Some Firms Hired in Katrina’s Wake Have Checkered Pasts

Some Firms Hired in Katrina’s Wake Have Checkered Pasts

Yochi J. Dreazen The Wall Street Journal, September 20th 2005

GoldStar EMS was on the ropes earlier this year, beset by legal problems. The Texas ambulance provider’s offices had been raided by the Federal Bureau of Investigation as part of a widening investigation into alleged Medicaid fraud. It faced a $1.3 million tax lien from the Internal Revenue Service. It had been forced to file for emergency bankruptcy protection to prevent the local tax assessors who had seized its airplane from also taking its helicopters. It had closed many of its offices across the state and fired two-thirds of its work force. Dozens of its ambulances sat idle in a parking lot in preparation for a fire sale. Then Hurricane Katrina tore through the Gulf Coast, and GoldStar’s fortunes began to change. Desperate to get ambulances into flood-ravaged areas of Louisiana, the Federal Emergency Management Agency put out a call for help. C. Henderson Consulting Inc., a small East Texas firm, bid for the work and signed a federal contract to provide up to 50 ambulances a day through the end of September at a total cost of $5.2 million…. The legal and financial problems had put GoldStar on life support until Katrina hit and its unused ambulances suddenly became a valuable resource. Under the terms of its deal with FEMA, Henderson Consulting is paid $3,100 a day for each ambulance and two-person crew, Mr. Rothberg says. Under the agreement between Henderson and GoldStar, the two companies split the profit on each ambulance equally, he says, allowing each company to net about $800 a vehicle. John C. Henderson, the owner of Henderson Consulting, says he knew about GoldStar’s troubles when he struck the deal but accepted the company’s assurances that they would be resolved in its bankruptcy proceedings. “Their legal and financial problems aren’t any concern of ours,” he says. Mr. Rothberg, meanwhile, says the company is proud of its work in Texas and hopes its initial monthlong subcontract will be extended. He defends the company’s right to win Katrina contracts. “We still live in America, and we’re still innocent until proven guilty,” he says.

Deborah Solomon contributed to this article. Write to Yochi J. Dreazen at yochi.dreazen@wsj.com.