The Archdiocese of New Orleans on Thursday strongly denied the allegations in a whistleblower lawsuit that claims the church and several other local institutions, including Xavier and Dillard universities, misrepresented the extent of damage to their facilities after Hurricane Katrina in order to collect a bigger aid check from the federal government.
A “qui tam” lawsuit filed under seal in 2016 by a former project manager at California-based engineering firm AECOM claims that a former AECOM employee, Randall Krause, knowingly gamed the system to gin up larger payments after it was hired by the Federal Emergency Management Agency to help local entities prepare damage assessments for FEMA aid.
An explosive whistleblower lawsuit unsealed Wednesday alleges that a California engineering firm pushed Xavier University, Dillard University,…
According to the suit, the archdiocese received large overpayments for two projects: The first was the St. Raphael School cafeteria building in Gentilly, which the suit says should have only cost $401,920 to repair, but for which the archdiocese was paid $10.1 million to rebuild. The suit says Krause helped create bogus paperwork that led to the various overpayments, knowingly inflated the cost of repairs and shrunk his estimate of replacement cost so that the replacement would be approved.
The second project involved two five-story buildings at Villa St. Maurice, an assisted living center in the Holy Cross area run by the archdiocese. The suit alleges that the archdiocese submitted damage assessment forms claiming that the upper four floors in both buildings were catastrophically damaged, when actually nearly all of the damage was to the first floor. As a result of those bogus claims — which the suit says were shepherded by a different AECOM employee, Scott White — the archdiocese was allegedly overpaid by $36 million.
In a statement Thursday, the archdiocese vehemently denied the allegations.
In seeking aid after Katrina, officials said, “Our finance office worked diligently and relied upon the knowledge and expertise of FEMA and their designated agencies and field representatives. Our staff was committed to working responsibly and being good stewards of the money received, and our documentation reflects that.
“The questions surrounding this issue arising over a decade later were surprising to us. Every dollar of FEMA funds received has gone back into the restoration of parish, school and other properties to serve the people of the Greater New Orleans community. We deny the allegation that the Archdiocese of New Orleans knowingly conspired to submit false information. We have cooperated with the federal government’s investigation and will continue to work with them as we resolve this claim.”
The church was aware of the lawsuit; it is mentioned in the archdiocese’s recent bankruptcy filing. Presumably, if the government succeeds in its effort to claw back some or all of the overpayment, it will be treated similarly to the archdiocese’s other creditors. A $46 million debt would rank as the archdiocese’s largest obligation.
Archdiocesan officials declined comment Thursday on how the whistleblower suit could affect thee bankruptcy case.
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Qui tam lawsuits remain under seal until the Department of Justice decides whether to join in the plaintiff’s complaint. That occurred on Wednesday; the suit was unsealed and the Justice Department announced it would seek to recover some of the alleged overpayments to the archdiocese and to AECOM. The Justice Department also announced it had already confected a $12 million settlement with Xavier, roughly $2.3 million of which will go to Romero and his lawyers.
The government’s intervention, meanwhile, said it had decided against seeking the return of any money from Dillard, which according to the whistleblower complaint was overpaid by approximately $15 million for damage to three buildings. It also declined to intervene against Krause.
Lawyers with the Justice Department have not explained those decisions, and they declined comment Thursday. But Dillard officials issued a statement late Wednesday saying that the government had decided not to seek the return of any of the money Dillard received after conducted an “independent investigation” of the whistleblower’s claims.
Krause could not be reached for comment.
The settlement with Xavier appears to leave the archdiocese and AECOM as the only remaining defendants. The suit also alleged that the Orleans Parish School Board and the Recovery School District were overpaid based on inflated damage assessments at three city schools, but neither entity was named as a defendant.
All told, the entities were overpaid by roughly $100 million, with nearly half of those overpayments going to the archdiocese, the suit says.
The lawsuit claims that all of the alleged overpayments were due to fraud and knowing misrepresentations, but the amount of evidence it provides to bolster that claim in each episode varies.
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Some of the alleged misrepresentations by Xavier, for instance, were very specific. University officials, allegedly at Krause’s urging, claimed damage to a basement that didn’t exist, and after the claim was challenged by FEMA, Krause provided pictures of a different building that was not in New Orleans.
None of the claims about Dillard alleged such direct subterfuge. Instead, the suit said that FEMA had rejected as too expensive an early damage assessment for three campus buildings that was prepared by Carl E. Woodward, a New Orleans contractor. The suit says that Krause worked with Dillard officials, successfully, to fill out new claim forms that would justify the amounts Woodward had set out.
AECOM has also strongly denounced the lawsuit and the federal intervention, saying in a statement that the company remains “proud of our efforts and intend to vigorously defend our work, all of which was done under the guidance and supervision of the federal government.” The company said it simply followed FEMA’s directives to be aggressive in seeking aid for claimants, and it said AECOM would have derived no benefit from getting unjustly large payments for the entities it was shepherding through the process.
The lawsuit says AECOM was paid about $300 million for its post-Katrina labors, but doesn’t specify how much of that money the plaintiffs believe should be returned. The suit claims that AECOM would have benefited from the overpayments — though perhaps only indirectly — because FEMA evaluated contractors on the basis of productivity, and because AECOM was able to bill additional hours by creating new damage assessments.
The case is being overseen by U.S. District Judge Eldon Fallon. Lawyers for the Department of Justice have 60 days to file their motion to intervene.
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