By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.
Senators Elizabeth Warren, Richard Blumenthal, Bernie Sanders, and Dick Durbin last week sent a letter to John Kelly, acting inspector general (IG) of the Department of Homeland Security, asking him to expand the ongoing investigation into the Federal Emergency Management Agency’s (FEMA) contracting in Hurricane Maria relief efforts in Puerto Rico.
The senators asked the acting IG to probe new reports of waste and abuse associated with the contractors hired to execute and manage the $1.2 billion Tu Hogar Renace (Your Home Reborn) program, created in October 2017 to provide temporary and immediate repairs for hurricane-damaged homes that would “return the home to safe, habitable and functional conditions, “ according to a press release issued by Warren’s office on 6th December:
In their letter to the DHS IG, the senators expressed concern about a recent New York Times report that “more than 60 percent of what FEMA is spending in the program” to repair up to 120,000 homes is not paying for these repairs but is instead “going toward overhead, profit and steep markups.” The report also found that that while homeowners were approved for “up to $20,000 each in aid,” a review of hundreds of invoices and contracts indicates that-in nearly every case-they received less than half of that.
The Bezzle
Regular readers are well aware of what a debacle the Trump administration’s response to Hurricane Maria has been (see, for example. my previous post, Puerto Rico: 1427 Hurricane Maria Deaths, which includes several links to Lambert’s thorough and wide-ranging coverage of this catastrophe). The island was a neoliberal casualty long before the storm hit (and that assault predated the Trump administration).
In the wake of Hurricane Maria, Senators Warren and Sanders have previously introduced legislation to restructure Puerto Rico’s debt (as I discussed in the post cited above). Yves succinctly cut to the crux in a previous post, Wall Street Got a Bailout, Why Not Puerto Rico?
The Grey Lady’s expose — cited in the Senators’ letter– must be read to be believed, $3,700 Generators and $666 Sinks: FEMA Contractors Charged Steep Markups on Puerto Rico Repairs:
Homeowners, who were approved for up to $20,000 each in aid, in nearly every case received less than half of what they were approved for, while layers of contractors and middlemen took the rest, a review of hundreds of invoices and contracts associated with the program shows.
The significant costs of transportation, warehousing, insurance and other services that are built into the prices for repairs are not unusual for FEMA disaster relief programs, which reflect the substantial expense of operating in disaster zones. But in Puerto Rico those costs were often so much greater than what would have been possible if homeowners had done the work themselves that they caused a public uproar.
A local opposition legislator, Luis Vega Ramos, called the housing program, which is operated by the Puerto Rico Department of Housing with FEMA funding, a mixture of “incompetence and corruption.” He called for federal investigators to examine the contracts awarded to repair companies to make sure the government was getting what it paid for.
The Grey Lady dug into the details, which document stunning examples of hogs feeding at the trough:
Contractors have said that the rates they collect cover a variety of expenses, including shipping fees, workers’ compensation insurance, vehicle and warehouse rental, taxes and profit. But prices charged for equipment and appliances often bore little relation to what was charged on the retail market, even in storm-ravaged Puerto Rico.
According to Department of Housing records, FEMA paid for about 12,400 people to receive generators at a cost of $3,700 each. The 5,500-watt portable devices and supplies they came with cost the contractors about $800 each, other documents show. FEMA paid $666 apiece for new bathroom sinks, but the contractors who actually bought and installed them paid $260 apiece. FEMA paid almost $4 a square foot to repair roofs; the work was done by subcontractors for $1.64 a foot.
The deal the Department of Housing signed required smoke detectors in every sleeping area, so each of the 122,000 houses in the program was equipped with the devices, for which FEMA was billed $82 apiece. A receipt reviewed by The New York Times showed that one subcontractor ordered them in bulk from an Ace Hardware store in the city of Aguadilla for $6.99 each.
I encourage readers who have access to the NYT to read the article in full – there’s a limit to what I can quote, and I selected only the juiciest bits.
What Is to Be Done
I’ve left off describing the political connections of the successful contractors, and will turn now to the McClatchy account, Senators want broader probe of FEMA contracts in Puerto Rico:
The senators also want the inspector general to dig deep on FEMA’s contracting practices that have allowed inexperienced bidders to win large and often vital contracts, an area on which McClatchy’s reporting shined a light. And they want the inspector general to review contracts with two winning bidders in the Tu Hogar Renace program that they said have connections to the Trump administration.
One of them, Adjusters International, whose senior vice president is Daniel Craig, who had been the administration pick to be FEMA’s deputy director. He withdrew from consideration last year after NBC revealed that a secret government report concluded that while serving in the Bush administration he falsified government travel and timekeeping records.
Excel Construction, the other company of concern to the senators, donated $100,000 in 2016 to the Trump Victory Committee and later was one of seven companies awarded a lucrative Tu Hogar Renace contract.
FEMA had no immediate reaction, nor did Excel’s parent company in Baton Rouge, La. Calls to Adjusters International in Utica, NY, were not returned.
Senators’ Previous FEMA Inquiries
In addition to the Sanders/Warren debt restructuring proposal mentioned above, these Senators have also otherwise reacted to the Trump administration’s botched response to Hurricanes Irma and Maria in Puerto Rico:
The letter is the senators’ latest inquiry into FEMA’s contracting process for the relief and recovery efforts following Hurricane Maria. Last year, the Senators called for an investigation of FEMA’s decision to award over $30 million in contracts to Bronze Star LLC for temporary roofing materials in Puerto Rico that were never delivered. In February 2018, the senators sent a second letter regarding the botched $156 million contract awarded to Tribute Contracting LLC for emergency meals provided after the hurricane, and in October 2018, Senators Blumenthal and Warren sent the DHS IG another letter regarding FEMA’s awarding of contracts to companies with little or no experience in conducting the work assigned to them.
Whether these efforts will trigger an expanded IG investigation – or more importantly, better FEMA policies – is unclear, however. George W. Bush paid a political price for his administration’s inept response to Hurricane Katrina. So far, the Trump administration’s spectacular incompetence in Puerto Rico hasn’t attracted nearly the same level of scrutiny.
2018-12-06 FEMA Contactors Letter
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I suppose insane overbilling and padding with simple hardware supplies for disaster “services” is SOP, much the way it has always been with military contracting
Does PR get a special colonial surcharge?
Exactly. I would have been more shocked if this wasn’t happening. Our whole government is one big graft machine and Trump is about the last person in the world I would expect to put a stop to it.
Goldman Sachs and Albertis (A Spanish company) have taken advantage of Puerto Rico by instituting lucrative toll roads; corruption runs rampant in PR and Puerto Rico has its own share of corrupt officials besides.
Actually Puerto Rico does have its own Colonial surcharge – the Jones Act. It was waived for a couple of weeks after it was obviously driving up the hurricane relief costs but the waivers were quickly allowed to expire. The Jones Act requires US-built ships among other US requirements. What are the odds that new ships are being built in American shipyards given the steel tariffs now in place?
https://thehill.com/blogs/congress-blog/politics/409752-damage-done-to-puerto-rico-by-the-jones-act-illustrates-the-need
Vancouver and Victoria in British Columbia are major beneficiaries of the Jones Act. Since all the cruise ships are foreign built, flagged, and crewed they need to stop in a foreign port between US stops. So any cruise ship that travels between two American ports on the Pacific Northwest (e.g. Seattle to Alaska) has to stop in one of those two cities to comply with the Jones Act. So the tourist traffic near the waterfront in those cities is booming.
Similarly, cruise ships stopping in Puerto Rico after embarking from Florida need to stop at other foreign ports along the way.
While the left hand wants audits, the other left hand wants more money released. From El Nuevo Dia,
The Senators also want to continue a waiver for local cost-share requirements, thus reducing the desire for local accountability.
Because we wouldn’t want to remove the shackles.
As the NY Times points out, the Puerto Rican Department of Housing manages the FEMA money. From El Nuevo Dia,
With these additional layers of managers and consultants, it’s not too difficult to see how a $1.64 sq.ft. roof becomes a $4 sq.ft. roof.
I believe most or all of the Puerto Rico government financial abilities have been taken over by a Congressionally-mandated external board in 2016. The governor is just an advisor to this board. So if there is corruption in the execution of these contracts, both the FEMA and the PR entities are under federal oversight.
https://en.wikipedia.org/wiki/PROMESA
Except the Oversight Board isn’t doing it’s job, regardless of whether their mandate is good or bad.
What can the Oversight Board do?
Careful with the blame game.
One must do full systems analytics in order to assess and identify systemic failure. Then one must identify RESPONSIBILTY for the systems and then RESPONSIBILITY for the human performance during any given event using the tools, including system, then in the moment available.
This analytic tool also applies to assessing responsibility for success.
In any event, that circumstance in Puerto Rico was a far bigger fiasco than you suggest in this post albeit the discussion in your post is certainly valid. E,g, was there not a dead bank or two in Puerto Rico and the electric system bonds a bit dodgy long before that event. I would also observe that Puerto Rico may be sovereign but it sure ain’t one of those sovereign states in USA.
The gvt structure of PR is not and has not been sustainable for many decades.
The number of municipalities(fiefdoms) has been excessive and lead to too many Chiefs and each with their own services and infrastructure to support.
Just the money wasted on this crazy duplication of projects , many within a couple of miles of each other was and is foolish.
Tons of money(debt) was wasted and now the calls for “rebuilding” are to rebuild this insane set of projects again.
PR is a hopeless case in my experience, there is no amount of funding that can overcome a large part of the culture that see the gvt “coupon” as a lifestyle choice.
Layer that on top of the outrage of corruption in many gvt offices and you had this disaster before the last set of storms.
I have lived here for many years and love the place, but throwing more money won’t fix it now.
Greed.
Send criminal middle men to jail. Call it welfare fraud or something
It doesn’t happen because kickbacks are involved.
While the IG is at it can he also investigate the Haiti “relief” efforts. Particularly the graft surrounding the Clinton Foundation?