Whistleblower Suit: Engineering Firm Pushed Xavier, Archdiocese to Cheat Fema after Katrina
By Gordon Russell
An explosive whistleblower lawsuit unsealed Wednesday alleges that a California engineering firm pushed Xavier University, Dillard University, the Archdiocese of New Orleans and the city’s public school system to cheat the federal government out of more than $100 million meant to rebuild or replace facilities destroyed in the aftermath of Hurricane Katrina. The suit was filed in 2016 by Robert Romero, a former project manager for the engineering firm, AECOM. Romero has been joined by the U.S. Department of Justice, which is seeking the return of the overpayments as well as money paid to AECOM. The department announced Wednesday that Xavier has agreed to repay $12 million to the federal government. As part of the settlement, Xavier will cooperate with the government in the broader case against AECOM. The firm was paid more than $300 million by the Federal Emergency Management Agency for consulting work after the storm, the department said in a news release. The lawsuit alleges that AECOM -- which helped institutions prepare estimates of the damage Katrina caused in order to qualify for federal “public assistance” grants -- systematically used “inflated repair estimates and other false information” to get FEMA to pay out more money than claimants were entitled to. The fraudulent claims include “damage to non-existent building foundations as well as fictitious basements,” as well as exaggerated square footage, the suit says. In many cases, the bogus assertions allowed the claimants to take advantage of a federal rule, pursuant to the Stafford Act, that says the government will pay for a full replacement of a building or facility that is more than 50% damaged. Xavier was overpaid by approximately $16 million, the suit alleges, thanks to several inflated or fraudulent claims. Those included claims of damage to a gymnasium slab and claims of damage to the basement of the student center, which had no basement. Dillard was overpaid by $14.3 million for inflated claims of damage to three buildings, the suit says: Straight Hall, Hartzell Hall and Camphor Hall. And the archdiocese -- which recently declared bankruptcy amid the coronavirus pandemic and a flood of lawsuits over alleged molestation by priests -- collected about $46 million in overpayments from FEMA, the suit says. The largest chunk of that, more than $36 million, was paid out after the archdiocese claimed that the four top floors of two assisted-living centers had been catastrophically damaged when that was not true. A recent filing in the archdiocese’s bankruptcy case made glancing reference to the whistleblower suit, though it gave no estimate of the church’s potential liability. Other alleged overpayments went to the Orleans Parish School Board, for Hynes Elementary School, and the Recovery School District -- which operated most city schools after the storm -- for Crocker and Chester elementary schools. The lawsuit doesn’t specify how much money the systems should have received, but it says that AECOM helped to inflate damage assessments and that the two systems received $14.5 million and $28.7 million, respectively, as a result. The damage claims overestimated Hynes’ square footage by 40%, while at Crocker and Chester, officials falsely claimed roof and second-floor damage where there was none, the suit says. Presumably, if the Justice Department’s lawsuit is successful, taxpayers could be on the hook for some of that tab. However, neither school system is named as a defendant in the suit. While the alleged overpayments presumably mostly helped the entities receiving the extra money, the Justice Department’s announcement that it had joined the suit portrays AECOM as the primary culprit. The lawsuit says that AECOM also benefited from the overpayments because FEMA evaluated its contractors on the basis of productivity. The claims also allowed AECOM to bill more hours, the suit says. AECOM disputed that any overpayments would have accrued to its benefit and said in a prepared statement that it intends to “vigorously defend” its work. “It’s disappointing that 15 years after Hurricane Katrina, the federal government wants to claw back funds from educational institutions that endured so much damage from the impact of the storm,” the statement said. “AECOM deployed immediately to New Orleans after the hurricane in 2005 and worked side-by-side with its residents and institutions to help rebuild the city and get students back into school. We are proud of our efforts and intend to vigorously defend our work, all of which was done under the guidance and supervision of the federal government.” Company officials disputed the notion that AECOM would have benefited from higher payments to aid recipients, and suggested that the company was just trying to satisfy directives from FEMA to write sweeping damage assessments to help New Orleans get back on its feet. The lawsuit pins much of the alleged fraud on one former AECOM employee, Randall Krause, who was involved in bogus or inflated claims filed by Xavier, Dillard and the archdiocese, the suit says. The suit says that other AECOM officials as well as representatives of the entities seeking assistance signed off on requests as well. Krause is the only one named as a defendant. One of the entities Krause was helping with damage estimates reported him to Romero’s AECOM supervisor, according to the suit, and Krause was fired. However, the suit says AECOM did not report Krause’s past transgressions to FEMA. In one example the suit describes, Krause used pictures that purported to show damage to the Xavier gym. But the pictures were shot elsewhere, and he downloaded them from the internet, the suit says. Called a “qui tam” suit, Romero’s whistleblower complaint was filed by Phillips & Cohen, a Washington, D.C., law firm that specializes in such cases. Under the federal False Claims Act, qui tam suits are filed under seal, and they are kept under seal until the government decides whether to join in. A portion of any money recovered goes to the filer of the suit. Romero was paid $2.3 million of the $12 million repaid by Xavier, according to the Department of Justice. Xavier officials referred questions to lawyer Jim Garner, who said that “the university relied heavily on AECOM, which prepared the reports” that were later deemed bogus. It was unclear late Wednesday whether the federal government was joining in all of the whistleblower's complaints. Dillard officials said in a statement that they do not believe the federal government is seeking the return of the alleged overpayment to the school. "The Department of Justice, after conducting an independent investigation, has declined to pursue any claims against Dillard arising out of this matter," spokesman Eddie Francis said. In a news release, federal officials portrayed the lawsuit as an effort to ensure taxpayer money is spent wisely and that aid programs aren’t abused. “The Department of Homeland Security (DHS) Office of Inspector General will continue to identify and investigate disaster fraud schemes to ensure that taxpayer funds are properly spent to help disaster victims and rebuild affected communities,” said DHS Inspector General Dr. Joseph V. Cuffari. “We remain committed to working with our partners in the Department of Justice to root out waste, fraud and abuse.”
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