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In the News
Feds reach terms with disaster company
Owners get $80K; lawsuit to progress
By EMILY KERN
Advocate staff writer
May 20, 2006
The federal government will take back $1.2 million from an initial $5.2 million it paid the owners of a disaster relief company to build a shelter after Hurricane Katrina for emergency workers in St. Bernard Parish.
As part of a settlement reached Friday in Baton Rouge federal court, the two owners of Lighthouse Disaster Relief will receive $40,000 each in living expenses in exchange for dropping any further challenges to the government’s attempt to garnish the money.
The attorneys for Lighthouse Disaster Relief will receive $100,000 in legal fees as part of the settlement, while a lawsuit the federal government filed against the company will continue through the court system.
The lawsuit the federal government filed in February alleges that Lighthouse Disaster Relief was paid $5.2 million to set up a base camp for disaster-relief workers in Chalmette after Katrina. However, the government claims much of the work never was done.
Attorneys for Lighthouse have said, however, that the company was unable to work for several days because of Hurricane Rita, which hit a few weeks after Katrina. In a news release, lawyers for Lighthouse also say the company was late in getting the camp up and running because the federal government asked workers to dismantle and move a partially completed tent site to another location.
As part of the settlement, Lighthouse owners Gary Lee Heldreth and Kerry Lynn Farmer each will receive $40,000 for food and shelter during the next 12 months. If the government’s lawsuit continues past one year, they each will receive another $40,000 in living expenses.
Heldreth and Farmer, both of Virginia, attended Friday’s hearing, but referred all questions to their attorneys.
While Lighthouse continues to fight the government’s suit, the government also will place liens on the owners’ cars, land, church and any other property bought with funds the Federal Emergency Management Agency provided after Katrina for disaster relief.
According to the lawsuit, Lighthouse was to establish a 1,000-person base camp with 75 air-conditioned and heated tents, flooring, bedding, linens, shower/restroom and laundry facilities, a recreation hall and two kitchens providing three meals a day.
The company promised it could deliver the shelter in two days, by Sept. 20, according to the lawsuit.
But by Oct. 2, the camp still wasn’t ready for residents and never was able to support more than 400 people, the lawsuit says.
According to the lawsuit, Lighthouse submitted an invoice for the full $5.2 million just two days after winning the contract and before any work had begun. The government paid the invoice in full, because, the lawsuit says, the National Disaster Finance Center was “deluged with Katrina-related invoices.”
After the mistake was discovered, the federal government asked to freeze the assets of the company and its owners, claiming they had spent the money on a motor home, three new cars and writing at least five $10,000 checks made out to cash. The lawsuit also says there were two $500,000 transfers to the owners’ personal accounts.
The government claimed it was worried that the owners would “continue to squander, dispose of, and waste money wrongly paid them.”
Attorneys for Heldreth and Farmer, however, countered that the government’s accusations are “outlandish.”
Heldreth and Farmer filed a motion to stop the government from garnishing their money and assets, and claim they are free to transfer and spend their earnings as they please.
In a news release, attorney Stephen Babcock says Lighthouse was prevented by the federal government from fulfilling the contract.
Lighthouse claims that FEMA officials told workers to await the passage of Hurricane Rita at a staging area in Baton Rogue. Once the hurricane passed, environmental concerns at the St. Bernard site delayed Lighthouse for several more days.
Once at the site, FEMA told Lighthouse to pick up and move the tents to another location, the news release says.
“Now the government wants to claim that Lighthouse didn’t fulfill its contract since it failed to start construction timely, ignoring that it was the government that prevented them from doing so,” the news release says.
In a statement released after court Friday, Babcock says the agreement will allow the lawsuit to move more quickly through the court system.
“The bottom line is that both parties left the courthouse today somewhat disappointed, and in the early stages of multimillion-dollar commercial litigation cases, that isn’t always a bad thing,” Babcock said.
