‘Spillionaires’ are the new rich after BP oil spill payouts

April 13, 2011

The oil spill that was once expected to bring economic ruin to the Gulf Coast appears to have delivered something entirely different: a gusher of money.

So many people cashed in that they earned nicknames: “spillionaires” or “BP rich.” Others hurt by the spill wound up getting comparatively little. Many people who got money deserved it. But in the end, BP’s attempt to make things right — spending more than $16 billion so far, mostly on damage claims and cleanup — created new divisions and even new wrongs.

Some of the inequities arose from the chaos that followed the April 20 spill. But in at least one corner of Louisiana, the dramatic differences can be traced in part to local powerbrokers.

To show how the money flowed, ProPublica interviewed people who worked on the spill and examined records for St. Bernard Parish, a coastal community about five miles southeast of downtown New Orleans.

Those documents show that companies with ties to parish insiders got lucrative contracts and then charged BP for every possible expense. The prime cleanup company submitted bills with little or no documentation. A subcontractor billed BP $15,400 per month to rent a generator that usually cost $1,500 a month. Another company charged BP more than a $1 million a month for land it had been renting for less than $1,700 a month. Assignments for individual fishermen also fell under the control of political leaders.

“This parish raped BP,” said Wayne Landry, chairman of the St. Bernard Parish Council, referring to the conduct of its political leadership. “At the end of the day, it really just frustrates me. I’m an elected official. I have guilt by association.”

The economic benefits rippled throughout the gulf. In the six months after the spill, sales tax receipts, a key measure of economic activity, rose significantly in eight of the 24 most affected communities from Louisiana to Florida. In only one community, in Mississippi, did receipts dip significantly.

Sales tax collections from Louisiana’s Plaquemines Parish rose more than 71 percent. And St. Bernard had a bigger jump than anywhere. That parish collected almost $26.8 million in sales and lodging tax receipts in the six months after the spill, almost twice as much as over the same period in 2009. Flush with cash from cleanup and claims, many fishermen bought new boats and trucks. Sales at the nearest Chevrolet dealer rose 41 percent.

Parish president’s powers

Just days into the crisis, St. Bernard’s parish president, Craig Taffaro Jr., invoked a Louisiana law to declare a 30-day emergency and handle the crisis without most normal government checks and balances. He chose the prime contractor that supervised the cleanup. He and people close to him decided which fishermen would be hired to put out booms and search for oil.

In some ways, parish residents seemed to view the disaster and BP’s culpability as an opportunity to recover from earlier blows. St. Bernard bore the brunt of Hurricane Katrina, which flooded almost every home in August 2005. Population dropped almost in half, from about 67,000 in 2000 to 36,000 in 2010, largely because people didn’t go back after Katrina and the hurricanes that followed. Before the spill, the parish slashed its budget by 11 percent, cutting garbage collection, the fire department and mosquito control. There was just no money.

The spill changed that. Fishermen were paid to lay out protective booms to try to corral the oil. Contractors were hired to manage the cleanup and provide security. Claims money began flowing to people who said their lives had been upended by the crisis.

The St. Bernard government was among the first to benefit, snagging a $1 million check for oil-spill expenses. Parish employees went shopping for cameras, printers, a file cabinet, staplers and 712 shirts emblazoned with the parish name. Taffaro and other officials said the parish shouldn’t have had to spend its own resources to respond to the spill. The shirts were necessary to identify employees at the cleanup site, they said.

Some of the money also went to overtime pay for more than 40 parish employees, including three who claimed overtime for picking up dog food for the animal shelter. St. Bernard’s homeland security director, David Dysart, a salaried employee, got almost $23,000 for working 497 hours of overtime in less than seven weeks, a fact first reported by the New Orleans Times-Picayune. Dysart did not respond to a query about his overtime.

As the money flowed, complaints spread. Subcontractors said those at the top of the cleanup creamed off money, while those at the bottom earned much less for doing the actual work.

BP provided only limited information to ProPublica. The federal government ceded control of cleanup spending to BP, and the U.S. Coast Guard, the federal agency most involved with overseeing BP’s response, said BP was spending whatever was required to clean up the spill.

Taffaro and other St. Bernard officials refused to respond to public-records requests ProPublica began filing in November. When asked again last week why the parish hadn’t provided any records, Dysart said that he would be happy to help but that filling the request would take time and cost a lot of money.

“I’m in the process of really, truly trying to assist you,” said Dysart, who is also the parish’s interim chief administrative officer.

In response to questions submitted by ProPublica last month, Taffaro said through his spokeswoman that he can approve overtime for salaried employees in extenuating circumstances and that Dysart eventually decided to stop taking overtime. Taffaro said that paying overtime for picking up dog food was necessary because the spill had caused fishermen to abandon their dogs.

Politically connected firms

Many companies and people earning big money in St. Bernard Parish had connections to parish powerbrokers, according to court documents, parish records and interviews done by ProPublica.

BP based its cleanup operation in the parish on land leased by Amigo Enterprises, which had been paying less than $1,700 a month to the Arlene and Joseph Meraux Charitable Foundation, according to the nonprofit’s most recent tax returns. But Amigo billed BP more than $1.1 million a month, BP spokesman Joe Ellis said. One of Amigo’s owners was St. Bernard’s sheriff of 26 years, Jack Stephens, who was also on the Meraux Foundation board.

Anthony Fernandez Jr., Stephens’s cousin and manager of Amigo Enterprises, said BP’s figure of $1.1 million was too high, but he refused to provide the actual amount. Stephens didn’t return calls for comment.

BP had no comment on the allegations that it was overcharged.

The company that benefited most from BP’s checkbook was Loupe Construction, a small, family-owned business. On May 5, Taffaro chose Loupe to manage the cleanup in St. Bernard, a contract that would eventually be worth as much as $125 million. Until then, its main job in St. Bernard had been helping to rebuild levees.

Taffaro said he selected Loupe after asking for proposals from several companies. The decision didn’t sit well with everyone.

“That company had no particular expertise in oil mitigation — none,” said Landry, the parish council chairman. “But we’ve been kept in the dark on the entire operation. Pardon the pun, but we’ve been left out of the loop.”

Company owner Paul Loupe referred questions to his attorneys. One, Karl Dix, said the company was chosen because of its levee projects and heavy construction work and because it was available. “There was this urgent need to start work immediately to protect the coastline,” Dix said.

After Taffaro named Loupe as the lead contractor, there was a feeding frenzy to get hired by the company. People with little connection to commercial fishing used old boats or bought new ones and signed up to work. Companies from Washington State, Nevada and Mississippi came to town. Everyone wanted a piece, just as after Hurricane Katrina. Only this time, the federal government wasn’t footing the bill. A reviled corporation was, and the prices reflected that.

BP sent a letter to the company in late August stating that all of Loupe’s invoices lacked the proper documentation.

“There was a lot of gouging,” said David Northcutt, who worked for a Loupe subcontractor and has since sued for unpaid wages. “It was a once-in-a-lifetime opportunity for a lot of people.”

As the cleanup dragged on, Loupe faced a cash-flow problem. For help, Loupe turned to Park Investments, a local company that primarily develops shopping malls. Park Investments and its related companies had done business with plenty of parish officials, including Stephens, the sheriff.

Although a search of court records showed that Park Investments rarely made such loans, the company agreed to loan Loupe an unspecified amount of money, with BP payments as collateral.

Park Investments and companies run by its two top executives donate frequently to Taffaro and other politicians, both statewide and nationally.

Confusing claims process

By fall, the small amount of oil that had hit parish waters was mostly gone, and the fishermen were getting the bulk of their BP money through the claims process, not the cleanup. The $20 billion compensation fund that BP and the federal government set up in August would run for three years, pay people who could prove damages from the spill and in theory avoid costly court battles.

Kenneth Feinberg, who administers the fund, said his team was initially overwhelmed by the number of claims it received.

The system didn’t differentiate between fishermen who got cleanup jobs with BP and those who didn’t. The amount people received for their initial six-month emergency claims was based on the paperwork they submitted, not their actual losses.

One man who earned $67,000 in 2009, fishing crabs and hunting a swamp rat called nutria, got $100,000 for his six-month claim. That was on top of $90,000 for working on the cleanup and $20,000 he received in initial BP claims. In the eight months after the spill, he made $210,000, more than three times his 2009 income.

But Thomas Gonzales, who said he filed $90,000 in taxable income in 2009, received only $22,000 in his six-month payment. “They’re giving the money to the young generation,” said Gonzales, who is 73. “They figure I got one foot over the hole.”

Many fishermen fretted that businesses that had been hurt by the recession, not the spill, were getting BP money: hairdressers, waiters, restaurant owners.

Felesia Carter, a manager at St. Bernard’s only off-track betting parlor, said customers were gambling away claims money. Her business was so good, she said, that employees worked overtime.

“I don’t understand how BP is just giving its money out like this,” Carter said. “Give it to the people who deserve it.”

Kim Barker is a writer for ProPublica, an independent, nonprofit news organization that produces investigative journalism in the public interest. A longer version of this article appears on the organization’s Web site. ProPublica’s research director, Lisa Schwartz, and researchers Kitty Bennett, Sasha Chavkin and Liz Day contributed to this report. To see a ProPublica story and video about a gulf fisherman, go to propublica.org/delacroix.

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