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  October 30, 2017

Meet the Journalist Who Exposed Whitefish's Sketchy Puerto Rico Contract

Puerto Rico has cancelled a controversial $300 million no-bid contract with the Trump-friendly firm Whitefish Energy after our guest, investigative journalist Ken Klippenstein, exposed it
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Ken Klippenstein is an investigative reporter and contributor to The Daily Beast. He is based in Madison, Wisconsin.


AARON MATÉ: It's The Real News. I'm Aaron Maté. Puerto Rico has canceled the controversial contract to repair its devastated power grid. The Montana-based firm Whitefish Energy was given a $300 million no-bid deal. Whitefish has deep Trump ties. It's based in the hometown of Interior Secretary Ryan Zinke and also has deep connections to a Trump campaign donor. Last week, a public outcry erupted after the contract was leaked. One of its clauses says that, "In no event shall governmental bodies have the right to audit or review the cost and profit elements."

I'm joined now by the reporter who broke the story about this contract for the Daily Beast. Ken Klippenstein joins me now. Welcome, Ken. First of all, you obtained this contract and made it publicly known. After that, there was a lot of controversy. Many outlets picked it up. Then a few days later, the contract was canceled. Can you explain to us what the contract said?

K. KLIPPENSTEIN: What the contract showed was that there were huge cost overlays. People were being paid over $100 a day, not even including food or lodging. For food, they were getting $80 a day. If you look at the cost of, say, a helicopter flight, that was $1,500 or $2,000. I spoke to a professional helicopter pilot who said that those prices were over double what they should be. In addition to the outrageous prices, it also showed that there was very little in the way of enforcement to make sure that this private firm actually carried out the work. There was a way for them to not have to follow a certain timeline. There was no specific deadline for getting this work done. In addition to that, there were serious limits to just the basic oversight that you would think would apply when there are federal tax dollars being used for a recovery response.

AARON MATÉ: Explain that. There is that provision that I read that bars an audit, including of the profit element. What does that mean, and how does that compare to other contracts? Is it usually built into a contract that it can't be audited when it's a contract offered by the federal government?

K. KLIPPENSTEIN: No, that's not supposed to be how it is. In fact, FEMA is supposed to exercise pretty tight oversight in any disaster response where federal tax dollars are being used, much less one where $300 million of federal tax dollars are being used.

The money is just one part. The other part is, the majority of Puerto Ricans are still without electricity. I was speaking to one Puerto Rican whose family has to use a kiddie pool to shower because they don't have running water yet. In addition to these huge cost overlays, lack of oversight, it doesn't appear that they're getting the attention and response that they need.

AARON MATE: Let's talk about this firm Whitefish that was, until you exposed their contract, going to be tasked with this huge job of repairing the power grid. You report in your piece that it appears that their parent company only had two full-time employees.

K. KLIPPENSTEIN: That's correct. At the time that Hurricane Maria, the hurricane that ravaged Puerto Rico, touched down, they literally only had two full-time employees. In addition to that, they're only two years old, had very little experience with these kind of crises. There are many firms, on the other hand, that did have experience with these kinds of things. When taken in the aggregate, I think it's reasonable to question, why did they get this enormous contract?

AARON MATÉ: What do you think the answer is? You also point out that they had deep ties to the Trump campaign.

K. KLIPPENSTEIN: I did some digging through campaign contribution reports from the FEC. What I found was that there's a very high-level Trump donor based in Texas named Joe Colonnetta who donated the maximum amount to Trump's primary campaign during the presidential election, donated the maximum amount to his general election campaign, donated the maximum amount to the Republican Party during that year, and then if you go back through previous years, donated huge sums of money to the Republican Party generally, including Rick Perry, who's now in the Trump cabinet. I went through their social media and found that Joe Colonnetta and his family, his wife, had photos of themselves at parties with Ben Carson, another Trump cabinet member, Rex Tillerson, secretary of state, so there are all kinds of connections with the Trump administration. If you really follow the money, you see that there's big donor money. This individual gave lots of money. This is the number one financier of Whitefish. That's where the connection is at.

Then in addition to that, you have the fact that the firm is based in a very small town, in Whitefish, Montana which is where Ryan Zinke, President Trump's interior secretary, is from as well. The entire contract seems to be rife with these connections to the White House. I think that raises serious questions about if there was political motive behind this contract.

AARON MATÉ: You point out in your piece too, at the Daily Beast, that it's not as if Whitefish was going to be doing the heavy repair work itself. It was effectively going to be a middleman to hire the actual contractors who were going to do the hard labor. There are questions about, then, why a small firm based in Montana would be needed to be paid $300 million to do that.

K. KLIPPENSTEIN: That's exactly right. If you look at it, they subcontracted out a ton, I think a majority of the work. I was speaking with one representative from the Puerto Rican Congress. What he told me is, "Why do we need middlemen if we can just have, "Typically in disaster responses, they come up with what are called mutual aid agreements within various public utilities that exist. This was unusual in that they went to these private firms.

AARON MATÉ: Ken, on the point of private firms in a broader sense when it comes to Puerto Rico, the big fear amongst many people was that this would be a classic case of disaster capitalism, firms preying on the devastation of the island to profit off of it. You've been covering Puerto Rico for a while now, and you've been looking at this angle of it. Your thoughts on the overall state of disaster capitalism in Puerto Rico in the aftermath of Hurricane Maria.

K. KLIPPENSTEIN: I have to agree with the Puerto Rican Congressman I was speaking with. Why can't they just go straight to the public utilities? Why can't they just go straight to the workers? Why do they need to have this private firm that's going to take a cut of the money determine who they hire, apparently charge way more for it, and not get the work done on time?

AARON MATÉ: We'll leave it there. Ken Klippenstein, whose reporting exposed the contract which fueled the outcry that led to the cancellation of the contract. You can find his writings at sites including The Daily Beast. Ken, thank you.

K. KLIPPENSTEIN: Thanks so much for having me.

AARON MATÉ: Thank you for joining us on The Real News.


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