Flood report questions if homes were built under reconstruction program

CHARLESTON — As West Virginia recognizes the two-year anniversary of a deadly flood, investigators issued a scathing report about contracts that were supposed to frame the state’s long-term response.

West Virginia has been unlawfully operating under multiple long-term flood relief contracts worth millions of federal dollars, a report from the Legislative auditor’s office concluded. The audit questions whether any homes were actually completed under the Rise West Virginia reconstruction program

Lawmakers seemed stunned by the findings June 24.

“No homes have been rebuilt?” asked Senate Minority Leader Roman Prezioso, D-Marion.

The 2016 flooding that left 23 dead and an estimated 1,200 homes destroyed. Ten inches of rain fell over 24 hours in some areas, damaging businesses, roads and water and sewer systems.

The former administration of Gov. Earl Ray Tomblin, late in its term, made an emergency request to use a consultant to administer federal relief funds. But controversy about the state’s response to long-term flood relief has all been over decisions made during the current administration of Gov. Jim Justice.

No one from Justice’s office or the state Department of Commerce was present to appear before the Post Audits Committee of the Legislature. “I’m disappointed that there’s no one here,” said Senate President Mitch Carmichael, R-Jackson.

The administration forced out Commerce Secretary Woody Thrasher and the agency’s general counsel, Josh Jarrell, whose signature was on the contracts.

Justice claimed he had no way of knowing until recently about the problems West Virginia was having with long-term flood relief. That’s despite the many constituents who complained for months about Rise and its red tape.

In late May, the Governor’s Office distributed a statement in which Justice said “There’s a new sheriff in town, and people need to realize that Jim Justice will see to it that West Virginia is not going to be on the short end of the stick.”

The statement, referring to Jarrell, said “Those people that weren’t doing their jobs have been held accountable.”

Justice placed Gen. James Hoyer, of the West Virginia National Guard, in charge of the long-term relief effort. In recent weeks, Hoyer described greater progress in getting a handle on West Virginians who still need help.

This spring, the governor halted the contract for a consultant management of flood relief activities, saying the agreement did not go through appropriate purchasing procedures.

Before that, the U.S. Department of Housing and Urban Development (HUD) labeled West Virginia a slow spender for the millions of dollars made available for relief on Feb. 20. HUD questioned several aspects of West Virginia’s approach.

Long-term flood relief was run through West Virginia Rise and the state Department of Commerce, where the director of community development is Mary Jo Thompson, the niece of Sen. Joe Manchin and his constituent services director when he was governor.

West Virginia has $149 million available in community development block grants for disaster relief.

West Virginians who expected government help with long-term housing months ago are still waiting.

Behind the scenes, the Legislative Auditor concluded, arose serious problems with the contracts for the consultants and construction companies that are supposed to handle that work.

The contract receiving the most scrutiny involves Horne LLP, a Mississippi-based company that grew into a national presence on disaster relief.

In West Virginia, Horne’s lobbyist is Mike Basile, a former general counsel to the state Development Office and a former staffer for Gov. Gaston Caperton who later assisted in the gubernatorial transitions of Bob Wise and Manchin. Horne’s local counsel is Jason Pizatella, who worked for multiple administrations.

The Horne agreement began with a $900,000 scope of work to develop a required action plan to submit to HUD and then to provide general project management services. No one disputes that part.

But between May 2017 and February 2018, the state Development Office and Horne executed six more agreements related to the original contract.

“The result of these additional Task Order Agreements increased the total value of the Development Office’s contractual relationship with Horne from $900,000 to approximately $18 million, an increase of nearly 1,900 percent,” the Legislative auditor concluded.

Commerce officials and Horne representatives contend the additional work was an aspect of the original contract that was bid out competitively and appropriately.

But legislative lawyers concluded the additional work orders did not go through the appropriate bidding process, saying they constitute new contracts because each contains separate and distinct terms and compensation.

To date, the Legislative auditor wrote, Horne received $703,692 in payments and invoiced for — but not yet received — about $1.4 million under the disputed task orders.

The Governor’s Office indicated during a June 15 press conference that a new contract with Horne was in the process of being finalized.

“Therefore, the Legislative Auditor would expect the new contract to have been procured through the Purchasing Division’s competitive bidding process, but as of today, has not seen this new contract. In addition, this new contract should not contain payments for any of the services that were already rendered under the invalid Task Order Agreements Three through Eight.”

This was another stunner, Prezioso indicated today.

“So we’re going to continue to do business with Horne even though they didn’t complete the requirements of their contract?” Prezioso asked.

Millions more in federal dollars are under scrutiny for construction contractors that won bids for West Virginia’s rebuilding.

Four contractors won bids worth $71.4 million, almost half the total federal dollars available.

The largest was work worth $49 million by Thompson Construction Group, which provides rehabilitation, reconstruction and manufactured housing. Thompson’s lobbyist, Larry Puccio, was Gov. Justice’s transition team leader and now serves as senior adviser to U.S. Sen. Manchin’s re-election campaign.

The trouble with these contracts is that the state started paying for work before HUD made the money available. The money from HUD was approved Feb. 20. All seven of the construction contracts have an effective date of July 1, 2017.

The Legislative Auditor contends the West Virginia Development Office violated federal law.

The Development Office issued almost $800,000 in payments under invalid contracts, the Legislative auditor concluded. More than $400,000 of that was paid prior to HUD’s release of the funds.

An additional problem is that these contracts, too, did not go through proper purchasing procedures, the Legislative Auditor concluded.

The state is required to demonstrate to HUD that it has sufficient financial controls in place.

Concluding that “none of these payments represent a full home reconstruction,” the Legislative auditor questions “whether any individual homeowner has received full assistance from the Rise West Virginia flood recovery program.”

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