NEW ORLEANS -- For anyone who wrestled with the Road Home grant process after Hurricane Katrina, Shannon and Greg Landry’s story is sure to conjure some bad memories.
And with the state suddenly making a push to take money back from homeowners, their ordeal may also raise the specter of a whole new nightmare.
After a drawn-out battle over damage calculations that resulted in a grant that was short by about $100,000, the Landrys convinced a Road Home supervisor that the program’s evaluator had measured their house incorrectly.
But instead of giving them more grant money, the Road Home instead came up with a new square footage figure – a number that seemed to have no basis in reality or documentary evidence, and one that would have knocked their modest $45,000 award even further downward.
So, like so many other Louisiana homeowners, the Landrys swallowed a bitter pill, rebuilt with less money than they apparently deserved, and put the Road Home behind them.
But it turns out the struggle wasn’t over. They and others recently received demand letters from a private lawyer acting on behalf of the state, suddenly telling them to pay back the money they used as directed all those years ago.
And giving them 30 days to do so.
It’s not clear exactly how many homeowners got the threatening form letters, which demand payment and only offer to explain the calculations if they appeal in a timely fashion.
But a slew of these notices of default went out in June and July. They are coming from the offices of E. Wade Shows, Attorney General Buddy Caldwell’s campaign treasurer and a common recipient of lucrative, no-bid legal work for the state.
The dunning letters appear to be a key part of the state’s efforts to improve grant recovery after two embarrassing audits in the spring tallied potential millions in misspent grants.
But after the recent spate of demand letters, he contends that “nothing has changed regarding (the agency’s) stance on repayment.”And he said the increased activity “simply relates to the maturity of the grant recovery process.”
Shannon Smiley-Landry and others say they understand the need to go after those who defrauded the state or failed to rebuild under the terms of covenants they signed when they collected their grants.
But in more than a dozen cases that WWL-TV examined, the letters went to homeowners who did appear to comply with all the rules. If they were indeed overpaid, it doesn’t appear to have been their fault.
“Why should I have to pay for an error that was made by them?” said Greta LaBorde, another Gentilly homeowner who is being told that she owes $20,000 back to the state, six years after getting her grant.
“I went through the whole process,” LaBorde said. “It was a long, arduous process. I remember that. I provided everything they asked me for. If they miscalculated, I don't see why I should have to pay for their mistake.”
LaBorde doesn’t even know where the state’s figure comes from. The Office of Community Development, which oversees the program, told her she got additional insurance proceeds after collecting her grant. But she said she can’t remember anything like that and she can’t find any records that reflect any such payment.
Because it's been so long, LaBorde's insurance company said it had no records of her Katrina claims. And when she asked the Road Home to produce documents to back up its case, LaBorde says a program employee told her they didn’t exist.
Doug Sunseri, a Metairie attorney who represents 12 clients who got the letters in the last few weeks, said LaBorde’s experience with purged documents is typical.
“The information that they would need now to respond to the inquiry by the Office of Community Development, a lot of those documents don't exist anymore,” Sunseri said. “The attorneys who handled their cases five and six years ago aren't required to keep those documents. Insurance companies may not have those documents. So they're going to be hamstrung responding to that request.”
The form letters can be intimidating. Shows and his Baton Rouge law firm, Shows, Cali & Walsh, was hired by the Office of Community Development in 2009 and given the title “special assistant attorney general,” which he puts in bold face at the bottom of each letter. And each letter begins: “On behalf of the Attorney General’s office, legal demand is now made upon you for full payment of the amount due.”
Forbes said his office hired Shows’ firm because it was authorized to issue such correspondence on behalf of the attorney general. He also said the firm was selected by Caldwell’s office.
“The activities under the contracts with (Shows, Cali & Walsh) have always been for the purpose of reaching out to grant recipients, either to establish compliance or to further the required recapture of overpaid Road Home grant funds,” Forbes said.
Shows declined to comment on his work, saying he wasn’t authorized to do so. But a partial production of records by the state indicates that his firm had received more than $300,000 to work on Road Home issues through March 2013 – before the state’s latest grant recovery push.
Shows has gotten three contracts for Road Home work so far, running through 2016 and capped at a total of $1.5 million.
For some homeowners, the letters are the first indication they even owe a debt. There’s no time wasted on niceties, though: The letters threaten “suit against you personally for the overpayment you received” if payment isn’t made in 30 days.
Walter Leger, a lawyer and member of the now-defunct Louisiana Recovery Authority board that oversaw the creation of the Road Home, worries the letters, in which Shows only offers to show homeowners proof of their debt if they properly dispute it within 30 days, put too much of the onus on homeowners.
“I would like to think it would be handled fairly (by Shows’ firm) and there will be a very legitimate discussion of the issues and a compromise on these,” said Leger, who emerged as the face of the state’s housing recovery efforts in the first years after Katrina and still leads the Louisiana Land Trust, which collected properties from homeowners who chose to sell to the state rather than rebuild.
“But still, I feel bad for homeowners, who got this behind them, who didn’t get enormous grants but may be required to hire an attorney to defend themselves against the potentially awesome powers of the state.”
The sudden blitz of letters also seems out of step with the state government’s position all along – to err on the side of compassion.
In December 2011, Forbes issued a press release saying the state would pursue the former Road Home administrator, ICF International, rather than punish homeowners for overpayments that were not of their doing.
Asked about the recent letters, Forbes said he couldn’t address specific homeowners’ cases, but said that if a Road Home review panel determines ICF was to blame for an overpayment, that’s who the state pursues for grant recovery.
So far, the state has sought $60 million from ICF for more than 1,300 overpayments. In some cases, he said the state went after ICF for part of a grant and the homeowner for another portion.
Some might say the state has been too easy on those who misspent the money. With the federal government’s blessing, OCD has trotted out a series of policy changes designed to help those who didn’t get enough to finish rebuilding or lost chunks of the their grants to contractor fraud or forced mortgage payoffs.
But state and federal auditors have also signaled that Louisiana might have to pay misspent Road Home millions back to the federal Department of Housing and Urban Development if they don’t ensure it was used right.
The state did not provide WWL-TV with the total number of demand letters sent or any kind of breakdown of whether they were for clerical errors or something more obviously the homeowner’s fault, such as failure to rebuild or elevate their houses.
“There are some people who didn't play by the rules and those people we need to be holding responsible, but the people who played by the rules: why should they be punished for playing by the rules?” Leger said
“To now suddenly put the pressure on people who have done the right thing and are moving on just seems fundamentally wrong.”
Sunseri believes the state is pursuing homeowners who complied with the rebuilding covenants because they are easier to track down than those who skipped town.
“One thing I've learned is that it's easier to collect from the law-abiding citizens than from non-law-abiding citizens,” he said. “And unfortunately, it appears that a lot of our clients -- our former clients who have recovered and are getting these letters -- are on the law-abiding side of the ledger.”
If you receive a Road Home demand letter and dispute it, the state suggests that you call the Road Home toll-free at 1-888-762-3252, ext. 2.