Ex-FEMA chief profiteering on Katrina?

In the traumatic days after Hurricane Katrina, Louisiana Gov. Kathleen Babineaux Blanco turned to one of the most respected names in emergency management: James Lee Witt, the so-called Master of Disaster. But an eight-month investigation by NBC News into the performance and billing practices of Witt’s firm, James Lee Witt Associates, raises questions about profiteering, cronyism and possible falsification of records by one of Witt Associates’ subcontractors.

As director of the Federal Emergency Management Agency during the Clinton administration, Witt won widespread praise for his handling of crises such as the 1995 Oklahoma City bombing and the 1993 Midwest floods. At the same time, he was credited with turning a moribund federal bureaucracy into an efficient and proactive agency.

By the time Witt started his own disaster recovery firm, James Lee Witt Associates, in 2001, his name and reputation were known internationally.

Blanco hired Witt Associates to help Louisiana’s stricken communities work through federal red tape and to help manage storm debris removal. The governor’s move was praised as a necessary step to getting the overwhelmed state on the road to recovery.

But the state’s open-ended no-bid contract with Witt Associates also raised concerns about the financial implications of privatizing disaster relief.

In an October 2005 New York Times article, Witt was clearly sensitive to the notion that he might prosper from the Katrina disaster. “I just don’t want anyone to say that we used this as a way to profit or to try to get new business,” he said. “I just don’t want that.”

And during a taped forum at the National Press Club the following month, Witt said emphatically, “I’m not charging Louisiana anything if I’m not doing something for Louisiana.”

Nevertheless, according to information obtained by NBC News through public records, internal documents and interviews, Witt’s company has made millions of dollars from sizable markups on work performed by its subcontractors.

Sizable fee and markups
Witt Associates’ initial estimate for the job was about $26 million. Records show the bill is now more than $40 million and rising. Given that Witt Associates’ reported total revenue was about $7 million in 2004, the Louisiana contract has clearly been a financial boon to the company.

An analysis by NBC News of Witt Associates invoices contained in state records show that the company’s top manager in Louisiana, Mark Merritt, tallied $506,000 in billable hours over the 10-month span from September 2005 through June 2006. One of bills totaled $92,675 for a single month’s work by Merritt — nearly as much as the state pays Gov. Blanco for the entire year. (Other monthly bills for Merritt’s work include $78,375, $80,850 and $63,800.)

Witt himself recorded only a small fraction of the hours put in by Merritt. Both billed the state $275 an hour. (Witt has said that is half his normal hourly rate.) Some of Witt’s charges were only tangentially related to Katrina recovery operations. He billed the state $550 for a brief interview he conducted with CNN and $4,125 for helping to coordinate a day trip to Louisiana by his old boss Bill Clinton.

Witt Associates reaps its biggest windfall, however, from billing the state double what it actually pays its subcontractors. Those 100 percent markups yield millions of dollars for Witt Associates for doing what insiders say is little more than clerical work.

For instance, Witt Associates subcontracted an Indiana-based company called PinPoint Resources to manage government grants for Katrina recovery. Public records and internal company documents show that PinPoint workers were paid $19 to $20 an hour. Pinpoint billed Witt Associates $37.50 an hour, and Witt Associates billed the state $75 an hour for doing little more than processing the paperwork with the state, sources say.

Witt’s most lucrative subcontract is with Arkansas-based Recovery Management Inc. (RMI). RMI hired workers like Wendell LaFosse to monitor debris removal and disposal. LaFosse, a stocky, plain-spoken Cameron, La., native, worked seven months for RMI before quitting in May 2006.

“I got a paycheck. I thought the paycheck was pretty good,” he says.

LaFosse says RMI paid him $18 an hour. Records show that RMI then billed Witt Associates about $50 an hour. Witt Associates subsequently billed the state $100 for that same hour of work.

“That’s what makes me angry,” LaFosse now says. “If you’re going to do a job, do it at a fair price — not at the taxpayers’ expense.”

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