Tuesday, March 27, 2007

Storm work deals go to inside players -- Time Picayune, Nov. 26, 2005


LENGTH: 2747 words

HEADLINE: Storm work deals go to inside players;
Contracts could hurt state's image

BYLINE: By Gordon Russell, Staff writer


Weeks after Charles Rice left his post as chief administrative officer of the city of New Orleans in June, the city sanitation department sought to hire a contractor for storm debris removal.

The day before Hurricane Katrina made landfall, Mayor Ray Nagin signed a contract potentially worth tens of millions of dollars with Omni Pinnacle of Slidell.

Omni's offer wasn't the cheapest of the six offers the city received. But the city didn't have to pick the low bidder, an experienced firm, because the job was considered a professional service rather than a finite task.

City sanitation director Veronica White, who oversaw the selection process, was hired into her city post by Rice. Rice, meanwhile, has turned up on Omni's payroll in his new position as a lawyer. Omni has also been represented in contract talks with the city and the Army Corps of Engineers by Rice's brother, Terrence Rice, according to a corps official.

The Rices' work for Omni is just one of many instances in which the politically connected have landed work as subcontractors in the few hot economic markets of post-Katrina New Orleans. Whether the job involves debris removal and staging, roof tarping, trailer sales or building inspection and cleanup, people with familiar names and faces are making money -- often in areas where they seemed to have no particular expertise before the storm. It's a sign, observers say, that perhaps the Louisiana way wasn't washed away with the storm's floodwaters.

Apart from the Rices, those who have found work related to Katrina's aftermath include a powerful lobbyist, a couple of state representatives, and, for a time, a St. Tammany Parish Council member. With the exception of the St. Tammany contract, which also involves Omni Pinnacle and which resulted in the filing last week of federal extortion charges against Councilman Joe Impastato, none of the contracts appears to involve anything illegal.

The impression that the Louisiana political and business worlds are inextricably entwined could hurt the state's chances of getting the federal help it needs, said Rafael Goyeneche, president of the Metropolitan Crime Commission.

"Our recovery depends on every dollar coming into this area to be used effectively and efficiently to rebuild our state and city," said Goyeneche. "I can't emphasize enough how precarious our position is."

Shaw Group Inc.

In spite of its ties to the Rices, Omni is far from being at the top of the politically connected contracting food chain.

That distinction arguably belongs to the Baton Rouge-based Shaw Group Inc., which has landed deals worth at least $300 million in areas as diverse as dewatering, tarping and building inspection. While the company's bona fides have not been publicly challenged -- it is one of the state's few Fortune 500 companies and has expertise in infrastructure repair -- competitors have attacked the size and value of some of the contracts Shaw has landed.

Shaw's political connections are well-known. Until just weeks ago, its chief executive officer, Jim Bernhard, was chairman of the state Democratic Party. Bernhard also was a strong supporter of Gov. Kathleen Blanco in the 2003 gubernatorial runoff, and he was chairman of Blanco's transition team.

For good measure, one of the firm's lobbyists is Joe Allbaugh, who was George W. Bush's chief of staff when Bush was governor of Texas, and ran Bush's successful 2000 presidential campaign. Allbaugh then served as director of the Federal Emergency Management Agency under Bush until 2003.

The company has said it has received the work because of its experience in post-disaster services. But responding to criticism about the contracts, the Federal Emergency Management Agency last month pledged to rebid a $100 million contract with Shaw covering a variety of services that the agency awarded with little or no competition.

Feeling the sting, perhaps, Shaw has recently launched a public-relations campaign including television ads in which Bernhard, using a highlighter pen to scrawl across the screen, touts the firm and its contributions to the state's economy.

Capitol clout

Compared with the Shaw Group, many of the other politically connected companies and individuals who have landed storm-related work rank as small fry. But that doesn't mean they're scrounging for scraps.

Randy Haynie, who is often described as the state's most influential lobbyist and who also has enviable access to the Blanco administration, landed a subcontract with ECC Operating Services, one of four companies that each received debris-removal contracts worth up to $500 million apiece with the Army Corps of Engineers.

Corps documents indicate that Haynie was hired for public relations, but the corps has refused to release specific figures on what any subcontractors, including Haynie, have been paid. Haynie did not return phone calls seeking comment.

Haynie's work is no doubt far less lucrative than three deals worth $108 million landed recently by a motorcycle shop owned by the father and uncle of state Rep. Gary Smith, D-Norco. Under the contracts, Bourget's of the South, which until recently lacked the state license needed to sell new trailers, is to supply FEMA with 6,416 travel trailers, according to FEMA.

Rep. Smith is the registered agent for the company, according to state records. But his father and uncle have said that their success in winning contracts has nothing to do with the political clout of Rep. Smith, who sits on the House Special Committee on Disaster Planning, Crisis Management, Recovery and Long-Term Revitalization.

State records show that Rep. Smith also serves as the agent for a firm called Alliance Construction, which incorporated weeks after the storm and soon landed a subcontract for debris hauling with Ceres Environmental Services Inc., one of the region's four main haulers. Federal officials have so far been unwilling to divulge the amount of such subcontracts.

Rep. Smith did not return calls about that contract.

One other state legislator, state Rep. Troy Hebert, D-New Iberia, also has his hand in the world of debris removal. Hebert has said he has worked as the subcontractor of a subcontractor of a subcontractor in hurricane debris removal. But he scoffed at the notion that political influence had anything to do with his landing work.

"I've been having a tractor since I was 14," he said. "I worked cleaning up Hurricane Andrew. If I was on the level of (a first-tier sub), then you could accuse me of that."

Local players

Debris pick-up is also the job for which the city of New Orleans hired Omni Pinnacle, the firm Charles Rice represents.

City officials denied that Rice played any role in Omni getting the contract in August. Rice said he has never negotiated with the city on Omni's behalf. And Terrence Rice said he has only attended meetings on behalf of his own firm, T. Rice and Associates.

In selecting Omni, the city bypassed DRC Emergency Services of Mobile, Ala., a company with debris removal contracts in many parts of the country that submitted the lowest price.

City sanitation director Veronica White said price was "one of several evaluation criteria on the proposal," and that Omni "ranked the highest when all criteria were evaluated." She did not say which factors put Omni over the top.

But DRC's officials are raising questions about Omni's selection.

"I'm shocked to learn that we were the low bidder and were not awarded this contract," Bob Isakson, head of DRC, said recently when told about the city's choice. "I'm certain our qualifications were more than sufficient."

It's unclear when Charles Rice began working for Omni. He and Omni's owner, Ronald Reine, both said their relationship sprang up after the firm received a city contract as Katrina approached New Orleans. When asked for a copy of Charles Rice's contract, however, Reine said through a spokeswoman that he could not locate it. Charles Rice and Reine also said Rice never contacted city officials while representing Omni.

Omni's position as the city's main debris collector lasted until Sept. 23, when the parties agreed to suspend the deal because the Corps of Engineers' policy is to pay only 90 percent of the cost as long as the city continued to supervise debris removal. To have the corps pick up the full cost, it would have to oversee the contract.

The corps' top contractors for that work in New Orleans were ECC and Phillips & Jordan Inc., two national disaster-management firms. But that did not mean Omni was out.

On Sept. 17, an agreement was struck under which Omni would become a "first-tier" subcontractor under both ECC and Phillips & Jordan, said Allen Morse, a debris expert for the corps. He said Omni was represented at the meeting by Reine and Terrence Rice. The city was represented at the meeting by White of the sanitation department, Morse said.

"They were trying to see if Omni could be absorbed by the prime contractors," Morse said.

Through spokeswoman Betsie Gambel, Reine said Terrence Rice had never represented him at anything except perhaps a job fair. Told that a corps official had said otherwise, Reine -- whose company walked off the job Friday citing unpaid invoices -- retorted: "Is this the same corps that owes me $20 million?"

Terrence Rice, through e-mail, said that the only meetings he attended "were on behalf of T. Rice and Associates and only T. Rice and Associates."

The Rices' work for Omni when the firm had a direct contract with the city did not necessarily violate any ethics rules, which say high-ranking public officials cannot do business with an agency they served until two years after the date they left the agency.

Charles Rice said he was well aware of such laws. He said he even sought recently an advisory opinion from the ethics board as to whether he could represent clients with business before the City Council or other city agencies.

The board said unequivocally that he could not do business with the city administration and initially forbade him from working with the council and other agencies. Rice said the board intends to revise the latter part of that opinion.

But in any case, Rice said, his only meetings on behalf of Omni had been with corps officials.

"The facts are, I appeared at a meeting with the Corps of Engineers and Omni Pinnacle, and I attended a meeting between Omni Pinnacle and Phillips & Jordan," Rice said. "I have never, and I repeat never, appeared at any meeting between Omni Pinnacle and any city officials."

Reine likewise said there was no connection between his hiring of Charles Rice and his success at City Hall.

"I did not know either Terrence or Charles until way after the city contracts were signed," Reine said through Gambel. "Since I met them, I have had minimal contact with them. Terrence represented me in a job fair. Charles has reviewed some contracts.

"No one ever spoke with the city on my behalf. I've never had any firm lobbying on his behalf for this or any city contract."

Federal charge

The contract Omni had with New Orleans is not the only controversial deal involving the firm and a political figure. Another contract in a different parish, has sparked the first post-Katrina public corruption indictment in south Louisiana.

Federal prosecutors last week charged St. Tammany Councilman Joe Impastato with extortion after he allegedly told a St. Tammany Parish landowner that he could set him up with a subcontract through Omni for a price. Impastato has denied that he's done anything illegal.

According to the federal complaint, Impastato demanded half the subcontract's $200,000 value. While Omni has not been charged with any wrongdoing, the complaint suggests that Impastato was able to deliver favors and retribution through Omni.

The contract that Impastato allegedly promised the landowner indeed materialized, the federal document said. But after the landowner refused to pay the graft, Omni stopped using the landowner's property, the complaint said. Prosecutors declined to directly answer questions about whether they believed Omni was complicit in the alleged scheme.

Reine declined to comment on the matter, citing the ongoing investigation. He said his company is not under scrutiny.

Subcontract awarded

Terrence Rice wound up with a subcontract from ECC when that firm took over New Orleans' prime debris-collection contract from Omni.

Allan Katz, a spokesman for ECC, said that Terrence Rice's company, T. Rice & Associates, had "performed several services for ECC and performed them well."

He did not say what the services were. Terrence Rice declined to answer questions about his work.

Another business owner who has also wound up with a lucrative subcontract from ECC, according to the firm, is Michael Sullivan, owner of TSG Solutions. Charles Rice has described Sullivan as a friend and occasional dinner companion. Sullivan won two subcontracts from city agencies during Rice's tenure as chief administrative officer, with deals netting TSG at least $1.3 million, according to city records. But Charles Rice said his friendship with Sullivan blossomed only after TSG firm received its city contracts.

Sullivan's resume says his firm's focus is "strategic planning, economic development and business development." Gambel, who is representing TSG as well as Omni, said TSG is mainly "doing debris hauling and solid-waste work." She added: "They've invested in a number of pieces of equipment to get the job done."

The company's work force now numbers about 40, Gambel said. She said that the work hews closely to TSG's mission of working in "construction-related fields."

Another well-known actor in political circles who has been retained by ECC is Bernard "Bunny" Charbonnet, a New Orleans Dock Board member and a leader of the political organization COUP.

Charbonnet, whose planning firm has offices in three states, said he initially received a contract worth up to about $500,000 to provide a project manager and about 10 other employees to oversee debris removal. He said he left the job after taking in about $100,000 because "it wasn't a good fit."

"It's nothing against ECC," Charbonnet said. "It just wasn't good for my company."

Subs tied to city

Some of the politically connected companies involved in the post-Katrina work have gotten work through The Shaw Group, which is the prime contractor for building inspections in New Orleans.

Shaw's major subcontractors include some companies well-known around City Hall. Among them: the engineering firms Three Fold Consultants, N-Y Associates and Citywide Testing and Inspection, the last one owned by Roy Glapion Jr., son of a late city councilman. All three firms have been active players in local politics, and Citywide and N-Y in particular have often been tapped for public contracts, public records show. All three companies have donated to Nagin's campaigns, with Three Fold giving a total of $6,000 and Citywide and N-Y Associates $10,000 apiece, state campaign finance records show.

Representatives of N-Y referred questions about their work to the Shaw Group. Officials from Three Fold and Citywide did not return phone calls.

The engineering firm Montgomery Watson Harza, which holds a contract for catch-basin cleaning and other debris-removal services, is also employing a familiar roster of subcontractors, including Three Fold and Citywide, and Sullivan's TSG.

It's unclear exactly how important connections to state or local politics are in the awarding of contracts or subcontracts. Officials at all levels have said that they seek the best deal they can get with a prime contractor, and then leave the hiring of subcontractors to that company.

And while elected officials have argued publicly that as much work as possible go to local firms, they say they don't lobby on behalf of particular ones.

Some degree of politics-as-usual is OK, Goyeneche said -- but there's a line that shouldn't be crossed.

"There's a tremendous push right now to see that local firms get more of this business," he said. "I'm sure they're contacting local political leaders to get those, and I'm sure they're using intermediaries to get that work.

"Should people not call on politicians and ask for favors? I don't believe that's the case. I think you can call on a friend to ask him to consider your firm, but don't go beyond that. You can't say, 'If you hire my firm, I'll do this for you.' "

. . . . . . .

Staff writers James Varney and Martha Carr contributed to this report. Gordon Russell can be reached at grussell@timespicayune.com or (504) 826-3347.


Shaw not among Fortune 500: A story in Sunday's editions identified The Shaw Group of Baton Rouge as a Fortune 500 company. While Shaw was listed as one of the nation's 500 largest companies in 2003 and 2004, the firm did not make the list in this year's rankings. (11/24/2005)

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