It’s rare to revisit a scandal after it’s died down and the headlines are gone, but the lessons to be learned from the now-canceled no-bid, no-audit contract that the government of Puerto Rico awarded to Whitefish Energy to help restore power after Hurricane Maria are too important to remain unexamined.
The $300 million deal came to light shortly after it was signed and immediately raised eyebrows for a number of reasons. To start, Whitefish Energy was an inexperienced new company with only two people listed as company employees in the few short weeks before they were contracted by local officials in Puerto Rico. The founder of the company was a childhood friend of Interior Secretary Ryan Zinke, and the company was based in his hometown. Even more disturbing was a provision in the contract that banned the company from having its accounts audited to prevent fraud and over-billing.
The Puerto Rico Electric Power Authority (PREPA), the local power company that signed the deal with Whitefish Energy, was so assailed by federal officials over the terms of the deal that they canceled the contract shortly after the damning details were made public. Nonetheless, contractors hired by Whitefish Energy have remained to restore power lines until the end of this month under the terms of the cancellation.
Now The New York Times has discovered exactly how lopsided the controversial deal actually was in a report published in the paper today. According to the Times, Whitefish hired electrical workers from Florida at rates starting at $42 per hour plus overtime, with senior linemen earning up to $100 per hour, including the overtime rates.
Given the long hours and difficult working conditions, these wages don’t seem disproportionate. The problem, however, is that Whitefish Energy bills PREPA $319 per hour for this work, a rate that the Times calls “far above the norm even for emergency work — and almost 17 times the average salary of their counterparts in Puerto Rico.”
PREPA is also paying Whitefish Energy multiples of the going rates for helicopter rental, aviation fuel, and food. The prices the company bills back are so high that the Army Corps of Engineers refused to hire them because they wanted to charge double what the agency considered reasonable.
While Whitefish claims that the difference between their costs and what they are billing reflect overhead costs not accounted for elsewhere in the contract, other energy companies who have come to the aid of their counterparts in similar disaster situations disagree, saying that they generally take no markups on labor costs during emergency repairs.
Now congressional watchdogs want to examine all of the contracts that Puerto Rico has issued to help rebuild after the disaster, particularly after discovering that another contract signed by PREPA with an Oklahoma based energy company contains the same no-audit clause as the Whitefish deal.
The disparity between the amount paid by PREPA to Whitefish Energy and the company’s actual costs means either that windfall profits are being made on the backs of the misery-laden inhabitants of Puerto Rico or, as some local residents suspect, that some serious kickbacks are changing hands in a corruption scheme that exploits the situation for the benefit of both PREPA officials and Whitefish.
With at least four congressional committees ready to investigate, the public will hopefully know the real answers soon.
