US: Private Sector Poised to Reap Windfall from Katrina

BATON ROUGE, LA. - Private contractors, guided by two former directors of the Federal Emergency Management Agency and other well-connected lobbyists and consultants, are rushing to cash in on the unprecedented sums to be spent on Hurricane Katrina relief and reconstruction.

From global engineering and construction firms like Fluor Corp. and Halliburton, to local trash removal and road-building concerns, the private sector is poised to reap a windfall of business in the largest domestic rebuilding effort ever undertaken.

Normal federal contracting rules are largely suspended in the rush to help people displaced by the storm and reopen New Orleans and the Gulf Coast. Hundreds of millions of dollars in no-bid contracts have already been let, and billions more will flow to the private sector in the weeks and months to come. Congress has already appropriated more than $62 billion for an effort that is projected to cost well over $100 billion.

Some experts warn that the crisis atmosphere and the open federal purse are a bonanza for lobbyists and private companies and are likely to lead to the contract abuses, cronyism and waste that investigations have uncovered in postwar Iraq.

"They are throwing money out, they are shoveling it out the door," said James Albertine, a Washington lobbyist and past president of the American League of Lobbyists. "I'm sure every lobbyist's phone in Washington is ringing off the hook from his clients."

Joe M. Allbaugh, a close friend of President Bush's, the president's 2000 campaign manager and the FEMA director from 2001 to 2003, and James Lee Witt, an Arkansan close to former President Clinton and a former FEMA director, are now high-priced consultants, and they have been offering their services to companies seeking or holding federal contracts in the post-Katrina gold rush.

Allbaugh said that he was helping private companies, including his clients, cut through federal red tape to speed provision of services and supplies to the storm-wracked region. Two of his major clients, KBR, a subsidiary of Halliburton, and The Shaw Group, already are at work on disaster response efforts. Cars with their logos were seen Friday at the Baton Rouge headquarters of FEMA.

Allbaugh said that he had played no role in helping Shaw or KBR get the work, insisting that help with federal contracts is not a service he offers to clients.

"A lot of people want to connect the dots, but the dots don't exist," he said, in a telephone interview from Texas. "I don't do federal contracts - end of story."

Clients of Witt, who is advising Louisiana Gov. Kathleen Babineaux Blanco on managing the crisis, are also in position to profit.

Among the clients are Nextel Communications, Whelen Engineering, a manufacturer of warning systems, and Harris Corp., a telecommunications equipment company.

Witt did not respond to a request to comment specifically on the role of his clients in reconstruction projects.

One of the most immediate tasks after Katrina hit was repair of the breaches in the New Orleans levees.

Three companies - the Shaw Group, KBR and Boh Brothers Construction of New Orleans - have been awarded no-bid contracts by the Army Corps of Engineers to perform the work.

Vice President Dick Cheney was chief executive at Halliburton before Bush tapped him to be his running mate in 2000.

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