Claims of Cronyism in $300 Million Puerto Rico Recovery Contract Awarded to Admin-Connected Firm

How did a company with 2 employees get a $300 million contract to restore power in the hurricane-ravaged US territory, Puerto Rico?

You may have read something a few days ago from the pro-Trump echo chamber that the Mayor of San Juan was doing *something* bad to stymie Trump's brilliant recovery strategy. This backlash stemmed from calls by Mayor Carmen Yulín Cruz for increased transparency in a lucrative contract awarded to a company called Whitefish Energy. That situation escalated to a twitter exchange reported by among other outlets, The Hill

In the exchange, Whitefish Energy appears to threaten to pull its linemen from the island:



So what's all the hubbub? Well for starters, the company had exactly 2 employees when they landed the contract, the largest single contract among those awarded as part of Puerto Rico's recovery efforts. Also attracting attention are stipulations from the contract, exposed when the document was leaked

In no event shall PREPA, the Commonwealth of Puerto Rico, the FEMA Administrator, the Comptroller General of the United States, or any of their authorized representatives have the right to audit or review the cost and profit elements of the labor rates specified herein.

Contractor will use commercially reasonable efforts to perform the work in such a manner to meet scheduling expectations, but PREPA waives any claim against Contractor related to delayed completion of the work.

Then there are the connections between Whitefish Energy and the administration. Whitefish Energy takes its name from the small Montana town from which it hails, Whitefish. As of the 2010 Census, Whitefish had a total population of 6,357. Who else happens to hail from Whitefish?

Interior Secretary Ryan Zinke.

In fact, not only do Andy Techmanski, CEO of Whitefish Energy, and Ryan Zinke admit to knowing one another, their kids are friends and Zinke's son worked a summer job for Techmanski:

Whitefish Energy is based in Whitefish, Montona, the home town of Interior Secretary Ryan Zinke. Its chief executive, Andy Techmanski, and Zinke acknowledge knowing one another — but only, Zinke's office said in an email, because Whitefish is a small town where "everybody knows everybody." One of Zinke's sons "joined a friend who worked a summer job" at one of Techmanski's construction sites, the email said. Whitefish said he worked as a "flagger."

And it's now also being reported that an investor in Whitefish Energy is an acquaintance and campaign donor to Energy Secretary Rick Perry:

“Texas-based company HBC Investments invested in Whitefish Energy this past August, a month before Hurricane Maria struck Puerto Rico and left the U.S. territory in the dark,” Montana Public Radio reported.

HBC Investments’ founder and partner, Joe Colonnetta, has donated more than $40,000 to Rick Perry’s previous campaigns. “As governor, Perry appointed Colonnetta as a trustee to the Teacher’s Retirement System of Texas,” MPR said Thursday.

And a donor to Donald Trump and the RNC:

The private-equity firm that finances Whitefish, HBC Investments, was founded by Joe Colonnetta, who serves as its general partner.

Federal Elections Commission data compiled by The Daily Beast shows Colonnetta contributed $20,000 to the Trump Victory PAC during the general election, $2,700 to Trump’s primary election campaign (then the maximum amount permitted), $2,700 to Trump’s general election campaign (also the maximum), and a total of $30,700 to the Republican National Committee in 2016 alone.

Colonnetta’s wife, Kimberly, is no stranger to Republican politics either; shortly after Trump’s victory, she gave $33,400 to the Republican National Committee, the maximum contribution permitted for party committees in 2016.

Zinke isn’t the only member of the Trump administration with a connection to the Whitefish contract. In addition to the Colonnettas’ contributions to Trump’s presidential campaign, Kimberly Colonnetta’s Facebook page contains a photo of her with Ben Carson, Trump’s secretary of housing and urban development. Another photo appears to show Kimberly Colonnetta with Trump Secretary of State Rex Tillerson. Both photos were posted the week of Trump’s inauguration.

As of now, FEMA and the White House are both pointing their fingers at PREPA:

The Federal Emergency Management Administration said in a statement that it was looking into whether the contract between Whitefish Energy and the Puerto Rico Electric Power Authority, or PREPA, “followed applicable regulations to ensure that federal money is properly spent.”

The statement said an initial review said FEMA “has significant concerns over how PREPA procured this contract and has not confirmed whether the contract prices are reasonable.”

FEMA also noted it did not give any preliminary approval for the deal, which was reached without competitive bidding.

The White House, meanwhile, sought to distance itself from the issue. White House spokesman Raj Shah said the deal with Whitefish was “made exclusively” by PREPA.

“The White House is not aware of any federal involvement in the selection,” Shah said in a statement.

Meanwhile, there are bipartisan calls in Congress for an investigation and Puerto Rico's financial oversight committee is moving to install an emergency manager for PREPA (Puerto Rico Electric Authority):

Puerto Rico’s financial oversight board is moving to install an emergency manager at the island’s state-owned utility amid criticism of a $300 million contract it awarded to a small Montana energy firm for work on the territory’s crippled electrical grid.

The board said Wednesday that it intends to appoint Noel Zamot, a retired Air Force colonel and member of the oversight panel, to oversee daily operations of the Puerto Rico Electric Power Authority.

Drain the swamp?

I'm actually in the process of moving to Whitefish as we speak so this whole thing is a bit surreal. Whitefish is a beautiful town and I hope this doesn't bring any bad press or animosity to the place. The people are great, don't let this sway your opinion of the place.

a reply to: theantediluvian
I'm not fully up to speed on this whole thing, but from what I understand is that whitefish was the only bid that required $0 up front, which is why they won the bid.

As far as the company only having 2 employees, that's not uncommon for a general contractor to be a single employee or in a small partnership. They will have partner companies they work with to secure the parts and labor needed for the specific job they will be doing.

What blows my mind about this Zinke guy is that he's from Whitefish, a decently successful resort town about an hour south of Glacier National Park yet he's taking funding away from national parks and trying to raise the entry fee for visitors.

He knows how important national parks are to certain communities, his OWN, yet he is trying to defund them while at the same time raising the prices.

Dude is a scumbag.

Some background on Whitefish:

United States flag inactive branch WHITEFISH ENERGY CORP. (Tennessee (US), 31 Oct 1980-31 Dec 1987, # 604 10655 N E 4TH BELLEVUE, WA 98004 USA)
United States flag branch WHITEFISH ENERGY HOLDINGS, LLC (Idaho (US), 26 Sep 2016- , 144 ASPEN RIDGE WAY WHITEFISH, MT 59937)
United States flag branch WHITEFISH ENERGY HOLDINGS, LLC (Texas (US), 11 Oct 2016- )
United States flag branch WHITEFISH ENERGY HOLDINGS, LLC (Washington (US), 11 Oct 2016- )
United States flag WHITEFISH ENERGY HOLDINGS, LLC (Montana (US), 28 May 2015- )
United States flag inactive WHITEFISH ENERGY, INC. (Montana (US), 8 Feb 1993- 2 Dec 1994)
United States flag Whitefish Energy Constructors, LLC (Montana (US), 13 Sep 2016- )
United States flag Whitefish Energy, LLC (Montana (US), 1 Aug 2017- )

Open Corporates

They were originally incorporated in 1993 but then restructured in 2014/15, thus a '2 year old company.'

Not long ago, a Brazilian company bought a majority share in Whitefish Energy:

TECHMANSKI AND two representatives from a Brazilian transformer company met Dec. 12 with local and economic development leaders about the project. Whitefish Energy Holdings is a servicing company that was established 18 months ago to work on power-line construction, substation construction and environmental mitigation projects. According to a company prospectus, Comtrafo, a Brazilian transformer manufacturing company, recently purchased 51 percent of Whitefish Energy, shifting the company’s focus toward production of large-scale transformers for the U.S. market.

Energy company considering Flathead for new plant

PREPA had an existing agreement in place that they chose not to take advantage of:

The American Public Power Association, based in Washington, confirmed today that the troubled Puerto Rico public utility that serves more than 3 million people on the island has decided not to request assistance from the group of 1,100 U.S. electricity companies standing ready to help.

The association coordinates mutual aid disaster assistance for U.S. public power companies, which include the Puerto Rico Electric Power Authority (PREPA). "The request for help was not activated," said group spokeswoman Meena Dayak. "We do have people who are ready to help."

...

Whitefish, a subsidiary of COMTRAFO Brazil, an engineering services firm that specializes in electric power transformers, said on social media that it had won a general contract to rebuild power lines in Puerto Rico. Whitefish has said it has committed an initial 200 power line employees to restoring the grid with a possibility of adding 200 or 300 more.

Puerto Rico utility says 'no thanks' to assistance

So, PREPA, rather than taking advantage of an existing relationship with APPA, chose to utilize COMTRAFO/Whitefish.

Looking a bit closer at PREPA's associations in the past we see:

“The fact is that safety and reliability must be PREPA’s first priorities, above all other considerations,” a searing report commissioned by the Puerto Rican government concluded last year. “Energy efficiency and renewable energy take time to implement; PREPA’s system is in a desperate state today.”

The report described the utility’s budget as “opaque and distortionary,” made worse by “poor record keeping.” The generous $134 million allocated for discretionary spending ― nearly one-third of the annual budget ― suggested a slush fund. Alleged corruption only made operating costs higher. A class-action lawsuit filed in 2015 accused PREPA of more than $1 billion in fraud, claiming it had taken kickbacks from oil suppliers including Brazil’s Petrobras and Royal Dutch Shell.

HuffPo

COMTRAFO & PETROBRAS also have history:

COMTRAFO is currently the only supplier in Brazil for Desalination Transformers for PETROBRAS. Very Special Transformers with imbued reactor, to pump the first filtering process of the brute petroleum.

Comtrafo presentation - rev. 2

Dirty deeds done dirt cheap.

Whitefish is a red herring.
the Puerto Rican electric company made this decision.
And we all know how electric companies are inscrutable pinnacles of ethics and honesty

a reply to: dashen

Yeah....but she took a photo with Ben Carson!

a reply to: theantediluvian

I think most people only hate corruption when it's spoken about vaguely. As in, things like "deep state", "the powers that be", "Wall Street corruption", "illuminati", "the establishment", "1% screwing over the 99%", "big government", etc.

But when the actual details of corruption are exposed (like in your OP), it falls on deaf ears. I don't know if it's just that people don't care about ethics, nepotism, & conflicts of interest, or if they only hate those previously mentioned words & terms because they've been conditioned to reject them (like with the word "socialism").

I'm leaning more towards the first option. To me, this situation seems like a textbook case of corruption. 1) There are more experienced firms out there that also could've done this work, but they won't even have a chance to see because this was a no-bid contract. 2) I also have a personal policy stance that aims to reduce overcharges & delays on projects. 3) These types of BS deals happened in Haiti after their catastrophic earthquake, which is one reason most of it was never rebuilt even though so much money was sent there. 4) And of course, the personal connections piss me off because it's basically a taxpayer funded lottery ticket for Zinke's friend. Once again, all that talk about "cutting out pork barrel projects" proves to be just a talking point.

However, I also fully understand why many people aren't actually against this type of thing. Regardless of what people may say in public, there are very few people who will turn down the chance to award $300 million to a family friend if they think there won't be any consequences for it. And in all honesty, I wouldn't have had a problem with this particular situation if it had a lot of oversight, was an open bid process (which allows for cheaper proposals & proposals by firms with proven track records), and didn't have the other elements that I mentioned before. After all, I'd rather my tax dollars go towards rebuilding and enhancing America than go towards imprisoning Americans or funding more wars.

originally posted by: dashen
Whitefish is a red herring.
the Puerto Rican electric company made this decision.
And we all know how electric companies are inscrutable pinnacles of ethics and honesty

Correct, the story is that a lone PREPA employee had access to a satellite phone and Whitefish was the only number to which they had access:

The contract was reportedly awarded through a phone call placed in the days immediately after Maria hit. A PREPA employee who happened to have a satellite phone and phone number for Whitefish made the call, according to a story published by E&E News, an independent news organization that focuses on energy and environmental issues.

weather.com...

Again, this ignores the existing arrangement PREPA had in place with APPA, which makes me wonder if they didn't also have contact information for someone within APPA but chose not to go that route in favor of the COMTRAFO/Whitefish company. Need to find out exactly which PREPA employee it was who made the call.

PREPA is the only entity authorized to conduct such business in Puerto Rico, making it a government monopoly

Puerto Rico Electric Power Authority






PREPA claims that the reason they did not activate the mutual aid agreement with APPA was:

SAN JUAN, Puerto Rico — The chief executive of Puerto Rico's bankrupt electricity company says he did not ask for help from mainland U.S. utilities before and immediately after Hurricane Maria destroyed the island's grid because the utility couldn't afford to pay anybody back for equipment and manpower.
...
Ramos was on several calls among APPA members prior to and just after Hurricane Irma, which struck right before Hurricane Maria, Hyland said. The question of the utility's financial resources "was never brought up in any of the calls."
...
Whitefish got the go-ahead to head to Puerto Rico, not from Ramos but from PREPA's procurement employees, who had a satellite phone and Whitefish's phone number, Ramos said. He did not explain why that communication source was unavailable to him.

Cash crunch slowed Puerto Rico's appeal for grid help, CEO says

So, according to PREPAs CEO it is their poor fiscal condition which necessitated the call to COMTRAFO/Whitefish and that PREPA and PREPA alone were responsible for the choice of who was called.

And we still don't know who other than, "procurement employees," for a specific person who made the call to COMTRAFO/Whitefish.

So wait? Does this look like PR decided on taking on a new company to supply it's power repair work because of it's connection to the Trump Admin? If they had an agreement that could have been used, than why else would they choose not to use them?

This whole thing is beginning to smell like they (PR) is using Whitefish in an attempt to create a negative image of the Trump Admin, while pretending to be the "poor victims" in the end? This is beginning to look like Foundation tactics in play.

a reply to: 3NL1GHT3N3D1

those idiot nazis did more to hurt whitefish reputation then anything else,we orginized a pretty big coutner protest to them last winter though ,welcome to montana by the way

a reply to: theantediluvian

The pre-contract size of the company doesn't mean anything. Labor contractors frequently hire locally sourced labor and may only have 1 or 2 individuals on their annual payroll when between major contracts. This is standard in the specialty construction industry.

The wording of "In no event shall PREPA, the Commonwealth of Puerto Rico, the FEMA Administrator, the Comptroller General of the United States, or any of their authorized representatives have the right to audit or review the cost and profit elements of the labor rates specified herein." would indicate that they're not following Davis-Bacon wage laws, which may or may not be legal. I know in most federally funded projects, wage rates are mandated to be reviewed and approved by the feds, but that's only in effect within the US. For contracts overseas that are federally funded (i.e. the reconstruction in Iraq contracts) Davis-Bacon isn't in effect. I don't know if the law applies to US territories. My only point with that is that the wording is standard for contracts I've seen outside the US.

This one: "Contractor will use commercially reasonable efforts to perform the work in such a manner to meet scheduling expectations, but PREPA waives any claim against Contractor related to delayed completion of the work." is absolutely an industry standard for fast track projects involving unknown risks at the time of contract signing. When the contract was let, nobody knew what the magnitude of destruction really was. 'Cost, quality, schedule... choose 2.' is an industry standard catchphrase for difficult design and construction projects. The weasel words are in there to indicate of the 3, the schedule could be the one that slips rather than high dollar change orders or half-assed work products.

They do need to explore the relationship issue.

weather.com...

I do want top address this from above:

The company is getting paid $309 an hour for each journeyman line worker, almost 10 times the average rate of such worker in the United States.
It's also getting a daily reimbursement of $332 for housing and $79 for food for each worker.

This isn't exactly accurate. The average lineman in the US is compensated approximately $39/hr under standard conditions. That's simply what that lineman is paid. However, most of them in remote conditions also receive hazard bonuses, which here in Alaska can easily double their standard base rate. Alaska linemen make about $50/hr in base compensation, which double to $100/hr in hazard conditions. I'd argue that Puerto Rico presently would be considered to qualify for hazard conditions by any labor union asked and is in a remote enough area to expect a higher base rate. Then you get into the difference between what the company is paid and what the company pays the worker. Federal standard overhead rate for labor is somewhere around a 1.55 multiplier, so now you'd be at $255, add in a %10 profit for the company and you're at $280/hr, so the $309/hr is certainly plausible and nowhere near "10x the national average" when you compare apples to apples.

Housing reimbursement is going to be purely market driven. I have no idea what the motel situation in PR is currently, but I'd be willing to bet the demand is through the roof with so many homes destroyed. $332 strikes me as reasonable. $79 per day for food isn't in any way outside the norm in any remote or access controlled region. Hell, if you're on per diem working a federal contract in Hawaii or Juneau, AK, you generally see a meal allowance in excess of $100 per day.

A company with ties to the current administration benefited from that in some way? Say it ain't so!

It helps to give both sides of a story when levying allegations of corruption.

"I had absolutely nothing to do with Whitefish Energy receiving a contract in Puerto Rico," said Zinke in a statement linked to a tweet. "Any attempts by the dishonest media or political operatives to tie me to awarding or influencing any contract involving Whitefish are completely baseless."

Zinke acknowledged that after the company's initial contract was awarded, he was contacted by the company, though he did not give the name of the individual who reached out to him. Zinke said he took no action and that all relevant documents would be disclosed to "appropriate officials."

"I welcome any and all investigations into these allegations," Zinke said.

The Department of Homeland Security's inspector general, an agency watchdog, confirmed Friday that federal auditors will review the Whitefish contract.

"As part of their standard procedure, they will conduct vetting to look for the presence of any inappropriate relationships," said Arlen Morales, a spokeswoman for the inspector general's office.

A Whitefish spokesman called Colonnetta's political donations "irrelevant." ''If one of the investors supported President Trump, that has nothing to do with anything," spokesman Chris Chiames said.

Puerto Rico Electric Power Authority director Ricardo Ramos has praised the work performed by Whitefish so far, saying the company's was the only offer the utility received that did not require a down payment. The power company is $9 billion in debt and was already struggling to provide service amid ongoing power outages before hurricanes Irma and Maria hit last month.

"There is nothing illegal going on here," Ramos said Thursday.

Chicago Tribune

originally posted by: Vector99
a reply to: theantediluvian
I'm not fully up to speed on this whole thing, but from what I understand is that whitefish was the only bid that required $0 up front, which is why they won the bid.

As far as the company only having 2 employees, that's not uncommon for a general contractor to be a single employee or in a small partnership. They will have partner companies they work with to secure the parts and labor needed for the specific job they will be doing.

That’s odd, no less than 10 minutes ago I heard it reported on MSNBC that the claim of them being the only company to offer help without a down payment is totally false and that other companies, including Florida Power & Light had offered to do the work with $0 dollars down.

Then there’s the part where I keep hearing that this contract was awarded without competitive bidding. They keep saying it was a “no-bid” contract. If that’s the case, then it sounds like Whitefish was the only company ever considered for the job.

Something smells like rotting whitefish!

a reply to: Flatfish

If that's the case, then yea, that's pretty corrupt and should be handled. It's being investigated so we'll see if anything comes of it.

a reply to: Flatfish
and
a reply to: Vector99

If, perhaps, you'd read through the thread, you might learn that it was a PREPA procurement employee who made the call to COMTRAFO/Whitefish and that not even the CEO was involved in that exchange.

FP&L is part of APPA.

APPA had had some initial dialogue with PREPA, between Irma & Maria, but supposedly the devastation caused by Maria all of the groundwork between PREPA and APPA was scrapped in favor of going with COMTRAFO/Whitefish due to one of the procurement employees being the only person with access to a satellite phone.

Definitely looks like that. Imagine if Obama would have done this while in office...LOL Hannity wouldn't have been able to stop talking about it for years.

Kinda like how Right wing media blasted Obama almost daily for golf and vacations but are silent while trump does the same.

Talk about brainwashing.

people should read many news sources and filter the trash out. And yes CNN is trash but it's fun to see what they aren't covering.

originally posted by: jadedANDcynical
a reply to: Flatfish
and
a reply to: Vector99

If, perhaps, you'd read through the thread, you might learn that it was a PREPA procurement employee who made the call to COMTRAFO/Whitefish and that not even the CEO was involved in that exchange.

FP&L is part of APPA.

APPA had had some initial dialogue with PREPA, between Irma & Maria, but supposedly the devastation caused by Maria all of the groundwork between PREPA and APPA was scrapped in favor of going with COMTRAFO/Whitefish due to one of the procurement employees being the only person with access to a satellite phone.

OK, now I’m wondering who provided the access to the satellite phone?

You don’t think it might have been provided courtesy of Joe Colonnetta and HBC Investments, do ya? I’d be looking for a connection there.

Probably had it hand delivered with the Whitefish phone number pre-programmed on speed dial.

Like I said, something smells a little fishy here and I’m glad it’s being investigated.