Katrina Survivors Were Told They Could Use Grant Money to Rebuild. Now They're Being Sued for It (ProPublica/The Times-Picayune)

ProPublica/The Times-Picayune (5/12/22): Richard A. Webster and David Hammer, WWL-TV

Celeste Matthews spent last summer’s 16th anniversary of Hurricane Katrina in a panic at her cousin’s house in Uptown New Orleans as another monster storm, Hurricane Ida, roared through the city. With every gust, she was terrified the windows would shatter.

The next day, she returned to her home in the Gert Town neighborhood to find part of the roof torn off. With the electricity out, she had to sleep with the windows open. Mosquitoes swarmed around her bed.

“It was horrible,” said Matthews, 67.

After three days without power, Matthews had her daughter drive her to Houston. A week later she returned home, closed the curtains and sank into a depression, spending the next several days in bed.

One morning, she awoke to a knock on the door. An Orleans Parish sheriff’s deputy was holding a stack of court papers. Matthews, her hands shaking, read the first page:

“State of Louisiana, Division of Administration, Office of Community Development – Disaster Recovery Unit Versus Matthews, Celeste.”

Below that: “YOU HAVE BEEN SUED.”

When the levees broke during Katrina in 2005, Matthews’ home was engulfed in 5 feet of water. She lost everything. Like most poor New Orleanians, she struggled to cobble together enough money to rebuild.

In 2008, the state of Louisiana offered Matthews $30,000 through the federally funded Road Home program to elevate her house to reduce the risk of future flooding. But her home was still unlivable, and she desperately needed the cash for repairs. To her relief, she said, a Road Home representative told her she could use the elevation grant to instead pay for repairs. So she did.

Now, more than a decade later, the state wanted the money back.

Louisiana has sued about 3,500 people — about one in every nine people who received an elevation grant — for failing to use the grants to raise their homes after hurricanes Katrina and Rita struck in 2005.

The real problem, however, wasn’t that people ignored the rules, according to an investigation by The Advocate | The Times-Picayune, WWL-TV and ProPublica. It’s that the state Office of Community Development and a contractor it hired in 2006, ICF Emergency Management Services, mismanaged the program. For more than a decade since, the U.S. Department of Housing and Urban Development has insisted that the state recoup the money from people who are noncompliant.

Louisiana gave money to 32,000 homeowners starting in 2008. The state was in such a rush to distribute grants that no one verified they were eligible, according to the testimony of a top state official in one of the lawsuits. Some homeowners, like Matthews, said Road Home representatives told them they could use the money for repairs, even though that would violate their grant agreements.

Twice between 2013 and 2015, the state tried to fix the problem, changing the rules to allow spending on repairs and other expenses. But by then, so much time had passed that many homeowners couldn’t prove how they had used the money.

Some homeowners said they originally planned to elevate, but found that $30,000, the typical elevation grant, was less than a third of what it typically costs to lift a house and put it onto raised footings.

In 2017, under pressure from the federal government to recoup the funds, Louisiana started filing lawsuits against residents.

For many low-income homeowners, the suits could threaten financial ruin. Several pre-emptively declared bankruptcy, according to their attorneys. Others failed to defend themselves in court, resulting in the state placing liens on their properties. Some fear their homes will be taken away.

“We worked our asses off to get where we are now,” said Michelle Williams, 54, who is being sued along with her husband, Patrick Williams. “And for this to happen? You’re not helping the people of Louisiana. You’re knocking us farther and farther back.”

If they lose the lawsuit, she said, “I will crumble.”

The failures of Louisiana’s elevation grant program are part of a tapestry of dysfunction in how America prepares for disasters and helps victims in their wake. ProPublica and The Advocate | The Times-Picayune are exploring how a range of policies unintentionally punish working-class Americans and people of color, contributing to the disproportionate harm they suffer in catastrophes.

The problem is particularly urgent in Louisiana. Not only is it one of the poorest states in the union, it’s the most flood-prone, and it has been struck by some of the costliest natural disasters ever to hit the U.S. Thanks to global warming, the severity of such events is increasing, and their monetary toll is skyrocketing: Adjusted for inflation, the cost of U.S. natural disasters has increased by 600% since 1980.

The lawsuits over elevation grants, which have left thousands of Louisiana homeowners facing the prospect of cripping liens or payment plans, are part of the broader pattern of poor disaster planning.

The majority of elevation grants were in lower-income neighborhoods and communities of color, as were the lawsuits that followed, according to an analysis by ProPublica and The Advocate | The Times-Picayune. For the roughly 3,000 lawsuits that could be mapped, more than half of properties were located in census tracts with median incomes below the surrounding areas.

Roughly two-thirds of the properties were in neighborhoods that were disproportionately Black compared to their parishes.

The state is seeking $103 million in the elevation lawsuits. So far it has recovered nearly 5% of that from 425 families through the suits, said Pat Forbes, executive director of the Office of Community Development.

The agency tried to avoid taking such an aggressive approach, he said. But the state is required by the federal government to claw back money from people who didn’t follow the grant requirements.

“We’ve gone to great lengths to try to not have to take money back from people,” Forbes said, adding that the state will not foreclose on anyone’s home to collect.

A HUD spokesperson said the state could have used its own funds to repay any misspent grants rather than going after homeowners.

Suing them years later runs counter to the goal of helping the devastated communities of Louisiana rebuild, said U.S. Rep. Troy Carter, D-L a.

Carter said he and other officials have talked to the Biden administration and Gov. John Bel Edwards about wiping the slate clean.

“These are not people that defrauded the government,” Carter said. “These are people that used the money to repair their homes. And they should not be put in a position where now those homes are being threatened.”

“I Wish I Never Signed That Paper”

Donnie Small’s family has deep ties to Jefferson Parish, which borders New Orleans. His father was the first Black sheriff’s deputy in the parish. Small drove a public bus there for 37 years.

After Katrina, Small volunteered to shuttle first responders between a small town upriver and New Orleans, 29 miles every morning and night. He did so when his own family was suffering, like so many others.

The one-story house in Kenner that he shared with his wife and two daughters sat in 2 feet of water for days after the storm. Everything had to be replaced: furniture, flooring, appliances, wiring.

Small, 69, received about $60,000 from his insurance company, but that covered only immediate needs, such as remediating mold and removing damaged trees. Unable to afford other accommodations, his family slept on air mattresses in the gutted structure, wearing masks to keep out the dust.

Small didn’t know how he was going to come up with more money, but he refused to give up. “I’ve never had any intentions of moving anywhere else,” he said. “This is my home. I’m going to be here.”

The Road Home program, created in 2006 to help people rebuild, often gave people less money than they needed to complete repairs because of how awards were calculated.

So in 2008, when the state sent 40,000 letters to homeowners telling them they were eligible for elevation grants, plenty of them were interested.

“The State of Louisiana is pleased to announce that funds are now available to assist you with the cost of elevating your home,” the letters read. To get the money, homeowners had to agree to raise their homes within three years of receiving grants.

Yet when Small met with a Road Home representative, he said, he was told he could put his $30,000 grant toward repairs. The money was a godsend, Small said.

Once the state Office of Community Development received an application, it sent the money to homeowners, Jeff Haley, who helped administer the elevation grant program as an official with ICF from 2006 to 2009, said in testimony during one of the elevation lawsuits.

No one double-checked before the money went out that homeowners were eligible or that their homes needed to be elevated, said Haley, who is now with the state Division of Administration. The state simply “didn’t have time,” he said. There was pressure to “get the funds out into the community as fast as possible.”

The state told the news organizations that it selected people whose homes were in flood-prone areas and who had already received another Road Home grant. It was up to homeowners to determine how much they needed to elevate their homes, officials said, and if they learned they were already at the correct height, they should have returned the money.

But when homeowners informed Road Home representatives, sometimes in writing, that they didn’t plan to elevate their homes, they were verbally told that they could use the money for repairs, according to eight families and eight attorneys representing more than 200 homeowners.

State officials told the news organizations no homeowners have identified who told them they could use the money for repairs. They suggested this didn’t happen until years later, after the state changed the rules to allow people who hadn’t raised their homes to use elevation grants for repairs.

Small said he never would’ve accepted the money if he hadn’t been told he could use it to fix his home.

“Back then it seemed they were really trying to help people,” said Small, who is the subject of a pending lawsuit. “We thought it was something that was a plus for us, that we can get our home back to the position that it was before the storm. Now, I wish I never signed that paper.”

Road Home Representative “Talked Me Into this Mess”

At least five appeals court rulings support homeowners’ contention that they were told they could use the grants for repairs.

Wallace and Kristy Styron received a $30,000 elevation grant even though their home was already above the required height. Wallace Styron testified that he repeatedly told a Road Home representative that he didn’t need to raise it, and even said he had submitted paperwork to prove it. But the person insisted he accept the grant, he said, telling him he could use it for repairs.

The representative “made me apply for this,” Styron testified in court after the state sued him in 2019 for failing to elevate his two-story home in southwestern Louisiana’s Cameron Parish. “She filled it out for me,” he said. “She talked me into this mess.”

None of that mattered, the state argued. The Styrons had signed a contract in which he agreed to raise his home, and he was bound by it.

A document outlining the benefits Styron qualified for, dated Dec. 2, 2006, says he was not eligible for an elevation grant. Forms for two other homeowners reviewed by the news organizations said the same. Another three homeowners indicated on forms they didn’t want the elevation money. Yet all those homeowners subsequently received grants, and all have been sued.

The state’s Third Circuit Court of Appeal ruled for Styron, finding that “the Road Home representatives maintained” that he “did not have to use the funds for elevation purposes.”

The court noted that the state made no effort to dispute the Styrons’ claim by, for instance, putting a caseworker on the stand.

The state’s caseworkers were employees or subcontractors of ICF, a subsidiary of a Virginia-based disaster management firm that won a contract for hundreds of millions of dollars in 2006 to manage the massive Road Home program, including processing grant applications and distributing funds to Louisiana homeowners.

State officials were highly critical of ICF’s performance throughout its three-year tenure. At first, they were unhappy with the slow pace at which the company awarded grants. Then, ICF said on its website in 2007, it sped up its work when “the need to move even faster than we believed possible quickly became clear.”

Cameron Parish attorney Jennifer Jones said ICF disseminated false information to families. She has won four lawsuits in which her clients testified that ICF caseworkers told them they could use the grants to fix their homes.

“All they wanted to do was get the money out, get the money out,” Jones said.

ICF spokesperson Lauren Dyke said the firm “worked within the policies put in place by the state.” She referred further questions to the state.

Even if families wanted to elevate, $30,000 was only a fraction of what most of them needed. The state estimated it would typically cost about $110,000 to raise a 1,500-square-foot home 3 feet — a complex process in which the home is lifted by a temporary network of support beams and jacks while a higher foundation is constructed below.

The state later offered more money, but there wasn’t enough to go around to everyone who needed more to elevate their homes.

By the time Cherylyn Davis got her elevation grant three years after Katrina, she said, she had been scammed out of $20,000 by three different contractors — a common complaint in the years after the storm.

Davis said she called a shoring company and learned it would cost more than $100,000 to raise her New Orleans East home.

“So I had no other choice but to finish my home” with the elevation grant, Davis wrote when the state demanded repayment in 2014. “I’m sorry that I did not inform you before this.” Considering she was missing some of her receipts, she asked, where “do we go from here”? She noted that she only earned $720 a month.

Haley, the former ICF official, testified in the Styrons’ case that the state and ICF were hearing from a lot of people that they didn’t have enough money to elevate and so they used the funds to repair their homes.

The state has asked a judge to enter a $28,263.57 default judgment against Davis because she hasn’t responded to the suit. She has neither the money nor the strength to fight the state, she said.

“I’ve been through a lot with this house,” she said. “I can’t worry about this, because I have a bad heart. I was sick for a long time worrying about things. I learned how to pray more and stress less.”

“These People Are Not Suspected of Fraud”

Thanks in part to the confusion around the program, 53% of grantees who had hit the three-year deadline to spend the money had not elevated their homes as of 2012, according to a 2013 report by HUD’s Office of Inspector General.

Most of the people who hadn’t followed the rules were “lower income or senior citizens who did not have sufficient resources to either rehabilitate their homes or to elevate them,” HUD said in a news release.

“These people are not suspected of fraud,” Forbes, the Office of Community Development executive director, said. “It’s just that they can’t demonstrate that the funds were spent for the purpose for which they were granted.”

While HUD seemed to sympathize with those who hadn’t fulfilled their grants, the federal agency for years has pressured the state to recoup money from noncompliant homeowners. With HUD’s approval, the state changed its rules several times to give people more ways to justify their spending.

The first time, in 2013, the state decided to allow grant recipients to count the cost of repairs, living expenses while rebuilding and other costs — but only if they could produce receipts. The original agreement hadn’t required people to save receipts, so few did, attorneys and homeowners said.

In 2015, the state tried a new approach: an inspection program to verify grantees had used the money for repairs.

That effort fell short too. So many hurricanes had struck Louisiana that inspectors couldn’t determine whether the repairs they saw were from Katrina or subsequent storms, Haley testified. The inspections were halted after two years.

According to the state, more than 5,000 families benefited from its remedies. Others, however, were left in an impossible position, said attorney Keren Gesund, who represents several families being sued by the state.

“Nobody has receipts, and they’re not sending out inspectors anymore. And they don’t trust your word. So then that means that a person has no real avenue of relief at that point,” Gesund said. “After a certain amount of time, there’s no way to prove anything.”

In 2015, HUD issued its sternest warning yet, telling Louisiana that if it didn’t commit to “vigorous enforcement against fraud, waste and abuse,” the federal agency would look at all its options. HUD guidelines say failure to repay misspent funds can result in a reduction in current or future grants, including disaster assistance.

Forbes said penalties could range from the state being forced to repay unaccounted-for Road Home grants “all the way down to not having to pay back anything.”

In 2016, Louisiana sued ICF, claiming it had committed “numerous breaches” of its contract through errors in its “handling of files, determinations of eligibility, the calculation of the grant award, and the distribution of funds.”

ICF denies it breached the contract, according to court records.

The state’s lawsuit, now six years old, is still pending.

Too Tired to Fight

Matthews, the homeowner who was served with her lawsuit shortly after Ida, moved to Baton Rouge after Katrina. She would drop her daughter off at school and walk to a nearby park, where she would sit on a bench and cry.

About 80% of New Orleans flooded after the federal levees failed. About 1,800 people died; hundreds of thousands were displaced. Matthews counted family and friends among both groups.

“I never completely recovered, emotionally,” she said.

It took eight years for Matthews to return to her beloved New Orleans home. At first she planned to use her grant to elevate it, but she decided not to when others said their houses had been damaged in the process.

Then she began to receive letters warning she might have to return the money.

Matthews didn’t know what to do. She hadn’t saved receipts. Several years later, she tried to get an inspector to assess the value of her repairs, but by then the state had discontinued inspections.

Between Ida and the lawsuit, she’s been dragged into the abyss of a debilitating depression that has been with her since Katrina. At this point, she said, she’s too worn down to fight the state.

Roughly half of the lawsuits target New Orleanians. For those suits that could be mapped, over two-thirds were filed over properties in high-poverty neighborhoods and nearly 80% in tracts with a higher proportion of Black residents than the city as a whole, according to an analysis by ProPublica, The Advocate | The Times-Picayune and WWL-TV .

The news organizations reviewed a sample of 200 of the more than 1,600 elevation grant lawsuits filed over properties in the city. Just 30% of the defendants in the reviewed cases have legal representation.

Judges can issue default judgments against homeowners who don’t respond. About 150 have been issued or are pending, according to the state’s list of lawsuits. The state can place a lien on each home, which will have to be paid off when the house is sold or passed on — greatly reducing what these homeowners can bequeath to heirs.

“The state is relying on people to not fight back,” said attorney Shermin Khan, who represents more than 50 homeowners. “They’re having their wealth stolen from them. Their only equity.”

Meanwhile, the state has paid Baton Rouge law firm Shows, Cali & Walsh $11.1 million since 2009 to litigate claims of fraud and waste for all Road Home programs, including the elevation lawsuits.

There are essentially two ways homeowners can win these cases, attorneys said: Provide receipts, or prove that the homeowner wasn’t eligible and the state knew it when the contract was signed.

Mark and Donna Leger were able to pull that off. When they filled out a Road Home application, they provided a certificate showing their house in Cameron Parish was above the required height. On a printout of their Road Home application, next to the question “Is home required to be elevated?” the “No” box is checked.

And yet the state still awarded the Legers a $30,000 elevation grant. According to a court ruling, Mark Leger testified that a Road Home representative told him he could use the money to elevate his air-conditioning units or the utility meter, or to repair his house.

Eleven years later, the state sued them. The Third Circuit Court of Appeal ruled for the Legers.

Valerie Labat of Marrero, across the river from New Orleans, produced receipts and an affidavit showing she spent more than $31,000 between her contractor and various purchases at home improvement stores. Lawyers for the state want her to show how she spent a $12,300 insurance settlement so they know she’s not double-counting any expenses.

Labat, a 28-year Army veteran who struggles with PTSD, broke down several times as she discussed the pending lawsuit.

“The whole thing was supposed to be Road Home!” she said. “You are providing me a road to get home. A path to get in my house. But now that I’m home, you’re gonna pull the road from under me? What the hell you name it Road Home for?”

Read the original story in ProPublica here.

Katrina Survivors Were Told They Could Use Grant Money to Rebuild. Now They’re Being Sued for It (ProPublica/The Times-Picayune)