Kentucky flood cleanup nets big payday for debris removal industry
After nearly every federally declared disaster, large, politically connected companies swoop in and secure lucrative cleanup contracts. Last year's flooding in eastern Kentucky was no different. Researchers and federal investigators have flagged these contracts as rife with opportunities for fraud and wasteful spending.
In the early morning of July 28, John Collins heard his neighbors were trapped in their house as the floodwaters rose in a Letcher County, Kentucky neighborhood called Stampers Branch.
He drove his off-road vehicle through pouring rain and rushing water to discover Betty Estep collapsed in her yard.
Collins’ wife Angela held a flashlight while another neighbor performed CPR, but it was too late. Estep died at age 67, making her one of the first confirmed fatalities in the flood.
The disaster dealt a serious blow to his business selling commercial trucks and truck parts, Collins said. The flood destroyed his vehicles, inundated a barn and covered the property in thick mud. All told, Collins said he lost about $250,000 in the storm.
But in the immediate aftermath, Collins said his thoughts were not on his business.
He and his family volunteered their services for weeks delivering supplies and clearing debris. Eventually, he realized that wasn’t sustainable.
“I kind of decided I had to quit because I was broke and we'd lost so much,” Collins said.
Thinking it was a good way to make some money while helping his community recover, Collins signed on to work for AshBritt, a Florida-based company hired by the state to manage the debris cleanup process across the flooded counties in eastern Kentucky.
As the Kentucky Center for Investigative Reporting previously reported, the cleanup process AshBritt was hired to manage left debris piled throughout the region as overlapping companies and government agencies struggled to coordinate effectively.
Collins started purchasing equipment he’d need as a subcontractor for the job: a dump truck, two excavators and two four-wheel drive trucks.
Between insurance, truck licensing fees and new equipment, Collins said it cost him another $250,000.
But Collins said he only worked for AshBritt for two and a half days in October. Then the company stopped calling with work, he said, after paying him a little over $4,000.
He never got an explanation as to why his work stopped, but said he has nothing bad to say about AshBritt.
“AshBritt made money off of every move we made.” Collins said. “So the more money we made, the more money they made.”
AshBritt is just one of many disaster response companies that utilize a playbook that repeats after nearly every federally declared disaster: Large, politically connected companies swoop in and secure lucrative contracts. Meanwhile, most of the work is completed by smaller subcontractors – many of them local business owners like Collins. Researchers and federal investigators have flagged these contracts as rife with opportunities for fraud and wasteful spending. And the complicated network of contractors and subcontractors strains the oversight process.
The Kentucky Transportation Cabinet said they have not seen any indications of fraud so far in the cleanup process.
But Wesley Maul, a former Florida emergency management director who oversaw cleanup and recovery efforts after hurricanes Michael and Irma said the industry’s incentive structure naturally drives up costs.
“Debris cleanup is a dirty business,” he said.
In September, Kentucky Gov. Andy Beshear said that, based on the amount hauled by that point, debris removal would reach an estimated $30 million.
Months later, the Transportation Cabinet said that estimate referred to the cost of the work done at that point in time. The scope of the work multiplied and Kentucky extended Ashbritt’s contract for another year in March. State records show that as of July 17, the state has paid AshBritt at least $170 million for the cleanup work.
That means Kentucky has paid a single company more than the Federal Emergency Management Agency paid out in aid for temporary housing or household repairs to individuals impacted by the floods.
Debris cleanup is a big job
Justin Branham, a U.S. Army Corps of Engineers staffer who has worked on recovery projects before, knew there was big money to be made in the wake of disasters.
Branham was also born and raised in the small community of McRoberts in Letcher County, one of the places hardest hit by the flood. He was tasked by the Corps to estimate the amount of debris in roads and waterways throughout eastern Kentucky.
Before that, he approached local officials with a warning:
“I said ‘I’m coming here as a friend and as a citizen of this county, because this is what’s going to happen,’” Branham said. “‘People are going to come in here and they’re going to promise you the moon.’”
Nobody had picked a company to lead the cleanup yet. But already, Branham said he saw trucks with heavy equipment displaying out-of-state phone numbers descend upon the county, looking to get a piece of the work.
Disaster cleanup is a vital part of the recovery process. Almost nothing else can get done until important roadways are clear of debris. And in mountainous eastern Kentucky, debris lodged in streams and valleys exacerbates future flooding.
It’s also one of the most expensive steps in the process. Few local governments can afford the cost of cleaning up after a major disaster themselves, so the Federal Emergency Management Agency will reimburse governments for what they spend on debris cleanup after a federal disaster declaration. The reimbursement process takes years to play out while FEMA reviews contracts and invoices, which means the true cost to Kentucky taxpayers isn’t immediately clear.
The process funnels massive amounts of federal dollars through intermediaries and into the hands of debris cleanup contractors. The Government Accountability Office found more than $10 billion in federal spending went to clean up after disasters in 2017 alone.
County governments take the lead in most disaster recovery scenarios, according to disaster experts and debris cleanup companies interviewed by KyCIR. But Kentucky Transportation Cabinet Secretary Jim Gray said that after the flood, counties approached the state with concerns that the financial burden of the project would outpace what local governments could spend on their own. So the cabinet took over the process.
“They’re just not experienced with handling this size of contract, [but] that’s the wheelhouse of the Transportation Cabinet, that’s what we do for a living,” Gray said in an interview in February.
The cabinet put out a request for bid proposals five days after the flood, on Aug. 2. Bids were due in less than 24 hours.
Randy Perkins created AshBritt in 1992, when Hurricane Andrew hit his community, the town of Homestead in South Florida. He expanded his landscaping business to help clean up the wreckage.
Since then, AshBritt has grown into the largest debris contractor in the game. The company won the largest debris cleanup agreement in history in 2021 after the Department of Defense and the Army Corps of Engineers awarded it $1.75 billion in debris management contracts.
AshBritt was among the companies scoping out the flood damage in eastern Kentucky even before a request for bid proposals was made public, the company told the Transportation Cabinet in procurement documents.
Nine companies submitted proposals and competition was tight. Companies proposed different prices for line items ranging from removing passenger vehicles and dead animals, cutting down certain trees and stumps, and hauling debris to a final disposal site. To evaluate the final cost, the cabinet made a scoring rubric that gave more weight to certain tasks that occur more frequently.
AshBritt's weighted bid beat out the nearest competitor, Ceres Environmental, by 33 cents.
The Transportation Cabinet said AshBritt won because it was the lowest bidder, but that notion was challenged almost immediately by another company that bid on the project, Custom Tree Care Disaster Response. Greg Gathers, Custom Tree Care’s CEO, emailed the Transportation Cabinet with concerns saying he saw issues with the way things were weighted, with relatively small line items given more importance than other, more expensive items.
“I have some serious concerns as to how this was weighted and the pricing you have from the ‘low bidders,’” Gathers wrote in an email obtained through an open records request. “The numbers are skewed so you have extremely inflated rates on many of the line items and will end up paying unreasonable rates which [will] probably not get reimbursed.”
Records show the message was forwarded to John Moore, the cabinet’s head engineer, who said Kentucky Emergency Management was reviewing the contract.
Ceres Environmental filed a formal bid protest on Aug. 17 laying out their own concerns with the solicitation process and weighted prices.
“This resulted in the award of a bid with egregious overpricing, which may ultimately harm Kentucky taxpayers and jeopardize federal reimbursement for the project,” Ceres’ bid protest stated.
Ceres claimed the short solicitation window did not allow for a thorough search and that the request for proposals was too vague. AshBritt was also underestimating the cost of waterway cleanup, Ceres claimed. Ceres argued the additional waterway costs, plus improperly weighted line items, would drive up the actual costs of the project to tens of millions of dollars more than what Ceres offered.
In total, Ceres estimated AshBritt’s bid would cost Kentucky nearly $40 million while its own would cost $4.8 million.
Nearly a year after the contract was signed, Kentucky has so far paid AshBritt $170 million, nearly four times the company’s initial estimate and more than five times the governor’s estimate in September.
In its response to the bid protest, AshBritt said Ceres’ claims were based on a “hypothetical scenario with assumptions of its own making.”
The Transportation Cabinet said that the short solicitation window was necessary due to the emergency at hand, and that Ceres’ should have raised their concerns with the bid process earlier.
The Kentucky Finance Cabinet decided against Ceres and denied their bid protest in December.
Moore, with the Transportation Cabinet, said in an interview that all bidders were given the same evaluation criteria, but the state chose AshBritt based on the “full scope” of their bid.
“The instances where…we found some unbalance, we worked with the contractor to get those more within reason and move forward on the project while continuing to maintain the contract as reasonable as we could,” Moore said.
The state would eventually modify its contract with AshBritt at least 18 times, according to procurement records.
Contract modifications included expanding the scope of the work and adding brand new line items, as well as revising the price of other like items.
For example, the state’s original contract with AshBritt included a line item for removing debris from waterways at a cost of $100 per ton. Weeks later, the state agreed to add another line item covering debris removed from waterways away from major roads. That line item was originally priced at $195 per ton, then raised to $210 per ton.
The Transportation Cabinet said the original line item only covered streams that could be reached from the road, and the second was added to clean up the more remote streams.
Wesley Maul, the former Florida emergency management director, said modifications to a contract “can be seen as a red flag.”
“Bids are often in a race to the bottom, so disaster contractors are incentivized to low-bid contracts with communities to get their foot in the door,” Maul said. “These prices are unsustainable and they're unable to perform at these prices. Then the community’s back is up against the wall and so desperately seek to renegotiate for higher prices.”
Opportunities for fraud
The disaster cleanup contracting process is complex and lacking in guardrails, which leaves taxpayers on the hook for potential fraud and wasteful spending, according to a Government Accountability Office report from 2020.
Auditors with the GAO found systemic issues in the procurement and contracting process industry “such as bribery, collusion, and false invoicing.” Once work started, the office found fraud schemes including “misrepresenting the amount, source or type of items removed.”
John Moore, the Kentucky Transportation Cabinet official in charge of debris removal, said the agency did not see any instances they believed to constitute fraud after the eastern Kentucky flood.
But reports prepared by the U.S. Army Corps of Engineers describe a pattern of behavior that would drive up the costs of the debris removal project.
The reports describe subcontractors working for AshBritt “manufacturing debris” by cutting down large tree limbs or removing trees that weren’t damaged by the flood, digging unnecessarily large access paths, turning in heavy, water-logged debris and clearing vegetation and dirt from stream banks to the point where the banks became unstable.
FEMA requires governments to contract with a monitoring firm to watch over the debris clearing work and make sure crews are only removing eligible debris. Corps reports regularly describe AshBritt crews working without supervision from monitors from Thompson Monitoring, the company hired by Kentucky to serve this role.
“This seems to be a pattern and a potential issue of concern,” one report stated.
Thompson Monitoring declined KyCIR’s request for an interview and instead forwarded questions to the Kentucky Transportation Cabinet.
At least one report explicitly accused a subcontracting crew in Knott County of misrepresenting debris in order to make more money. A report filed on Oct. 8 said two trucks showed up at a debris dump site with tickets marking their haul as vegetation, which would earn a higher payout. The trucks contained a thin layer of vegetation covering a full bed of heavier rocks and dirt.
“It is the opinion of the USACE Lead that this has the appearance of “load staging” for higher payouts,” the report stated. The matter was referred to the Transportation Cabinet and AshBritt.
In an interview, Moore said the cabinet, AshBritt and other agencies involved in the cleanup met regularly to discuss issues like this. Moore also said separating dirt from vegetation was "difficult" because of the nature of the flood and the mixed debris cleanup crews had to deal with, but that crews were paid appropriately.
Christopher Currie, director of the GAO's Homeland Security and Justice Team, said this type of behavior may not amount to fraud, but is common after major disasters.
“Fraud is a very specific criminal activity that is not substantiated, usually, until there's a conviction,” Currie said. “But fraud is just one type of what I would call improper payment. There's also a lot of other improper payments when you're talking about federal dollars being spent.”
The GAO made five recommendations to address weaknesses in the oversight of disaster recovery contracts, including conducting regular fraud risk assessments and clearly communicating the risks to contracting agencies. All five recommendations are still open and have not yet been fully addressed.
John Gabbard, who lives in Breathitt County, claims contractors damaged his property and removed several expensive walnut trees, even though the flood didn’t do much harm to his property.
“My opinion is they are just after big stuff for weight and just don’t care how they do it,” Gabbard said.
Gabbard hired a landscaper who estimated repairs to his land including filling in holes dug by cleanup crews and stabilizing the bank next to the stream would cost $31,000. He mailed a copy of the estimate to the subcontractor, BD Transport out of Clearfield, Kentucky, through certified mail. On Feb. 7, the day after Gabbard said the certified mail reached company headquarters, the company dissolved according to records with the Kentucky Secretary of State.
Belinda Purnell, who filed as BD Transports registering agent with the secretary of state, did not return a phone call for comment.
Holding debris removal contractors accountable is typically a struggle.
Lawsuits have followed in the wake of AshBritt’s work, including cases in Oregon and California where plaintiffs claim the company removed trees that were not damaged by wildfires in order to inflate profits. Both lawsuits were dismissed when the judge found plaintiffs did not have proper standing.
In a lawsuit following debris cleanup in Mississippi after Hurricane Katrina, AshBritt successfully argued they could not be held responsible for damages because they were working on behalf of the federal government and following specific instructions as to how to remove debris.
The federal government, in this case the U.S. Army Corps of Engineers, enjoys immunity from civil litigation that results from projects such as disaster response, a U.S. District Court judge ruled in an order dismissing the suit.
“AshBritt, as a contractor carrying out the work of the U.S. Army Corps of Engineers, is entitled to this same immunity from suit,” the judge wrote.
Local workers, unpaid bills
After AshBritt secured the contract to manage the cleanup process in Kentucky, the company hired local subcontractors to haul the debris out of the streams and valleys.
Some subcontractors like Brandon Brock said they were happy with the role AshBritt played. He owns a timber company in Letcher County and was one of the primary contractors hired by AshBritt.
“It’s a volume game, a numbers game,” said Brock when interviewed by KyCIR last December. “The more ground you can cover the more you’re going to make.”
AshBritt’s contract paid $210 per ton of debris removed from the waterways. KyCIR spoke to contractors whose contracts ranged anywhere from $160 per ton to $180.
Jonathan Tucker is another subcontractor who worked for AshBritt. He said what followed the flood was “one of the craziest years of my life.”
Tucker was on vacation with his family when the flood struck. His mother-in-law’s house was flooded, so the family rushed home to Letcher County to help.
“From day one it's just been a mad dash, from friends and family being flooded to, you know, people that needed help that we went and helped,” Tucker said. “And then the contract started coming in and we had to work to make money to support our families and the men that count on me to come to work for me every day.”
Tucker said AshBritt has done a good job managing the project, but it cost the state more than it should have.
“They overpaid for it. They severely overpaid for it,” Tucker said. “I mean, it could have been bid out for a third of what it went for.”
Tucker also said he witnessed other crews “abusing the system” to make more money.
“I know of situations where people pretty much took everything out of these people's yards and just stole it, because we got paid by the ton,” Tucker said. “And they were just hauling in whatever they could get their hands on.”
In a statement, AshBritt said monitors gave the approval for all debris removed and they followed the guidelines provided by Kentucky, FEMA and the Army Corps of Engineers.
In mid-October, subcontractors in Letcher County held a work stoppage because they were unhappy with the way the cleanup project was being managed. AshBritt founder Perkins came to the area to address the workers himself. He offered $25,000 to some subcontractors to get back to work, according to several people present at the meeting, including some who accepted the money.
In a statement, AshBritt said the money was intended to acknowledge the “difficult financial situation in the local community” because work crews lost money by not working during the stoppage.
Other work crews claim they have not been fully paid for their work. In a lawsuit filed in May, Florida-based Blaze Tree Services alleged AshBritt and a subcontractor withheld money owed to them for work starting around Aug. 8. Two other companies told KyCIR the same thing – they still hadn’t been paid by both the subcontractor and AshBritt.
In a statement, AshBritt said the subcontractor, NEV, LLC was terminated because “they were not appropriately paying” crews working for them.
Emmy Marquess, the owner of NEV, said she couldn’t discuss the issue due to pending litigation, but strongly denied AshBritt’s claims. Marquess said AshBritt stopped paying NEV abruptly, so the company could not pay crews working below them. AshBritt maintains they paid everyone with “verified claims” working for NEV.
AshBritt has faced similar lawsuits following other disasters, including a lawsuit filed in a federal court in New Jersey following Hurricane Sandy where a group of workers claimed a subcontractor failed to pay them the prevailing wages as stipulated under the law. AshBritt argued that its contract with the subcontractor protected them from liability, and the case was eventually dismissed.
Because the process is so vulnerable to wasteful spending, FEMA recommends states and local governments establish pre-positioned contracts with debris removal companies. But Kentucky and most of the region impacted by the floods did not have those prior contracts on hand.
John Moore with the Transportation Cabinet suggested that might change based on their experience with this disaster.
"That's something that has come up in conversation, but we've not taken the action on it yet," Moore said in a February interview.
By late April, an AshBritt employee said in a podcast it was his understanding that Kentucky had established a pre-contract for statewide disaster recovery.
Julia Crowley, a professor at the University of Missouri-Kansas City who trains local governments on disaster preparedness, said lining up contracts ahead of time takes the pressure off when disaster strikes, so governments aren’t negotiating massive contracts under rushed, emergency conditions.
That helps keep costs fair and ensures plenty of time to comply with FEMA’s strict guidelines controlling the release of federal funds. Without them, Crowley said, disaster-stricken areas are prone to wasteful spending and slowed recovery.
“There's so many different actors involved, there's so many different levels of government involved, that if they haven't had these conversations in advance, haven't made the plans and taken the steps to get the prequalified contractors, it's just so easy for them to be taken advantage of,” Crowley said. “It's a scenario I've just seen play out just way too much.”
U.S. Sen. Rick Scott, a Republican from Florida, has introduced legislation aimed at reforming this industry. As Florida’s governor from 2011 to 2019, Scott dealt with disaster recovery after storms like Hurricanes Irma and Michael.
Scott said state, local and federal governments can do a better job of following best practices to keep the costs low.
“You have to have pre-landfall contracts. Everybody should know what they are. If we're good government, we should be transparent,” Scott said. “They need to be enforced. Agencies shouldn’t have a different contract for the same service. And then we ought to have oversight to make sure money doesn't get wasted.”
Scott's legislation would form an advisory group to review debris removal contracts and study the use of pre-disaster contracts, but so far the measure has not progressed past the committee phase.
That may be in part because the debris cleanup industry is large and politically connected, said Samantha Montano, an assistant emergency management professor at the Massachusetts Maritime Academy.
“One thing that I think is really important for people to understand is that disaster recovery is a multibillion dollar industry,” Montano said. “We are at kind of the whims of their lobbying and the profit that they think that they can make from a disaster.”
The industry is well connected at the federal and state levels, and AshBritt is no exception.
Perkins and his son-in-law, a top executive at AshBritt, Gerardo Castillo, each donated $10,000 to the Kentucky State Democratic Central Executive Committee this past May, according to Federal Election Commission records.
The FEC records show two other $10,000 donations to the party from AshBritt employee Bill Johnson and his wife.
Castillo said in an email that AshBritt employees make contributions “as good corporate citizens…and there is no connection with any political events.”
In response to questions about the contributions Kentucky Democratic Party communications director Anna Breedlove, sent the following statement:
“The Kentucky Democratic Party receives thousands of donations from people across Kentucky who support Governor Beshear’s strong record of creating jobs, achieving the lowest unemployment rate in Kentucky history, and leading the Commonwealth through deadly natural disasters and a historic pandemic."
Together, these two firms represent some of the largest companies in the world, including pharmaceutical giant Pfizer and private equity firm Blackstone, as well as entire governments like Bahrain and India.
AshBritt hired lobbying firm McCarthy Strategic Solutions to represent them in Kentucky in December of 2021. McCarthy Strategic Solutions consistently employs some of the highest paid lobbyists in the state.
AshBritt bolstered its lobbying power in Kentucky again in August of 2022, after the Transportation Cabinet hired the company to clean up flood debris, by hiring MML&K Government Solutions, another high-powered lobbying firm.
Perkins has also become involved with politics directly.
When he unsuccessfully ran as a Democrat for a South Florida Congressional seat in 2016, the Democratic Congressional Campaign Committee prepared a research memo laying out his strengths and weaknesses as a candidate.
“His problems-solving successful business owner, whose rags to riches story, personifies the American Dream,” the memo stated.
Perkins’ largest liability as a candidate, according to the memo, was his business’ track record.
AshBritt “has a history of donating to politicians and winning bids, despite charging the highest rate for its work and being accused of doing substandard work,” the DCCC memo stated.
The memo cited a congressional investigation into the company’s contracts following Hurricane Katrina. Perkins defended AshBritt’s track record before the U.S. House Government Reform Committee in 2006, saying the company followed government procurement rules. The memo also cited an audit from 2009 that accused AshBritt of overcharging the school board in Broward County nearly $800,000. The company admitted no fault but settled the case in 2014.
Debris cleanup is far from done in eastern Kentucky, and state and federal recovery managers continue to roll out new phases of the effort.
The state set aside $10 million in funding for this project from the Eastern Kentucky State Aid Funding for Emergencies, a special fund established last year by the Kentucky Legislature.
But instead of allowing other companies to vie for the project, Kentucky extended its original contract with AshBritt to last another year and include debris removal from private property.
That contractor was AshBritt. The Transportation Cabinet said they extended the contract in order to keep the project moving and avoid delays.
John Collins, the contractor who found the body of one of the first flood victims, said he did not pursue this next phase of work.
“I was a little, I don't know, fed up with it,” Collins said.
Collins is planning to leave eastern Kentucky and move to Tennessee to start a general contracting business with his son.
He said he was contemplating the move even before the flood, but the damage to his business made it a necessity.
“We have to go somewhere and do something, it's just not happening here,” Collins said.