[StBernard] Parish contracts investigated by FBI

[Westley Annis]

FBI investigating St. Bernard contracts
By Karen Turni Bazile 
St. Bernard/Plaquemines bureau 

The FBI has launched a multi-faceted investigation into post-Hurricane
Katrina spending in St. Bernard Parish, examining public contracts including
a $370 million debris pick up deal that parish officials granted without
bids five days after the storm and gave again to the same firm later last
year despite receiving lower offers, according to interviews with
competitors and a parish official who have been questioned by federal
agents. 

Agents are also probing into parish spending on temporary trailers, employee
overtime, and a no-bid contract for removal of hazardous waste and sewage,
the interviews indicate. 

Contractor Lamont "Whip" Murphy, whose Murphy Construction Inc. was one of
11 firms that unsuccessfully sought the debris contract, said the FBI
questioned him and a business partner a few weeks ago, seeking details on
the way the debris contract was awarded. 

Larry Ingargiola, the parish director of the Office of Homeland Security and
Emergency Preparedness, said three FBI agents interviewed him last week on a
range of topics including the debris pick-up deal, as well as the parish
spending on temporary trailers, overtime, and the hazardous waste and sewage
removal contract. 

James Bernazzani, special agent in charge of the FBI's New Orleans office,
said he could not comment "on a pending investigation." U.S. Attorney Jim
Letten also declined to comment. 

Word of the FBI investigation comes after months of public criticism from
contractors and private questioning by some parish officials, about how the
parish awarded the contract to collect debris from public and private
property to Alabama-based United Recovery Group, the same week Katrina
flooded the entire parish. 

Parish President Henry "Junior" Rodriguez, who signed that original contract
as an emergency measure on Se pt. 3, said the FBI has not interviewed him
and that he was not aware of the FBI investigation. 

"I don't give a f-- if the FBI is investigating. If an FBI investigation
would clear up everything and get the progress started in St. Bernard, I
would welcome it. The feds need to do their job, but please hurry it up so
we can get moving." 
Ingargiola said the parish's has nothing to hide and did nothing wrong. 

"They were on a fishing expedition for any information I had," Ingargiola
said of the FBI agents who met with him at his temporary FEMA trailer in
Chalmette. "Anytime you have this amount of money out, somebody is going to
be looking at everybody. I actually watch my P's and Q's." 

J.S. Lawrence Green, URG's chief operating officer, said the FBI has not
contacted the firm and that the company has done nothing wrong. 

"We would welcome them to come contact us," he said of the FBI. "I would
hope the federal investigators would look into any contract where federal
dollars are spent to this magnitude."

St. Bernard is one of only two parishes in the metro area that decided to
hire their own debris removal company after Katrina instead of letting the
Army Corps of Engineers handle the job. Plaquemines Parish is using its own
firm for some parts of the parish and letting the Corps pick up debris in
the rest. 

St. Bernard officials said hiring their own firm gave them more control over
the contract and would ensure efficiency. But seven months after the storm,
URG has amassed $70 million in mostly unpaid bills because the contract has
been mired in controversy as the Federal Emergency Management Agency
continues to haggle over specific charges. URG stopped debris pick-up March
11, saying it could no longer afford to work while waiting for government
reimbursement, though collections may soon resume after the state on
Wednesday said it will pay some of the company's bills. 

When Rodriguez signed URG's no-bid con tract four days after Katrina, most
of the parish was still inundated. Parish officials said URG representatives
arrived by helicopter before state and federal emergency responders,
offering enough equipment and manpower to begin clearing streets. 

URG executives who flew into St. Bernard after the storm were representing
four firms: Cabal Industries and Compliance Envirosystems, both of
Louisiana, and Alabama companies IED and McInnis Services, according to
parish documents. Rodriguez signed the Sept. 3 contract with the four firms,
which then proceeded to register URG as a joint venture on Sept. 19,
according to records of the Louisiana Secretary of State. 

Murphy said the FBI inquired about that initial process. He declined to give
more details, but said his company had also approached parish officials
shortly after the storm looking to help in the clean up. No contract came
out of that effort, he said. 

Green said his group of business partners had no relationships with any St.
Bernard official before the hurricane. He said they came to St. Bernard
inmediately after Katrina "because that is where the water was." 

Council Vice Chairman Joey DiFatta, who was then the council chairman, said
he met with URG representatives in the harried days after the storm. 

"They came in with a plan - with a map of St. Bernard to get the mud off the
streets and to get the streets passable. They were the first people to offer
to get our parish usable again. It made sense to us to jump the gun and gets
things started as soon as possible," he said. Councilman Craig Taffaro said:
"If it weren't for them coming in to begin clearing the roadways of the
sludge that settled on the streets from the storm surge and made it unsafe
to drive on the streets, it would have taken a lot longer for the parish to
become accessible to residents." 

The initial award of the contract, however, raised criticism in the
following months from po tential competitors and even from some council
members who privately complained that they were not part of the initial
process to award what will likely be one of the largest post-storm contracts
in the parish. 

Responding to the criticism, the Parish Council reopened the debris contract
for competition and 12 companies submitted proposals, including URG and
Murphy Construction. Administrators who ranked the responses gave URG the
top score and in November the council, in a 6-1 vote, picked the firm and
authorized Rodriguez to negotiate a new contract. 

Only council member Lynn Dean voted against selecting URG, saying their
offer was too costly. 

"It was way too high a price, and when you don't go with the low bidder, you
know there is something phony going on in there somewhere," Dean said. 

Councilman Mark Madary said he opposed the contract at an emergency council
meeting shortly after Rodriguez signed it, but that he supported it in
November. Still, h e said he has questions about the deal and that he is not
surprised to hear the feds are investigating. 

"I would think that they would be," he said. "Obviously there are problems
with it. I always objected to the cost. They should adjust their costs to be
more in line with the other areas.... FEMA should deduct those expenses they
think are unrealistic, and let us continue on. If URG is not happy with that
arrangement, then they should bow out and let somebody else come in and take
it up with FEMA."

The council's decision to keep URG was mired in controversy as well. Just
after the council vote, Murphy Construction filed a protest with the parish,
arguing that URG's prices, when applied to the estimated volume of debris to
be picked up, amounted to an offer as much as $150 million higher than
Murphy's, according to the filing. URG disputes the figure. 

Murphy officials also filed a complaint in December with U.S. Sen. Mary
Landrieu, saying their offer would ha ve saved taxpayers at least $137
million. 

"It is criminal to allow FEMA and St. Bernard Parish to spend over
$137,882,550 more than is required to clean up the storm debris in St.
Bernard Parish," Murphy wrote in its letter to Landrieu. "With money being
so tight in Washington, these millions could be a windfall for the residents
of St. Bernard." 

Landrieu's office did not return calls seeking comment. 

Murphy officials said they also filed a complaint with the Metropolitan
Crime Commission, a non-profit government watchdog. Anthony Radosti, the
commission's vice president, said he couldn't comment on a particular
complaint, but that his agency routinely refers such grievances to the FBI. 

Murphy is not the only contractor complaining about the process. Bob
Isakson, president of DRC Emergency Services of Mobile, Ala., another firm
that sought the job, said he was dismayed over the award of the debris
contract to URG, saying his firm's quote was lower for nearly every line
item. 

"I'm shocked that they would have selected a company that's new and that had
very little previous experience, and who had a higher price, over us,"
Isakson said. 

Green said that he disagrees with Murphy's assertion that their contract was
cheaper than URG's proposal and that there is no wrong doing. He could not
be reached Wednesday to comment on DRC's assertions. 

"It's easy to Monday-morning quarterback the situation," Green had said
earlier. "I don't think anyone knocked on the parish's door for four weeks
after the storm (to help with debris)."

Sources close to the investigation said the FBI took an interest in the case
in part because URG got the job in November despite not having the lowest
prices. 

Parish documents related to the offers received for the contract do not make
it clear whether Murphy presented the lowest offer among the 12 firms
competing. But the documents show the initial difference between offers f
rom URG and Murphy was even higher than Murphy first calculated. 

According to a parish analysis of the two offers that considers the volume
of debris to be collected, URG's initial offer amounted to $806.6 million,
while Murphy's totaled $426.5 million, parish documents show. 

Rodriguez, however, called URG's contract "fair." He signed a new contract
with the firm Dec. 9 after the council picked the company. But Rodriguez
said the parish has since negotiated URG's prices down and reflected the
changes in a March 7 amendment to the deal. Administrators said they have
also lowered their estimates of debris to be collected, resulting in further
savings. 

But the parish's own analysis shows that even URG's lower prices remain
higher than Murphy's. According to the parish comparison of the two firms'
offers, which incorporates the smaller debris volumes, URG's reduced
contract is valued at $369.7 million. That's $22 million above the $347
million Murphy would be cha rging for the same services, based on the firm's
initial prices and the revised debris volume, according to parish records. 

Murphy said the fact that URG's costs have been lowered doesn't justify the
parish's decision to go with a company whose initial offer was millions of
dollars more than many of its competitors. 

"Why didn't they negotiate with us?" Murphy said. "We would have been a hell
of lot more cheaper." 

Parish officials said the debris contract is a professional service, and
therefore they were not legally required to take the lowest price. They said
they also had doubts about Murphy's capacity to do the work.

The federal investigation has extended to other parish contracts as well. 

Ingargiola, who said he got a call Thursday and met later in the day with
three FBI agents, said they asked about the work being done by a hazardous
waste contractor, ACTI of California, which also is responsible for hauling
sewage from non-functioning l ift stations to a processing plant. That
contract, worth an estimated $15 million, was also awarded in a no-bid
emergency process, but Ingargiola said that work has been advertised for bid
now. He did not say when a new deal may be awarded. 

ACTI operations manager James Karsten said the group stopped doing all
parish work, except sewage removal, a while back. Karsten said he didn't
know the FBI had been looking into the contract and that he hasn't spoken to
any investigators. 

Ingargiola also said agents asked about the parish's procedures for
approving employees' overtime since the storm, and that he directed the
agents to another employee to address their questions about trailer
purchases. The parish has ordered thousands of trailers for residents from
Century Investement Group of Connecticut. Parish officials said the firm
approached them last year with a proposal, and they telephones competitors
seeking other offers before selecting Century. 

Jim McGuir e, a partner with Century, said he knows FBI agents questioned
Ingargiola about the trailer purchases, but he thinks that is to be expected
given the amount of federal assistance flowing through the parish. 

"I think they are questioning anything the parish did and how they did and
why they did it, which is understandable," McGuire said. "I don't think they
are investigating the validity of our contract." 

McGuire said he has not been contacted by the FBI. Ingargiola said the
parish faced extraordinary situations when it selected contractors after the
storm. 

"We were working our asses off during the storm," Ingargiola said. "I don't
think anyone intentionally did anything wrong. All we were interested in is
saving lives and evacuating people and whatever we had to do, we did...
Anytime you have this amount of money out, somebody is going to be looking
at everybody." 

Rodriguez said he's not worried about the FBI sniffing around. 

"As far as I'm concerned they can look at everything," he said. "We have
nothing to hide. We are doing the best we can. If anyone has done anything
wrong, then that is their problem, not mine." 

Staff writer Gordon Russell contributed to this report. Karen Turni Bazile
can be reached at kturni at timespicayune.com or (504) 352-2543.