‘Spillionaires’: Profiteering and Mismanagement in the Wake of the BP Oil Spill
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.
Some people profiteered from the spill by charging BP outrageous rates for cleanup. Others profited from BP claims money, handed out in arbitrary ways. So many people cashed in that they earned nicknames — “spillionaires” or “BP rich.” Meanwhile, others hurt by the spill ended up getting comparatively little.
In the end, BP’s attempt to make things right — spending more than $16 billion so far, mostly on claims of damage and cleanup — created new divisions and even new wrongs. Because the federal government ceded control over spill cleanup spending to BP, it’s impossible to know for certain what that money accomplished, or what exactly was done.
Some 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, including some reported earlier by the New Orleans Times-Picayune, for St. Bernard Parish, a coastal community about five miles southeast of downtown New Orleans.
Documents show that local companies with ties to insiders garnered lucrative cleanup contracts and then charged BP for every imaginable expense. The prime cleanup company, which had a history of bad debts and no oil-spill experience, submitted bills with little documentation or none at all. A subcontractor charged BP $15,400 per month to rent a generator that usually cost $1,500 a month. A company owned in part by the St. Bernard Parish sheriff charged more than $1 million a month for land it had been renting for less than $1,700 a month.
Assignments for individual fishermen followed the same pattern, with insiders and supporters earning big checks.
According to sales tax collections, Louisiana made out better than anywhere. Sales tax collections from Plaquemines Parish rose more than 71 percent, while St. Bernard saw the biggest jump of all. The 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 toys, boats and trucks. Sales at the nearest Chevrolet dealer rose 41 percent.
Some of the influx of money can be traced to the efforts of St. Bernard’s parish president, Craig Taffaro Jr., a 45-year-old psychotherapist with a wrestler’s build, a cue-ball head and a trimmed goatee.
Just days into the crisis, Taffaro did what many parish presidents did: He invoked a Louisiana law that allowed him to declare a 30-day emergency and handle the crisis without most normal government checks and balances. But Taffaro used his powers more broadly than most, saying that he wanted to put money back into the community. Unlike the leaders of other Gulf communities, Taffaro — not BP — chose the prime contractor that supervised the cleanup. He and his allies also decided which fishermen would be hired to put out boom and search for oil. At one point, Taffaro hired his future son-in-law to work in the finance department and help on the spill.
In some ways, parish residents seemed to view the disaster and BP’s culpability as a way to recover from earlier blows. More than other coastal communities, St. Bernard bore the brunt of Hurricane Katrina, which flooded almost every home in August 2005. The population dropped almost in half, from about 67,000 in 2000 to about 36,000 in 2010, largely because people didn’t come 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 boom, the floating material used 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 parish 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, six pairs of children’s scissors and 712 shirts emblazoned with the parish name. 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 and Taffaro’s good friend, was paid almost $23,000 for working 497 hours of overtime in less than seven weeks. That meant he was working an average of more than 16 hours a day, including weekends.
As the money flowed, complaints spread. Some beneficiaries didn’t necessarily suffer from the spill but had social or political connections. Subcontractors said those at the top of the cleanup creamed off money for doing very little, while those at the bottom earned much less for doing the actual work.
At first, everyone was angry with BP. But as the months wore on, some St. Bernard residents directed their frustration at Taffaro, blaming him for handing out jobs and money to a small group of insiders.
Meanwhile, Taffaro was attacking BP and the federal government in the media, appearing on TV alongside Gov. Bobby Jindal and testifying in Congress. His outrage was palpable. There wasn’t enough boom, coordination or respect for the local government. BP wasn’t making good on its obligations.
The pressure paid off. Taffaro at one point boasted that St. Bernard had doled out more BP cleanup money to commercial fishermen than any other Louisiana parish. His claim is impossible to verify, because neither Taffaro nor anyone else would provide details about the spending numbers.
Louisiana Gov. Bobby Jindal, front left, holds up a tar ball while Bernard Parish President Craig Taffaro, front right, begs BP and the U.S. Coast Guard to deploy more booms to protect fragile wetlands at a press conference in Hopedale, La., on May 7, 2010. (Mira Oberman/AFP/Getty Images)
Many companies and people earning big money from the spill had connections to parish powerbrokers, according to court documents, parish records and interviews done by ProPublica.
Amigo Enterprises Inc., which for years leased land to one of the busiest marinas in the parish, got in early. BP based the cleanup operation at the marina in Hopedale, which made sense. But the price Amigo charged BP for the land was astronomical. Amigo had been leasing the land for less than $1,700 a month from the Arlene & Joseph Meraux Charitable Foundation Inc., according to the nonprofit’s most recent tax returns. The company billed BP more than $1.1 million a month, said BP spokesman Joe Ellis.
Amigo wasn’t just any company. One of the owners was St. Bernard’s powerful sheriff of 26 years, Jack Stephens, who also sat on the board of the Meraux Foundation. According to the most recent ethics form Stephens filed with the state, he earned more than $100,000 from Amigo in 2009.
The company that benefited most from BP’s checkbook was Loupe Construction and Consulting Co., Inc., a small, family-owned business in a nearby parish with few employees and a bare-bones website that misspelled the company name. On May 5, Taffaro chose Loupe to manage the cleanup in St. Bernard, a job that would eventually be worth as much as $125 million.
Owner Paul Loupe had a long history of debts and lawsuits. Four lawsuits, three of which have been settled, accused him of not paying his bills after Katrina and Hurricane Rita, when he and another small Louisiana company joined up to clear debris in nearby Jefferson Parish, the company’s only major experience responding to a disaster. Loupe’s website says the two companies performed more than $100 million worth of work for Ceres Environmental Services Inc., the Minnesota-based company that hired them.
“There was a lot of gouging,” said David Northcutt, who worked for a Loupe subcontractor and has since sued for unpaid wages. “Everybody had their hand out, of course. It was a once-in-a-lifetime opportunity for a lot of people.”
F.J. Campo, who ran the boat launch at Shell Beach that provided fuel for BP boats, said one man who had been trying to sell his fiberglass yacht in Florida brought it back to the parish, got it hired by Loupe, parked it behind the docks and came into the launch every nine or 10 days to bill BP for fuel for the generator.
“They used to hide it behind the docks over there, and it never worked,” Campo said.
In July, Loupe hired a Washington state company, Farrow Construction Specialties Inc., to set up marsh-washing systems on barges. Almost immediately, a Farrow consultant named Larry Howell, who had once pleaded guilty to a federal bank fraud charge, set up his own company with people from South Carolina, Texas and Arizona to take over the Farrow contract.
Tim Henson, who had years of experience cleaning up oil spills and worked with a company that partnered with Farrow, said Loupe positioned 13 or 14 skimmer boats around each marsh-washing barge, even though the barges themselves functioned as oil skimmers.
“BP was being billed for all the man hours of all those boats,” said Robert Brown, an engineer who helped out on the project. “One would disappear to go take a break or take lunch. Then another one would fill in and do nothing. It was the Keystone Kops.”
During a squabble over the Loupe subcontract, Mike Turner, who had initially partnered with Howell and Farrow, said rumors began spreading that the FBI was investigating him. He hired a lawyer and called the FBI. He said he was told he was not being investigated, but he spent hours talking to a New Orleans-based FBI agent about allegations of payoffs and overbilling.
“I spilled my guts. So now, it’s my understanding they are being investigated,” said Turner, referring to the parish and the businesses that were hired for the cleanup.
As the cleanup dragged on, Loupe faced a cash-flow problem. For help, Loupe turned to Park Investments Ltd., a local company that primarily develops shopping malls and other commercial properties. Park Investments and its related companies had done business with plenty of parish powerbrokers in the past — Stephens, the sheriff, had been a partner in at least one development.
Park Investments and companies run by its president, Lewis Frank, and owner, Joseph Georgusis, are major political donors in Louisiana. And one of the politicians they frequently donate to is Taffaro, the parish president.
In essence, the cleanup company chosen by Taffaro was now being financed by some of Taffaro’s biggest supporters.
Melanie Burford/Prime for ProPublica
St. Bernard was certainly not the only community where markups flourished.
In another Louisiana parish, a BP supplier hired more than 20 vessels a day, paying at most $2,500 a day for each vessel but charging BP $15,000 a day. The supplier pocketed at least $250,000 every day for months, according to someone who saw the bills.
Bills from another Gulf state showed that BP paid a subcontractor $36 an hour for workers to clean up oil along sandy beaches, according to the same person. The subcontractor hired a temp agency, which provided workers for about $14 an hour, leaving the subcontractor with the $22-an-hour difference. The temp agency then made its own profit, hiring workers for about $10 an hour.
On Aug. 21, Loupe delivered 139 invoices to Louisiana’s main incident command post in Houma — the first time the finance team said it had seen any of the invoices. All told, Loupe claimed BP owed it $34.7 million.
On Saturday, Aug. 28, Paul Loupe, Taffaro and Dysart met with BP officials in New Orleans. Loupe, unable to pay his subcontractors, asked BP to pay him something within two days. BP officials refused. Loupe and BP then agreed to review the invoices together.
“As we discussed at the meeting, all of the invoices reviewed to date lack certain critical information that, in accordance with well accepted business practices and BP’s code of conduct, BP requires before it can approve an invoice for payment,” the letter said.
BP also began balking at other bills. Parish Oilfield claimed to be owed $900,000 for sheriffs’ deputies, BP’s Ellis said. At $45 an hour, that meant the deputies had clocked as many as 20,000 hours since the spill.
If Parish Oilfield pocketed $15 for every hour worked — given that the normal off-duty deputy rate was $30 an hour — that would have meant $300,000 for the company itself.
In addition, Amigo Enterprises, run by the sheriff, his cousin and a third partner, claimed to be owed millions for equipment, rent and fuel at the Hopedale base.
Within days, the spill cleanup ground to a halt. Amigo refused to provide fuel for the cleanup. So did Campo at Shell Beach and another fuel dock on Delacroix Island, because Loupe hadn’t paid past bills.
On Aug. 31, the sheriff’s office signed an eviction notice for BP at the Hopedale site because BP had not paid rent to Amigo. “Landlord wants possession of his property,” the notice said, without clarifying that the sheriff’s company was the landlord. That night, Taffaro held a press conference, highlighting the eviction notice and accusing BP of not paying its bills, including more than $3 million owed to Amigo and more than $34 million owed to Loupe.
“We are calling on BP to step forward to make this right,” Taffaro said.
BP paid Amigo. The cleanup resumed.
While contractors fought for BP’s cleanup money, commercial fishermen jockeyed for BP-financed jobs to replace their lost income.
As long as oil poured into the Gulf, the fishermen were unable to work and unqualified for most other jobs. Some went on anti-depressants. Others started drinking too much. Nearly all tried to join BP’s “Vessels of Opportunity” program, which was supposed to provide a lifeline for commercial fishermen by hiring them and their boats for cleanup work. Boats could make $1,200 to $3,000 a day. Crew members often earned $200 a day, while captains earned as much as $360 a day.
The program was so lucrative, if disorganized, that people throughout the Gulf, including some nonfishermen, started fighting over the slots for boats. As complaints grew, Landry, the St. Bernard council chairman, and another council member pulled together a committee of fishermen and seafood dealers to create a list of bona fide fishermen. Then they drew names to set up assignments.
“That list was posted,” Landry said. “And the next day everything changed. Craig Taffaro took over.”
Using his emergency powers, Taffaro set up St. Bernard’s version of Vessels of Opportunity. Now Taffaro, not BP, controlled who got the coveted jobs.
Soon after the cleanup began, commercial fishermen also started complaining that a small group of favorites got more work than anyone else. ProPublica’s analysis of parish checks paid to fishermen over the first six weeks, filed as part of a court case, seems to bear that out. A small group worked regularly, earning $24,000 to $34,000. Although Taffaro and Dysart said those fishermen performed additional jobs, the same fishermen got and kept those additional jobs throughout the entire cleanup. Meanwhile, Eric Melerine, a top fisherman from Delacroix Island, earned only $5,260 during those first six weeks. His younger brother Jason, also a full-time commercial fisherman, earned just $4,560. Another fisherman, Donald Campo, failed to get hired on the BP cleanup at all, despite signing up.
“Sometimes with things like that, it’s all about who you know,” Campo said. “It’s about connections.”
Cisco Gonzales, who owns an air-conditioning company and runs the Louisiana Crawfish Festival, got his boat on the cleanup by lending it to his nephew, a fisherman whose own boat broke down. Many fishermen complained about Gonzales earning money from the spill, especially fishermen who couldn’t get a boat hired. Gonzales said he felt bad about all the animosity against Taffaro.
“Me and him’s good friends, to tell you the truth,” Gonzales said. “With Craig, he’s done a more than fair job in our community.”
On June 1, fishermen showed up at a council meeting to complain about the selection system. They complained that some fishermen worked seven days a week, while others hadn’t worked in 30 days. Stacy Campo, a fisherman’s wife, said the inequities were ripping apart the community.
“You are the one we look to for the answers,” she told Taffaro. “You are breaking up families and friends because you can’t get an answer. Why is it that we have some big boats on the job that’s been on the job since this started? My husband’s been on rotation once. Why is that? We want the answers. This is going to kill a community that has been together for hundreds of years.”
Taffaro promised to fix the job list and make sure assignments were fair. He also emphasized that St. Bernard was handing out more money to the fishing industry than any other Louisiana parish. In the next two weeks, he said, parish fishermen would earn $4.5 million working for BP. By early September, that would reach $7 million.
One fisherman complained that BP was putting absurd amounts of money into the parish and said he wanted his own piece of the action.
“This is ungodly amounts of money,” Taffaro agreed. “Many people are making more money than they’ve ever made in their entire lives. I don’t have a problem with that, and I agree with you: that I want everybody to share the wealth in this situation.”
At the end of the meeting, Landry asked Taffaro for an accounting of how the parish had spent the BP money.
“Not a problem,” Taffaro replied.
But Taffaro and the parish turned over only some of the records, despite four public-records requests by Landry and the council clerk. Landry had to get a court order to obtain more. The council shared some records with ProPublica; others were in the court file.
One man who earned $67,000 in 2009 fishing crabs and hunting a swamp rat called nutria got $100,000 for his six-month emergency claim. That was on top of $90,000 he earned working on the cleanup and $20,000 he received in initial BP claims. In the eight months after the spill, he earned a total of $210,000, more than three times as much as he earned in all of 2009.
The distributions seemed crazily disproportionate.
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, the other one on the edge.”
Jason Melerine, 28, who said his income was about $90,000 in 2009, received a six-month emergency compensation check for $180,000. To support his claim, he submitted invoices showing that his boat sold $280,000 worth of seafood the year before, an amount that didn’t reflect his expenses.
His brother Eric Melerine, who earned $111,000 in 2009, received just $60,000. To support his claim he used his 2009 tax return, which did reflect his expenses.
Eric Melerine’s deckhand Mikey Labat, who made about $70,000 in 2009, initially received $6,900 for his six-month claim. His wife, Laura, was so upset that she filed an appeal and got the family another $18,000. Later, after hearing rumors of waitresses and hairdressers earning big money, she said she went to the claims office and sarcastically asked if she could file her own claim because her husband wasn’t paying her an allowance for cooking and cleaning.
Many fishermen fretted that businesses that were suffering from the recession, not the spill, were getting BP money. A hairdresser at Dorene’s hair salon received $8,000 for her emergency claim. Waitresses at the World of Wings Café and Wingery received between $5,000 and $7,000; the restaurant’s owner got $50,000. A valet car parker at a five-star hotel in New Orleans that was 98 percent full received $1,000.
Felesia Carter, a manager at St. Bernard’s only off-track betting parlor, said she heard customers talking about how they were gambling away claims money. Her business was so good, she said, that employees worked overtime and weren’t allowed to file for claims.
“I don’t understand how BP is just giving its money out like this,” Carter said. “Give it to the people who deserve it.”
In September, Randy Nunez, one of Loupe’s lawyers, invited people to an event hall in New Orleans’ historic warehouse district to raise money for Craig Taffaro’s re-election campaign, two invitees said. Nunez did not return later calls from ProPublica.
The stakes are high for the October election, because the parish council recently bumped the next president’s salary from $70,000 to $128,000, a hefty sum in a community with a median household income of about $38,500 a year, about $13,500 below the national median.
More than 200 people showed up for the fundraiser at The Chicory, including Paul Loupe and his wife, witnesses said. Records filed by Taffaro’s campaign committee show that he pulled in $207,400 — more than his combined donations from the previous two years. No other president or presidential candidate in St. Bernard has ever reported raising that much money in a single night, according to Louisiana records available online.
At least $45,800 of that money came from people and companies that ProPublica has linked to the cleanup effort, including Loupe, Nunez’s law firm, Park Investments and people and businesses connected to Park. The amount is likely higher than that, but no list of companies that worked on the spill is available for comparison with Taffaro’s campaign filings.
Through his spokeswoman, Taffaro said all of the contributions were legal.
Is BP shortchanging contractors? Are contractors trying to scam BP? Because none of the records are public, it’s impossible to know for sure.
The last interview ProPublica had with Taffaro was in November. He complained that the BP emergency claims were not distributed fairly and said BP and the federal government should have listened more to local authorities.
When pressed about how he selected Loupe and picked the boats for cleanup, Taffaro abruptly ended the interview.
“We’re done,” he said, escorting the reporter to the door. “I will not allow you to do this to St. Bernard Parish.”
by Kim Barker
ProPublica, April 13, 2011, 1:05 p.m.
ProPublica’s research director, Lisa Schwartz, and researchers Kitty Bennett, Sasha Chavkin and Liz Day contributed to this report.