Puerto Rico authorities requesting $10 million from FEMA to pay Whitefish

Energy contract in Puerto Rico under scrutiny
Energy contract in Puerto Rico under scrutiny

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    Energy contract in Puerto Rico under scrutiny

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Energy contract in Puerto Rico under scrutiny 01:23

Story highlights

  • FEMA administrator Brock Long spoke to a Senate panel
  • "There's no lawyer inside FEMA that would've ever agreed to the language that was in that contract," Long said

Washington (CNN)Puerto Rico authorities are asking FEMA to pay $10 million for the power restoration efforts underway by Whitefish Energy Holdings, CNN has learned.

Word from the Puerto Rico Electric Power Authority of the request came hours after FEMA Administrator Brock Long told members of Congress at a hearing on Tuesday that agency funds have not been used to compensate the company.
The controversial nature of the contract -- with hourly rates for some workers in excess of $400 -- rocketed the small and young Montana company into the spotlight. The company's connections to the Trump administration further fueled the questions. Over the weekend, Puerto Rico authorities said they were looking to end the contract.
    "As I understand, not one dollar has gone towards that contract from FEMA," Long said. "And what we're doing is rectifying to make sure that PREPA has not requested any funding for that reimbursement effort.
    But PREPA and the the government of Puerto Rico are both bankrupt, and effort to bring the island back online will be massive and expensive. President Donald Trump in September ordered FEMA to pay 100% of many recovery costs for the first six months after the storms. The contract calls for PREPA to pay Whitefish up to $300 million for satisfactory work.
    PREPA spokesman Carlos Monroig said the power authority would honor its contract to compensate Whitefish, and then seek reimbursement from FEMA.
    A separate source familiar with the payments told CNN that Long played semantics in his testimony.
    "FEMA makes payments to PREPA. PREPA pays Whitefish," the source explained. "When FEMA says they're not approving of Whitefish, that is where the money is going."
    Spokespeople for FEMA did not immediately return calls from CNN late Tuesday. Calls to Whitefish were also not immediately returned.
    The contract between Whitefish and PREPA, signed in late September, called for an initial $3.7 million payment, followed by reimbursement of up to $300 million for completed satisfactory work.
    FEMA's Long told members of the Senate Homeland Security and Governmental Affairs Committee that his agency would not have signed off on the contract, had it been made aware of it.
    "There's no lawyer inside FEMA that would've ever agreed to the language that was in that contract to begin with," Long said. "There was also language in there that would suggest that the federal government would never audit Whitefish -- which, there's not a lawyer inside FEMA that would ever agree to that type of language."
    Long spoke as several arms of the federal government are looking into the contract. The FBI has opened a preliminary inquiry into the contract, a source familiar with the review told CNN on Monday. An inspector general and several congressional committees are also asking questions.
    Key to the inquiries are whether the contract was entered into appropriately. The company's ties to the Trump administration have also raised eyebrows. The company is based in the small Montana hometown of Interior Secretary Ryan Zinke, and the CEO is an acquaintance of the secretary. An investment firm that owns a major stake in the company is run by a donor to Trump's presidential campaign.
    The company, Zinke, the White House, and PREPA have denied any wrongdoing in issuing the contract.
    A top official with the Army Corps of Engineers explained Tuesday his understanding of why the company turned to Whitefish Energy, rather than mutual aid agreements with utilities elsewhere in the US.
    "They did outreach at some point for mutual aid," Maj. Gen. Donald Jackson said.
    The island's "financial situation" meant utility companies "were hesitant to engage" out of concern they would not be paid, Jackson said. PREPA then struck the agreement with Whitefish.