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Louisiana sued Hurricane Katrina survivors for misusing recovery grants. Now it has halted collection efforts.

After WWL-TV investigation, the state says it hopes a federal agency will approve a settlement that will allow it to drop the lawsuits.

David Hammer / Eyewitness Investigator, Richard A. Webster (The Advocate | The Times-Picayune)

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Published: 4:29 PM CDT May 31, 2022
Updated: 10:32 PM CDT May 31, 2022

The state of Louisiana is pausing efforts to collect money from thousands of homeowners who accepted hurricane recovery grants and used them for repairs rather than elevating their houses. The decision comes after news outlets presented the state with evidence showing that its lawyers have stepped up the pace of court filings even as the state hopes to wipe away the lawsuits entirely. 

Jay Dardenne, the head of Gov. John Bel Edwards’ Division of Administration, said Monday that the state has agreed to settle a related lawsuit against a company that ran the recovery program after Hurricane Katrina. If the federal government approves that agreement, he said, the state would drop the suits against homeowners who didn’t follow the rules on how they spent elevation grants.

An investigation by WWL-TV, ProPublica and The Advocate | The Times-Picayune found evidence that some of those people were told they could use the $30,000 grants on repairs instead. Years later, the state sued about 3,500 families — roughly 1 in 9 grantees — demanding the money back.

Dardenne said he was troubled by evidence gathered by the news organizations showing that the law firm Shows, Cali & Walsh, which represents the state, has accelerated its efforts to collect tens of thousands of dollars from each homeowner.

With the state on the cusp of a solution, “there’s no reason to try and take any more cases to judgment,” Dardenne said.

He said the state is waiting for the U.S. Department of Housing and Urban Development to approve a proposed settlement between the state and the company it hired to manage the federally funded Road Home recovery program from 2006 to 2009.

In 2016 the state sued that firm, ICF Emergency Management Services, accusing it of mismanagement. A mediator helped the two sides come to an agreement in late 2020. 

The state wants to send the money it expects from that settlement to HUD to satisfy its obligations for Road Home grants that weren’t spent according to the rules. If HUD agrees, the state will drop its lawsuits against homeowners and cease collection efforts in cases that have gone to judgment, Dardenne said.

“I think we’re inching very close to that happening,” Dardenne said. 

Dardenne said he and Edwards have spoken with HUD Secretary Marcia Fudge about accepting the proposed ICF settlement. When asked if he believes Fudge is in favor of dropping the suits, Dardenne said, “I do.”

A HUD spokesperson declined to comment on that characterization, but said, “HUD continues to work with the state.”

Meanwhile, the litigation continues. 

In New Orleans, home to almost half of the elevation lawsuits, lawyers filed almost as many motions for judgment in a recent six-week span as they had in the first three and a half months of the year. 

Lawyers with Shows, Cali & Walsh filed 42 motions for judgment from January to mid-April, according to court records. Over the following six weeks, they filed 38 motions seeking roughly the same amount — $1.2 million. 

About half of the filings in both periods were for default judgments, a ruling that can be imposed when a defendant fails to respond in court. Such judgments result in liens on the properties, preventing them from being sold until the debt is paid. 

Dardenne said the state has not sought to speed up recovery efforts. He said any increase in court filings likely reflects the timeline of individual cases.

Among those targeted was New Orleans homeowner Celeste Matthews. The same day she was featured in news stories by WWL-TV, ProPublica and The Advocate | The Times-Picayune that detailed the lawsuits, the law firm notified her that it would pursue a default judgment against her.

Credit: (Sophia Germer/The Advocate | The Times-Picayune)
Celeste Matthews shows the siding she had installed after Hurricane Katrina. Matthews received a Road Home grant to elevate her Gert Town home in New Orleans but used the money for repairs instead.

U.S. Rep. Troy Carter, a Democrat whose district includes much of New Orleans, where many of the lawsuits have been filed, said last week the state should put such filings on hold.

“Conversations are getting more frequent and focused in these past few weeks in the work to end the injustices of the Road Home program,” Carter said. “The state should not continue, and is not required to, keep exacting these punishing actions against my constituents.” 

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