State report criticizes LIPA for consulting fees

State report criticizes LIPA for consulting fees

Posted: Updated:
Former LIPA COO Michael Hervey Former LIPA COO Michael Hervey
NEW YORK (MYFOXNY) -

The Long Island Power Authority, which was heavily criticized for its poor response to Hurricane Sandy, is facing new scrutiny.

More than 90 percent of LIPA's 1.1 million customers on Long Island lost power after Superstorm Sandy and didn't get it back for weeks. Now a new report criticizes the utility giant for its poor performance.

A scathing report by the Moreland Commission, which is a panel appointed by Gov. Andrew Cuomo, pointed out why LIPA performed so poorly after several major storms.

Among their discoveries, while many LIPA customers were paying some of the highest utility rates in the country, outside consultants were raking in up to $500 an hour in fees totaling $65 million over four years. One even billed $6,800 for a Manhattan hotel room and another for a trip to Puerto Rico, complete with a seaplane ride.

"What stands out here is the absurdity some of the charges these outside contractors charge the utility. Just ridiculous stuff that normally other utilities would be picked up by audit and monitoring – but they were not picked up by LIPA," said Matthew Cordaro, LIPA Watchdog Ph.D.

Determining who was involved and when may prove difficult says the panel. They found what they call a disturbing revolving door between the highly paid consulting company Navigant and LIPA.

One example is LIPA's COO during Sandy was Michael Hervey. Since January, Hervey's been working for Navigant.

"That's not unusual actually," said Cordaro. "Through the country, as execs wind down their careers at utilities, many times they will join outside contractors."  

Those are just some of the alarming revelations in the report but there are others. The panel found that LIPA trustees spent a mere 39 seconds discussing storm preps four days before Sandy and that LIPA ratepayers have been footing the bill for the high, unexplained consultant payments and accounting irregularities to the tune of $15 million in overcharges.

"Well, it's obviously dishonest and as taxpayers that we all are, whether its consumer or real estate taxes, we want the officials that are heading everything to be as honest as possible – so it's very discouraging," said one Long Island resident.  

The commission is turning over its finding to federal prosecutors to see if criminal charges are warranted.  Gov. Cuomo is also calling for prosecutors to take a very close look at what they've uncovered.

Both LIPA and Navigant Consulting have refused to comment on the Moreland Commission report.

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