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THE NEW GRAPES OF WRATH

by Rita J. KingSpecial to CorpWatch
August 16th, 2006

It isn’t just immigrants getting bilked. Squatter camps cropped up across the decimated Gulf Coast, filled not with refugees, but with people like Marty Reay, 57, and his 24 year-old-son, Chris Reay, who left their home in economically depressed Michigan hoping to find work hauling debris.

For nine years, the Reays owned an antique mall in Ionia, Michigan, but when the nearby Electrolux factory closed its doors, the local economy bottomed out and the business couldn’t stay afloat.

“We weren’t getting rich but we were earning a living as a lower middle class family,” said the father of six and grandfather of 10. “We’ve had so many factories closing in Michigan. It’s a real sad state of affairs, with the jobs being outsourced and CEOs and executives retiring with enormous packages while their workers don’t have health insurance. This country is slowly eliminating the middle class.”

Reay, who has recorded every detail of his ordeal in a series of notebooks, formed a company, Icorn Trucking, and drove with his son from Michigan through obliterated Mississippi on their way to New Orleans, where they say they hooked up with Michigan-based L&J Contracting and met a man named Joe Travis on Oct. 15, 2005

“He told us they could definitely use us,” Reay said. “Everywhere you looked, you could see that the work needed to be done.”

L&J Contracting was a subcontractor to Phillips & Jordan, a corporation that received five major contracts through the Army Corps of Engineers in the immediate aftermath of Katrina including a competitive $500 million contract (with an additional $500 million option) for debris removal, disposal and demolition. (59)

Phillips and Jordan, Inc. is a Knoxville, Tennessee-based general and specialty contractor established in 1952. Its past disaster recovery contracts have included “projects ranging from coal slurry clean-up to animal carcass incineration.” Involved with recovery after Hurricanes Andrew and Fran, Phillips & Jordan also received sizable contracts after the World Trade Center attack. The firm is also on active status for Army Corps of Engineers for disasters in the North Atlantic, South Atlantic and South Pacific regions.

The terms of Phillips & Jordan’s primary contract mandated that preference be given to subcontractors who were small, locally owned, operated by women, minorities, the disabled, and veterans. But when Reay spoke to Joe Travis of L&J, he didn’t mention this. Instead, Reay said he promised $6.50 a cubic yard for all the debris Reay could pick up, haul and dump.

Reay says Travis told him to return to New Orleans with equipment, including a roll-off trailer, excavators, a front end loader and other costly pieces. “We went back to Michigan and invested our life savings,” Reay said.

“We were told that we’d [have work] for at least six months, but possibly up to three years,” Reay told CorpWatch. After grossing between half and three quarters of a million dollars per year and paying off the equipment, Reay figured he’d clear about $200,000.

On Nov. 13, 2005, the Reay caravan left Michigan. When they arrived in New Orleans, L&J said they had no work for them, perhaps because they didn’t qualify under the conditions of the subcontract. No one said why.

Devastated and desperate, Reay and his son tried to find other opportunities and ended up in Gautier, Mississippi, where they stayed in a camper at a squatter camp for five months, jumping at the slightest hint of available work.

“We beat the bushes,” Reay said. “Some of the private buildings said we could clean up their roofs that had blown off so we could have the steel.”

He said the atmosphere reminded him of John Steinbeck’s famous book, The Grapes of Wrath, in which word would get out that tomatoes needed to be picked, Reay said, and “a thousand men would show up for the job, not trying to get rich, but to make a living.”

“It was a huge rumor mill all the time,” Reay said. “The campsite became a little community. People were networking.

We had campfires at night. Every once in a while, there would be a violent outburst, somebody had too much to drink and it would all just be too much for him. People came and went. We would hear about work. People would disappear and you’d never see them or hear from them again.”

When the men finally did get small jobs, Reay said they were “sixth- or seventh-level subcontractors” beneath AshBritt and other major corporations.

Looking for any advantage, the Reays registered with the Small Business Association and signed up for their Central Contractor Registry. Almost instantly, they were bombarded with email from National Association of Government Contractors, a lobbying group that donates millions to Congressional leaders who control federal procurement (60), and sells its services — advice and accelerated access — to prospective contractors. The implication, said Reay’s wife Connie, was that winning even a bottom-tier subcontract was a pay-to-play proposition. The confusion of the process and the sinking suspicion they may be duped, the Reays said, has prevented them from pursuing it.

Reay suffered a heart attack in January, but kept working because he couldn’t afford not to. He and his son started to install FEMA trailers, another multi-level subcontracting situation that did not last long. It took them over a month to get paid, and they said they gave up on seeing the money.

In March, Reay and his son started doing debris removal for AshBritt in Hancock County, Mississippi, without a written contract. The subcontractor who hired him, Bonnie Pottala, was the third-tier contractor on the job. Pottala offered $6.30 per cubic yard, but had to pay several crew members Pottala insisted they use. In the end, Reay says, they actually grossed closer to $4 per cubic yard. It wasn’t enough to live on, so Reay is looking for another job. This is the first time in his life that he hasn’t been able to find one, said Connie Reay.

Lower-tier subcontractors like Reay may be suffering as the result of new, tougher auditing standards that FEMA has introduced since drawing criticism for the initial no-bid, costplus contracts it awarded. Now FEMA holds up payment to primary contractors on some jobs until comprehensive audits can be performed. That means the primary contractor and-if the primary cannot or will not front the money-everyone on the tiers below is working out-of-pocket until the money begins trickling down. At the bottom, that can mean the difference between eating and going hungry.

Shaw Construction, for example, took a beating on Wall Street this spring when it overestimated its second-quarter results. It had expected a $480 million payment for work it has completed, but was still waiting. In a conference call with investors, Shaw’s Executive Vice President and CEO Robert Belk said, “We’ve basically had to pay ourselves on a timely basis, even though we weren’t paid on a timely basis.”

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