Katrina Victims May Have to Repay Money

NEW ORLEANS (AP) -- Imagine that your home was reduced to mold and wood framing by Hurricane Katrina. Desperate for money to rebuild, you engage in a frustrating bureaucratic process, and after months of living in a government-provided trailer tainted with formaldehyde you finally win a federal grant.

Then a collector calls with the staggering news that you have to pay back thousands of dollars.

Thousands of Katrina victims may be in that situation.

A private contractor under investigation for the compensation it received to run the Road Home grant program for Katrina victims says that in the rush to deliver aid to homeowners in need some people got too much. Now it wants to hire a separate company to collect millions in grant overpayments.

The contractor, ICF International of Fairfax, Va., revealed the extent of the overpayments when it issued a March 11 request for bids from companies willing to handle ''approximately 1,000 to 5,000 cases that will necessitate collection effort.''

The bid invitation said: ''The average amount to be collected is estimated to be approximately $35,000, but in some cases may be as high as $100,000 to $150,000.''

The biggest grant amount allowed by the Road Home program is $150,000, so ICF believes it paid some recipients the maximum when they should not have received a penny. If ICF's highest estimate of 5,000 collection cases -- overpaid by an average of $35,000 -- proves to be true, that means applicants will have to pay back a total of $175 million.

One-third of qualified applicants for Road Home help had yet to receive any rebuilding check as of this past week. The program, which has come to symbolize the lurching Katrina recovery effort, is financed by $11 billion in federal funds.

ICF spokeswoman Gentry Brann said in an e-mail Friday that the overpayments are the inevitable result of the Road Home grant being recalculated to account for insurance money and government aid given to Katrina victims.

Brann said there was a sense of urgency in paying Road Home applicants, and ICF and the state knew applicants would have to return some money.

''The choice was either to process grants immediately or wait until the March 2008 deadline (for submitting Road Home applications) before disbursing any funds,'' Brann said in her e-mail.

Brann pointed out that 5,000 collections cases would represent a 4-percent error rate for the Road Home that is ''quite good for large federal programs.''

Frank Silvestri, co-chair of the Citizen's Road Home Action Team, a group that formed out of frustrations with ICF, sees it far differently.

''They want people to pay for their incompetence and their mistakes. What they need to be is aggressive about finding the underpayments,'' he said. ''People relied, to their detriment, on their (ICFs) expertise and rebuilt their houses and now they want to squeeze this money back out of them.''

The prospect of Road Home grant collections comes less than two weeks after the Louisiana inspector general and the legislative auditor said they were investigating why former Gov. Kathleen Blanco paid ICF an extra $156 million in her waning days in office to administer the program. With the increase, ICF stands to earn $912 million to run Road Home, a contract that also sweetened its initial public stock offering, and helped it buy out four other companies. It now reaches into government contracting sectors that include national defense and the environment.

Paul Rainwater, executive director of the Louisiana Recovery Authority, the state body that asked for the Blanco-ICF investigations, acknowledged the collections could be painful for applicants, many of whom have used up their nest eggs to rebuild.

''The state must walk a fine line of treating homeowners who have been overpaid with fairness and compassion and ensuring that all federal funds are used for their intended purpose,'' said Rainwater, an appointee of new Gov. Bobby Jindal.

Upon receiving money from Road Home, grantees sign a batch of forms, including one that says they must refund any overpayments.

Melanie Ehrlich, co-chair of Citizen's Road Home Action Team, which has documented Road Home cases that appear littered with mistakes, said she had no confidence that ICF had correctly calculated overpayments. She charged that the company was more likely using collections as retribution against people who had appealed their award amounts in effort to get the aid they deserved.

''I think they are looking for ways to decrease awards and that's part of dissuading people,'' she said.

Brann said applicants are told an appeal could boost or diminish their award. She called Ehrlich's charge ''a totally unfounded assertion.''

Contaminated homes denied funds

It was one thing for Leatrice Roberts to find out that the government had sold her a townhome built on top of a waste dump. But it was mindboggling to learn, at age 74, that the Road Home can't buy her out because the land is contaminated.

"You talk to this one at Road Home, you talk to that one, nobody can tell you if she'll get her money," said Roberts' daughter Patricia, who now lives in Lakeview with her disabled mother and serves as her caretaker.

The state's $10.3 billion Road Home program pays homeowners up to $150,000 to rebuild their homes or to buy them out and transfer the land to a New Orleans redevelopment authority. Financing for the program comes from the U.S. Department of Housing and Urban Development, which currently runs HANO -- the same agency that decades ago built the Press Park complex where the Robertses' storm-damaged townhome is located.

In the past two weeks, state officials informed homeowners such as Leatrice Roberts who lived atop the old Agriculture Street landfill before Hurricane Katrina hit that their Road Home applications had been placed on hold indefinitely because they live on a Superfund cleanup site. The EPA in 1994 added the 9th Ward enclave to its Superfund list, but said the area could be made safe with mitigation steps such as the replacement of topsoil.

On Thursday, state spokeswoman Christina Stephens said state agencies were working with local leaders and the EPA to come up with a policy for using HUD financing to buy the properties on the Superfund site.

HUD said its money can't be used to purchase contaminated land, but that it would work with the state to come up with a solution.

Federal subsidies

Homeowners in the neighborhood argue that they are entitled to compensation when it was HANO and the city of New Orleans, backed by federal subsidies, that built the homes on an old city dump, placed public housing tenants there and sold the homes to poor residents in a rent-to-own initiative. The neighborhood included a subdivision development called Gordon Plaza.

HUD spokesman Brian Sullivan said the federal housing agency sympathizes, but doesn't consider itself a party to the dispute.

"We appreciate the fact that it must be a maddening situation for these homeowners," he said.

Late Thursday, Stephens said the state decided to put applications from former residents of the landfill neighborhood back into the Road Home pipeline. Blending elements of two Road Home options, the property owners would have their grants calculated based on a regular rebuilding grant, but they also would be allowed to use the money to relocate. She said the state was still working out details of the policy, including who would assume ownership of the properties.

"We can't keep these people in a holding pattern forever," Stephens said.

The land's hidden legacy

The Robertses believe they were the second family to move into the HANO Press Park complex when it opened in 1970. When HANO showed the widowed Leatrice Roberts the property, she recalls that nobody told her it was on top of the old 95-acre landfill, a city dump from 1909 to 1958 that briefly reopened after Hurricane Betsy in 1965.

Everyone in the neighborhood knew Roberts' Montegut Street townhome by the heavy door with "Roberts" in a gold-painted iron design in the middle. After Hurricane Katrina flooded the townhome and destroyed the roof, someone took that door.

Leatrice Roberts now uses a wheelchair because of heart problems, diabetes, high blood pressure and a blood clot in her lungs. She's been waiting for Road Home to buy her out since her first appointment in November 2006, and using her Social Security checks to pay $1,500 in monthly rent.

The property deed of Roberts, for many years a subsidized renter at Press Park, shows she purchased her townhome from HANO on Nov. 4, 1991, three years before the EPA found dangerous levels of lead in the ground and declared the area a Superfund site. A few years after that, Roberts and her other daughter, Gail Wells, were diagnosed with cancer, they said. Roberts lost a kidney and Wells had ovarian cancer, but both say they are now cancer-free.

During the same year that the site was added to the Superfund list, school officials shut down Moton Elementary School, across Abundance Street from the row of townhomes, citing fears of the health effects of buried waste. But local and federal officials at the time turned aside residents' pleas for a buyout of their homes.

Post-storm contamination

After Hurricane Katrina, when the EPA tested the ground in New Orleans and gave the city a clean bill of health, there was one glaring exception: In the old Ag Street landfill area, yards had 50 times the normal level of the cancer-causing petroleum byproduct benzo(a)pyrene.

Nevertheless, FEMA trailers were supplied for properties in the area. Road Home officially initially said the program would provide rebuilding grants, but not buyouts, in the area. And HANO told homeowners they could move back into their homes, even though a judge had called the neighborhood unfit for people.

Roberts is among hundreds of former Press Park and Gordon Plaza residents waiting for HANO and the city to pay a class-action judgment, in a suit sparked by pre-Katrina contamination issues. It took 13 years to win the lawsuit in Civil District Court, where Judge Nadine Ramsey declared the neighborhood "unreasonably dangerous" and "uninhabitable." She ordered HANO, the city and their insurers to pay fair-market value, plus amounts ranging from $4,000 to $50,000 for emotional distress, depending on how long a resident lived at the site before contamination was found in 1993.

On Jan. 30, the state's 4th Circuit Court of Appeals largely upheld Ramsey's ruling, although it cut the emotional distress awards in half. On Thursday, HANO appealed to the Louisiana Supreme Court and other defendants are expected to also press appeals, said plaintiffs' attorney Suzette Peychaud Bagneris.

Bagneris said she has asked the Road Home for more than a year to offer buyouts to the Ag Street landfill homeowners, just as the program has done for those affected by the Murphy Oil spill that occurred during Hurricane Katrina in St. Bernard Parish.

"Our requests fell upon deaf ears," Bagneris said.

Stephens said the Murphy Oil spill is not limited by federal rules governing Superfund sites. The Murphy Oil spill has its own section in Road Home policies. Until the state's decision Thursday, there had been no policy for Superfund sites.

Population Rebounds In Storm - Hit New Orleans: Census

WASHINGTON (Reuters) - New Orleans, abandoned by thousands of residents after destructive floods and hurricanes in 2005, was one of the fastest growing metropolitan areas in the United States last year, according to a report released by the U.S. Census Bureau Thursday.

The Louisiana city's population climbed by 4 percent, with an increase of 39,885 residents between July 2006 and July 2007, making it the eighth-fastest growing metro area in the country, the bureau said.

Hurricanes Katrina and Rita slammed into other cities along the Gulf of Mexico in the summer of 2005, and the census said they, too, saw modest increases in their population last year. In Mississippi, Gulfport had 1.8 percent population growth and Pascagoula had 1.6 percent growth. Beaumont, Texas, experienced a 0.5 percent increase in population, and Louisiana's Lake Charles a 0.4 percent increase.

In 2006, the nonprofit research organization Rand Corporation estimated fewer than 200,000 people were living in New Orleans, compared to 485,000 in 2000. Residents were evacuated to cities around the United States and many never returned.

In general, eight of the ten cities with the highest rate of increase were located in the South, the census said, including Palm Coast, Raleigh, Gainesville, Austin, Myrtle Beach, Charlotte and Clarksville.

The 50 fastest-growing cities were split roughly between the South and the West, according to the census, with none located in the Northeast.

In terms of numerical growth, the cities with the largest gains were concentrated in the Southwest, with Dallas netting the most new residents last year at 162,250, according to the census.

The Riverside, San Bernardino and Ontario metropolitan area in California, called "The Inland Empire" by some locals, gained 86,660 residents last year, ranking it fifth in terms of population increases despite a foreclosure crisis that has gripped the desert region for more than a year.

According to RealtyTrac, a database compiling foreclosure rates, foreclosures in Riverside and San Bernardino counties were among the highest in the nation at the end of 2006, in the middle of the census' survey period, and they continue to grow as the housing boom fizzles. Earlier this month, RealtyTrac said the area had the fifth-highest foreclosure rate nation-wide.

Nagin OKs demolition of Lafitte housing complex

The light-brown bricks of the Lafitte public housing complex will soon be rubble.

Mayor Ray Nagin signed its demolition permit Monday, allowing the destruction of all but 196 units, which are being preserved temporarily for returning public-housing residents.

Shortly after the City Council voted in December to demolish the "Big Four" public housing developments, the mayor signed three of the four permits. Since then backhoes and dumptrucks have been working steadily to pull down and haul away apartment buildings at the B.W. Cooper, C.J. Peete and St. Bernard complexes.

But the mayor kept his pen from Lafitte's demolition permit, saying that the U.S. Department of Housing and Urban Development hadn't handed over what he and the City Council had requested. Specifically, as a condition of demolition the mayor and council wanted to see the redevelopers' financing plans, master-development agreements signed by all resident councils, documentation that the Housing Authority of New Orleans had provided enough affordable housing for returning public-housing residents, and an expansion of HANO's current one-man board to include local representation and input.

The mayor had always maintained that he would authorize the Lafitte demolition when HUD provided the necessary paperwork.

Still, preservationists and public-housing advocates held out hope that Lafitte's demolition was being reconsidered. They argued that Lafitte was better designed and maintained than the other complexes being razed and that it was an integral part of the culturally rich 6th Ward.

Those hopes were dashed Monday afternoon after the mayor said that he and council members were "comfortable" that HUD was honoring its wishes.

"We're really disappointed," said Walter Gallas head of the New Orleans field office for the National Trust for Historic Preservation. "We believe that the city, HUD, and HANO are making a big mistake."

People who sold homes early still awaiting state money

Amanda Dumas is not the sort to feel victimized.

Sure, she has multiple sclerosis, a disease that is slowly destroying her muscles and making her more susceptible to illness, but she focuses on the fact that she's still ambulatory, still earning a living. Yes, her Meraux home and the homes of her extended family were destroyed in Hurricane Katrina, but most of them found homes on the north shore, near medical services they need. They've moved on.


Dumas wouldn't even dwell on the fact that she, her parents, her in-laws and other relatives had to sell their St. Bernard Parish houses at a loss. Except for one nagging thing: The Road Home program once promised to help make them whole, and nearly two years after the homeowner relief effort began, the state can't seem to make up its mind.

"They told us we qualified, then they said if they had money left over," said Dumas, a staff member for Taylor Energy in New Orleans. "Well, now they have $1 billion left over and they're still telling us we're in inactive status. It's outrageous."

The state recently determined it has $1 billion in the Road Home budget to restore an elevation grant program it suspended in April 2007. The latest budget estimates also show the state hopes to add hundreds of millions of dollars for other program costs. It also signals, at least for now, that $60 million is being reserved for homeowners who sold their properties early.

Many mixed messages

Of all the homeowner groups who have found themselves in Road Home limbo -- mobile home owners who had to clamor for inclusion, condo owners caught up in confused damage calculations, houseboat residents still seeking eligibility, those facing ownership succession issues -- nobody has been given more mixed messages than the 4,772 applicants who sold their homes before the aid program launched, or before they could make it through the grant decision process.

The group doesn't include thousands of homeowners who sold out in the first year after the 2005 storms and never applied for Road Home help. Details of their circumstances are unknown.

The original Road Home action plan, as approved May 11, 2006, addressed the applicants who sold out early.

"A homeowner that can demonstrate that he or she remains in a loss situation after selling the damaged property to another party may receive assistance under the program to compensate for remaining losses," the May 2006 document said.

Based on comments received during the past year by The Times-Picayune and homeowner advocates, these Katrina victims generally were elderly, disabled or both. They were desperate to sell, and willing to accept a low price, because they were the least able to wait the 10 months it took for the state to launch the Road Home -- or the three-quarters of a year longer it took, typically, to get from filing an application to landing a grant.

Many of them felt forced to leave devastated areas, but often reinvested in Louisiana. There's Peter Tesvich, for example, whose insurance and sale of his Meraux home in March 2006 left him about $40,000 short of recouping his losses as he rebuilds his life in Hammond. Or Hillary Brown, an 80-year-old veteran, who had to sell his Chalmette home in November 2006 for a paltry $29,000, and used his entire life savings to buy a new one in Covington.

They all seemed to be left with the same questions: If the point of the Road Home was to keep Louisiana homes in commerce and encourage storm victims to come back, aren't they prime candidates for grants? And, now that Road Home rules have changed to allow people to collect compensation and later sell their homes on the open market for additional funds, why doesn't it work the other way around?

In the summer and early fall of 2006, as the first applicants started trickling in for Road Home appointments, those who had sold under duress said they were told they qualified, no strings attached. They say that changed in 2007, especially after state officials reported the Road Home would be billions of dollars short of paying those who were rebuilding their homes or selling them to the state. On May 24, 2007, the phrase "subject to the availability of funds" was added to the action plan's section on sold homes.

Dream home lost

"At our appointment in November 2006, they told me as long as we relocated within Louisiana, we qualified and wouldn't be penalized," said William Nuckley, a disabled 74-year-old who estimated he faces a deficit of about $280,000. That estimate is based on application of the Road Home standard of $130 per square foot to his 5,000-square-foot "fortress" of a home in eastern New Orleans, less $263,000 he got from insurance and $106,000 from a private sale.

"Later on, they changed their tune and told us we were last and on the shelf somewhere."

Nuckley sold his Kenilworth East neighborhood home in June 2006, just as the Road Home was gearing up, because he was convinced by program staff and his reading of the newly minted action plan that he could still recover up to $150,000 of his losses.

He and his wife, Adele, were disabled when Katrina hit -- he had just recovered from bladder cancer surgery, she was suffering from heart trouble -- and they tried to ride out the storm. Floodwaters nearly killed them both, hurtling them across the house's interior when the garage door gave way. Their son pulled off a heroic swimming rescue, and a sturdy mattress was used to float Adele Nuckley to a nearby levee, William Nuckley said.

After that traumatic episode and the loss of the dream home he had built to his wife's exacting specifications -- and after a year of waiting for the state to finalize its recovery plan -- they felt compelled to sell, using their insurance proceeds and retirement savings to buy a new home in Destrehan. They expected a Road Home grant to arrive in due time. But the couple never thought they'd spend much of the next year and a half fretting over policy interpretations in an indecisive recovery program.

"We relive this in our nightmares," William Nuckley said. "My wife has crying jags every day. And I just want what's due us -- no more, no less. We worked all our lives. The American taxpayers decided we should have it, but now the politicians, they're just being frivolous with it."

Yes, no, yes, no

Last summer, as Louisiana leaders appealed to Congress for additional billions to keep the Road Home solvent, they left early sellers out of the equation, leaving the impression to many that the group wouldn't qualify for grants. But that changed again in November and December, when Congress came through with $3 billion for the Road Home and state officials announced it would be enough to cover all qualified applicants.

James and Charlotte Rhodes, who sold their Plaquemines Parish home in April 2006 at a loss, received a series of e-mails from Anita Anderson, the Louisiana Recovery Authority's constituent services specialist, that show the dizzying effects of the state's waffling:

--On Nov. 27, Anderson wrote: "At the outset, you were fully eligible to apply for Road Home assistance regardless of whether you sold your property on the open market. However, your application was in a 'holding pattern' to be considered for assistance later, if the budget allowed. Unfortunately, even after receiving the good news of the additional $3 billion in federal funds on the way to plug the budget shortfall, it has been determined there still is not adequate funding to serve homeowners in your situation."

--Then, on Nov. 30: "Persons who sold their homes without assigning the (Road Home) rights to a new owner are not eligible for the program. This has been the policy from the beginning."

--And on Dec. 18, the pendulum swung back: "Although current budgetary data appears to support the notion there may be adequate money in the Road Home budget to serve all homeowners currently in the program, it has not yet been determined whether there will be a SURPLUS. However, in the event there are excess funds available, we will take into consideration the possibility of making homeowners who sold their homes at loss eligible as we move forward in arriving at the budget certainty required to make definitive policy decisions on this issue."

On 'inactive status'

And this month brought the most confusing scenario yet. Applicants who sold their homes early received letters, dated March 12, stating: "Due to current budgetary constraints, it is unlikely that The Road Home will be able to provide funding assistance to homeowners who previously sold their homes."

But that very same day, the LRA, which oversees the Road Home, released budget projections that showed it was setting aside $60 million for sold homes. That would provide $12,610 for each homeowner if all made it through the process and the money were divided equally.

When asked about the apparent contradiction, LRA spokeswoman Christina Stephens said the budget isn't set in stone and the letters to applicants were only making official what's been true for months -- that these applicants have been placed in "inactive" status. That means, she said, that nobody at Road Home is working on their files, but they aren't out of the program entirely.

Dumas said the $60 million budget item was the first time she'd seen any kind of commitment to people who sold their homes early, so she was encouraged. But she said the letters upset her elderly parents, who lived in almost the same size house in Meraux and face a similar loss of about $38,000 when their insurance and sale proceeds are considered. They would benefit greatly even if they could recoup just $10,000 of the loss, Dumas said.

"My husband and I, we'll be OK," she said. "But I worry about the elderly and other disabled people who didn't have a choice."