Tuesday, January 03, 2006

4-year scandal of the 9/11 billions

New York Daily News - http://www.nydailynews.com
4-year scandal of the 9/11 billions
This series was reported and written by the Daily News Investigative Team: RUSS BUETTNER, HEIDI EVANS, ROBERT GEARTY, BRIAN KATES, GREG B. SMITH and Assistant Managing Editor RICHARD T. PIENCIAK

Just two days after the terrorist attack on the World Trade Center, with the nation still in deep collective shock, President Bush met in the Oval Office with Sens. Chuck Schumer and Hillary Clinton.

Schumer gave the commander in chief first-hand details of our city's devastation and the horror, then told him New York needed at least $20 billion to recover and rebuild.

Without hesitation, Bush agreed.

So whatever happened to the President's promise, which was later increased to $21.4 billion? And, what happened to the money we did get? Did it go to those who needed help the most? Or did some of it end up lining the pockets of the wealthy, the well-connected and hucksters who played the system?

Four years after 9/11, it is time to lift the veil of our collective sorrow and examine without sentimentality or fear of political incorrectness what was done with the generous commitment underwritten by American taxpayers.

(Note: This report originally appeared on December 3rd, 2005)

Today, the Daily News Investigative Team begins an in-depth examination of the federal government's Sept. 11 disaster recovery program for New York City.

The 9/11 tragedy brought out the best in most of us — the countless acts of heroism, the passionate outpouring of volunteerism and the unprecedented generosity of a grieving nation.

It turns out that the huge and sudden influx of billions of dollars in federal disaster recovery aid also brought out the worst in others — to a degree that is sad and disheartening.

To be sure, the financial assistance given to New York City after the Sept. 11, 2001, terrorist attacks delivered tremendous benefit to countless citizens and businesses, small and large.

But a four-month Daily News investigation of the $21.4 billion disaster recovery package reveals that major elements of the aid process were procedurally flawed — from the determination of how much money was supposedly needed, to how it was distributed, to how it was actually spent and ultimately, to how little oversight there was over the spending. In effect, no one was watching.

As a result, 9/11 recovery aid was used to finance a plethora of projects that taxpayers elsewhere could be forgiven for characterizing as old-fashioned pork-barrel spending.

# Hundreds of millions of dollars were spent on projects that seemingly had nothing to do with 9/11 and lower Manhattan.

# Programs were plagued with so many loopholes that millions more ended up being given to recipients who did not fit the full intent of the particular program.

# Still more millions went to help projects already in the works before 9/11 or on the drawing board with no prior funding source.

# Huge contracts were given to companies and organizations linked to the very officials tasked with deciding how to spend the money — creating, at a minimum, the potential for multiple conflicts of interest.

# Substantial sums were given to companies to stay in lower Manhattan even though they had no intention of leaving.
# In many cases, original eligibility rules were expanded, and deadlines extended, so that virtually no one was ineligible. Vast numbers of applications were filed during the final weeks of signup periods.

# Rules for some aid programs were so loose and broadly drawn that otherwise honest people grabbed their little piece of the 9/11 money pot — like the thousands of New Yorkers who took advantage of FEMA by obtaining free air conditioners, air purifiers, air filters and/or high-efficiency vacuum cleaners.

# The gold rush also attracted businesses and organizations that followed all the rules for obtaining relief but didn't necessarily need free money to survive.

Then there's the city Department of Education. It did such a poor job of keeping track of how it spent its $32 million share of Project Liberty grief counseling funds, that four years later, the feds are still withholding $26.8 million. Finally, The News found that program after program was designed, then redesigned, with a singular goal: spend every dime.

For example, in August 2002, the Empire State Development Corp. revised the formula for its Business Recovery Grant program to make the maximum awards available to more companies. Based on the old rules and the spending rate at that point, the recovery grant program never would have spent its full allotment.


Because the amount of money was established before the scope of the need was determined, Congress had to guess how best to distribute the funds among federal agencies. Technically, virtually all of the money has been allocated, but significant amounts have yet to be spent. Gov. Pataki wants to use $2 billion worth of unused, expired Liberty Zone benefits to help pay for a rail link connecting Kennedy Airport to lower Manhattan.

Another chunk of leftover cash, $125 million in unused workers' compensation funding, has been a lightning rod for a New York vs. Red States battle. Republicans had wanted to recoup those funds while the New York delegation has argued that the money is desperately needed to fund medical services for the legions of heroic workers who are plagued with chronic illnesses they say were caused by working at Ground Zero. A tentative deal has been struck to restore the funds.

Although some police, fire and security projects in the city were paid out of the $21.4 billion, the federal 9/11 disaster recovery aid did not include New York's share of anti-terrorism legislation that paid for multibillion-dollar improvements in our nation's security.

The federal recovery aid also does not include the $7 billion paid out by the Victim Compensation Fund.


For 9/11, longstanding disaster aid rules were turned on their head.

Take the $8.8 billion dispensed through the Federal Emergency Management Agency — 40% of the overall aid package.

Under the Stafford Act, which governs federal disaster relief, victims typically first apply to the Small Business Administration for loans. If rejected, applications are generally made to FEMA. That rule was dropped in New York.

Additionally, for the first time, FEMA paid 100% of claims across the board, instead of splitting it 75%-25% with the locality. Also, instead of reimbursing all qualified claims, for the first time FEMA aid was capped — at $8.8 billion. Since the money "had" to be used, the rules had to be changed — such as the deadline extensions and loosened eligibility requirements.

Because of the need for immediate work orders, city procurement rules went out the window; there were many no-bid contracts.

And considering the size of the aid package — the same as the estimated 2003 gross domestic product of Afghanistan — there was little aggressive monitoring or oversight for fraud and misappropriation.

There was no incentive to do so, either. The local political effort focused on getting every penny of Bush's promise, getting the money faster, extending application deadlines, expanding access and easing eligibility requirements.

But in the end, what did all that speedy and forceful effort mean for one of New York's main disaster recovery goals — the rebuilding of Ground Zero?

With fighting over the International Freedom Center, the Drawing Center, the sanctity of the twin towers' footprint — with sparring between the governor and the mayor over stalled development at the site, along with angry words from victims' families and other special interests — Ground Zero remains the big loser.

Additional research by Ellen Locker

No science behind number

The magic number of "$20 billion" that President Bush first said he would give New York was actually pulled from thin air, a figure born of politics and compassion rather than actuarial calculation and meaningful analysis.

Sen. Chuck Schumer (D-N.Y.) came up with the number in an effort to match the amount of emergency money being planned for anti-terrorism security across the country — legislation that made no specific mention of New York.

"To ask for more than $20 billion — more for New York than for all the military and the rest of the country — would seem excessive," Schumer told the Daily News. "But to ask for less than $20 billion would be derelict in my duties as a New York senator. So I figured, 'Let's match it, $20 billion for the rest and $20 billion for New York.'"

Schumer remembers Bush asking, "New York really needs $20 billion?"

"At least that, Mr. President," Schumer replied.

"You got it," said Bush.

As Schumer later recalled, "I got up out of my chair, and I almost went over to hug him, but I realized he was the President, so I patted him on the back."

From the moment the Oval Office meeting of Sept. 13, 2001 ended, come hell or high water, New York City was going to get its $20 billion.

Displays of machismo by Bush, Gov. Pataki and then-Mayor Rudy Giuliani also played a part in the recovery-aid equation.

Bush said an attack on New York was an attack on America. A message had to be sent to the terrorists that we would not cower — lower Manhattan had to be rebuilt.

Pataki and Giuliani said that in order to guarantee the area's future as a business capital, it was important to rebuild bigger and better — a phrase that became one of the mantras of the 9/11 recovery.

Simple replacement was not going to be good enough.

For a while, there was talk that the $20 billion was only a down payment. On Oct. 9, 2001, with Giuliani's support, Pataki announced a credulity-straining $54 billion rebuilding plan that included funding a high-speed passenger rail service between Manhattan and Schenectady — 170 miles upstate. The plan quickly died.

Over time, the rest of the nation gradually lost its political and emotional sympathy for New York. The White House budget director accused New York legislators of playing a "moneygrubbing game."

In March 2002, Bush announced a final overall aid package of $21.4 billion. But the number bounced around until the White House, city Controller William Thompson and others said the package had fallen to $20.8 billion because of "program adjustments."

In fact, it will be years, if ever, before the final tally can be calculated. There will probably always be unresolved issues regarding the value of tax benefits included in the overall aid package.