Federal legal aid for poor spent on alcohol, staff loans, report says

http://www.cnn.com/2008/US/01/17/legalaid.programs.ap/index.html

Congressional investigators: Legal Services Corp. didn't monitor how money spent
The nonprofit, funded by Congress, distributes grants to legal aid groups in all states
Top LSC officials say they don't tolerate "spending of grantee funds outside the law"
Report questioned the use of more than $1 million in payments

WASHINGTON (AP) -- Congressional investigators say legal aid programs serving poor people spent federal money on alcohol, interest-free loans for staff, late charges on overdue bills and even lobbyist registration fees.

The parent organization that distributes grants to programs in all 50 states, Legal Services Corp., failed to monitor how the money was spent by state and local legal aid officials, according to the investigators in a new report. It did not specify how much money was misspent but questioned the use of more than $1 million in payments.

The new report, obtained by The Associated Press, was based on examination of spending at 14 of 138 legal aid programs financed by the Washington-based Legal Services Corp.

The top officials of the Legal Services Corp. responded, "We have no tolerance for any spending of grantee funds outside the law or the regulations of the LSC, and have formally referred all potential violations noted in the report to our Office of Inspector General."

"We will take whatever actions are warranted when all of the facts are known," said corporation President Helaine Barnett and Board Chairman Frank Strickland.

Among the organizations whose activities were questioned in the report: Nevada Legal Services Inc.; California Indian Legal Services Inc.; Legal Aid and Defender Association of Detroit, Michigan; Legal Services for New York City; Philadelphia Legal Assistance Center; Wyoming Legal Services; and Laurel Legal Services Inc. of Greensburg, Pennsylvania.

Some of those groups were not identified in the U.S. Government Accountability Office report, but congressional offices disclosed they were among the ones targeted by GAO investigators.

After an April 2006 visit to the Las Vegas office of Nevada Legal Services, the GAO cited the conclusion of inspectors checking the program's performance: "Overall, this program is in very good shape. Its delivery structure is sound, its management is excellent, and its case handling staff are performing at a high level."

But less than one year later, during a February 2007 visit by compliance inspectors and congressional investigators, federal officials decided to investigate questionable transactions, including a complex $3.6 million real-estate deal.

The Legal Services Corp., a nonprofit corporation funded by Congress, distributes grants to legal aid groups in all 50 states. The state and local groups help poor people involved in civil cases, including domestic violence, child custody, housing foreclosures, veterans and Social Security benefits, consumer problems and health issues. Three of four clients are women, mostly mothers.

Congress gave the group $348.6 million for the last fiscal year.

The Associated Press previously reported on extravagant spending on hotels, meals, limousines and other perks by the corporation's presidentially appointed board of directors and top staff in the Washington headquarters.

The latest report angered two lawmakers who have been monitoring the program's problems.

"It is not acceptable to Congress or the taxpayers for scarce funds to be spent on the enrichment of others instead of on legal services," said Sen. Mike Enzi, R-Wyoming, senior Republican of the Committee on Health, Education, Labor and Pensions.

Sen. Charles Grassley, R-Iowa, senior Republican on the Senate Finance Committee, said the findings were "more documentation of abusive and wasteful spending that is jeopardizing the ability of the Legal Services Corporation to provide legal assistance to people in need."

Among the findings:

• The New York City, Detroit and California Indian Legal Services programs used federal money to buy liquor. Federal guidance for nonprofit corporations states that costs of alcohol are unallowable with no exceptions.

The New York officials did not return telephone messages by the AP requesting interviews. An official in Detroit declined to comment.

The California program didn't violate any rules, its executive director, Devon Lomayesva, told the AP. She said her group was willing to discuss the matter with the parent corporation's inspector general.

The GAO said the Detroit executive director acknowledged her program paid another organization for beer and wine costs for a reception.

The New York City executive director told GAO investigators, "LSC funds are no longer used to purchase alcohol."

• In Detroit, a contractor was paid far more than staff members, about $750,000 between 2004 and 2006, to operate computer servers and maintain the computer network. When asked by investigators why he was not an employee, with a commensurately lower salary, "he stated that there were benefits to being an independent contractor," the GAO said. The GAO said there appeared to be little distinction between the contractor and other legal aid employees in the same office.

• The Philadelphia office gave employees the perk of interest-free loans, which were used for college tuition, down payments on homes and purchases of personal computers. The GAO said there are no rules that would permit such loans.

The Philadelphia office did not return telephone messages left by the AP.

• In New York, the group used grant money to pay for lobbyist registration fees. With only limited exceptions, recipients cannot use grant money for lobbying. Each payment was only $50, but the executive director there agreed the payments violated its rules and promised it will not happen again, the report said.

• California Indian Legal Services, the New York City program and Wyoming Legal Services used funds to pay late fees on overdue accounts. In Wyoming, a vendor who was angry about unpaid office rent "threatened to place a lien against the goods in the unit and sell them at a public auction," the GAO said.

Wendy Owens, executive director of the Wyoming organization, told the AP, "Those late payments occurred under the tenure of a previous executive director and we have long since corrected those issues."

The GAO said all three executive directors agreed there was no excuse for failure to make payments on time.

• In Greensburg, Pennsylvania, the executive director was questioned by the GAO about a $30,000 payment to another organization. The director "stated that the previous executive director entered into the agreement and that she did not know anything about the agreement, other than the fact that she continued to pay the bill every year," the GAO said.

The executive director, Cynthia Sheehan of Laurel Legal Services Inc., disputed the investigators' conclusion, saying the money went to a bar association's free legal help program.

"I can assure you I did know what it was and that the Legal Services Corporation approved the contract every year," she told the AP.

• The Las Vegas office purchased its building with federal and non-federal funds and then agreed to sell it to a developer for $3.6 million, the GAO found.

When the sale fell through, the organization was able to keep $280,000 that the developer placed in an escrow account as "earnest money."

However, the $280,000 was placed in an account that was immune from any controls by the Legal Services Corp.

Investigators described the deal as an "unusual transaction." Legal Services officials eventually concluded the funds should have gone to a restricted account and kept under their scrutiny.

Nevada Legal Services officials declined to comment.

 

newsday.com/news/local/ny-enheal0102,0,1238070.story?coll=ny_news_local_promo

Newsday.com

Funding special districts

The perks your tax dollars pay for

BY SANDRA PEDDIE

sandra.peddie@newsday.com

11:30 PM EST, January 1, 2008

The Federal Bureau of Investigation’s Management of Confidential Case Funds
and Telecommunication Costs

Audit Report 08-03
January 2008
Office of the Inspector General

 

"Let me be clear that no single policy or action will undo the excesses of the last few years," Paulson said. 

Your Tax Dollars Not at Work

http://www.pitch.com/2008-01-03/news/your-tax-dollars-not-at-work/full

The Citadel Plaza shopping center was supposed to revive the inner city. Instead, it has leveled a neighborhood and left a contaminated mess. Now the developer wants more of our money.

By Carolyn Szczepanski 

Published: January 3, 2008

Behind Benni Ewing's house, there's a festering, empty expanse where a shiny new shopping center should be.

The area looks like an abandoned dumping ground. Hip-high weeds blanket awkward mounds of dirt. Unruly vines creep up half-toppled utility poles. Huge piles of rubble sit next to streets with no houses.

On the northeast end of the 35-acre tract, a crumpled stretch of chain-link fence arches up from the ground like the skeleton of some prehistoric beast. In the middle of the raw landscape, one boarded-up white house stands like a ghost of the former neighborhood.

The place looks like a forgotten war zone, not the site of one of the largest taxpayer-backed projects ever in Kansas City.

Behind a standing portion of the chain-link fence, signs read "COMING SOON: CITADEL PLAZA." But it has been seven years since an organization called the Community Development Corporation of Kansas City started this project at 63rd Street and Prospect. Construction on the 300,000-square-foot shopping center was supposed to be finished by the end of 2007.

Ewing lives in a five-bedroom house on Park Avenue, where homes were to be leveled to make way for Citadel Plaza. The 40-year-old Sprint employee says she got a letter from the Community Development Corporation of Kansas City in October 2006, telling her that the developers intended to buy her out. Ewing says her house has been in her family for 37 years, so when the CDC-KC offered her $42,000 to move, she said, "No way."

She expected a negotiation. But in the past year, she hasn't heard again from the CDC-KC. She has listened to the rumble of backhoes and bulldozers, though, as the organization continued demolition on her street. "They call our neighborhood blight, but look what they've turned it into," she says.

She points to the ripped-up sidewalk in front of her house. Down the block, orange pylons spill into the street, next to muddy lots. An oversized tumbleweed of discarded plastic fencing spasms in the wind. An explosion of trash — a splintered television, a rolled-up rug, a handful of black garbage bags — has been splayed over the curb for months.

"Why are they doing this to my family?" Ewing asks. "Why are they making us live like this and not communicating with us?"

The man who could answer those questions is William Threatt Jr., president of the CDC-KC. If you ask him, the area is evidence of a groundbreaking achievement to bring big-name retailers to an underserved community. He'll tell you that the CDC-KC just needs the city to front it $45 million to make sure the project doesn't fall through.

But if the recent past is any indication, that would be a risky investment.

Before Terry Riley was the city councilman for the 5th District, he was an AmeriCorps volunteer in 1994 and 1995 in one of Kansas City's toughest neighborhoods. The Blue Hills neighborhood — bounded by Prospect on the east, Paseo on the west, 47th Street on the north and 63rd Street on the south — was a neglected and dangerous slice of the urban core.

"Blue Hills Park was known as a gang park. It had bullet holes in the backboard of the basketball goal," Riley says.

Volunteers worked to shut down crack houses and start block watches; they began to improve the housing stock and encourage homeownership.

In 1994, City Hall marked the southeast corner of the neighborhood as part of a massive tax-increment-financing plan — a 14-project initiative that would front developers some future tax revenues if they would help revive blighted areas. Riley says the blocks around the intersection of 63rd Street and Prospect were perfect for city incentives.

"I mean, it's everything you can possibly imagine: the blight, the crime, the land, the poverty levels, everything," he says. "It fits the criteria like none other."

Finding someone to redevelop the area wasn't easy, though. Residents wanted a full-service grocery store and other retailers. Will McCarther, now the vice president for community affairs at Research Medical Center, was part of the original team tasked with getting the project off the ground. He says he met with the city's big-name developers, but they weren't interested in taking on the Citadel Plaza.

The CDC-KC seemed like a good fit. The idea of community-development corporations grew out of a federal push, in the 1960s, to revitalize declining inner-city communities. CDCs use public funds to jump-start new projects in blighted areas that traditional developers and private funders consider risky investments.

Established in 1974, the CDC-KC is one of more than 4,000 such entities across the country. But like many of them, the CDC-KC is small. Threatt, who makes $92,000 a year, according to the group's most recent tax filing, says it has only five full-time employees, down from as many as 30 in the late 1990s. For the most part, Threatt says, the CDC-KC contracts with outside experts for specific projects.

When it came to finding a developer for the Citadel Plaza, the CDC-KC wasn't a stranger to the neighborhood. In recent years, it had developed the Linwood shopping center at 31st Street and Prospect and the Metro Plaza at 63rd and Paseo.

But Citadel would be a much larger undertaking than anything the CDC-KC had done. Spanning seven city blocks, the new shopping center would include more than 320,000 square feet of retail space — more than three times the size of the CDC-KC's biggest previous project. With millions spent on street beautification and redesigning a portion of 63rd Street, the total price tag would exceed $80 million — considerably more than the $12 million spent on Linwood.

Maps and diagrams fill the small conference room in the CDC-KC's office on Linwood. According to project outlines, the Citadel Plaza will include staple goods and services, such as a supermarket, a shoe store and clothing retailers. But it will also include a day spa, a fitness center and an art gallery. Threatt won't divulge company names, but he says the CDC-KC has secured letters of intent from businesses that will occupy more than 70 percent of the space, including an anchor tenant.

Market studies commissioned by the CDC-KC indicate that area residents have more than enough buying power to make the center profitable. According to a study by St. Louis-based Development Strategies, people living within three miles of the site spend more than $1 billion every year on the same goods and services envisioned for Citadel Plaza. No longer will urban residents have to drive to midtown or Independence to get fresh vegetables and baked goods, Threatt says. The development will draw from traffic along U.S. Highway 71 and thousands of employees at nearby Research Medical Center.

In 2001 and 2002, the federal Department of Housing and Urban Development awarded the CDC-KC nearly $3 million in grants to buy properties and demolish them. Kansas City lent the CDC-KC $1 million in late 2005 and another $200,000 in early 2006. The city also advanced $3.5 million in TIF funds in 2007. Threatt says Citadel Plaza has plenty of private backing as well, though he won't name names. Of the $80 million price tag, Threatt says, less than 6 percent will come from taxpayers.

Based on the scarred and trash-strewn landscape at 63rd Street and Prospect, Citadel has a way to go. But Threatt thinks his group deserves congratulations. This project, he says, is far more difficult than the typical shopping-center development. The typical developer, Threatt says, buys empty plots from a single owner and starts leveling the land. But the CDC-KC has had to knock on the doors of more than 150 houses and businesses, negotiate with scores of homeowners and banks, then tear down dozens of structures.

There are only a few properties left to be acquired, a handful of structures left to demolish.

"The risk is over," Threatt says. "They said it couldn't get done, and we've done it."

But that's far from the truth.

ill Threatt is a somber man who speaks with the slow, methodical cadence of a professor lecturing first-year students.

When it comes to the Citadel Plaza, Threatt deflects criticism with indignant certainty of the project's merits and his organization's progress.

Threatt has a long history in housing and public service. He worked for HUD in the late 1970s and early 1980s. As an associate superintendent for the Kansas City, Missouri, School District, he oversaw the security and management of the district's many buildings. He did consulting work for the CDC-KC before he stepped in as president in 2000.

But Threatt and the CDC-KC have some troubled spots on their development records.

In 1988, Threatt was a representative for a development company called 7th Street Investors. That year, the now-defunct Housing and Economic Development Financing Corporation (a nonprofit agency that managed the city's spending of federal housing funds) lent the group $82,000 to renovate two apartment buildings in the 5900 block of Benton Boulevard. The term of the loan was 15 years, but from 1988 to 2003, Threatt's investment group didn't make a single payment. In 2004, taxpayers recovered little more than half the amount when 7th Street Investors paid off $50,000 and the loan was settled.

Later, there were more loan problems. Shortly after he took the reins in 2000, Threatt says, city officials asked the CDC-KC to renovate an apartment building at 2901 East Linwood. The group used $102,000 of the city's federal housing money to buy the building and assess its rehab potential. In August 2004, though, the structure was placed on the city's dangerous-buildings list after neighbors complained about vagrants squatting there.

Nathan Pare, manager of the city's dangerous-buildings department, says that when the city inspected the property, the roof was shot, the foundation was separated and the building was wasting away from years of neglect.

For three years, city officials sent the CDC-KC letters, posted notifications on the structure itself and filed notices with Jackson County. "We never had any feedback from them whatsoever," Pare says of the CDC-KC.

In November, the city tore down the building at a cost to taxpayers of $21,825.

Around the same time that 2901 East Linwood went on the dangerous-buildings list, another CDC-KC property burned.

Carolyn Turner purchased a home on East 61st Street from the CDC-KC for $97,500 in 1999. But the CDC-KC hired a builder — Nelson Construction — that installed the wrong countertops in the kitchen, laid the wrong floor in the downstairs bathroom and hung octagonal windows in square holes.

"I wrote to everybody at CDC, and they kept telling me I need to talk to somebody else," Turner says. "Everyone kept passing the buck."

On July 2, 2004, Turner's son came home to discover that the house was on fire. In 2006, she filed suit against the CDC-KC to recoup the repair costs; according to court documents, an investigator concluded that the fire was linked to improper wiring for the microwave. In December 2007, a judge ordered the CDC-KC to pay Turner $3,300 to fix the exterior of her house.

That's not the only time that the CDC-KC has been to court in the past two years. In 2006, Douglass National Bank sued the CDC-KC after it defaulted on a $500,000 promissory note. A circuit judge ordered the CDC-KC to repay the note plus $50,000 to cover interest, late fees and attorneys' costs.

Three months after the ruling, the CDC-KC handed over $200,000 to settle another lawsuit in federal court. That dispute dated back to 2004, when the Aldi supermarket chain contracted with the CDC-KC to assemble property near 30th Street and Prospect for a new grocery store. Aldi pulled out of the deal and for two years tried to recoup $200,000 it had put in trust. The CDC-KC ignored or denied Aldi's requests to release the money. In June 2007, the CDC-KC returned the money and the case was dismissed.

The CDC-KC was held in contempt of court last year. That dispute had to do with the CDC-KC's partner in the Citadel Plaza development: New Markets LLC, based in Las Vegas. In 2003, New Markets failed to pay a Pittsburgh architectural firm $64,000 for design services. Attempting to recover its costs, the architectural firm sued to garnish New Markets' stake in the Citadel Plaza.

The CDC-KC and Citadel Plaza LLC were decidedly uncooperative. For months, Citadel Plaza LLC — represented by Phillip Kusnetzky, also the attorney for the CDC-KC — ignored the court's order to respond to questions. In March 2007, Threatt didn't show up to his deposition, even after being served with subpoenas and rescheduling the deposition three times. In September, a Jackson County judge held the CDC-KC and Citadel Plaza in contempt. (New Markets satisfied its debt with the Pittsburgh firm in late October 2007, and the contempt charge against CDC-KC was dropped.)

Threatt says the New Markets lawsuit was nothing more than lawyers fighting with each other, and that his attorney told him not to attend the deposition. He says there was no wrongdoing in the case of the 7th Street Investors loan, and because the money stopped flowing from the city, the CDC-KC had inadequate financial resources to deal with the now-demolished building at 2901 East Linwood. Threatt also insists that Turner's lawsuit was without merit and that, in the supermarket case, it was the Aldi chain that violated the contract, not the CDC-KC.

Lawsuits and loans aside, even CDC-KC's successes have been qualified — most notably, the Linwood shopping center at 31st Street and Prospect.

Threatt acknowledges that the original concept — to create a shopping center featuring only mom-and-pop retailers — failed. In recent years, though, Threatt says the CDC-KC has lured regional and national chains to the center and invested $4 million to improve the look of the decade-old development.

"These shopping centers have been a resounding success," Threatt says. "Go into Ashley Stewart or Foot Action, and you don't know if you're at 31st and Prospect or Oak Park Mall."

Outside, it's a different story. On the west side of the street, the parking lot undulates with uneven pavement, and a security guard lingers in front of the abandoned anchor-tenant space. The former grocery store is empty and dark but for a few forgotten shopping carts and discarded buckets. It's been more than six months since the supermarket closed. Threatt says the CDC-KC is looking for a replacement.

Hearing that Threatt calls the shopping center a "resounding success" worries Pat Keeling. A former president of the Blue Hills Neighborhood Association, she doesn't want the Citadel Plaza development to end up like Linwood.

"For the life of me, I don't see why they're allowed to continue," she says of the CDC-KC. "They did that Linwood shopping center, and it's a disaster. And I've said from the very beginning that we didn't want an extension of that here."

What they got has been much worse.

In the late 1990s, Keeling was excited about the promise of a new shopping center that would spur development along Prospect. A longtime neighborhood advocate, she's proud — and protective — of Blue Hills. So it galls her that the Citadel Plaza project has faltered over the past seven years.

After the CDC-KC started buying and tearing down houses, the area turned into an eyesore, residents say. The CDC-KC bought homes and let them sit vacant for months. Criminal activity flourished around the abandoned structures, and the ghost blocks turned into illegal dumping grounds. Paul Tancredi, the current president of Blue Hills Neighborhood Association, says it got so bad that the fire department and SWAT teams used the structures for training.

When workers finally tore down the houses, they didn't bother to clean them out, recalls resident Janet Boggess. "Debris, furniture, toys," she says with disgust. "It was a mess, a literal nightmare."

Threatt doesn't deny that the first phase was disjointed. "Their concern was valid," he says of the neighbors. "What occurred was, in those days, you'd get some funds in, and the money wouldn't go as far as you thought."

But the CDC-KC made mistakes that had little to do with having enough money. In January 2005, the CDC-KC agreed to pay Joseph Witherspoon $63,000 for his home on Wabash. Two months passed, and the CDC never closed the deal. After consulting a lawyer, Witherspoon assumed that the contract was void.

One day in late March, Witherspoon got a frantic call from his son, who was living in the Wabash home. A demolition crew had started ripping into the Witherspoon's still-inhabited house. Workers busted down the back door and began to strip the siding.

"Before we'd come to any kind of settlement, they started to destroy my house," Witherspoon says.

The infuriated homeowner filed suit against the CDC-KC. The case was settled out of court. Witherspoon says he was compensated for the damage.

Threatt insists that the crew only "clipped the side of his house." Photos from Witherspoon's case file, however, show one side of the home mostly torn off.

Demolitions continued during the summer of 2006 — and the fallout was far more serious.

In June, inspectors from the city health department determined that the CDC-KC was tearing down houses that contained asbestos.

When Thomas Gerleman, a public health specialist, visited the Citadel Plaza site on June 8 and 9, the area was scattered with debris. Eight men were loading lumber from a dilapidated house into the back of a station wagon. When he started taking photographs, Gerleman noted in his report, the demolition workers "became belligerent and threatening."

Gerleman reported that the owner of the demolition company, Delroy Fadell, "could not produce any documents or permits authorizing him to demolish any of the structures, nor was he aware if any environmental surveys had been done." The scene raised suspicions of widespread asbestos contamination.

"It looks like a hurricane or tornado did the demolition," Gerleman concluded.

In a letter to City Manager Wayne Cauthen, Threatt complained that the CDC-KC was being made a "scapegoat" and said he was "completely flabbergasted" at allegations that he had failed to abide by federal and state laws requiring special handling of asbestos. He wrote that media attention and the investigation by the health department were "designed to embarrass the City of KCMO and damage the credibility of the CDC-KC and the economics of the project."

A year later, Threatt still scoffed about reports of asbestos contamination. "It's a technical item," he told The Pitch in May 2007. "We're talking about charred little pieces of hard asbestos siding or floor tiles that should have been — we find out after the fact — remediated, taken off before and, for various reasons, wasn't."

Despite Threatt's claims, the contamination proved real and extensive. Kingston Environmental Services found asbestos in 11 of 12 standing structures and on nearly all of the recently cleared lots. Kingston also found asbestos buried as deep as 6 inches underground and suggested that there could be hidden contamination on older lots overgrown with vegetation.

Threatt expects the cleanup to cost $250,000. The state estimates a $300,000 price tag.

Threatt also told The Pitch in May that the CDC-KC had the financial resources to deal with the problem and that the cleanup would start soon. In fact, it would be another six months before the city and the state signed off on Kingston's cleanup proposal. According to city documents, the effort was slated to begin November 5 and wrap up by the end of that month.

To date, no dirt has moved on the site.

In October, Threatt acknowledged that the CDC-KC had made a mistake and said his organization had paid the price. "Were there private financiers and banks concerned by all the negative publicity? Yes. Have we lost some loan commitments, lost some investment commitments? Yes. It is one of the major reasons why the time frame has elongated," he says.

Even if the cleanup moves forward, the CDC-KC faces stiff state penalties for failing to properly dispose of the asbestos. The Missouri Department of Natural Resources issued citations in early 2007; in September, the still-unresolved issue moved up the legal chain to the state Attorney General's Office.

Steve Feeler, chief of the DNR's enforcement section, says there were two reasons for the escalation. First, the complexity of the situation raised some legal issues best left to the state's top attorneys. The second reason: "I was ignored by counsel for CDC-KC for about four months," Feeler tells The Pitch in an e-mail.

In mid-December, the state signed off on a settlement that requires the CDC-KC to pay a $50,000 fine and invest more than $400,000 in community environmental projects and eco-friendly design elements at the Citadel Plaza.

An investigation by the U.S. Environmental Protection Agency is ongoing.

Through all of the discussion of asbestos contamination, Benni Ewing says she has never received a letter from the CDC-KC regarding the health issues or how it was handling the cleanup. She wonders if that empty white house behind her property is still standing because it's full of asbestos. Whenever a pile of demolition debris shows up on her block, she can't help but wonder: Is that rubble contaminated?

Keeling says that over the years, she has tried many times to speak with Threatt and the CDC-KC staff, mostly to no avail. Tancredi says the Blue Hills Neighborhood Association invited the CDC-KC, along with other organizations, to a meeting this past summer, but no one from the CDC-KC showed up.

Threatt tells The Pitch that the CDC-KC was not informed of that meeting. In July, though, he did receive a strongly worded letter signed by the Southtown Council, Research Medical Center and the Blue Hills Neighborhood Association. That letter outlined the groups' previous support for the project and emphasized that they were "extremely concerned" about the lack of progress.

"Unfortunately, not only have positive outcomes not been forthcoming in a reasonable fashion, but collectively we are experiencing significant issues and challenges resulting from CDC-KC's lack of performance," the letter noted.

It took the CDC nearly four months to reply in writing. In his November 7 response, Threatt outlined the progress of the project and blamed City Hall for the delay.

Two days after Threatt sent that letter, though, the CDC-KC was hit with another lawsuit.

Adnan Khan owns a Valero gas station on 63rd Street, just west of Prospect. Earlier this year, the CDC-KC agreed to pay him $775,000 for his property. In October, Threatt sent Khan a letter giving him 18 days to vacate the premises. The CDC-KC then changed its story and said Khan could stay until the end of November if he paid $9,000 rent. More than the rent requirement, Khan was struck by the CDC-KC's insistence that he "not remove anything from the location."

Ron Bodinson, Khan's attorney, says his client has no problem turning over the property when the CDC-KC is ready to clear the land and start developing. "But he does object to them turning over the property to a competitor and them being able to sit there, using his equipment, making money," Bodinson says.

Threatt says the CDC-KC bought Khan's entire operation, not just the land.

Now, he says, the only thing holding up further development is a financing agreement with the city — an agreement lending the CDC-KC $45 million in taxpayer-backed bonds.

Threatt says he hopes that the City Council will authorize that $45 million early this year. "It has been very frustrating," he says of his negotiation with the city.

But if the city lends Threatt $45 million and Citadel Plaza doesn't break ground, or if it isn't as successful as the CDC-KC pro­jects, the public will be left with the debt.

Along the way, Citadel Plaza's troubles have stirred unusual tensions at City Hall.

That much was clear back on February 21, 2007, at what should have been another boring meeting.

That day, Threatt and a gallery of CDC-KC lawyers and financial backers sat before the City Council's Finance and Audit Committee. Their goal: Secure permission to negotiate a deal with the city manager — a deal for $55 million in city-backed bonds to start construction on the Citadel Plaza.

City Finance Director Deb Hinsvark told the committee that staffers from her department had been meeting frequently with the CDC-KC and that the two parties had "dramatically" different projections for how much revenue the Citadel Plaza would produce. The city's financial advisers believed that Citadel Plaza would ring up $55 million in TIF reve­nues over 20 years; the CDC-KC projected $101 million over the same length of time. The finance staffers suggested an independent study.

"We've been working very hard with this developer, and this does feel like a surprise end run around our staff," Hinsvark said of the CDC-KC's effort to negotiate a deal directly with Cauthen.

Riley accused Hinsvark of impeding the project. Other council members had to cut in to keep the meeting on track.

At one point, Hinsvark approached the microphone while council members were speaking. "I need to correct something I said earlier," she said.

"Hold on real quick," Riley interjected. "Never before have we had a staff member who, while the council is talking, abruptly gets up and interrupts and says, 'No, I want to talk right now.' That's totally inappropriate. I was trying to say something, and she just runs up to the microphone and arbitrarily cuts me out."

"I apologize, Councilman Riley," Hinsvark said when the committee chair allowed her to continue.

"From the finger pointing in my face earlier this morning to the interruptions ..." Riley trailed off.

"He and I have been arguing all morning," Hinsvark acknowledged.

Hinsvark left City Hall abruptly in September 2007.

Riley still bristles at what he considers to be unfair scrutiny of the project by city staffers.

Cindy Circo, Riley's fellow 5th District council member, did not return calls from The Pitch seeking comment on Citadel Plaza.

Threatt says the city has forced the CDC-KC to jump through hoops that other developers haven't had to, such as the third-party study.

"We're not trying to say we did everything perfectly," Threatt says. "We have a cross to bear. But that's not what the holdup is in this project. There are items prohibiting it moving forward."

But he won't specify what those items are.

Neither will LaTrisha Underhill, the assistant city manager working on the CDC-KC agreement.

In October, Underhill told The Pitch that the Citadel Plaza situation was "an emotional issue for a lot of people."

But when pressed for specific issues delaying the agreement, she was unwilling to provide details. "They've been various and sundry," she said.

Underhill left her job at City Hall on December 20, after news reports that she had sent sexually explicit e-mails.

Tancredi is adamant that, before the city puts taxpayer money on the line, the CDC-KC must convince the city that it can be trusted. The CDC-KC should fully explain how things got so bad, how it intends to clean up its financial and environmental mess, and how it will complete the project, Tancredi says.

"I don't think they ought to rely on the argument, 'Hey, we're on the east side, no one else is doing much over here, so back us up.' They should be able to say, 'These are our abilities and this is how we'll get it done.'"

Ewing and neighbor Janet Boggess are starting yet another year wondering what's going to happen to what used to be their neighborhood. They're thinking about suing the CDC-KC or the city — if they can figure out which to blame.

 

Now up for grabs: Federal funding for your digital-TV upgrade

http://www.news.com/8301-10784_3-9838556-7.html?tag=nefd.pulse
 

While this next article centers around Australia's portion of donations to tsunami victims back in '04, the U.S. gave $350 million to the same cause. Also please remember that the U.S. was one of the main targets by members in the U.N. for not giving enough.

Ref: CNN article "U.S. ups tsunami aid from $35 million to $350 million"
============

 PRI Unveils California’s Top 10 Policy Blunders of 2007 Press Release
12.20.2007
http://www.pacificresearch.org/press/id.3548/press_detail.asp

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For Immediate Release:
December 20, 2007

Contact: Susan Martin
PRI (415) 955-6120
smartin@pacificresearch.org

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The Pacific Research Institute (PRI), a free-market think tank based in California, today unveiled its annual “California Top 10 Policy Blunders” of 2007.

“Governor Arnold Schwarzenegger has stated that he will begin 2008 by declaring “a state of fiscal emergency” – a far cry from saying there will be no operating deficit earlier this year,” said Joshua Treviño, vice president of public policy at PRI.

California’s top 10 policy blunders include mistakes and missed opportunities in education, the economy, technology, and health care:

1. Continuing to Pursue Massive Tax Increases to Finance the Governor's Health Care Scheme. As part of the unending state health care debate, the governor has proposed a 6 percent payroll tax and a $1.50-a-pack cigarette tax increase to finance his proposed new California health care scheme. The governor wants voters to approve these tax increases next year at the ballot. At a time when the state economy is slowing down and the 2008-09 fiscal year deficit could be as high as $14 billion, the governor wants to spend an additional $14 billion for his new health care scheme financed with taxes on workers that will destroy jobs. Where is the logic or common sense? This proposal will cause severe hardship for California's economy for decades to come.

2. Assembly Considers Corporate Welfare for Tech Companies. In late February 2007, Assemblyman Mark Leno (D-San Francisco) introduced a bill mandating that California government and its employees use only the non-proprietary, open document format developed by IBM, Sun Microsystems, and Google. Not only would user-friendly, time-tested, and familiar applications be replaced with untested and unstable new software, but state agencies would be required to convert all existing documents to the new format. Without any significant justification, this bill threatens to destabilize the government’s critical information infrastructure, decrease worker productivity, and increase the budget deficit. While the legislation stalled in committee in 2007, Leno plans to reintroduce it in January 2008.

3. Another Year of the California Sick Tax. The Federal government and almost every state encourage Health Savings Accounts (HSAs) by allowing individuals and their employer to fund them with pre-tax income, similar to an IRA or 401(k). California taxes these contributions. Assemblymen Alan Nakanishi, Cameron Smyth, and Chuck DeVore, and Senators Abel Maldonado and George Runner have introduced bills to correct this flaw, but the bills died on the table. It survives, barely, in the governor’s health proposal, which contains the necessary tax reform. HSAs paired with high-deductible health plans will encourage Californians to save for health care rather than depending on employers or the government.

4. Increasing the Minimum Wage. At a time when the national economy could soon slip into recession and the state's economy is slowing down with massive looming state budget deficits, Sacramento lawmakers showed no common sense by increasing the cost of hiring California's low-skill workers. On January 1, 2007, the state's minimum wage went up more than 11 percent to $7.50 per hour, making it the fifth-highest minimum wage in the nation. On January 1, 2008, the minimum wage will increase to $8. This will lower employment of low-skill workers at a time when California should be encouraging job creation and stronger economic growth. Instead, job growth in California is now less than half of what was projected by state officials.

5. Ending an Era of Public-School Choice. Most California parents no longer have the right to choose their children’s public schools without permission from their resident school districts—a freedom they have had for nearly 15 years. In its reauthorization of the Districts of Choice Program (SB 80), the legislature prohibited new public school districts from participating and piled mountains of red tape onto current participants.

6. Municipal Wi-Fi is a No-Go in California. Plans to blanket California cities with free wireless Internet access continued to fail in 2007 amidst rising costs, poor planning, and chaotic bureaucracy. These projects are built on a flawed model, and their failure was predictable. In San Francisco, Earthlink abandoned its muni wi-fi project, declaring that the model “is simply unworkable.” In Sacramento, a coalition of high-tech firms has refused to fund its own proposal. After nine months of planning, a muni wi-fi project in Napa was scrapped when engineers realized that utility poles were too short. In Silicon Valley, the nation’s foremost innovation hub, an ambitious wireless project is floundering and project leaders have declared, “we don’t have a business model here.” Even in tiny Mountain View, home of tech giant Google, the company’s best and brightest engineers have failed to build a city-wide network which works indoors.

7. A $14 Billion Tax and Spending Hike Posing as “Health Reform”. Governor Schwarzenegger’s evolving health plan began as a $12 billion obligation. It would require all Californians to buy health insurance, tax doctors two percent and hospitals four percent of revenues, and tax employers with 10 or more employees four percent of payroll. Gov. Schwarzenegger also said he would “never close the door on anything,” including an additional tax hike on California residents. And so it came to pass. Nine months later, the California Legislature met in special session to consider a revised version of the governor’s plan. It would cost $2 billion more, and would rely on the lottery to fund health care. Similarly, all Californians would have to buy health insurance, insurers would not be allowed to rate risks, and hospitals would still have to pay 4 percent of revenues. The governor’s latest “compromise” with Assembly Speaker Nunez indorses a payroll tax of up to 6.5 percent on businesses. A tax hike is not health reform.

8. Producing Shaky Unrealistic Budgets. Before the ink was dry on the governor's current fiscal year budget it was clear that the economic assumptions and budgeting practices used by the governor and Sacramento lawmakers are flawed. When the budget was passed, the governor said that the current fiscal year budget would have no operating deficit. But now it is clear that this statement will not be true. According to current projections, the current fiscal year revenues (ending June 30, 2008) will be at least $2.5 billion lower than expected. And the projected deficit for the next fiscal year is now a staggering $10 billion to $14 billion. Gov. Schwarzenegger has stated that he will begin 2008 by declaring "a state of fiscal emergency" -- a far cry from saying there will be no operating deficit earlier this year. Reinstating dynamic revenue analysis, as PRI advocates, would help produce more realistic budget numbers. And comprehensive tax reform could end the "revenue rollercoaster."

9. Pushing Government-run Preschool…Again. U.S. House Speaker Nancy Pelosi (D-San Francisco) was stumping for more spending on government-run preschool last summer at a national children’s summit. “We know that these investments in our children today pay off many-fold in later years.” National research and California voters, however, know better. Studies have consistently shown that preschool does not have long-term benefits for students, and California voters overwhelmingly rejected a 2006 government-run universal preschool initiative.

10. Bowen ends e-Voting in California. In August, Secretary of State Debra Bowen decertified nearly all the touch screen electronic voting systems used in California. She made this decision without consulting local election officials, and despite the fact that there has never been a documented case of election fraud involving an electronic voting machine. The voting machines discarded by Bowen were purchased with a $200 million bond approved by voters in 2002. Not only has this investment been lost, but Bowen appears reluctant to embrace any new technologies in the future, declaring that “for government applications, you don’t want to be on the cutting edge.”

Dishonorable Mentions:

A $203-Million-a-Year Health Access Plan in San Francisco. San Francisco Mayor Gavin Newsom’s health plan for the city’s uninsured residents requires employer contributions of around $30 million annually – which could still result in job losses. The program is not insurance, and does not fix government-caused insurance problems. Instead, it offers San Franciscans the incentive not to become insured at all, because they will receive highly discounted or free care without it. Moreover, the Golden Gate Restaurant Association (GGRA) filed suit against the San Francisco Employer Mandate for Healthcare, the restaurant group contends that provision conflicts with the federal Employee Retirement Income Security Act (ERISA) because the U.S. law is the exclusive regulator of employer health plans. GGRA currently awaits the court’s decision.

Attempting to Halt the Growth of Charter Schools. Slashing classroom funding for high-poverty charter schools by more than half wasn’t enough for the California State Assembly. Under the cover of night, Speaker Fabian Nuñez (D-Los Angeles) introduced “trailer bill” SB 92, which would have forced Gov. Schwarzenegger to choose between forfeiting existing classroom funding or letting fewer charter schools open. The gambit backfired when hundreds of Los Angeles charter school parents and teachers protested outside Speaker Nuñez’s Los Angeles district office.

California Warns Santa: You Owe Taxes on Those Toys! On the eve of “Black Friday,” the busiest shopping day of the year, State Board of Equalization Chairwoman Betty T. Yee released this helpful reminder: “As the holiday season approaches and gift buying begins, shoppers want to be aware of their tax obligations. If you buy something that is taxable from an out-of-state retailer who didn't charge tax, it's very likely you owe the use tax.” Not only does this message confuse, scare, and drive away consumers at the height of the holiday shopping season, but it also puts a knife in the back of California retailers. Yee has unwittingly reminded consumers that unlike businesses which set up shop in California, out-of-state Internet retailers such as Amazon.com do not collect sales tax. With Congress voting to protect Internet access from taxation, state legislators are looking to ramp up taxes on e-commerce. The BOE is working with other states on the “Streamlined Sales Tax Project” to facilitate the collection of taxes on out-of-state purchases. In the meantime, however, Yee reminds Santa: shop out-of-state and save!

Preventing Health Insurers From Acting Against Fraud. One of the benefits of the market for individual health insurance in California is that health plans can underwrite applicants’ risk. This means, for example, that smokers pay higher premiums than non-smokers. Some applicants misrepresent their health status when they apply for health insurance. Sometimes, the insurer identifies the fraud and rescinds the policy. The Department of Managed Health Care, the California Department of Insurance, and the courts are de facto forbidding these audits, by requiring insurers to prove that the applicant “willfully misrepresented” his health status; that is, mind-reading. Outlawing these rescissions forces the insurer to raise health premiums for everyone, because insurers will become gun-shy.

State-Mandated Sensitivity Training for Teachers to Stop Racism and Improve School Performance. In November, State Superintendent of Public Instruction Jack O’Connell convened a two-day summit on racial achievement gaps. Before the summit even began, he told the San Francisco Chronicle that racism is to blame and state-mandated sensitivity training for teachers is the solution. That explanation hardly passes the straight-face test since at more than one in 10 affluent, suburban school districts statewide where fewer than one-third of students are in poverty (nearly 300 in all), a majority of students in at least one grade are not proficient in English or math. A lack of rigor, not racism, is the real culprit behind California’s poor public school performance.

State Forbids Employers From Creating Cyborgs. In November, Governor Schwarzenegger signed a bill barring employers from forcefully implanting microchips under the skin of employees. These chips, known as “radio frequency identification” (RFID) tags can carry personal information, and could potentially be useful for keeping tabs on workers. This law is unnecessary for the same reason we don’t have specific laws forbidding employers from stapling bar codes to employees’ foreheads, or branding them like cattle: assault is already illegal.

Failing To Allow More Autonomy for Nurse Practitioners. The state should reform “scope of practice” laws affecting nurse practitioners, who are qualified to provide basic, affordable health care. This would allow Californians to take advantage of retail-based “convenient clinics,” a competitive answer to emergency rooms for basic services. More primary-care physicians are entering specialty fields, but nurse practitioners (NPs) provide quality care comparable to physicians and enjoy wide-ranging prescribing and billing ability, while costing less. Unfortunately, California regulations prevent more than four nurse practitioners working under one supervising physician at a time. Freeing this profession is necessary to allow “storefront” health clinics, which are expanding by the hundreds in other states, to grow in California. More such clinics will improve care for many patients who flood emergency rooms to the detriment of hospitals, taxpayers, and patients themselves.

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 http://www.apatheticvoter.com/GovernmentWaste-PA.htm

State-issued credit cards' use runs gamut
http://www.ajc.com/metro/content/metro/stories/2007/12/22/pcards_1223.html?cxntlid=homepage_tab_newstab

By ANDREA JONES, MEGAN CLARKE
Published on: 12/23/07

Pornography, tattoos, concerts, dating services — you name it, state and local employees have charged it and taxpayers have paid for it.

A Journal-Constitution analysis of more than four million transactions on government purchasing cards in the last three years reveals a program that has morphed from a simple way for workers to buy office supplies into a spending spree on track to hit $370 million this year.

There are now more than 23,000 cards floating around the state. State, city and county employees used the cards to buy hundreds of thousands of items, from mattresses to jewelry, the records show.

The cards function as Bank of America credit cards and are billed to government agencies.

When an employee of Georgia Perimeter College, for example, spent $51.55 at drnatura.com — "The #1 Colon Cleansing and Body Detox Resource," — that charge would have appeared on a bill paid by the college's Student Life Department.

Other agencies paid charges of $2,024.68 to Brooks Brothers (Georgia Tech); $1,800 at Frank's Gun Shop (Department of Human Resources/Brain and Spinal Injury Trust Fund); $2,335 to a dentist; (Ware County Board of Commissioners); $1,140.20 at Bridal Basics (Middle Georgia Technical College) and $326.32 at Mac's Beer and Wine (Georgia Tech), records show.

Clayton State University and DeKalb County schools both paid charges at Ed's Pawn Shop — $720 and $160 respectively.

While state officials say the vast majority of purchases are legitimate — University System spokesman John Millsaps said the colon cleansing was a prize for a health fair — there are plenty that raise questions.

In many cases, the questions are complicated by shaky policies and practices on card usage.

Here are a few categories of state and local employees' card charges since 2005, according to the AJC analysis:

• • $13 million in travel expenses, including $6 million for plane tickets, $240,000 in booking fees and $6.1 million in hotel and resort charges.

• • Nearly $6 million at Amazon.com

• • $2.2 million at florists

• • $9.3 million at restaurants and caterers, including $657,000 at Chick-fil-A

• • At least $91,000 at jewelers

• • More than $56,000 on gift cards.

Purchasing-card policy prohibits purchases of gift cards, as well as fuel and professional services like doctors or lawyers. Entertainment is off-limits, but some travel expenses are allowed. The policy specifically prohibits personal use of the cards.

Still, tracking questionable spending is tricky.

Transactions list vendors — such as Amazon.com or Office Depot, Match.com or *XFC Inc. — but not individual items. It takes a little research to know *XFC Inc. is linked to a pornographic Web site.

If supervisors aren't examining each charge, it's hard to tell what is legitimate, said John Abbey, the director of performance operations at the state auditor. Abbey's office spot-checked seven state agencies this year and found widespread abuse.

"When you look down the list, unless it says something like 'Victoria's Secret,' you won't know," Abbey said. "The review has to occur at the individual level."

Policies vary

Confusion over what are allowable purchases has been another issue with the program.

At colleges and universities, the cards are funded from a variety of sources, including athletic associations, National Science Foundation grants and student fees. Sports teams use p-cards for travel and food. Professors use them to buy lab equipment with grant money. Some workers have multiple cards paid from different funding sources.

Colleges and universities are among the biggest card users and, according to the state audit, often had the most lax rules governing their use.

Policies and spending limits vary by agency. Charges that look suspicious often turn out to be authorized.

In Forsyth County, an employee charged $853.20 for tickets to a NASCAR race. Donna Kukarola, who heads the county's purchasing department, said county commissioners approved the expense as a prize for an employee appreciation luncheon.

The GBI charged $278.35 in DragonCon tickets. Turns out the tickets were for one session for a special agent and a computer specialist who investigate hacking.

"They did not attend any other part of DragonCon," said GBI spokesman John Bankhead.

Shannon Dunaway, a police sergeant in Colquitt, used his card for two transactions totalling $190 at Psycho Clown Tattoo. He said he found himself in a bind while traveling after his personal credit card was frozen.

"They had done the work and I didn't have no choice," he said. He said he reimbursed the city when he got home. The transaction nevertheless violated policy.

With millions of transactions on thousands of cards, it is impossible to write a policy to address every possible kind of misuse, said Brad Douglas, the commissioner of the Department of Administrative Services.

"First and foremost, it's a people problem," he said. "Any manager worth his salt will look at a charge and say, 'Is that legitimate?' "

No new cases of fraud

Whatever their problems, p-card programs are increasingly popular nationally. Just three states, Alabama, New Hampshire and Illinois, do not use them for state business.

Douglas, the Administrative Services commissioner, said his agency is developing tighter p-card controls, including supervisor training and clearer policies. The department has created an audit staff for continued monitoring.

When the results of the state audit were made public in October, the governor was "absolutely livid," Douglas said. Gov. Sonny Perdue ordered all 129 state agencies that use the cards to review their purchases.

"Everyone is taking it extremely seriously," Douglas said.

The state agencies submitted reports to the state's chief financial officer and chief operating officer in November. The reviews turned up no new cases of fraud, according to the agency reports.

The governor's office issued a statement last week saying the Department of Administrative Services is auditing or plans to audit several agencies, including Georgia Tech. P-card spending is down 23 percent and almost 1,200 cards have been deactivated, the statement says.

"The governor is pleased with the steps state agencies and DOAS are taking to correct these challenges, but he expects regular status reports and updates on the additional oversight. ..." the statement said.

The review of 129 state agencies covers about 6,600 of the total number of cards in use.

Employees of the University System, which operates separately, used 10,000 cards. The system is conducting its own review, culling 600,000 transactions from the last fiscal year at 35 public institutions. So far, auditors have visited eight campuses. Two university employees have either retired or been fired as a result of the additional scrutiny. The system plans to finish by March.

The 6,400 cards used by county and city governments and school systems aren't subject to state oversight.

Self-approval allowed

Missing receipts, poor documentation and little oversight of card use were the norm at many agencies.

State auditors found that Tech employees responsible for reviewing card use were overseeing too many cardholders, In one case, a p-card coordinator oversaw purchases for 116 cards.

Tech has overhauled its policy, including reducing the number of cards any one supervisor must monitor. And, instead of assuming charges are legitimate until there's reason to suspect otherwise, cardholders may now be required to demonstrate their purchases are work-related.

At Georgia Perimeter College, where five employees have resigned or have been terminated in the p-card scandal, more than a dozen staffers were allowed to approve their own purchases without a manager's review.

Employees in the Student Life Department routinely charged hundreds of dollars with Ticketmaster for events including Justin Timberlake concerts and the Hot 107.9 Birthday jam. The tickets were sold to students at a discount price, according to University System spokesman Millsaps.

Student Life employee KaToya Fleming made car payments, paid debt collectors and bought manicures, clothing and groceries, ringing up more than $13,600 in suspect charges, according to records. She was put on unpaid administrative leave in May and resigned in June, according to her personnel records.

Another employee stayed on the payroll months after preliminary audit findings challenged her charges in May.

Patrice Wright, who bought gift cards and a debit card she used to reserve a hotel room in Hawaii, worked at Perimeter until final audit results were released two months ago.

Wright, serving as interim director of student life, was suspended for two days without pay in September for violating the school's code of conduct in connection with p-card use, according to her personnel records. She returned to her previous job as coordinator of wellness and recreation at an annual salary of $36,673 and was no longer allowed to have a purchasing card. She resigned in October, according to her personnel file.

Fleming and Wright were among three Georgia Perimeter employees whose purchases were detailed in the original state audit. They aren't identified in the audit by name, but the records analyzed by the AJC link names and purchases.

The GBI subsequently investigated all three employees, said Bankhead. The results have been turned over to the state Attorney General's office, he said. The AG has not yet taken action.

Efforts to reach both women by phone and e-mail were unsuccessful.

Keith Chapman, director of College Services at Perimeter college, said employees are no longer allowed to approve their own purchases.

"It was a flaw in our system," he said. "We now have a lot stricter record-keeping."

AJC staff member Kevin Keeney contributed to this report.

 

A Reading Program's Powerful Patron

By James V. Grimaldi
Washington Post Staff Writer
Thursday, December 20, 2007; A01

http://www.washingtonpost.com/wp-dyn/content/article/2007/12/19/AR2007121902645_pf.html

When Congress decided to appropriate $2 million in fall 2001 to help D.C. kindergartners and first-graders learn to read, city school officials were told that the money could be spent only on the Voyager Expanded Learning literacy program, a new product with virtually no track record. They had just picked a different reading curriculum, and "we didn't want to be guinea pigs," recalled Mary Gill, then the system's chief academic officer.

School leaders did not know that the $2 million was an earmark that had been guided into law by Sen. Mary Landrieu (D-La.) just after she had received more than $30,000 in campaign contributions at a fundraiser held by Voyager's founder and chairman.

Landrieu's earmark illustrates the unusual role that Congress has played in shaping the District's troubled school system. No other school budget is subject to approval by Capitol Hill. None is so susceptible to the whims and policy prescriptions of federal lawmakers. And the parents, teachers and administrators of D.C. schools are the only ones in the country who lack a voting representative in Congress.

The Voyager story also highlights the haphazard way that curricula end up in the District's classrooms. For many years, educators have said that the patchwork of instructional material is one reason the city's students hover near the bottom of rankings in national test scores.

Landrieu, as the ranking Democrat and chairwoman of the Senate's D.C. appropriations subcommittee until early this year, was a pivotal figure in school spending and policy issues. With the Voyager earmark, she intruded on a curriculum decision normally made by teachers, principals, administrators and educational advisers.

"It is unclear to me why Congress thinks they're qualified to do that," said Michael Casserly, executive director of the Council of the Great City Schools, a nonprofit group based in the District. He said he thought the earmark was "a bad idea" because it added to the "overall fractured nature of the system."

D.C. schools have long been subjected to experimental curricula, piling "one program on top of another for so many years that one cannot tell what the system is trying to do academically or why," said a report commissioned by Casserly's group four years ago.

Landrieu declined requests for an interview, but in a statement to The Washington Post this month, she said she has "long championed new approaches to improving children's education, leading the push for smarter public-private partnerships and for innovative programs like Voyager."

Landrieu has received about $80,000 from Voyager employees and lobbyists, Federal Election Commission records show. "It is not uncommon for Members of Congress to receive contributions from individuals who support their policy goals," she said in the statement to The Post, echoing a similar response she gave Education Week last year for a story on Voyager's political connections.

Voyager employed lobbyists and made political contacts to obtain at least 14 earmarks over five years, worth more than $8 million, according to a review of congressional records. Some went to other parts of the country, but most -- $5.23 million -- went to D.C. schools.

Randy Best, a founder of Voyager who has close ties to the Bush administration, said that "no fundraiser was ever tied to any legislation" of Landrieu's.

The political networking, he said, "gives you access to tell your story," he said. "I think we had a compelling story."

D.C. administrators and teachers said in recent interviews that they found the Voyager program useful, even successful for certain students. But in 2005, when the District did a survey of educators to select a new systemwide reading program, Voyager did not rank among the top three. It remains in use at two dozen schools for summer programs and pupils reading below grade level.

Some school officials who did not know that Voyager came to their classrooms as part of an earmark expressed frustration with the congressional interference.

"What other school district in the country has to go through the labyrinth of red tape this school district goes through here?" asked Charles H. Harden Jr., principal of Park View Elementary School, one of the schools that used the Voyager program. Landrieu and Congress "shouldn't be dictating what we do here," he said.

Purse Strings

Landrieu was one in a long line of congressional overseers of the District. Congress retains the right to approve the city's budget because it was the only way in 1973 that a powerful member of the House Appropriations Committee, Rep. William Natcher (D-Ky.), would agree to grant the District home rule.

Two of the most sweeping D.C. education initiatives by Congress -- authorizing charter schools and approving taxpayer-supported vouchers for private and religious schools -- were imposed over the objections of school officials. Those programs provided families with alternatives but did not directly address the larger problems in the public system. More than a quarter of D.C. students have gone to charters, and administrators say that many of those left behind are the most difficult to educate.

Some D.C. officials said they were dismayed when Sen. Dianne Feinstein (D-Calif.) reversed her opposition to vouchers and switched sides in 2000 to allow the program to be implemented, although she did not support vouchers in San Francisco, where she had been mayor. Feinstein said she backed the plan for D.C. schools because Mayor Anthony A. Williams had supported it.

"Local leaders should have the opportunity to experiment with programs that they believe are right for their area," she said at the time.

Landrieu, a major backer of charter schools in the District, sponsored a provision requiring the city to offer any surplus school property to public charter schools for at least 25 percent less than its appraised value before selling it to anyone else. D.C. school officials objected, saying that she had not consulted with local authorities first.

Voyager's Campaign

Best, a Texas merchant banker and entrepreneur, began leveraging political connections almost as soon as he launched Voyager in Dallas in 1994. He hoped to tap into what he thought would be a burgeoning business as pressure built for universal testing and higher standards for public schools.

"I decided the world needed one more reading program -- one that worked," Best said.

When George W. Bush ran for governor of Texas in 1998, Best and his fellow Voyager investors contributed more than $45,000 to his campaign, and they gave more than $20,000 to his running mate. As Voyager grew, it hired several state education officials, including the Texas education commissioner under Bush. When Bush ran for president, Best signed up to join the Pioneers, an elite group of "bundlers" who pledged to bring in $100,000 for Bush. Best said he raised only about $10,000.

As president, Bush appointed former Houston schools superintendent Roderick Paige to be secretary of education, and Paige launched Reading First, a $1 billion-a-year reading program. To develop it, the Department of Education turned to some of the same researchers Best had hired to create Voyager's program.

By that time, Best had hired a Washington lobbyist and was looking for a way to get pilot programs in some schools without going through the process of selling curricula district by district. He signed up with the firm of former U.S. representative Bob Livingston, a Louisiana Republican and former chairman of the House Appropriations Committee. Livingston began seeking "federal funding support for Voyager educational programs," according to his lobbying disclosure form.

"I'd never heard what an earmark was before," Best said.

Earmarks for curricula are rare, said Keith Ashdown, who tracks such appropriations at the nonpartisan Taxpayers for Common Sense, a budget watchdog group. Federal law prohibits the Department of Education from dictating curricula, requiring such decisions to be made locally. No such law restricts Congress.

On Sept. 24, 2001, the House Appropriations Committee included $1 million for Voyager in the District's spending bill. A clause required the city to match it with another $1 million. But Livingston did not produce a similar earmark out of the Senate, Best said. So Voyager hired another lobbying firm, O'Connor & Hannon, which arranged a meeting for Best with Landrieu, the ranking Democrat on the D.C. appropriations subcommittee.

Landrieu was "supportive of the idea" of federally funded pilot programs for Voyager, Best said. "The data we had was persuasive."

The Fundraiser

Shortly after the meeting in Landrieu's office, Best said he was called by someone in her office to ask whether he would throw a campaign fundraiser. On Oct. 19, 2001, at Best's residence in the Claridge, a high-rise condominium complex overlooking the Dallas skyline, Landrieu gave a short talk on the importance of reading, Best said.

The campaign contributions from Voyager employees and their relatives were enough to put the company on Landrieu's all-time Top 20 list of donors for people affiliated with an organization or company, a review of federal election records showed. Voyager employees, families and political action committees have given more to Landrieu than companies such as BellSouth and Tenet Healthcare.

The donors included Randy Best and his wife, Nancy, in addition to least six other Voyager executives and Voyager's Senate lobbyist, Roy C. Coffee Jr., who said he remembered making a $500 donation but declined to discuss it. Most had never before given to a Democrat running for Congress.

Most of the donors declined to discuss the donations or the fundraiser. Jeri Nowakowski, the Voyager executive vice president for product development who led the team that developed the company's reading programs, and her husband donated $4,000. Nowakowski said Landrieu was one of the few Democrats to whom she had given campaign money because "I've just known that she has been a supporter of education."

Campaign finance records indicate that Landrieu received contributions of about $30,000 on or about Nov. 2. Four days later, she went to the Senate floor and offered an amendment to the House bill with the $1 million Voyager earmark. Landrieu jettisoned the matching money requirement and doubled the federal portion to $2 million.

"I am concerned about the current financial and management challenges of the schools and hope to work with the city on this front more specifically," Landrieu said in a speech to her fellow lawmakers. "We have to think outside of the box, in a new way."

"Sometimes," she said, "I think our District has been treated as a national guinea pig instead of the nation's capital."

A month later, on Dec. 7, the Senate passed the $7.1 billion D.C. appropriations bill, including the $2 million Voyager earmark. Less than two weeks later, Voyager got another boost from Landrieu in the spending bill for the Labor and Education departments: $700,000 for the program to be tried in Louisiana. The following year, the District got another $2 million earmark, $575,000 went to Ohio and $250,000 went to Pittsburgh.

'Found Money'

Voyager "wasn't something the school system solicited," said Gill, the retired D.C. schools academic administrator.

When picking a reading program, the District typically convenes principals, teachers and academic experts to decide which product fits best, said Elizabeth Primas, director of literacy for the system.

The selection of the core reading program is done every five years. For struggling students, the District also adopts an intensive "intervention" curriculum that often mirrors the core program.

Since the Voyager grant was only enough for a pilot program, it interfered with school administrators' desire to have a uniform intervention curriculum so that transient students didn't have to learn a new system each time they switched schools.

Although school officials might have wanted more control over the federal earmark, that is not how the congressional process works, said Gregory McCarthy, who at the time was deputy chief of staff for Mayor Williams.

"You definitely want to protect home rule and not undermine local authority," McCarthy said. However, when other jurisdictions received such grants, "other superintendents would say, 'It is found money, and you ought to find a way to work with it.' We always looked at it as money for children, and it was something that wouldn't otherwise be done."

Gill said she took the Voyager program and made the best of it. She was pleased that Voyager wanted to do rigorous testing to track student progress. She targeted schools in the poorest neighborhoods and hired additional employees. In the end, she said, Voyager was fine for some students, mainly because it included intensive training for teachers.

"I was really a nonbeliever," Gill said, until "I saw children who I knew were not reading . . . come in and listen and read."

Linda Butler, who at the time of the earmark was a reading coordinator and is now in charge of the District's federal reading grants, said that she didn't know where the Voyager money came from but that she was elated to get it. It helped pay for "campus coaches" who worked with teachers.

"I wondered how it landed here," Butler said. "If it was given to help our children, wonderful! Where can we get more grants from Congress?"

Mixed Reviews

Voyager officials said that a review of test results "strongly suggests" that their program had a "significant impact" on schools using it through 2005.

Last spring, the Department of Education offered a mixed review of Voyager. The department's "What Works" Web site, which rates curricula, says that Voyager's reading system has "potentially positive results" for learning phonics and letter recognition but "potentially negative effects" in reading comprehension.

Teachers at Park View are also divided. Monica Chase, a teacher there for 13 years, said she has used Voyager and a program offered by Houghton Mifflin. She said she prefers Houghton Mifflin because it publishes complementary materials for other subjects, such as math.

"I think they learn more with Houghton Mifflin, because it is cross-curriculum," Chase said. "They understand their homework better."

A 2002 study in Washington and Cleveland sponsored by the Council of the Great City Schools compared kindergarten students' reading skills in four public schools using Voyager with those at four schools not using Voyager. The study concluded that "a significant difference was found in favor of the Voyager classrooms."

Casserly, of the council, said that the study was interesting but limited in scope and that it needed "considerably greater investigation." There were issues about the size of the sample, the use of schools that did not make for ideal comparisons and the reliance on Voyager for some of the data.

"The results did not apply to a large number of cities, schools or students," Casserly said. "We didn't make much of it."

Voyager issued news releases to promote the results. The company's senior vice president, Jim Nelson, sent a handwritten note to Margaret Spellings, then the White House education adviser and now the secretary of the Department of Education. Nelson had known Spellings in Texas, where both worked for Bush when he was governor. "The results are pretty amazing," Nelson told Spellings. "It proves the research is true -- they can learn to read."

D.C. school officials selected Voyager for 24 schools in 2003 when they applied for federal grants through the Reading First program.

Voyager spokeswoman Shannon Overbeck said the company's subsequent review showed that students using the program improved their results on No Child Left Behind testing.

"We are very confident about the performance of [Voyager] in D.C. schools where it was implemented correctly," Overbeck said.

On Feb. 1, 2005, Best sold Voyager to ProQuest, an educational publisher, for $380 million -- a 12-fold return on his initial investment.

 

 

Black Lawmakers to Press for More Earmarks

By Jonathan Allen Thu Oct 4, 10:09 AM ET
http://news.yahoo.com/s/cq/20071004/pl_cq_politics/blacklawmakerstopressformoreearmarks

African-American lawmakers are exploring ways to get more appropriations earmarks, which disproportionately go to districts represented by their white colleagues.

Rep. William Lacy Clay, D-Mo., broached the idea of expanding the House Appropriations Committee at Wednesday’s meeting of the 42-member Congressional Black Caucus.

Clay’s proposal, the first of what are expected to be numerous CBC approaches to closing the earmarks gap, calls for creating two new spending panel seats to be filled by black lawmakers.

A Congressional Quarterly examination of earmarked dollars showed that they are distributed disproportionately, with extra money going to appropriators, leaders and members in swing districts. White Democrats secured on average twice as much earmarked money for their districts as black House members in the House-passed fiscal 2008 appropriations bills, according to CQ’s analysis of data compiled by the group Taxpayers for Common Sense.

“It’s a glaring disparity,” Clay said after the caucus meeting.

More black appropriators “would be just a step to get at the inequities in the process,” he said.

Clay did not suggest that minority lawmakers are subjected to discrimination based on their race or ethnicity.

The disparity in earmarks comes from a combination of factors, including a lack of African-American representation among the upper echelon of appropriators.

Majority Whip James E. Clyburn, the highest-ranking African-American in Congress, cautioned against acting hastily.

“What may look like a quick fix may do damage to a system that’s tried and true,” Clyburn, D-S.C., said, pointing to a mostly seniority-based system of awarding committee and subcommittee chairmanships that has benefited African-American lawmakers on other panels.

He said the time to deal with the question of committee assignments is at the start of the next Congress, in 2009.

Majority Leader Steny H. Hoyer, D-Md., said he had not had time to consider the issue, and a spokesman for Speaker Nancy Pelosi, D-Calif., said she had not either.

Thousands of Earmarks

CQ examined the 5,670 earmarks, totaling $4.2 billion, attributed to a single sponsor. Excluded from the analysis were roughly 1,000 projects, totaling $1.5 billion, that were attributed to multiple sponsors. The Appropriations Committee did not disclose what share of the multiple-member earmarks should be credited to each lawmaker who wrote a letter on its behalf.

The analysis showed that the average white Democrat got $12 million; the average member of the all-Democratic Congressional Black Caucus got $6.1 million; and the average Hispanic Democrat got $5.7 million.

Even though Democrats are in the majority and control nearly 60 percent of the earmark money, minorities in the Democratic Caucus got less on average than the $8.7 million that the average Republican secured.

That is a particularly sore point not only among members of the Congressional Black Caucus but also among Hispanic Democrats.

The Congressional Black Caucus plans to discuss the disparities, and means of addressing them, in greater detail at its meeting next week.

There are 37 Democratic appropriators, five of whom, or 13.5 percent, are black. African-Americans constitute 17.7 percent of the Democratic Caucus. Adding two black lawmakers to the committee would give the Congressional Black Caucus 17.9 percent of the party’s Appropriations seats.

Several members of the Congressional Black Caucus said they are concerned about the disparities and want to discuss their options for addressing them.

Florida Democrat Corrine Brown endorsed Clay’s proposal but said she believes that “changing the priorities” of the spending process “is the main thing.”

Bennie Thompson of Mississippi, the chairman of the Homeland Security Committee, said he probably would support Clay’s proposal but added, “That’s not the only way” to close the gap.

The 66 Democratic and Republican House appropriators kept 45 percent of the earmarked dollars in the House-passed bills for themselves.

“Adding two CBC members helps those two CBC members,” said Democrat Artur Davis, who represents Alabama’s only black majority district.

“The leadership, going forward, should address these issues,” he said.

Clay said he wants to examine disparities in the awarding of earmarks to members in swing seats compared with their safe-seat colleagues.

Politically vulnerable incumbents in both parties get extra earmark money to help them fend off challengers from the other party.

Nearly all of the black and Hispanic members come from heavily partisan districts that are not likely to switch party hands.

“That eventually cheats our constituents,” Clay said.

And, if lawmakers from heavily Democratic districts do not bring home their share of dollars, they could be vulnerable to primary challenges.

“No member of Congress has a safe seat, in my opinion, because we all have to stand for re-election,” he said.

Response Expected

Emanuel Cleaver II, D-Mo., one of the few CBC members who represents a white-majority district, said he expects Democratic leaders to be receptive to CBC efforts to close the gap on earmarks.

“If we had a hostile leadership, I think the CBC would be beating the war drums,” he said.

“The Democratic Caucus needs to review the system and/or formulas for appropriations because in many instances, if not most, the CBC members are the ones whose districts are most decrepit and in need of an injection of dollars,” Cleaver said.

Many Republicans also have reacted strongly to disparities in the distribution of earmarks, and several are preparing proposals to change current practice.

“Obviously, federal priorities are not concentrated in the districts of appropriators and leadership. Those members are simply in a better position to steer federal money home,” Jeff Flake, R-Ariz., said on the House floor.

“That’s hardly a defensible way of spending taxpayer money,” said Flake, who wants to end the practice of earmarking.

Phil Gingrey, R-Ga., is expected to unveil a plan Thursday that he contends would cut earmarks and establish parity, although many lawmakers in both parties would strenuously oppose a perfectly even distribution.

Brown said the CBC may team up with Hispanic lawmakers and members of the Congressional Asian Pacific American Caucus.

“This is something the TriCaucus can work on,” she said.

 

State Controller Audit Confirms Massive Wasteful Spending and Abuse in California Prison Medical System

Westly Refers Potential Fraud Cases to State Attorney General

http://www.californiaprogressreport.com/2006/08/state_controlle.html

By Frank D. Russo

Flanked by Robert Sillen, the Receiver appointed by Federal Judge Thelton Henderson to reform the California Department of Correction and Rehabilitation (CDCR), State Controller Steve Westly released an audit this morning on the steps of the state Capitol showing massive cost overruns and flagrant disregard for financial oversight during the last year. The findings of this 36 page document dovetail with what Mr. Sillen has found in documents he has filed in Federal Court and statements he has made in court hearings. Mr. Sillen will be meeting tomorrow with the Governor Schwarzenegger and legislative leadership in Sacramento.

The State Controller’s audit documents a lack of oversight during the Schwarzenegger administration's watch and widespread waste of public funds. The main findings include the following:

• California is now spending $820 million for contracted-out prison health services. That’s $542 million more than when Schwarzenegger took office – a 300% increase (Appendix B). California spends $1.48 billion overall on the prison healthcare system – an increase of 53% since Schwarzenegger took office (Appendix A).

• “Information that strongly suggests contractors may have engaged in abusive contract practices and that these issues have not been properly and promptly addressed.” (pg 10)

• “Excessive delays in contract processing and procurement of medical equipment and supplies resulted in unnecessary expenditures, compromised services, and raised health and safety concerns…” (page 11)

• “CDCR initiated action to renegotiate contracts that resulted in the department paying considerably more to the contractor.” (page 14)

• “Some contractors may have been able to generate significant profits through their contracts with the CDCR with relatively little effort.” (page 15)

• “The CDCR’s need for outside hospital services increased, as at least two of the department’s four acute-care hospitals are functioning at a fraction of their capacity, resulting in increased costs for contracted services.” (pg. 20)

• “Internal controls at State prisons are ineffective in identifying and preventing overpayments and billing abuses.” (pg. 25)

It costs $3,850 per year to provide health insurance to the average California worker. CDCR spends $7,000 per inmate per year on healthcare.

“There’s no way to sugarcoat these findings,” Westly said. “The State pays twice as much to provide health care to a prisoner as it costs to insure the average California worker – and the State has very little to show for it. We have to stop pouring millions of dollars down a bottomless pit and fix this system.”

Robert Sillen stated that “We are not getting value for the dollar.” Although he stated that under plans he is developing overall medical expenses will not go down, the money will be spent more wisely. There is “stunning gross mismanagement and we’ve got to put a stop to it,” he said.

Sillen is about to increase the salaries of medical professionals working in the state prison, including doubling what pharmacists are paid, so that they can be hired and vacancies filled. “We have to have competitive salaries. In the long run we will definitely save money because of what we are paying registries.” But overall more money will be needed to address other health care needs of inmates.

Controller Westly’s auditors found numerous specific examples of waste and abuse:

• CDCR overpaid a contractor almost half a million dollars for services rendered over a 10-month period. This same contractor provided inaccurate test results of Hepatitis C. Instead of firing the contractor, CDCR paid for retesting, duplicating the costs for testing the same inmates. CDCR then renewed this doctor’s contract for another three years.

• One urologist charged the State $2,036 per hour for his services.

• An orthopedic surgeon billed the State $1.48 million for a year’s worth of clinical and surgical services at two prisons. When the Controller’s Office examined an invoice from this surgeon for a single day’s worth of procedures, auditors found that he had charged for services that would have required 30 hours of actual work.

The Controller has referred these findings to the Attorney General for possible legal action against contractors who overcharged the State millions for services not performed.

CDCR’s medical spending rose from $676 million in the 2000-2001 fiscal year to an estimated $1.2 billion this year. In April, Controller Westly launched the audit of CDCR to determine why, despite doubling its spending on health care since 2000, the State’s prison healthcare system was failing to provide adequate care. The CDCR healthcare system is the first-ever California entity to be taken over by the federal government.

“The people of California are entitled to know how their tax dollars are being spent,” continued Westly. “This audit clearly shows that CDCR is plagued by waste and abuse. My staff and I stand ready to work hand-in-hand with the Receiver to address these issues, and with the Attorney General to prosecute those who have cheated the State out of millions of dollars.”

Here are the findings of the report.

Finding 1 –The CDCR has no clear policies to manage its medical service contracts and provide proper oversight for billing and payments.
Finding 2 – The CDCR’s contract negotiation process is deficient, and as a result, CDCR continues to pay significantly more than other major purchasers of healthcare services for the same medical services.
Finding 3 –CDCR contracts continue to pay hospitals based on a percentage of the hospital’s billed charges, which has led to overpayments and billing abuses.
Finding 4 – An opportunity for significant State savings has been delayed for years due to objections raised by a contractor who is financially benefiting from the delay.
Finding 5 – Prison medical facilities have been functioning at a fraction of their capacity due to lack of qualified personnel, services, and equipment.
Finding 6 – CDCR’s first level of review for contract charges and medical services is ineffective due to lack of staff training.
Finding 7 – Decisions regarding medical treatment are sometimes made based on legal considerations rather than on what is medically necessary and appropriate.
Finding 8 – Internal controls at State prisons are ineffective in identifying and preventing overpayments or billing abuses, and this has allowed several contractors to inflate their charges.

 

In the aftermath of Hurricane Katrina, the Bush Administration turned to private contractors to provide relief and recovery services worth billions of dollars. Now, one year later, it is apparent that taxpayers and the residents of the Gulf Coast are paying a steep price for the failure to stop waste, fraud, and abuse in federal contracting.

At the request of Reps. Waxman, Cardoza, Obey, Tanner, Norton, and Tierney, this report examines procurement spending in response to Hurricane Katrina. The report identifies 19 Katrina contracts, collectively worth $8.75 billion, that have experienced significant overcharges, wasteful spending, or mismanagement.

There are indications that federal officials may repeat many of the same mistakes in responding to future disasters. Earlier this month, the Federal Emergency Management Agency awarded new contracts worth over $1 billion to several of the same companies implicated in the wasteful Hurricane Katrina response.

Key findings in the report include the following:

• Full and Open Competition is the Exception, Not the Rule. As of June 30, 2006, over $10.6 billion has been awarded to private contractors for Gulf Coast recovery and reconstruction. Nearly all of this amount ($10.1 billion) was awarded in 1,237 contracts valued at $500,000 or more. Only 30% of these contracts were awarded with full and open competition.
• Contract Mismanagement Is Widespread. Hurricane Katrina contracts have been accompanied by pervasive mismanagement. Mistakes were made in virtually every step of the contracting process: from pre-contract planning through contract award and oversight. Compounding this problem, there were not enough trained contract officials to oversee contract spending in the Gulf Coast.
• The Costs to the Taxpayer Are Enormous. This report identifies 19 Katrina contracts collectively worth $8.75 billion that have been plagued by waste, fraud, abuse, or mismanagement. In the case of each of these 19 contracts, reports from the Government Accountability Office, Pentagon auditors, agency inspectors general, or other government investigators have linked the contracts to major problems in administration or performance.

 

Louisiana Officials Could Lose the Katrina Blame Game
By Jeff Johnson
CNSNews.com Senior Staff Writer
September 07, 2005
http://www.cnsnews.com/ViewNation.asp?Page=\Nation\archive\200509\NAT20050907a.html

(1st Add: Includes information about restoration of Mardi Gras fountain)

(CNSNews.com) - The Bush administration is being widely criticized for the emergency response to Hurricane Katrina and the allegedly inadequate protection for "the big one" that residents had long feared would hit New Orleans. But research into more than ten years of reporting on hurricane and flood damage mitigation efforts in and around New Orleans indicates that local and state officials did not use federal money that was available for levee improvements or coastal reinforcement and often did not secure local matching funds that would have generated even more federal funding.

In December of 1995, the Orleans Levee Board, the local government entity that oversees the levees and floodgates designed to protect New Orleans and the surrounding areas from rising waters, bragged in a supplement to the Times-Picayune newspaper about federal money received to protect the region from hurricanes.

"In the past four years, the Orleans Levee Board has built up its arsenal. The additional defenses are so critical that Levee Commissioners marched into Congress and brought back almost $60 million to help pay for protection," the pamphlet declared. "The most ambitious flood-fighting plan in generations was drafted. An unprecedented $140 million building campaign launched 41 projects."

The levee board promised Times-Picayune readers that the "few manageable gaps" in the walls protecting the city from Mother Nature's waters "will be sealed within four years (1999) completing our circle of protection."

But less than a year later, that same levee board was denied the authority to refinance its debts. Legislative Auditor Dan Kyle "repeatedly faulted the Levee Board for the way it awards contracts, spends money and ignores public bid laws," according to the Times-Picayune. The newspaper quoted Kyle as saying that the board was near bankruptcy and should not be allowed to refinance any bonds, or issue new ones, until it submitted an acceptable plan to achieve solvency.

Blocked from financing the local portion of the flood fighting efforts, the levee board was unable to spend the federal matching funds that had been designated for the project.

By 1998, Louisiana's state government had a $2 billion construction budget, but less than one tenth of one percent of that -- $1.98 million -- was dedicated to levee improvements in the New Orleans area. State appropriators were able to find $22 million that year to renovate a new home for the Louisiana Supreme Court and $35 million for one phase of an expansion to the New Orleans convention center.

The following year, the state legislature did appropriate $49.5 million for levee improvements, but the proposed spending had to be allocated by the State Bond Commission before the projects could receive financing. The commission placed the levee improvements in the "Priority 5" category, among the projects least likely to receive full or immediate funding.

The Orleans Levee Board was also forced to defer $3.7 million in capital improvement projects in its 2001 budget after residents of the area rejected a proposed tax increase to fund its expanding operations. Long term deferments to nearly 60 projects, based on the revenue shortfall, totaled $47 million worth of work, including projects to shore up the floodwalls.

No new state money had been allocated to the area's hurricane protection projects as of October of 2002, leaving the available 65 percent federal matching funds for such construction untouched.

"The problem is money is real tight in Baton Rouge right now," state Sen. Francis Heitmeier (D-Algiers) told the Times-Picayune. "We have to do with what we can get."

Louisiana Commissioner of Administration Mark Drennen told local officials that, if they reduced their requests for state funding in other, less critical areas, they would have a better chance of getting the requested funds for levee improvements. The newspaper reported that in 2000 and 2001, "the Bond Commission has approved or pledged millions of dollars for projects in Jefferson Parish, including construction of the Tournament Players Club golf course near Westwego, the relocation of Hickory Avenue in Jefferson (Parish) and historic district development in Westwego."

There is no record of such discretionary funding requests being reduced or withdrawn, but in October of 2003, nearby St. Charles Parish did receive a federal grant for $475,000 to build bike paths on top of its levees.

Earlier this year, the levee board did complete a $2.5 million restoration project. After months of delays, officials rolled away fencing to reveal the restored 1962 Mardi Gras fountain in a four-acre park featuring a new 600-foot plaza between famous Lakeshore Drive and the sea wall.

Financing for the renovation came from a property tax passed by New Orleans voters in 1983. The tax, which generates more than $6 million each year for the levee board, is dedicated to capital projects. Levee board officials defended more than $600,000 in cost overruns for the Mardi Gras fountain project, according to the Times-Picayune, "citing their responsibility to maintain the vast green space they have jurisdiction over along the lakefront."

Democrats blame Bush administration

Congressional Democrats have been quick to blame the White House for poor preparation and then a weak response related to Hurricane Katrina. U.S. Rep. Henry Waxman (D-Calif.), ranking Democrat on the House Government Reform Committee, joined two of his colleagues from the Transportation and Infrastructure and Homeland Security committees Tuesday in a letter requesting hearings into what the trio called a "woefully inadequate" federal response.

"Hurricane Katrina was an unstoppable force of nature," Waxman wrote along with Reps. James Oberstar (D-Minn.) and Bennie Thompson (D-Miss.). "But it is plain that the federal government could have done more, sooner, to respond to the immediate survival needs of the residents of Louisiana and Mississippi.

"In fact, different choices for funding and planning to protect New Orleans may even have mitigated the flooding of the city," the Democrats added.

But Rep. Tom Davis (R-Va.) suggested that Waxman "overlooks many other questions that need to be asked, and prematurely faults the federal government for all governmental shortcomings; in fact, local and state government failures are not mentioned at all in [Waxman's] letter."

Davis wrote that Waxman's questions about issues such as the lack of federal plans for evacuating residents without access to vehicles and the alleged failure of the Department of Homeland Security to ensure basic communications capacity for first responders might "prematurely paint the picture that these are solely, or even primarily, federal government responsibilities.

"This is not the time to attack or defend government entities for political purposes. Rather, this is a time to do the oversight we're charged with doing," Davis continued. "Our Committee will aggressively investigate what went wrong and what went right. We'll do it by the book, and let the chips fall where they may."

The House Government Reform Committee will begin hearings on federal disaster preparations and the response to Hurricane Katrina the week of Sept. 12. The House Energy and Commerce Committee is schedule to hold hearings on the economic recovery from Katrina beginning Wednesday morning.

Money Flowed to Questionable Projects
State Leads in Army Corps Spending, but Millions Had Nothing to Do With Floods
http://www.washingtonpost.com/wp-dyn/content/article/2005/09/07/AR2005090702462.html

By Michael Grunwald
Washington Post Staff Writer
Thursday, September 8, 2005; A01

Before Hurricane Katrina breached a levee on the New Orleans Industrial Canal, the Army Corps of Engineers had already launched a $748 million construction project at that very location. But the project had nothing to do with flood control. The Corps was building a huge new lock for the canal, an effort to accommodate steadily increasing barge traffic.

Except that barge traffic on the canal has been steadily decreasing.

In Katrina's wake, Louisiana politicians and other critics have complained about paltry funding for the Army Corps in general and Louisiana projects in particular. But over the five years of President Bush's administration, Louisiana has received far more money for Corps civil works projects than any other state, about $1.9 billion; California was a distant second with less than $1.4 billion, even though its population is more than seven times as large.

Much of that Louisiana money was spent to try to keep low-lying New Orleans dry. But hundreds of millions of dollars have gone to unrelated water projects demanded by the state's congressional delegation and approved by the Corps, often after economic analyses that turned out to be inaccurate. Despite a series of independent investigations criticizing Army Corps construction projects as wasteful pork-barrel spending, Louisiana's representatives have kept bringing home the bacon.

For example, after a $194 million deepening project for the Port of Iberia flunked a Corps cost-benefit analysis, Sen. Mary Landrieu (D-La.) tucked language into an emergency Iraq spending bill ordering the agency to redo its calculations. The Corps also spends tens of millions of dollars a year dredging little-used waterways such as the Mississippi River Gulf Outlet, the Atchafalaya River and the Red River -- now known as the J. Bennett Johnston Waterway, in honor of the project's congressional godfather -- for barge traffic that is less than forecast.

The Industrial Canal lock is one of the agency's most controversial projects, sued by residents of a New Orleans low-income black neighborhood and cited by an alliance of environmentalists and taxpayer advocates as the fifth-worst current Corps boondoggle. In 1998, the Corps justified its plan to build a new lock -- rather than fix the old lock for a tiny fraction of the cost -- by predicting huge increases in use by barges traveling between the Port of New Orleans and the Mississippi River.

In fact, barge traffic on the canal had been plummeting since 1994, but the Corps left that data out of its study. And barges have continued to avoid the canal since the study was finished, even though they are visiting the port in increased numbers.

Pam Dashiell, president of the Holy Cross Neighborhood Association, remembers holding a protest against the lock four years ago -- right where the levee broke Aug. 30. Now she's holed up with her family in a St. Louis hotel, and her neighborhood is underwater. "Our politicians never cared half as much about protecting us as they cared about pork," Dashiell said.

Yesterday, congressional defenders of the Corps said they hoped the fallout from Hurricane Katrina would pave the way for billions of dollars of additional spending on water projects. Steve Ellis, a Corps critic with Taxpayers for Common Sense, called their push "the legislative equivalent of looting."

Louisiana's politicians have requested much more money for New Orleans hurricane protection than the Bush administration has proposed or Congress has provided. In the last budget bill, Louisiana's delegation requested $27.1 million for shoring up levees around Lake Pontchartrain, the full amount the Corps had declared as its "project capability." Bush suggested $3.9 million, and Congress agreed to spend $5.7 million.

Administration officials also dramatically scaled back a long-term project to restore Louisiana's disappearing coastal marshes, which once provided a measure of natural hurricane protection for New Orleans. They ordered the Corps to stop work on a $14 billion plan, and devise a $2 billion plan instead.

But overall, the Bush administration's funding requests for the key New Orleans flood-control projects for the past five years were slightly higher than the Clinton administration's for its past five years. Lt. Gen. Carl Strock, the chief of the Corps, has said that in any event, more money would not have prevented the drowning of the city, since its levees were designed to protect against a Category 3 storm, and the levees that failed were already completed projects. Strock has also said that the marsh-restoration project would not have done much to diminish Katrina's storm surge, which passed east of the coastal wetlands.

"The project manager for the Great Pyramids probably put in a request for 100 million shekels and only got 50 million," said John Paul Woodley Jr., the Bush administration official overseeing the Corps. "Flood protection is always a work in progress; on any given day, if you ask whether any community has all the protection it needs, the answer is almost always: Maybe, but maybe not."

The Corps had been studying the possibility of upgrading the New Orleans levees for a higher level of protection before Katrina hit, but Woodley said that study would not have been finished for years. Still, liberal bloggers, Democratic politicians and some GOP defenders of the Corps have linked the catastrophe to the underfunding of the agency.

"We've been hollering about funding for years, but everyone would say: There goes Louisiana again, asking for more money," said former Democratic senator John Breaux. "We've had some powerful people in powerful places, but we never got what we needed."

That may be true. But those powerful people -- including former senators Breaux, Johnston and Russell Long, as well as former House committee chairmen Robert Livingston and W.J. "Billy" Tauzin -- did get quite a bit of what they wanted. And the current delegation -- led by Landrieu and GOP Sen. David Vitter -- has continued that tradition.

The Senate's latest budget bill for the Corps included 107 Louisiana projects worth $596 million, including $15 million for the Industrial Canal lock, for which the Bush administration had proposed no funding. Landrieu said the bill would "accelerate our flood control, navigation and coastal protection programs." Vitter said he was "grateful that my colleagues on the Appropriations Committee were persuaded of the importance of these projects."

Louisiana not only leads the nation in overall Corps funding, it places second in new construction -- just behind Florida, home of an $8 billion project to restore the Everglades. Several controversial projects were improvements for the Port of New Orleans, an economic linchpin at the mouth of the Mississippi. There were also several efforts to deepen channel for oil and gas tankers, a priority for petroleum companies that drill in the Gulf of Mexico.

"We thought all the projects were important -- not just levees," Breaux said. "Hindsight is a wonderful thing, but navigation projects were critical to our economic survival."

Overall, Army Corps funding has remained relatively constant for decades, despite the "Program Growth Initiative" launched by agency generals in 1999 without telling their civilian bosses in the Clinton administration. The Bush administration has proposed cuts in the Corps budget, and has tried to shift the agency's emphasis from new construction to overdue maintenance. But most of those proposals have died quietly on Capitol Hill, and the administration has not fought too hard to revive them.

In fact, more than any other federal agency, the Corps is controlled by Congress; its $4.7 billion civil works budget consists almost entirely of "earmarks" inserted by individual legislators. The Corps must determine that the economic benefits of its projects exceed the costs, but marginal projects such as the Port of Iberia deepening -- which squeaked by with a 1.03 benefit-cost ratio -- are as eligible for funding as the New Orleans levees.

"It has been explicit national policy not to set priorities, but instead to build any flood control or barge project if the Corps decides the benefits exceed the costs by 1 cent," said Tim Searchinger, a senior attorney at Environmental Defense. "Saving New Orleans gets no more emphasis than draining wetlands to grow corn and soybeans."