Friday, March 14, 2008
Meanwhile, company assigned to distribute money reaping profits
NEW ORLEANS - Two-and-a-half years after Hurricane Katrina, tens of thousands of miserable homeowners are still waiting for their government rebuilding checks, and many complain they can’t even get their calls returned. But the company that holds the big contract to distribute the aid is doing quite well for itself.
ICF International of Fairfax, Va., has posted strong profits, gone public, landed additional multimillion-dollar government contracts, and, it was learned this week, secured a potentially big raise recently from the state of Louisiana.
In the waning days of Gov. Kathleen Blanco’s administration, state officials increased the management contract ceiling from $756 million to $914 million — this, after the Legislature wanted to fire ICF over its handling of the homeowner recovery program, called Road Home.
“I’m flabbergasted that this company could be so inefficient and could mess up so consistently and for so long,” said Bill Yurt, 57, who has been living in a FEMA trailer for 2½ years.
He said ICF hasn’t sent an appraiser to determine the grant amount that will resurrect his gutted house in Gentilly. And his calls to an ICF caseworker have gone unreturned for a month.
56,000 applicants still waiting
Road Home was created in June 2006 to compensate homeowners for the breach of New Orleans’ government-run levees. The program is funded by the federal government but run by the state of Louisiana. Homeowners can apply for grants to repair their homes, or obtain buyouts if they don’t want to fix things up.
Yet, 56,000 applicants — nearly 40 percent of the qualified total — had yet to receive a cent as of last month. Plagued by cost overruns and delays, Road Home is expected to cost the taxpayers $10 billion in federal money and has become another glaring symbol of frustration and red tape in post-Katrina New Orleans.
“Supposedly they had the expertise, but what we’ve learned ever since is it’s been on-the-job training,” said Frank Silvestri, co-chairman of the Citizens Road Home Action Team, or CHAT, a community group that was formed in anger over ICF.
ICF spokeswoman Gentry Brann blamed the state’s ever-changing rules and political meddling by officials and community groups for many of Road Home’s difficulties.
She complained that Road Home has come to be regarded as an entitlement program, and said the company must carefully evaluate 157,000 applications to guard against fraud.
“The state essentially redefined the goal of the program from rebuilding to relief in midstream,” Brann said.
She said the $914 million that the company could earn is to cover the costs of the program and was approved by public officials.
Company partly blames expenses
“It’s very important to note this is not a ‘pay increase.’ It’s not actually even ‘pay’ to ICF. Rather it is an increase in the contract ceiling to cover the additional unit price costs incurred by our subcontractors,” Brann said.
The state got tough with ICF last year, threatening to terminate its contract, and ultimately set benchmarks to force it to “close,” or decide cases more quickly.
However, ICF now stands accused of inflating its closing figures by deliberately using red tape, confusion and delays to get applicants to settle for low grant amounts.
“They have been pressured into signing closing documents,” said Melanie Ehrlich, the other chair of CHAT, who has documented nearly 1,000 such disputes. “We know that this includes applicants who had obvious mistakes in the calculation of the grant.”
Ehrlich said more than half of the Road Home applicants who have contacted CHAT say they are appealing their awards. Some report getting letters from ICF telling them they were not eligible for a grant, followed by letters congratulating them for receiving one.
Dorcil Albair, a resident of Cameron Parish, said she got $9,800 from Road Home for damage estimated by her insurer at $49,000. She said she signed Road Home papers with hundreds of others at a local hotel.
“They just shoved the paper in front of us,” said Albair, 65. “It was like an assembly line.”
The company had the inside track from the start, critics say. It won the Road Home contract from a committee of housing experts and a state agency pressed by Blanco to jump-start the rebuilding. A few companies submitted bids. But ICF, which counted a $23.6 million Department of Housing and Urban Development contract as its previous experience, had already designed the Road Home template.
The relationship alarmed a state ethics board. But ICF was not dropped as the contractor.
More government contracts
ICF timed the Road Home contract with the launch of its initial public stock offering, triggering millions in bonuses and options for its top executives, and has bought out four other companies to tap the deep well of government contracting work.
It counts among its recent deals a $15 million Homeland Security agreement to protect chemical installations from terrorists, and a $10 million contract to help the Environmental Protection Agency preserve the ozone.
ICF reported a profit of $40.6 million in 2007, up from $11.9 million a year earlier. The company’s stock price has at times doubled since the Wall Street offering, reaching a 52-week high of $34.36.
Securities and Exchange Commission records show no public officials among ICF’s leading shareholders. Its lobbyists include former Rep. Robert Livingston, R-La., who has offices in Washington and the state Capitol, and local insider Randy Haynie, whose clients include Philip Morris and pharmaceutical company Pfizer.
Louisiana officials have publicly said dumping ICF could further slow the recovery and generate more political fallout. Privately, they say pulling the ICF contract would be an admission of mismanagement that could give Katrina victims grounds to sue.
“A deal is a deal, whether it’s a good deal or not,” said Walter Leger, a housing official with the Louisiana Recovery Authority, which oversees Road Home and has been critical of ICF.
Audit finds incorrect payouts
Adam Knapp, deputy director of the LRA, said bad publicity ultimately will spur ICF to better perform. “Their stock will rise and fall on their delivery here,” Knapp said.
A state audit in September looked at a sampling of 80 Road Home grants and found that the incorrect amounts had been awarded 37 percent of the time. One-fifth of eligible applicants who applied in the program’s first six months — more than 13,000 — hadn’t received grants as of January, according to company data obtained by CHAT.
ICF responded to such backlogs by reassigning 500 staffers as caseworkers. But no new employees were hired to meet the demand.
Brann said that is because the company stands to make only a 3 to 5 percent profit on the contract after it pays taxes, its 2,000 employees and 35 subcontractors. “While the revenue from the Road Home contract is large, so are the costs,” she said.
The deadline for new applications for Road Home assistance has passed, and Brann said the company expects to resolve its last case this summer.