NEW ORLEANS -- Last year, Gov. Bobby Jindal’s administration responded to a WWL-TV report exposing theft in a Katrina recovery program by having one of the thief’s business partners look into it, public records show.
Not surprisingly, Small Rental Repair Program Director Mark Maier cleared his business partner, Lago Construction, of any wrongdoing – findings that rang hollow when Lago’s owner later pleaded guilty to theft and conspiracy charges.
State officials did eventually withhold $168,000 in outstanding payments to Lago in reaction to the television report, but didn’t actually stop those payments until a month after our report, when we followed up to ask about the progress of the internal state investigation, the emails show.
The state also allowed the company to keep working and collecting payments moving forward – all the way until August 2013 when Lago’s owner, Praveen Kailas, pleaded guilty to conspiracy and theft of public funds.
Our story in October 2012 alleged that Lago employees billed for hours on the rental program when they were actually doing other things and billed for additional employees without performing much, if any, additional work.
The story also pointed out the strong connections between Jindal and the Kailases, a major New Orleans-area landowning family that gave $38,000 to Jindal’s federal and state campaigns, including in-kind donations of office space and parties.
So, the governor’s office promised swift action. But soon after, state emails show that administration officials turned the probe over to federal agents and waited on them to mete out any punishment.
Pat Forbes, head of the Office of Community Development, said Wednesday that state officials did act quickly by “alerting state and federal law enforcement officials of possible criminal activity.”
Investigators for the U.S. Department of Housing and Urban Development, which had provided about $800 million in federal taxpayer dollars for the state to run the rental repair program, took up the case from the moment the WWL-TV report aired.
Kailas pleaded guilty in August 2013, admitting that he added six employees to the public payroll without cause and agreed that he stole “not more than $236,000.” He has recently objected to some of the findings in his pre-sentencing probation report and had his sentencing pushed back to Dec. 18 after hiring new attorneys.
The lawyers, Kyle Schonekas and Billy Gibbens, are top white-collar defense attorneys and did not respond to requests for comment.
State leaders were clearly concerned by our questions last fall and asked for a full accounting of Lago’s time, but had a hard time nailing anything down because Lago’s construction monitors, who went out to rental properties to check on rebuilding progress, were not required to show how much time they spent on a given project.
Maier responded with a report that claimed to be “independent” of Lago and of the prime contractors the state had hired to administer the program – Shaw Group and ACS. But Maier stated on his own consulting website that Lago was one of his business partners, and he was hired by Shaw and ACS to serve as the program director.
“I have not seen any evidence or patterns that indicate that timekeeping fraud is/was taking place,” Maier wrote in an email.
His report showed how Lago had grown from six full-time employees to 13, doubled their monthly hours billed and increased their monthly cost to the state by 58 percent, but never analyzed whether they were actually conducting more property inspections.
“There is no evidence that Lago, ACS or Shaw invoiced unauthorized or excessive time for Construction Monitoring services,” Maier wrote.
Political commentator John Maginnis, publisher of LaPolitics.com, said he would have expected a more rigorous investigation from the Jindal administration, particularly after questions were raised about his ties to the Kailas family.
He called Maier’s report a “whitewash,” and was surprised to hear that he remained in charge of the program after the allegations in the WWL report were confirmed.
“Someone in the administration needs to take responsibility for this whole fiasco,” Maginnis said. “Even if there was no criminal wrongdoing on the part of someone in the Jindal administration, there was some real official wrongdoing that seems to go beyond incompetence, to neglect. And the fact that there was no discipline on anyone involved – that raises a lot of questions.”
Late Wednesday, Forbes emailed us to say that the state was having Maier replaced as manager.
“Out of an abundance of caution, we have asked Shaw to put a new manager over the program,” Forbes said. He added that the program remains under “active investigation.”
Maier did recommend that the state set up more rigorous reporting of how contract employees use their time when they work outside the office, something the state has implemented.
Maier’s analysis was not the only aspect of the state’s investigation of Lago. Emails show that state officials tried to follow up on allegations in our initial report that Kailas and his employees were working on the state home elevation program and another state project involving the Katrina Cottages at the Fischer development, while simultaneously claiming full-time hours on small rental.
It had already been reported that Kailas’ home-lifting company, Cajun Elevation and Shoring, got in trouble for breaking the rules of the state elevation program. So, when we asked about Lago’s small rental program billing, a state spokesman asked Forbes in an email why Cajun’s track record didn’t raise any red flags with Lago.
“When Lago was approved as a subcontractor for the Shaw contract that began in February 2012, the Small Rental managers did not know that Lago and Cajun Elevation were run by the same people/affiliated with each other,” Forbes wrote in response.
With the Katrina Cottages, emails show that state officials felt they had the right to hire Lago under Shaw’s rental repair contract to perform work in the separate FEMA-funded project. They also said they would have the Katrina Cottage program reimburse the small rental program for the work performed in April 2012, but had not yet done so when we asked about it six months later.
And the billing problems were not limited to Lago, either. WWL-TV also exposed a similar practice by state Rep. Girod Jackson, who claimed to have worked full days for a small rental program subcontractor on the same days he was recording a full-day’s worth of votes on the floor of the House of Representatives.
When Jackson pleaded guilty to tax fraud in August, he resigned from the House and from his small rental program job. A single state email in August alerts state staff that Lago and Jackson were both being removed officially from the program and would no longer be able to access program computer files.