April 29th, 2008
10:34 AM ET

They gave him money to fix his house. Now they want it back.

New Orleans residents affected by Katrina may have to pay back the money they were given in grants.
New Orleans residents affected by Katrina may have to pay back the money they were given in grants.


Randi Kaye
360° Correspondent

Every time I go to do a story in New Orleans I hold onto a little piece of hope that things are going to be better this time.

That the community is going to be more healed, that the town is going to look more alive, and that the programs put in place to help homeowners are actually doing so.

Well, I should have known better.

Imagine this: Louisiana residents – after all they’ve been through and all they’ve lost – are now being billed by the state for nearly $200 million!

Yes – you read that right, $200 million.

Why? Well – it turns out the contractor hired by the state to dole out federal dollars designed to help homeowners rebuild... uh... well... how do I say this... OVERESTIMATED!!

The contractor, ICF International, may have overpaid as many as 5000 residents. In other words, the state gave these people too much grant money after state inspectors estimated home damages.

In all, homeowners could be asked to pay up $175 million. Some families could be on the hook for $150,000 each!

I interviewed a New Orleans man named John Montegut who had spent about $100,000 repairing his home. About $20,000 of it was from a state grant, part of that federally funded Road Home program to aid homeowners. Well, he just got a bill in the mail for $13,000 from the state telling him they’d overestimated his grant payment.

How’d that happen? Montegut told me the state’s inspector included in his damage claim the repair of six skylights (he doesn’t have any skylights!!) and the replacement of 22 windows which were far above the water levels and completely unharmed. Montegut says the inspector was in his house for five minutes and he was not allowed to see the damage claim so had no way of knowing what was included.

Here’s the killer: Montegut doesn’t have the money to pay the state. He spent that money fixing up his house. But he and every other homeowner who got a grant signed a contract with ICF agreeing to pay money back if overpayments were later discovered. Now remember, he wasn’t even allowed to see his paperwork. Montegut told me he never expected he’d owe the state money. But it turns out the actual cost of repairing his house was far greater than the grant anyway.

The contractor, ICF, told us it is a federally funded program and the state is demanding that it ask for repayments. ICF is promising a “compassionate process” and says it doesn’t expect a large number of families to be affected but we’ve learned from an advocate for the homeowners about 300 families have already been billed. The state plans to fine ICF for its mistakes and it plans to hire an auditor to review every case.

Is it cruel, as homeowners have said, to ask residents for money back after all their suffering following Hurricane Katrina? Or, as resident John Montegut told me, “They (ICF) made mistakes all along, why should people suffer?” What do you think? We'd like to know.

Program Note: See Randi Kaye's “Keeping them Honest” report on AC360 tonight at 10pm.


soundoff (601 Responses)
  1. Bob Abernathy

    Anderson: Let me get this straight...the government of the State of Louisiana is involved...and you expected this to work for the people? Of course the State has a program requiring people to agree to reimburse any over-payments, while not allowing people to see the claim paperwork. Of course the State hired a contractor who performed shoddy work. Hello...it's Louisiana. (I lived there, worked there, and worked for the Governor's Office, once upon a time.) I would delve further and see who the contractor is related to in the State Legislature. It's got to be somebody's brother-in-law.

    April 29, 2008 at 2:40 pm |
  2. David Mule`

    I lost everything. Got 14 feet of water. Was offered $6000. Was like getting spit on. Losing everything was hard, but what we had to endure from the local and federal govt enities was\is unheard of. Katrina's winds are still blowing for a lot of folks including me.
    I also know people that made out on insurance and received 60,000 from the LRA. The LRA is highly flawed. Best thing I can tell the people is "do it by yourself" like I am trying to do. It is hard, but dealing with a bunch of morons is worse

    April 29, 2008 at 2:40 pm |
  3. Donna Tucker

    As a survivor of Hurricane Katrina who now resides in San Antonio, Tesas, I am not surprised by this revelation. I received a SBA loan (not a grant) for my losses in Louisiana but I had to pay back to FEMA approximately $5000 out of the loan because you are not allowed to receive a loan and a grant. Of course I am paying back the full amount plus the $5000 that was sent to FEMA.
    Although my home was insured, the federal government does not recognize nor compensate bond-for-deed homeowners. All monies went to the primary mortgage owner although I had been paying the mortgage since 1998! These are our stories and trust me there are worse than mine. If you wonder about taxs breaks for us, well no one understand how to do it or how it operated so there was no tax breaks for many of us, either.
    I still get comments from folks who tell me that we spent our free money on jewerly and beer or that we brought crime and voodoo to areas we evacuated to.
    I am still trying to gain back all that I lost, 14 years of living in the same home, raising my children in it. I have no animosity towards people but I wish people would think about who is standing around them when they make these ignorant, general statements about Hurricane Katrina survivors (I am not a victim).
    Thank you,
    Donna Tucker

    April 29, 2008 at 2:39 pm |
  4. deborah,OH

    This is just another example of the level of irresponsibility that exists in our govt. today. The Administration ignored New Orleans when Katrina first happened, & everything I have read says they are still ignoring them. My prayers are with these people–the economy & all is tough enough today for the "average" American–let alone someone trying to rebuild after a disaster. It will be interesting to see AC360 tonight & what Anderson & all have come up with.

    April 29, 2008 at 2:39 pm |
  5. NOLa Contrarian

    Rahni, please stop calling people "Katrina Victims". First of all, the damage suffered by the overwhelming majority of my fellow Orleanians was not caused by Katrina, but by the Federal Levee Failure. Secondly, the word "victim" implies a complete powerlessness, which may have been a decent descriptor two years ago in hte immediate aftermath of the flood, but at this point, using that word tends to undermine the spirit of our still fledgling recovery.

    And now to win even more friends... Blackballing ICF is a very convenient way for the media to paint an extremely complex situation with a very wide brush and stir up public indignation without presenting all the facts. Although the immensity of running the Road Home program is unprecedented in US History, the biggest challenge ICF has had on this program is to manage the constantly fluctuating requirements and regulations set forth for the program by the State and Federal government agencies who are SOLELY responsible for the program's design. These unfortunate cases are the results of the program's design, not its implementation. ICF has never once been accused of incorrectly implementing one single directive it has received from the government. Blaming ICF for this situation is simply a case of shooting the messenger, writ large.

    And frankly, in a ten billion dollar pprogram, if only two million was allocated incorrectly, that is an amazing accomplishment. I'll help you by doing the math - that is a 1 in 5, 000 or .0002% margin of error.

    April 29, 2008 at 2:39 pm |
  6. Nancy

    ICF should be making those payments to the state, not the residents that received the grant, how could they have possibly made such a huge mistake?

    April 29, 2008 at 2:39 pm |
  7. William

    What about those homeowners that spent their Katrina money on new Escalades? Will they have to sell their "deluxe spinners" or remove the window tinting or the 50 million watt stereo to cover what they might owe back to Uncle Sam?

    April 29, 2008 at 2:38 pm |
  8. Bill, Decatur, IL

    What are my thoughts?? Well, I'm glad you asked. Folks build below sea level, don't have adequate insurance and then hold out their hands for money to rebuild below sea level. Interesting. Insanity is defined as doing the same thing over and over and expecting a different result.

    You shouldn't have got the money in the first place. Pay it back.

    April 29, 2008 at 2:38 pm |
  9. Matt

    Maybe the State would have more money to help people if there wasn't so much abuse by so many people. I understand the state gave them to much, but when they realized that what did they do with the money, they probably spent it... why should they profit? same with all the abuse of the government relief cards, people used then for season tickets to the saints, hawaii vacations, bottles of crystal... To many people down there abbused the system, and it took away from the people who needed help.

    April 29, 2008 at 2:37 pm |
  10. Xandre

    Thank you CNN for keeping the continuing horror of Katrina in the spotlight. I lost my family home and was lucky to sell the property, but my friends and neighbors continue to go through the lunacy of state and local government to put their lives back together. There is NO EXCUSE for a MAJOR US CITY to continue to be in shambles. You can bet if this happened in a foreign country, the greater news media, Hollywood, and our government would be there to fix it right up quick!

    April 29, 2008 at 2:37 pm |
  11. Joann

    If the people didn't get enough, they would be asking for more. They should absolutely be required to repay ALL overpayments.

    April 29, 2008 at 2:37 pm |
  12. Debbie

    not one family should be responsible for re-payment. the contractor should accept the fault as their own. how could any decent human being bill someone that has literally been through hell and have the audacity to say that they do not feel it will affect a lot of families. one family is to much. this is absurd.

    April 29, 2008 at 2:36 pm |
  13. Jimmy

    If nothing was signed then I would consider the money to not be owed. If an individual signed the paper without looking at it, then it is the individuals fault for not being resposible enough to read what he is signing. This article needs a bit more information before a final judgment can be had but people need to step up and take some responsibility for their lives.

    April 29, 2008 at 2:35 pm |
  14. Pat

    First of all, how does the state (or anyone else for that matter) KNOW that the contractor overestimated or exactly which homes were overestimated and by exactly how much? Then second, if this is a federally-funded project, it is probably the Feds wanting their money back from the state so the state went after the contractor. The contractor is saying the state is forcing him to ask for refunds but the state probably doesn't care how the contractor gets the money returned. To me, if the contractor did shoddy work, then the contractor is liable...even if that puts him out of business...which is how it should be if he can't do a better job than he did. When people ask you to sign something without a chance to review it and there's a clause that says you have to pay money back for some reason, then it sounds like you probably "got took" as my grandfather would say! Shame on everyone who took advantage of those homeowners when they were in need. Shame! Shame!

    April 29, 2008 at 2:35 pm |
  15. John Hendrix

    I am from Louisiana, there is so much abuse here it is unreal. People are working for the road home program that can't spell "CAT". ICF is paying them $19.00 per hour to shuffle paperwork and those same people were the inspectors that filed the paperwork. My insurance has gone thru the roof because so many people here did not have insurance, I'm thinking 42% did not. Why would anyone live 13 Feet below flood level and not carry something as cheap as flood insurance? Don't talk about pain and suffering when most of the State is subsidizing people that don't carry enough insurance to fix or rebuild there home. Same for car insurance. I pay the highest car insurance in the US because people don't have insurance on there cars either.


    April 29, 2008 at 2:35 pm |
  16. Scott

    What no one realizes is that finding competent people to fill jobs was nearly impossible after the storm. The same is true for the people hired to do these estimates. There were so many jobs and so few people, you almost had to hire anything and everything. I don't care where this would have happened, it's got nothing to do with the government or the people. It's sad that this is going on, especially when there is so much left to do, but I cannot put the blame solely on the government. It is impossible to have competent people waiting in case something like this happens.
    Another problem that people did not anticipate is that anyone who received a grant, is liable for the taxes as income. Not many people knew this, nor did they plan for this. This is one problem that I have to blame the government for. Why not hold out the taxes when you paid these grants, instead of leaving people with thousands of dollars in unforseen taxes owed at the end of the year? No matter how hard we try to finally get our feet under us, something seems to continue to come up that yanks them from under us.

    April 29, 2008 at 2:34 pm |
  17. Eileen Greiner

    If they were not allowed to see the papers they were signing then their rights to full disclosure were denied and they should not have to pay one red cent back. Sounds to me that these families should band together and get a well known reliable lawyer. Its time Americans start fighting back when their goverment on any level pulls stunts like these.

    April 29, 2008 at 2:33 pm |
  18. Ryan

    If a family was indeed to owe 150K themselves they knew they were overpayed and simply chose to say nothing about it. This isn't a lottery, those recieving money should take what they need and not pad their claims. I am sure anyone who has had a house burn down anywhere in the country would love that opportunity to skim.

    If you spent 100K repairing your house you should have just leveled it and built another. Given the average New Orleans home in the worst hit areas before the storm and contruction prices there and the South in, 100K is more than enough to build a fresh fresg there. Katrina was obviously a horrible experiance, but it doesn't entitle them to anything more than the aid programs are authorized to give. For every family that gets overpaid, another might not get paid at all.

    April 29, 2008 at 2:33 pm |
  19. Matt

    If they got more than they were supposed to why shouldn't they pay it back??? those are my tax dollars. Saying they don't have it anymore is a joke. If it cost you 13000 to fix it and you were given 20,000 how dare someone not expect to pay back the rest of it. If they made a mistake and it actually cost more than what they now say it did i am sure they have an apeal proccess. People in this country need to stop looking for handouts!

    April 29, 2008 at 2:33 pm |
  20. Wilberto Jimenez, Monmot, MD

    There's no such thing as "Free Money", folks.

    If you've ever received any type of grant, student loan, housing allowance, etc., then you know there's always fine print to read before you sign. Just because someone's an idiot and doesn't read the fine print, doesn't mean they're entited to a consequence-free award. It's that type of attitude that helped cause the mortgage-finance monetary crisis.

    Good luck collecting that money though. If past performance is any indicator, then the government will spend more money through collection agents, than they will ever recover.

    April 29, 2008 at 2:33 pm |
  21. NOLA Love

    This is, indeed, a cruel situation to inflict upon New Orleans residents that are trying to rebuild and recover. The state and federal government should be ashamed. Compare it to a Food Bank asking for its food back after a person in need was given a meal. Indefensible.

    April 29, 2008 at 2:32 pm |
  22. KC

    Regardless of the ineptitude of some of these governmental programs, the Road Home and others did deliver millions of dollars to homeowners who would not take on the reasonable price of flood insurance to mitigate their potential for devastating loss when they were living in a rather high risk area. I just don't see it as "the little guy gets screwed" when EVERYTHING they got was a hand out.

    April 29, 2008 at 2:32 pm |
  23. Jennifer

    The state admits it knows that ICF "made mistakes all along," and is proving that by fining ICF. Were all residents denied access to the claims that inspectors submitted on their behalf? If I'm signing something that says I'm legally obligated to repay any overpayments then I would certainly insist on having copies of that claim estimate. It sounds like something fishy was going on with ICF and their inspectors, and the state should be obligated to fully investigate the company and obtain repayments from them. I don't think the state should be requiring the residents to repay these funds when they were obviously taken advantage of by ICF.

    April 29, 2008 at 2:32 pm |
  24. DaveMN

    How horrible. Something similar happened to me when I was on food stamps for a while. Months later I was billed by the state for overpayment because it had miscalculated my benefit. It felt like a kick in the ass when I was least able to handle it and trying to get back on my feet financially.

    April 29, 2008 at 2:32 pm |
  25. the truth

    make the ICF, pay it all back !!!!!!

    April 29, 2008 at 2:32 pm |
  26. Sean Mentor

    I feel for the people in NOLA. I really do, but lets all be sane and gut the city. Re build it somewhere it won't flood again. What is the point of rebuilding a city that is below sea level with a levee that can't hold back storm surges from a category 3 hurricane?

    April 29, 2008 at 2:32 pm |
  27. Major Dan

    It's not the residents fault; sounds to me like the contractor didn't perform their task correctly, they should be liable. Government has to get tougher on contractors across the board and hold them responsible for poor performance.

    April 29, 2008 at 2:31 pm |
  28. Kristie

    What I don't understand is why the residents of New Orleans continue to elect the same officials back into office there...

    April 29, 2008 at 2:31 pm |
  29. Chris

    Why would anyone be so ignorant as to sign a contract without seeing all of the details? Tell me these same people are the ones signing those variable interest rate loans and now want us to pay for their poor judgement?

    April 29, 2008 at 2:31 pm |
  30. N Poche

    when a family is really using the money to fix their house it is terrible if it has to be repaid but maybe further investigating will prove that there has been so much money wasted by homeowners money that has NOT been put into rebuilding their homes which is what the money was dedicated for in the first place. Why is this side of the story never reported.

    April 29, 2008 at 2:30 pm |
  31. Kathy, Texas

    Why won't the Feds pull the money WE are ALL spending to rebuild Iraq and use it in New Orleans?????? Have they fogotten where their TRUE allegiance should lie? Leave it to the fedgov.

    If it was in the "no show paperwork" that any overestimate would have to be repaid BY THE GRANTEE, did the state also ask for receipts of materials and labor? Seems a moot point to estimate how much each individual would (but shouldn't) have to pay back based on the state figures. Did anyone EVER get a copy of the grant paperwork that they signed? Get a class action to sue ICF for non-disclosure AND the STATE inspector for fraud.

    April 29, 2008 at 2:30 pm |
  32. Bubba

    This is just funny to me! I mean, lets consider ALL the facts...People complained about all the red tape and how long it took FEMA to distribute relief. Now we are saying more checks and balances were needed. We are upset because estimates were done quickly and contained errors? It obviously isn't the peoples fault!! I mean not only did they live in houses that they had no insurance on, but they signed a document agreeing to the estimate and agreeing to pay back any overage. How many people, honestly, that are reading this would ever sign anything without reading it?!?! Can we please start enforcing a little something called PERSONAL RESPONSIBILITY? I mean, the guy in the story, John Montegut, spent about $100,000 fixing up his home, but only 20,000 of that was from the state grant. So he somehow came up with $80,000 to fix up his house, but can't come up with 13,000 to pay the state back!! And I would be willing to bet that when that 20,000 dollar check came, it included some sort of disclosure or a copy of the estimate with it!! But nobody complained about the over estimates until it was time to pay the money back!! This can be summarized by saying, "People are mad that they have to payback money that was not rightfully theirs!!!"

    April 29, 2008 at 2:30 pm |
  33. Alex

    Thats just wrong...

    April 29, 2008 at 2:29 pm |
  34. Dave

    Cindy – I don't see how this is NOLA's govnt fault..sounds like ICF dropped the ball so they should cover the costs. Kinda makes you wonder how they received a big RAISE after 3 years of making a mess out of the rebuilding funding!!

    April 29, 2008 at 2:29 pm |
  35. Brian from Texas

    The government should have never given these people money to begin with. New Orleans is a city below sea level and should be allowed to go under water and all property should be abandoned. Tax payers should not have to pay for these idiots to repair their homes;.

    April 29, 2008 at 2:29 pm |
  36. Katie

    I hate to even read stories like this. My family was living in new orleans for 8 years when hurricane katrina hit. I have had lots of hope thinking maybe some day we could move back there. I dont ever see that happening. It's just nightmare after nightmare with the government.

    April 29, 2008 at 2:28 pm |
  37. Helen

    I think this is DISGUSTING but am not surprised, this is what happens to people in this great country,

    April 29, 2008 at 2:28 pm |
  38. Kevin

    I for one am tired of the whole whoa is me attitude these people have down there. What happened was a bad thing. So was Andrew and Hugo. You didn't hear about all of the bad things after these storms. I believe that the people of NO believed that they are owed something and would say anything to keep this money.

    April 29, 2008 at 2:26 pm |
  39. John

    Utterly amazing...but not surprising. Does ICF have any relation to Haliburton or the mortgage industry? Hmmph.

    April 29, 2008 at 2:26 pm |
  40. lovable liberal

    Seems as though the first place to look for give-backs ought to be the profits of ICF, which made the mistakes. No way should the same company be in charge of the "compassionate" process of reconciling amounts. That's the definition of conflict of interest.

    April 29, 2008 at 2:26 pm |
  41. Martin Smith

    Isn't it illegal to make someone sign a contract without reading it first?

    There must be a US constitutional ammendment protecting citizens from this sort of thing?

    Martin Smith, Kelowna, BC

    April 29, 2008 at 2:25 pm |
  42. J. Williams

    Old news.

    We can spend billions a week in a country halfway around the world, but we can't spend a fraction of that on our own.

    Who was it that said that we can judge a society based on how it treats its worse-off?

    April 29, 2008 at 2:25 pm |
  43. Scott Slidell

    One of your bloggers asked "how does one ever prepare?" One prepares by being responsible and buying flood insurance in an area that averages 2 feet below sea level and storm insurance in a city that has a Cat 3 or greater pass every 5 years (average over last 40 years). Those of us that were responsible and have insurance are now paying an extra 10% per year to subsidize those that don't want to be responsible. The government did it's job and more than helped with displacement costs and assisting to cover the deductibles. Since when is the Federal Government supposed to replace personal accountability? If you can't afford to responsibly own a home, you can't afford to own a home.

    April 29, 2008 at 2:24 pm |
  44. PTC

    I just moved from that area and things are getting better in some places, but NOLA will never be the same and if companies and government keep beating them down (financially) how will they ever come back?
    "But he and every other homeowner who got a grant signed a contract with ICF agreeing to pay money back if overpayments were later discovered. Now remember, he wasn’t even allowed to see his paperwork." I just have one question about that part ....how can he sign a contract when he hasn't even been allowed to see the paperwork?....don't you have to sign on the paper, and shouldn't the contract contain all the informational paperwork (supporting documents). I think that ICF should be held responsible for a vast majority of the overpayments! It isn't the homeowner's responsibility to estimate how much the repairs were going to be...it was ICF's. If the state/federal government needs the money back they should go after the one that is responsible! off the track, but still relevent... why would ICF include a clause like that in the contract if it hadn't intentionally planned on overestimating the repairs?

    April 29, 2008 at 2:23 pm |
  45. Kristien

    Why doesn't the state just fine ICF the entire $2 Million? I personally wouldn't sign anything I had never seen, but I can understand these residents must have been desperate to get their lives back in order.

    I can understand if the repairs were less than the money they received, that they would need to return the remaining amount....However, it looks like the grants did not even come close to the actual cost of repairs. It sounds like these folks didn't get enough..opposite of what is being claimed. But that is often the case.

    My parent's house was flooded (to a much lesser extent) back in 1998 from El Nino (in California). All I know is the cost to repair the home far outweighed any benefits they received from FEMA or from flood insurance. Luckily for them, they had savings to fall back on, but it sure put a big dent in it.

    Good luck to the residents of New Orleans. Louisina and the Federal Government should be ashamed.

    April 29, 2008 at 2:23 pm |
  46. Karmen Barnes

    This is absolutely ludicrous. You tell someone that they will have to pay you back if you overestimate their funds, but you don't let them see your estimate???? Isn't the government tired of screwing the people of New Orleans? At what point are they ashamed of themselves?

    April 29, 2008 at 2:22 pm |
  47. Jesse

    just like when wal-mart sued their own disabled employee for her money she was using to take care of herself after a terrible accident

    find the politician behind this and hold him responsible CNN!

    you do great work but dont give up on reporting the tragedy, investigate it and hold thos respsonislbe accountable!

    Jesse Akers

    April 29, 2008 at 2:22 pm |
  48. john atl, ga

    The point is "They gave him money..." This sounds like what happens when you wait for government to bail you out rather than buying flood and homeowners insurance. Visit areas outside of New Orleans and you will see a tremendous quantity of homes going up, or already up! The difference? They took care of themselves rather than waiting for the taxpayer to bail them out. Remember, "they" is not the government. "They" are those that buy insurance and pay the taxes to bail out those who will not care for themselves.

    April 29, 2008 at 2:22 pm |
  49. djc -Baton Rouge, La from N.O. now

    Hold on Cindy! don't say NOLA is at fault, its the federal government not the city!
    Get your comments straight!

    April 29, 2008 at 2:22 pm |
  50. Martin Smith

    What's amazing (but not totally unexpected) is that the multi millionaires who were affected by last year's wildfires in California got their money right away to fix up their houses and had emergency services on the ground within hours, but the poor people of New Orleans who can least afford it are still living in FEMA trailers, and had to wait FIVE DAYS for FEMA to deliver water to the Superdome.

    FEMA claims that they "learnt lessons" from the way they handled New Orleans. Why aren't those lessons they learned being applied in New Orleans, but are being applied in other areas of the country.

    Of course, the government claims that the fact that most of the residents affected in New Orleans are African Americans has absolutely nothing to do with their decisions.

    Martin Smith, Kelowna, BC, Canada

    April 29, 2008 at 2:22 pm |
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