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Disaster Profiteering on the American Gulf Coast Fact Sheet


This fact sheet is compiled from the August 2006 report Big, Easy Money: Disaster Profiteering on the American Gulf Coast by Rita J. King.

The hurricanes that devastated the Gulf Coast in 2005 created a situation ripe for exploitation by corporations, a "free-for-all" maintained by government incompetence and corruption, especially by the Federal Emergency Management Agency (FEMA).

Amount appropriated by Congress for hurricane relief: $85 billion
Amount received by FEMA’s Disaster Relief Fund: $38 billion
Amount granted by FEMA in contracts so far: $6 billion

Contracts for small businesses made up only 13% of the net worth of all contracts granted by FEMA, and only 1.5% of all contracts went to minority-owned businesses. Only 16.6% of all contracts have been awarded to businesses headquartered in the three worst-hit states. Meanwhile, firms from Virginia alone have laid claim to more than 30% of FEMA’s largesse (again, in dollar value)

For example, the Department of Homeland Services (DHS) has paid out a combined worth of $3.4 billion to four companies, mostly for housing, or more than double their original value. The companies are Bechtel, CH2M Hill, Fluor and Shaw.

Under “Operation Blue Roof" these companies got almost $2,500 for each blue tarpaulin used to cover storm-damaged roofs in the worst-hit areas from FEMA — almost enough to pay for a new roof in many cases (and the tarps were only designed to last 3 months). The workers who actually tacked the tarp onto the roof (a two-hour job) were probably making closer to minimum wage.

Disaster profiteers in the Gulf Coast have used their friends in high places to secure uncompetitive contracts, and continue to try to evade responsibility for shoddy work and overcharge the federal government by millions of dollars. These are some of the worst corporate offenders (many of which first landed military contracts in Iraq):

Akima Site Operations

The Army Corps of Engineers awarded Alaska-based Akima a $39.5 million no-bid contract for providing portable classrooms. Local businessman Paul Adams of Adams Home Center, said he submitted a bid at half the price but was rejected.

Americold Logistics

Contracts totaling $1.7 billion were awarded to Americold, which provides ice and cold storage facilities, thanks to another former FEMA director-turned-lobbyist, James Witt. One of these was to deliver ice, a container of which moved from location to location by truck, for over 1600 miles before melting, unused.

AshBritt

AshBritt landed a $500 million contract for debris removal, with the help of the former head of the Army Corps of Engineers, lobbyists with close ties to Republicans, and Florida governor Jeb Bush. But the Army Corps was so disappointed with AshBritt’s performance that it threatened to terminate the contract.

AshBritt’s $500 million contract for debris removal amounted to about $23 for every cubic yard of debris removed. AshBritt in turn hired C&B Enterprises, which was paid $9 per cubic yard. That company hired Amlee Transportation, which was paid $8 per cubic yard. Amlee hired Chris Hessler for $7 per cubic yard. Hessler, in turn, hired Les Nirdlinger, a debris hauler from New Jersey, who was paid $3 per cubic yard.

Blackwater USA

This private security contractor, provided protection to FEMA employees arriving in the flooded city at a cost of $950 per guard per day.

Carnival Cruise Line

This company rented three ships to FEMA for $236 million for six months, which works out at $1,275 a week per evacuee. By comparison, the company sells cruise deals for $599 per person per week including entertainment. The ships were half empty most of the time, so the real cost was probably closer to $2,500 per person. Given that they were moored in one place and neither entertainment nor food was provided, the company must have cleared a nice profit.

Meanwhile the nation of Greece offered the use of ships for free. The Carnival Cruise Line proposal was promoted by the president's brother Jeb Bush.

CH2M Hill

The City of New Orleans initially awarded C2HM Hill a $23 million contract to remove flooded cars, despite receiving lower bids from local firms. The contract was rescinded after mounting criticism.  Along with Fluor, Shaw, and Bechtel, the company was the first to be awarded about $400 million (initially) in no-bid contracts to provide temporary housing following the hurricanes. All the companies are donors to the Republican party and are major contractors in Iraq

Clearbrook, LLC

Clearbrook billed FEMA $5 million dollars before the start of an $80 million contract to build camps for emergency personnel—plus another $3 million in overcharges

Emergency Disaster Services (EDS)

EDS won a $3.6 million FEMA contract for 30 days for providing meals to 200 to 400 emergency personnel—at the dubious cost of between $100 and $279 per meal

Entergy

Entergy is threatening to cut off gas and electricity to New Orleans unless the federal government grants it $718 million to maintain and rebuild its damaged infrastructure. Otherwise the company says it will have to charge the average ratepayer $8,943 in the form of a rate increase of at least 140 percent, or $45-a-month increase per household.

Meanwhile the company's parent earned up $10 billion in revenues last year and has $29 billion in collective assets. Its 2005 profits of $923.8 million alone could easily have covered the shortfall in New Orleans.

Fluor

Even though Fluor had a history of over-billing the federal government, FEMA awarded around $1.3 billion in contracts for temporary housing and other services. This was achieved in part by exploiting federal law intended to set aside contracts for minority-owned businesses

Kellogg, Brown & Root (KBR), a subsidiary of Halliburton

KBR’s $30 million naval contract for repairing military bases was secured with the help of the same lobbyist that got the Shaw Group’s foot in the door.

KBR subcontracted with a company called Tipton Friendly Rollins that sub-contracted the work to Kansas City Tree, who sub-contracted the work to Karen Tovar Construction, who did not pay their workers. It took a lawsuit by Mississippi Immigrant Workers Alliance to get them their back pay: $141,000. By that time it was too late, as Karen Tovar had threatened the undocumented workers with jail, so many of them had fled.

Kenyon, a subsidiary of Service Corporation International (SCI)

Kenyon, a funeral-services firm headed by a close family friend of the Bush clan, recovered 535 bodies in New Orleans, but billed the government over $6 million—or about $12,500 per victim. Local black morticians volunteered their services to help in recovery and processing of bodies, but were turned away by FEMA. Kenyon billed the state thousands of dollars for beef jerky, a DVD player, and model cars, to entertain its staff.

Murphy Oil

In St. Bernard Parish, home to multiple oil refineries and power plants, an estimated million gallons of oil saturated the parish post-Katrina from 44 spills. The worst was Murphy Oil’s Meraux refinery, a 100,000 barrel a day facility. Katrina knocked over a 250,000 gallon above-ground tank, sending an oily, muddy slick through the parish. Soil samples taken by the Louisiana Bucket Brigade show the presence of arsenic, heavy metals, pesticides, diesel, benzene and other toxic compounds.

It will cost Murphy $70 million to clean up the six miles of coastline sullied by the Meraux accident. The company has paid $30,000 per home in settlements with some homeowners; others are embroiled in a lawsuit with the company.

Shaw Group

A total of $600 million in no-bid contracts were secured for the Shaw Group with the help of a lobbyist who was President Bush’s former campaign manager and later the head of FEMA.

United Recovery Group (URG)

FEMA initially contacted URG without a competitive bid system, but ended up awarding URG a competitively bid contract for $369.7 million. However, a local company insists that its own bid was $137 million lower

Waste Management Inc. (WMI)

The Vietnamese community in New Orleans East once known as Versailles (for the nearby housing project) has re-opened 45 of 53 of its businesses. Ninety-five percent of the homes have been cleaned up. Unfortunately they live next to the Chef Menteur dump site owned and operated by Waste Management Incorporated (WMI). Debris haulers may “tip” their load into the landfill for $5 a cubic yard. With between 7,000 and 9,000 yards being hauled into the 87 acre facility each day, WMI is earning between $35,000 and $45,000 daily in tipping fees.

Click here for the press release, to see key findings, read the text version or to download the report.