of Cardinal Capital Management, which is based in Milwaukee, said the units were advertised in publications that focused on the deaf population, but also in the state’s largest newspaper and in a local magazine. 
 
 “Our intention has never been to exclude, but to make sure the units are utilized to the fullest extent possible, as the law requires,” Mr. Schwenker said. 
 
 The demands from HUD mobilized advocacy groups across the country. Last week, 75 of them signed a letter from the National Association of the Deaf to the federal housing secretary, Shaun Donovan, accusing HUD of “forcing deaf and hard-of-hearing individuals to only live according to an ideological vision of forced integration.” 
 
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 In an interview, the association’s chief executive officer, Howard Rosenblum, said the approach “ignores the unique communication needs” of the deaf, making them more isolated. Denise Resnik, a co-founder of the Southwest autism center, said the agency’s attitude felt “like reverse discrimination.” 
 
 By Friday, HUD had scaled back its efforts. A spokesman said the agency had decided to “take a pause” in the negotiations to give the state and the developer time to submit evidence demonstrating the housing needs of the deaf population to justify the use of federal money in the project. 
 
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 Jeff Rosen, the chairman of the National Council on Disability, which advises the federal government on disability policy, said these types of discussions could help the government better understand the challenges faced by groups of disabled people like the deaf, who do not often have the opportunity to live in a community that they feel is “appropriate and fit for them.” (The council has not taken an official position on the Apache ASL Trails case.) 
 
 “Our understanding of discrimination and disability policies is evolving,” Mr. Rosen, who is deaf, said through a sign-language interpreter. 
 
 “In the past, our interest was really more focused on providing basic access to opportunities,” he said. “Now, we’re having a more involved conversation that includes living the way we choose. That’s the type of evolution we’re talking about, and it is not unique to deaf people.” 
 
 A report by the National Fair Housing Alliance last year ranked disability as by far the main source of housing discrimination complaints received by HUD, representing 54.9 percent of them in 2011. 
 
 There have been no formal complaints filed against Apache ASL Trails, federal officials acknowledged. The agency learned of the potential irregularities during an audit last year of Arizona’s use of HOME grants, which are given to state and local governments to create affordable housing for low-income families. It is the state’s responsibility to ensure that the grants comply with federal law. 
 
 Agency officials said that other housing developments offering accommodations for the deaf had been partly paid for with HUD grants, but gave no overwhelming preference to deaf tenants or did not exclude other groups in their advertising. 
 
 Tanya Towers in Manhattan is the only complex among the handful of examples given by HUD that currently houses only deaf and hard-of-hearing people, although others can apply, federal officials said. 
 
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 Mr. Trasviña said no one living at Apache ASL Trails would be displaced. The compliance agreement with HUD would limit the number of units set aside for tenants who are hearing-impaired or in wheelchairs to roughly 19, or 25 percent of its 75 units. 
 
 The dispute over the agreement has consumed many hours for lawyers on both sides. Mr. Schwenker, the developer, said the agency cobbled together sections of a Web site for a group of hearing-impaired senior citizens to justify its claim that marketing for the units was exclusionary. Agency officials did not disclose which promotional materials they specifically took issue with, citing the continuing negotiations. 
 
 Apache ASL Trails was built near the light-rail line that links Tempe to Phoenix and Mesa. Its resident manager, Linda Russell, is deaf; through an interpreter, she said she communicated with residents who do not know sign language through notes scribbled on paper or on the white board she keeps in her office. 
 
 A nonprofit organization offering sign-language interpretation and other services has an office in the complex. Weekly workshops — both spoken and with simultaneous sign-language translation — are held in its lobby. 
 
 “A lot of the people who live here, we share common language; we’re able to socialize,” Mary Susan Case, 72, who was born deaf to a hearing family, said through an interpreter. “I’m not lonely anymore.” ||||| When 200 of CGI Federal’s top managers gathered at the luxurious Nemacolin Woodlands Resort in southwestern Pennsylvania on a brisk day in early November 2009, they found time for business -- and high jinks. 
 
 During the two-day event, managers presented PowerPoint slides celebrating the phenomenal success of CGI Federal, a major technology contractor, in winning lucrative government contracts. Most attendees stayed in the resort’s Chateau Lafayette hotel, a replica of the Ritz-Carlton in Paris, and at a formal dinner under the elaborate chandelier in the ballroom, George D. Schindler, the president of CGI Federal, spoke of the company’s big profits that year and its bright future. 
 
 The fun came during a team-building exercise following a boozy lunch in conference rooms not far from the hotel’s Lady Luck casino. Managers were split off into small groups and asked to solve math-laden riddles. For each correct answer, they received a bicycle part. The goal was for the teams, around 20 or so, to assemble children’s pink and blue bicycles, then race their tasseled bikes up and down the carpeted corridors of the hotel. 
 
 “People were riding these bikes drunk through the hallways of the resort,” recalls one former manager who attended the event, while others were “duck-walking” the children’s bikes, which were too small for most adults to sit on. Amid “a lot of hooting and hollering,” the manager recalls, the hotel staff was laughing. “Some people were bombed out of their minds until 2 a.m. It was greed and opulence, and it was on the taxpayers’ dime.” 
 
 He was wrong about one thing: taxpayers didn’t pay directly for the event for CGI Federal, the American arm of Montreal-based CGI Group that is known these days as the main company behind the glitch-plagued Healthcare.gov website, the engine of President Barack Obama’s health care law. Through a lucrative government contract, CGI Federal is the principal contractor assigned the daunting job of building the federal online insurance marketplace -- a large, complex website intended to help millions of ordinary Americans obtain health insurance that instead has become a byword for technological failure. 
 
 American taxpayers are among the main drivers of earnings at CGI, whose stock market value is $11.6 billion. For its recently-ended fourth quarter, the company’s revenue grew nearly 53 percent, to $2.38 billion. That put its total revenue for its fiscal 2013, which ended in September, at more than $9.8 billion, with nearly $442 million in profits. 
 
 CGI Federal and its parent company, CGI, do behind-the-scenes work, often with “Top Secret” clearance, for hundreds of American and foreign government agencies -- from the U.S. Nuclear Regulatory Commission and State Department to the Kyrgyzstan Border Service and World Anti-Doping Agency. But the questions swirling around the company go beyond how it mangled the showpiece reform of Obama’s presidency. Some investors and analysts are expressing concerns about potentially aggressive bookkeeping, weak disclosure practices and corporate governance issues. 
 
 See all of the best photos of the week in these slideshows 
 
 In recent months, Deutsche Bank and at least one hedge fund, 683 Capital Management in New York, have been asking if the company is double-counting revenues. Mike Yerashotis, an analyst at Veritas Investment Research, an independent equity research firm in Toronto, writes in recent research notes that investors should have a “healthy degree of scepticism” about CGI’s earnings. Yerashotis, a chartered financial analyst, cites a “red flag” around complex accounting issues, including deferred revenues, contract losses and work in progress. 
 
 Other issues predate the Obamacare debacle. In November 2011, a whistle-blower sued the company, claiming that an internal CGI Federal “Rat Pack” planned a “shell-company scheme” designed to get around U.S. Housing and Urban Development restrictions on subcontractors processing federally subsidized low-income housing payments -- effectively defrauding the U.S. government. In an 2010 email, a CGI manager drolly dubbed the scheme the “flying nun,” a reference to the 1960s television sitcom featuring actress Sally Field as a nun with a shady past. CGI Federal manages more than 25 percent of the nation’s Section 8 low-income apartments and houses, earning some $50 million a year from the business. 
 
 “Wheeling ’n Dealin’” 
 
 CGI had humble beginnings, and those early years provide some clues as to how CGI Federal ended up getting ripped in headlines for the Obamacare flop. 
 
 Established by Serge Godin, now the company’s executive board chairman, in Quebec City in 1976, CGI began with small local projects, including a contract for data-processing at an Alcan aluminum smelter in Godin’s French-speaking hometown of Saguenay, a town of nearly 144,000 residents 285 miles north of Montreal. 
 
 The nascent field of information technology was on the verge of booming, and Godin jumped in, expanding CGI’s workforce, gobbling up smaller Canadian technology companies and landing contracts with Bell Canada, the National Bank of Canada and Quebec’s pension plan. 
 
 But Godin, who grew up one of nine children and now owns a champion harness-racing horse named ‘Wheeling ’n Dealin’, had bigger plans. He had long dreamed of jumping the border to get into the lucrative U.S. market. In 2004, after decades of smaller acquisitions of Canadian companies, he got his chance: CGI snapped up a faltering Fairfax, Va.-based technology and consulting company called American Management Systems for $858 million in cash. AMS, eventually renamed CGI Federal, was founded by five former Defense Department officials who had worked under Defense Secretary Robert McNamara during Kennedy and Johnson. 
 
 The deal was a turning point for CGI, doubling its size in the United States overnight. More importantly, it gave CGI -- until then generally locked out of bidding on U.S. federal contracts due to U.S. restrictions on foreign contractors -- a valuable U.S. subsidiary it could use to court American agencies for business. CGI, whose initials stand for Conseiller en Gestion et Informatique, began using the phrase “Consultants to Government and Industry” in corporate materials. 
 
 Riding its self-described “buy and build” strategy -- and determined not to be a Salieri to the Mozart of Accenture -- CGI Group in 2010 bought Stanley Associates, an Arlington, Va.-based contractor to the nation’s defense and intelligence agencies. The $1 billion deal doubled again CGI’s U.S. operations and made Godin, who owns some 31 million shares in the company, including a majority of CGI’s voting stock, a billionaire, according to securities filings. Still, there was a divide between Montreal-based CGI Group and its fast-growing U.S. subsidiary CGI Federal, as the parent company’s “hand’s off” approach largely left the growing U.S. subsidiaries to their own devices. “Montreal wasn’t really involved in Federal’s business,” says a former executive. 
 
 Godin stepped down as chief executive of CGI Group in 2006, handing the day-to-day responsibilities to Michael E. Roach, but he still wields enormous power over the company, according to current and former insiders. 
 
 Former executives say the company still very much reflects his unusual management philosophy. CGI has a slim policy manual and relatively little in-house training for its staff -- unusual for a company that now has 69,000 employees across 400 worldwide offices. Under a “make your own job” ethos, CGI Group generally does not give employees job descriptions or job titles; instead, it lumps their skills into a database and requires them to find their own projects within the company. As part of that “manage yourself” mandate, CGI doesn’t even track sick days, and its three-week “bench policy” requires an employee to find a new project in that time-frame or risk being fired. Most employees are identified as “consultants,” and are compensated through profit-sharing plans. All that traces back to Godin’s favorite saying: “Nobody ever washes a rental car” -- if you own it, you will take care of it. 
 
 “Everyone is kind of self-employed,” says Gordon Divitt, a senior executive consultant at CGI in 2007 who was chief information officer at Interac, a Canadian ATM company for which CGI ran technological plumbing. “You’ve got to manage yourself, which is very unusual at a company this size.” Godin, he says, espoused “a philosophical approach, rather than a traditional hierarchical approach.” 
 
 Many big corporations have “mission statements,” essentially feel-good boilerplate outlining their raison d’etre. CGI has a “Constitution,” with “chapters” laying out “Fundamental Texts.” The unusual manifesto-style document, available on CGI’s website and referenced in securities filings, extols what the company has long called “The CGI Dream: ...to create an environment in which we enjoy working together and, as owners, contribute to building a company we can be proud of.” “Serge believes CGI is truly unique,” says a person close to Godin. 
 
 Despite its atypical management philosophy, CGI Federal sought to cultivate a more mainstream image, in line with that of competitors like Accenture, Cap Gemini and IBM’s government-contracting division. CGI Federal staffed up on former government managers and executives from the Environmental Protection Agency and other agencies. In 2008, it created the CGI Institute for Collaborative Government -- a think-tank with policy specialists at George Mason University, Johns Hopkins University and Virginia Tech. 
 
 The institute reflects CGI’s growing vision of itself as being embedded in the government agencies it serves. Mark Abrahamson, the former executive director of IBM Center who served as an informal consultant to the CGI iteration, says contractors like CGI “get really attached to their mission -- they think they’re working for the public good and providing a public service.” A senior technology executive familiar with CGI puts it more bluntly: “They think they’re part of the government.” 
 
 AMS provided most of the executive and managerial manpower at CGI Federal, which almost overnight had a new book of federal contracts with the Department of Health and Human Services, Los Angeles County and other agencies. At the helm was Schindler and his team -- the ardent cyclists at the Nemacolin event in November. In January, the company promoted Schindler to president of U.S. and Canada for CGI Group, giving him a larger role overseeing CGI Federal within the parent company. 
 
 But with its history of botched federal contracts, including a $60 million screw-up for the Federal Retirement Thrift Investment Board, the overseer of retirement accounts for 4.6 million current and former federal employees, AMS has also supplied some headaches. 
 
 These days, says one insider briefed on the matter, CGI “doesn’t want to be associated with the AMS culture.” Asked about cultural differences, a CGI Federal spokeswoman said that there weren’t any and called both companies “introverted” and “heads down.” Asked to elaborate, the spokeswoman pointed to the “lack of advertising” by both companies. 
 
 But Peter Bourke, an American consultant who helped the two companies integrate, saw something different. “With the merger, both companies had the interesting challenge of merging two different cultures,” he writes in a CGI “case study” on his website. 
 
 The Double-Dip Sundae 
 
 Last year, CGI got into the Asian and European markets when it acquired Logica plc, an Anglo-Dutch technology firm, for $2.7 billion -- its biggest acquisition, one that made it the world’s fifth largest information-technology company. Robert Atkinson, president of the Information Technology and Innovation Foundation, a lobbying group, thinks CGI’s sights are set even higher: “What they would like to be is a Lockheed Martin -- the largest government contractor” in its industry. 
 
 Before this deal, most CGI employees were in Canada and the United States, with some in India, but it now had access to many more educated, lower-cost technology workers in Hyderabad and Bangalore. 
 
 With CGI’s global reach expanding, one Logica business the company jumped into was a Dutch crime-watch service called Burgernet, a “citizen’s network” that resembles a neighborhood watch group on technological steroids, with deep ties to the state. In a promotional video for Burgernet, two hoodlums on a red moped in the outskirts of Amsterdam snatch a brown purse from a woman pushing a baby in a stroller. A bystander witnessing the crime whips out his cell phone and calls a special Dutch government center to report the theft. A blond-haired dispatcher quickly texts a “keep-an-eye-out-for-these-guys” message to local shopkeepers and residents, and loops in the police. Calls fly back and forth, as “Pot,” a white-coated butcher, and “Mr. Smit,” a young man glancing out his apartment window, ring the center to report sightings. 
 
 The scenario, set to dramatic, campy music, is a striking example of how CGI, like most federal contractors, views the deep intertwining of business and federal agencies. CGI touts Burgernet (the name has nothing to do with hamburgers--it refers to the Dutch word for “citizen”) as “a great success,” with more than 1.3 million people in 382 cities and towns across the Netherlands signed up. 
 
 Logica is a very good business, in other words, but is it as good as CGI says it is? 
 
 In the past 15 months, CGI has three times made accounting adjustments to the deal adding up to $1.1 billion, according to an analysis of securities filings by Yerashotis, who covers the company for Veritas Investment Research in Toronto. 
 
 The adjustments mean CGI can record an additional $1.1 billion in pre-tax earnings, from related increases in revenue and decreases in expenses. That is something investors like, because earnings are a key driver of a company's stock price. But Yerashotis, who first flagged the issue last March, argues in a Nov. 14 research note that the economic picture behind CGI's earnings may be different: that the adjustments will not produce a corresponding amount of cold, hard cash -- a key metric to the health of corporate earnings. 
 
 Yerashotis suggests that while the move appears to be legal, it might make CGI’s earnings -- and share price -- appear stronger than they really are. 
 
 In a Nov. 14 research note, Bryan Keane and Ashish Sabadra, equity analysts who cover CGI for Deutsche Bank and have a “sell” rating on the stock, wrote that “we continue to question the quality of the company’s earnings,” and 683 Capital, a hedge fund in New York, has similar questions, according to a person briefed on the matter. The fund declined to comment. 
 
 Skeptical analysts have honed in on increases for accounting purposes regarding money related to contract work Logica has completed but for which it has not yet submitted bills -- so-called deferred revenue. Making the increases allows CGI to shrink that liability as Logica gets paid, and record a corresponding increase in income -- even though there is no corresponding additional cash coming in from those contracts because Logica already accounted for that revenue prior to its acquisition by CGI. In his research note, Yerashotis flags that gap, noting that over its last fiscal year, CGI’s earnings before interest and taxes nearly doubled, while its free cash flow appears to have increased by only 58 percent. 
 
 The disconnect could potentially dim prospects for shareholders, who probably know that CGI has never paid a dividend on its stock. 
 
 In their report, the Deutsche Banks analysts ask if CGI is effectively “double-counting revenues.” Deutsche Bank declined to make Keane or Sabadra available for questions. 
 
 None of that seems to worry most equity analysts. In recent weeks, more than a dozen brokerage firms have raised their target price on CGI’s stock. Scott Penner, who covers the company for TD Securities and is also a chartered financial analyst, has slammed the Veritas and Deutsche Bank analyses. Logica’s accounting prior to its acquisition, Penner wrote on Sept. 3, “was clearly a more aggressive way of recognizing revenue… yet Veritas (and now this broker)” -- meaning Deutsche Bank -- “spins it as CGI being more aggressive.” 
 
 A spokesperson for Ernst & Young in Montreal, which audits CGI, did not return calls requesting comment. 
 
 Asked about the accounting questions, Lorne Gorber, CGI’s senior vice president for global communications and investor relations, says doubters “don’t know our company. These guys are outliers… they’re looking at complex accounting issues, and investors have to wait and see” as the integration of Logica is completed “and assume the progress we’ve made will stand for itself.” 
 
 Rescued by The Flying Nun 
 
 In early 2010, CGI Federal managers in Fairfax, Va., caught wind of some potentially devastating news: HUD, one of its biggest government clients, was considering limiting the number of Section 8 low-income houses and apartments for which any one federal contractor could process payments. The biggest threat was the agency’s plan to put out to bid contracts that CGI Federal -- and others -- already held, and to limit profit margins at winning contractors to 10 percent. 
 
 At the time, CGI ran the technology governing payments for 25 percent of the nation’s Section 8 stock -- 275,000 multi-family houses and apartments. Working with local public housing authorities, as required under HUD rules, CGI Federal had generated up to $50 million a year in fees from processing Section 8 payments and performing annual inspections, among other tasks, and CGI wanted more of that business -- as much as three-quarters. At stake amid the HUD limits was $625 million in revenues over four years, according to a confidential April 8, 2010 memo. 
 
 Section 8 housing is largely a grim business in blighted urban areas. Nonetheless, CGI Federal’s profit margins on the business were large. According to a confidential three-page internal document obtained by Newsweek and dated January 28, 2010, they ran as high as 51.7 percent, more than four times the 10 percent profits cap that HUD wanted. Another worrisome point for CGI Federal: HUD’s Inspector General found that some public housing contractors, including those affiliated with CGI Federal, had over-billed the Section 8 program by tens of millions of dollars. 
 
 In the face of this threat, some CGI Federal managers came up with an idea. “I don’t know whether this is possible or allowable, but can we create new entities for selected jurisdictions that are a joined (sic) venture of a PHA and a CGI subsidiary,” wrote Panos Kyprianou, a director of consulting services in CGI in a confidential email dated January 29, 2010 and obtained by Newsweek. “If this holds then we can get away with the unit restrictions as these entities will somehow be independent from CGI.” 
 
 In other words, could CGI set up entities it secretly controlled, put public housing authorities in front of them, and then hide behind them when bidding on Section 8 contracts? “In other words,” Kyprianou wrote, “can we hide behind a subcontractor?” 
 
 CGI already had close ties to some public housing authorities, into which it has effectively embedded its employees. One example: the Oakland branch of California Housing Initiatives Inc recently listed Andrew Hill of CGI Federal as its contact person on its website. The link has since been removed. 
 
 In his email, Kyprianou dubbed the proposal “flying nun” -- a reference to the 1960s sitcom about a seemingly virtuous nun with a dirty past. “The idea was to use shell companies to do the bidding, get the award and them fold them into CGI,” says one former manager. “Our business model was going to be screwed unless we used sleight of hand.” 
 
 Marybeth Carragher, a CGI vice president of consulting, replied to Kyprianou’s email that same day: “I was thinking exactly -- well almost exactly -- that scenario.” She added that she wanted to “mock up a few potential scenarios for working around” the proposed HUD restrictions. 
 
 CGI says in a statement that an alleged contracting scheme “never existed; nor was it ever contemplated.” 
 
 A spokesman for HUD in Washington, D.C. did not return calls requesting comment. 
 
 A Man Called HUD 
 
 Benjamin Ashmore, a former HUD manager hired by CGI Federal around 2009, alleges that he was fired in 2011 when he objected to behind-the-scenes proposals to skirt HUD restrictions. He filed a whistle-blower lawsuit in late 2011 that asserts CGI Federal devised a “director shell company scheme” -- a front for hiding behind public housing authorities. His lawsuit, which is wending its way through Federal District Court in Manhattan, also alleges that CGI violated Securities and Exchange Commission fraud rules. 
 
 CGI Group argues in court papers that no SEC violations are involved because its unit, CGI Federal, is not a publicly traded company, but a judge rejected that argument. 
 
 Ashmore’s complaint alleges that CGI created an in-house team of managers to address the HUD restrictions. Formally dubbed the “Rapid Action Team,” or RAT, the group openly called itself “The Rat Pack” in a undated slide that features photographs of CGI employees next to ones of Frank Sinatra, Sammy Davis Jr. and Hollywood’s other original Rat Pack members. 
 
 In a statement, CGI Group said that “the alleged contracting scheme that Mr. Ashmore describes never existed; nor was it ever contemplated.” 
 
 Ashmore, now the founder, president and chairman of the National Family Civil Rights Center, an advocacy group with offices in Washington, D.C. and New York, says that when he left HUD to join CGI, he was “impressed with CGI and excited to join the company. It was like being dazzled by the Emerald City from afar.” 
 
 He says things turned sour when he saw what he alleges was a shell-company scheme. “Being at CGI was like peering behind the curtain and realizing that the Wizard of Oz was just a charlatan… behind the curtain, greed, deception and profits replaced common sense and ethical obligations to clients.” 
 
 Asked about Ashmore’s lawsuit, Garber says simply, “we’ll let the courts do their work--that’s what the whistle-blower function is intended to do.”
– HUD proposed a federal mandate Thursday that has some smokers fuming: a ban against lighting up in public housing nationwide, the New York Times reports. If the law passes, more than 3,100 public housing agencies would prohibit smoking in all living units, indoor common areas, administrative offices, and outdoor spaces near those other areas, the Washington Post notes. The reason: to keep residents safe from secondhand smoke, cut down on fire risks, and curb building maintenance expenses, per the Times. "The argument about secondhand smoke is over," HUD Secretary Julian Castro tells the paper. "It's harmful." Since HUD started encouraging public housing groups to implement bans in 2009, more than 600 agencies with at least 228,000 units have gone smoke-free, per the Post—but now the federal housing department wants to make it universal. A study by the CDC backs up the economics, predicting that a nationwide ban would result in annual savings of $153 million. The group that would feel the biggest burn: the NYC Housing Agency, the nation's largest public-housing group, with more than 400,000 residents in about 178,000 apartments, per the Times. But some worry that, without community support, it will be difficult to enforce, and they don't think the cops should be involved. "It should be resident-led," the chairwoman of the NYCHA tells the Times. HUD says it will listen to public comments on the potential law before making a final decision.