Feds eye LIPA ties to consulting firm

LIPA crews work on a pole leaning over LIPA crews work on a pole leaning over the westbound LIRR tracks just west of the Hickville station in Hicksville. (Jan. 31, 2013) Photo Credit: Howard Schnapp

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Federal prosecutors are looking into the findings of the state Moreland Commission that LIPA paid exorbitant fees and expenses to a widely used utility consulting firm, LIPA officials said Thursday.

Long Island Power Authority spokesman Mark Gross said the authority was "fully cooperating" with prosecutors. He added, "No subpoenas have been issued." The Moreland Commission had referred its findings to the U.S. attorney last month.

A special committee of the LIPA board of trustees that is examining internal practices, invoices and findings of the commission met Wednesday at LIPA headquarters and made reference to an investigation as the group moved to a nonpublic executive session. LIPA chairman Larry Waldman said the board was moving to the private session to "discuss the federal investigation status" and the suspension of LIPA's contract with Navigant Consulting, the Chicago firm at the center of the Moreland Commission findings.

Zugiel Soto, a spokeswoman for the U.S. attorney's office in Brooklyn, said Thursday, "We cannot confirm, deny, or comment at the moment."

In its report last month, the Moreland Commission, empaneled by Gov. Andrew M. Cuomo, found that LIPA "lacks internal controls for reviewing consultant charges, which has led to potential overbilling, improper expensing and other questionable charges passed on to ratepayers," among a laundry listed of other allegations.

Among the charges: one Navigant executive billed LIPA for more than $4.5 million over a five-year period -- at $300 to $500 an hour -- while expenses such as executive-level travel and costly hotel stays were billed to LIPA.

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During the LIPA committee meeting, LIPA staffers discussed a range of new measures aimed at monitoring possible overbilling and employee conflict issues. But they also defended some of the practices. One Navigant executive's use of a sea plane to fly among Puerto Rican islands was a legitimate expense, a LIPA lawyer said, because the person was needed in Washington, D.C., to testify on LIPA's behalf before the Federal Regulatory Energy Commission.

"This was not an exorbitant expense," LIPA general counsel Lynda Nicolino said of the $105 for a "puddle-jumper" flight from Isla Grande to San Juan, Puerto Rico. "It wasn't an instance where LIPA customers paid for his resort hotel vacation."

Nicolino also defended against the charges of a "revolving door" discussed in the Moreland Commission report in which seven Navigant staffers went to work for LIPA and two from LIPA went to Navigant, including Mike Hervey, former LIPA chief operating officer, who is now a Navigant consultant.

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"We do not have any reason to believe that Mike Hervey was ever working on any LIPA accounts," for Navigant, she said.

A Navigant spokeswoman wasn't immediately available for comment, but in a recent statement the company said its rates to LIPA were properly bid and approved.

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