Allegations of graft and favoritism being investigated after whistleblower files a lawsuit
The state has placed a second top official in its beleaguered hazard mitigation program on administrative leave as the Jindal administration and the U.S. Homeland Security Department investigate allegations of graft and favoritism toward certain home elevation contractors.The state's operations manager for the program, David Knight, who has been accused in a whistleblower lawsuit of favoring a key program contractor, was placed on leave Monday "out of an abundance of caution," state spokeswoman Christina Stephens said. He will receive his pay while on leave.
Home elevation work in New Orleans, in June 2006. Last week, the state's production team leader, Courage Idusuyi, was placed on paid leave because of allegations that he took gratuities from and showed favoritism to the same contractor, the New Orleans construction firm J-Con.
Public records and other documents reviewed by The Times-Picayune show that Knight approved disputed invoices filed by J-Con, which has partnered with Davie Shoring to become one of the busiest home-elevation contractors in the federally financed hazard mitigation program.
Greg Pierson, the employee who filed the whistleblower suit, works for the program manager, Shaw Group. He once was the program's liaison to J-Con, and said Knight pressured him to approve J-Con invoices seeking payment for thousands of dollars in added costs that a computer program denied.
Pierson complained in an email message to his superiors at Shaw that J-Con was trying to "double-dip" on reimbursements, for such items as replacing a house's plumbing system after elevating it.
Pierson said he once refused to approve a J-Con invoice that claimed an additional $3,000 for plumbing restoration work, beyond the hard costs allowed by FEMA. In response, Knight sent Pierson an email saying: "You need to just sign this and stop questioning everything."
Whether or not these charges were proper is in dispute. The state has changed its rules -- and is considering doing so again -- governing what costs contractors can bill the state for.
FEMA has said contractors may charge the state up to $67 per square foot in "hard costs" for lifting homes and constructing stairs, plus additional "soft costs" for nonconstruction items such as permitting, design and engineering work.
But the state offered contractors some leeway. It agreed to cover contractors at $75 per square foot or more after contractors complained that the cost of restoring plumbing, gas and electrical connections and bringing outdated equipment up to code would often exceed the FEMA-approved amounts.
The person who created invoices for J-Con, David Torkanowsky, has said he simply plugged a final cost estimate into a computer program, which assigned charges to certain items automatically.
Pierson alleged fraud when Torkanowksky charged the state for replacing gas lines on a property that had no gas service, and then rectified the error by simply redistributing the charges and keeping the same bottom line. But Torkanowsky said that was allowed under the program.
Pierson said the state's computer program was supposed to prevent contractors from claiming such additional charges. He said Knight directed him to manually approve the extras J-Con had claimed. When Pierson refused, Knight told him, "This program is not designed to be black and white," according to an email Pierson sent to his bosses.
In what Pierson also describes as favoritism, Knight authorized special overtime for Shaw employees so they could expedite J-Con files through to payment.
State Commissioner of Administration Paul Rainwater said the reason for the overtime was that state officials wanted "to get the (hazard mitigation) program moving" when it was badly stalled last year. The overtime was not limited to employees handling J-Con files, he said, but his spokeswoman later acknowledged "a team ... worked some overtime because it had fallen behind."
J-Con, through a spokeswoman, said the program lost 200 of its files, forcing the company to bear the $200,000 cost of recreating those documents. The company says the state agreed to help by creating a staff team dedicated to J-Con.
Shaw placed Pierson on suspension last week after he spoke to reporters. The state got a temporary restraining order last week against Pierson disseminating program records.
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David Hammer can be reached at dhammer@timespicayune.com or 504.826.3322.