All the reasons Puerto Rico’s $300-million contract with Whitefish Energy is under investigation

The Federal Emergency Management Agency (FEMA) and two Congressional committees are all investigating a $300-million contract to rebuild Puerto Rico’s energy grid after hurricane damage. The text of the contract between Puerto Rico’s energy authority and Whitefish Energy Holdings was first made public by local publication Caribbean Business, sparking questions and a disavowal from FEMA.

Here’s why the US government might be concerned:

Little experience

Before winning the Puerto Rico contract, Whitefish had just two employees, and little relevant experience, as the Washington Post reported. That experience included a $500,000 electricity line repair in Washington state, chief executive Andrew Techmanski told Caribbean Business, a local business publication.

Close administration ties

Whitefish is backed by private equity company HBC Investments, a donor to the Trump presidential campaign, and to a PAC that supported Trump’s energy secretary Rick Perry. It is also based in the Montana town of the same name, which happens to be the hometown of White House cabinet secretary Ryan Zinke.

Unusual terms

A copy of the $300 million contract made public by Caribbean Business includes some eyebrow-raising terms. (The copy was pulled from the internet Friday morning, but parts of it are still circulating on social media). Whitefish’s spokesman didn’t respond to questions about the contract.

• No audit of Whitefish’s cost and profit from the project

  
  

  A clause that says “In no event shall” the Puerto Rico Power Authority, (PREPA), the US or Puerto Rico government, or FEMA “have the right to audit or review the cost and profit elements of the labor rates specified herein.” (pg. 27)
• A pledge that FEMA denies

  
  

  The document states that “by executing this contract, PREPA hereby represents and warrants that FEMA has reviewed and approved of this contract, and confirmed that this contract is in an acceptable form to qualify for funding from FEMA or other US governmental agencies,” (pg. 30)
• Significant expenses

  
  

  Accommodation costs of $331.42 per person, per day, and food costs of $79.82 per person, per day. Flights to and from Puerto Rico estimated at $1,000 per person, each way.

In a statement, FEMA said that “any language in any contract between PREPA and Whitefish that states that FEMA approved that contract is inaccurate,” and that it has “significant concerns” with how PREPA procured the contract. FEMA reimburses local governments and businesses after natural disasters but has strict rules about who it will pay back and how much money it will pay, so that taxpayer money is well spent.

The House Committee on Energy and Commerce has asked Whitefish’s chief executive officer to appear in front of the committee (pdf) on Nov. 9 because it has “a number of questions” about the contract. The House Committee on Natural Resources is also asking questions about the “size and terms of the contract,” and has demanded Whitefish turn over all related communications.

Earlier this week, a Twitter $TWTR account run by Whitefish threatened to pull its workers from the island after San Juan’s mayor asked questions about the contract. Puerto Rico’s governor pledged there will be “hell to pay” if any wrong-doing is discovered.