Katrina: disaster profiteers pocket millions in deals

A year after Hurricane Katrina, the reconstruction of the devastated Gulf coast is being severely hampered by waste and inefficiency overseen by "disaster profiteers" who are making million of dollars, according to a watchdog group. The group claims the inefficiency - along with the companies' political connections - follows a pattern similar to what happened in Afghanistan and Iraq.

With much of New Orleans still in ruins and its population half of what it was before the hurricane, a new report claims millions of dollars has been squandered by wasteful processes that have seen 90 per cent of the first wave of reconstruction contracts awarded to firms outside Louisiana, Mississippi and Alabama. Local firms have been frozen out while immigrant workers have been exploited and often unpaid.

"One year after the disaster, the slow-motion rebuilding of the region looks identical to what has happened in Afghanistan and Iraq," said Pratap Chatterjee, the director of Corpwatch. "The process of getting Katrina-stricken areas back on their feet is needlessly behind schedule, in part, due to the shunning of local business people in favour of politically connected corporations from elsewhere in the US that have used their clout to win lucrative no-bid contracts with little or no accountability."

When President George Bush addressed America from floodlit Jackson Square in New Orleans on 15 September last year, he said: "Our goal is to get the work done quickly. And taxpayers expect this work to be done honestly and wisely.... And in the work of rebuilding, as many jobs as possible should go to the men and women who live in Louisiana, Mississippi, and Alabama."

Yet the report details how the overwhelming majority of initial contracts for construction went to companies - "usually large, politically connected corporations - based outside these three states". Among the biggest winners of contracts were Florida-based Ashbritt, which received a $500m contract; Bechtel of San Francisco, which has received $575m worth; and Texas-based Fluor Corp - $1.4bn. One Louisiana company that received a large contract was the Shaw Group, which was awarded $950m worth.

There is no suggestion that any of these companies has acted illegally or stepped outside acceptable commercial practice.

The report's author, Rita King, said: "The devastation of the Gulf coast is tragic enough but the scope of the corporate greed that followed, facilitated by government incompetence and complicity is downright criminal. Sadly, disaster profiteering has become commonplace in America. Corporations are growing rich off no-bid contracts while the sub-contractors [get] peanuts."

Another aspect highlighted is the failure to pay immigrant workers, who do much of the reconstruction work. It details the efforts of the Mississippi Immigrants Rights Alliance which has had to fight for $300,000 in wages owed to immigrant workers.

Rosana Cruz of the National Immigration Law Centre said: "The level of assault against workers feels like war. There is vulnerability in each successive layer of sub-contracting. This is a microcosm of what is happening around the world. If you're poor and you're brown we can do what we want with you."

Companies named in the report dismissed its findings. Bechtel quoted the Federal Emergency Management Agency's (Fema) assessment of its work as "remarkable" and said its rate of providing emergency housing was "faster than at any time in Fema's history". It said 70 per cent of its sub-contracts went to local firms.

A Fluor spokesman said it had provided temporary homes for 150,000 people and had used 30 local vendors: "We are very proud of the work we have been able to do in Louisiana."

Federal authorities have issued $9.69bn in Katrina reconstruction contracts. The Department of Homeland Security's inspector general, Richard Skinner, told Congress in April: "The federal government, in particular Fema, has received widespread criticism for a slow and ineffective response. Unfortunately, much of the criticism is warranted."

Golden Pyramid: How dust and debris turns into dollars

The report claims many large companies established 'contracting pyramids', with each layer skimming money. It highlighted the $500m contract awarded to Ashbritt to remove debris, which worked out at $23 per cubic metre of rubbish moved. In turn, it hired C&B Enterprises to do the work for $9 per cubic metre, which in turn hired Amlee Transportation which was paid $8 per cubic metre. Amlee hired another company for $7 a cubic metre. Finally, the work was done at $3 per cubic metre by a haulier from New Jersey.