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Politically connected firms thrive on federal contracts
Making big money off Katrina

By Eric Ruder | January 5, 2007 | Page 2

HURRICANE KATRINA caused more than immense devastation and hardship for hundreds of thousands of Gulf Coast residents. It also created a bonanza for the disaster business, and a government boondoggle that will likely top the $2 billion mark in 2007.

The media have been filled with stories of alleged fraud committed by survivors of the disaster, but federal inspectors are now focusing on multimillion-dollar contracts handed out to giant, politically connected construction and engineering firms like Halliburton and Bechtel.

Much of the most lucrative government work that went to these corporations was under no-bid contracts--meaning that the companies didn't have to compete with any other firms. "Based on their track record, it wouldn't surprise me if we saw another billion more in waste," said Clark Kent Ervin, the Department of Homeland Security's inspector general in 2003 and 2004.

Local debris-removal contractors in southern Mississippi don't need federal investigators to tell them that big firms are gaming the system to the tune of millions. "There is no difference doing what we're doing for $12.90 (per cubic yard) and what they're getting $36 for," James Necaise, vice president of Necaise Brothers Construction in Gulfport, said of the politically connected AshBritt firm.

AshBritt has a portfolio of high-powered friends and clients, including a contract with the Washington lobby firm of Barbour Griffith and Rogers, which was founded by Mississippi's Republican Gov. Haley Barbour.

With Democrats taking control of Congress, at least seven committees plan hearings or other investigations into the Katrina-related fraud and abuse, focusing on Halliburton, Bechtel, AshBritt and other Republican-connected companies.

But the Republicans aren't the only ones with their hands in the till. Louisiana Democratic Party chair Jim Bernhard resigned from his position three weeks after Katrina to devote more energy to his other job--as chairman of the engineering firm Shaw Group.

In the ensuing months, Shaw Group raked in more than $300 million in reconstruction contracts--leading to a spike in Shaw Group's revenues and a 63 percent increase in its stock price. Bernhard himself also made out pretty well, with his personal stake in the company increasing in value by about $30 million.

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