Video: The Fleecing of America

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updated 6/5/2006 7:22:03 PM ET 2006-06-05T23:22:03

The collection, hauling and smashing of debris in Louisiana and Mississippi resulting from Hurricane Katrina is still a daily ritual that has already cost taxpayers almost $2.5 billion. But government investigators and those closest to the cleanup now say hundreds of millions of taxpayer dollars may have been wasted. Workers, contractors and government investigators say the large size of the contracts and the multiple tiers of subcontractors have pushed up the cost of the cleanup while slowing down the pace of the operation.

“I have not seen a better example of waste and ineptness in my lifetime,” says Troy Hebert, a part-time Louisiana state legislator and full-time owner of a debris removal company.

Hebert has worked past hurricanes and complains that this time, the Army Corps of Engineers gave debris removal contracts to four major corporations — which did little actual cleanup themselves, instead farming out much of the job to layers of local subcontractors.

The result?

“They were able to make huge, huge sums of profits off of actually other people doing work to clean up our communities, and that's not the way it should be,” says Hebert.

The four primary contractors — Ashbritt Inc., CERES Environmental Services Inc., Environmental Chemical Corp. and Phillips and Jordan Inc. — were each provided with a $500 million contract and a $500 million option by the Army Corps. The companies claim that they did not permit multiple tiers of subcontractors but admit that in some cases their subcontractors may have subcontracted to others. By contract, Environmental Services Inc. permits only two layers of subcontractors, but the company acknowledges that in a few rare instances it found as many as five layers of subcontractors. Ashbritt says it took pains to ensure that it had only one tier of subcontractors on the debris removal work it performed in Mississippi. But in one case NBC News discovered four tiers of subcontractors.

Here's an example of how it worked: The Ashbritt company was paid $23 for every cubic yard of debris it removed. It in turn hired C&B Enterprises, which was paid $9 per cubic yard. That company hired Amlee Transportation, which was paid $8 per cubic yard. Amlee hired Chris Hessler Inc, which received $7 per cubic yard. Hessler, in turn, hired Les Nirdlinger, a debris hauler from New Jersey, who was paid $3 per cubic yard.

Nirdlinger is not happy.

“It's a pyramid,” says Nirdlinger. “And everybody is taking a piece of the pie as you work your way up, and we're at the bottom. We’re doing the work!” he says.

Ashbritt acknowledges it does not own any trucks to haul debris, but insists it typically doesn’t allow layers of subcontractors. It also says that its contract with the Army Corps involved much more than simply hauling debris. As project manager, the company was also responsible for loading the debris trucks, managing the tremendous logistical operations of the debris-removal operation and providing hundreds of workers to manage the cleanup efforts. While the company says there may have been problems with subcontracting practices on other Army Corps debris removal contracts, it says that did not happen on its own contracts and insists that taxpayers got their money's worth.

Congressional investigators disagree.

“Contractors were being paid two, three times what they should have been paid to get the job done,” says Rep. Tom Davis, R-Va., and chairman of the House Homeland Security Committee. “And the job took in some cases two and three times as long as it would have.”

A Federal Emergency Management Agency spokesman says costs for debris removal ranged from $13 to $25 per cubic yard. Some cities that did not engage in debris-removal contracts with the Army Corps negotiated their own contracts directly with private companies and seem to have managed to obtain a lower end price. For example: Gulfport, Miss., hired one company to handle its cleanup and paid $14.95 per cubic yard. Biloxi, Miss., paid $15.89 per cubic yard to three separate contractors.

CERES Environmental Services Inc., one of the four Army Corps primary contractors, says it was paid rates ranging from $14.15-16.36 per cubic yard for its cleanup work. It in turn contracted with Loupe Construction, a small Louisiana company that then hired the company that Troy Hebert worked for, McGee Cos. McGee was paid $10 per cubic yard, but Hebert says he was paid as little as $6 per cubic yard on other debris-removal contracts. In a statement to NBC News, CERES says: “CERES has worked diligently with the Corps to perform the work safely, quickly, and properly for reasonable prices.”

An official with the Army Corps of Engineers says the agency also is concerned that tiers of contractors drove up costs to taxpayers. The official says that, in the future, the Army Corps will probably negotiate its contracts differently and award more direct contracts with smaller budgets as one method of trying to reduce the number of subcontractors on any one contract.

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