Allegations of overbilling and other improper charges by consultants to the Long Island Power Authority added an unsettling endnote to LIPA's controversial history as state-mandated reforms are set to take effect, observers said Sunday.
The Moreland Commission, an investigative body empaneled by Gov. Andrew M. Cuomo to examine utility performance after superstorm Sandy, on Saturday said it found instances of exorbitant charges and a "revolving door" between LIPA and its top consultant, Navigant Consulting Inc. The commission referred its findings to the U.S. attorney's office for the Eastern District for investigation.
Lawmakers, LIPA trustees and others said the allegations and possible criminal probe highlighted the need for increased oversight and the lessened role for LIPA that was codified in a new state law passed last week.
"It certainly reinforces the premise of the bill, including the need for additional oversight and more responsible behavior on the part of our electric supplier," said Assemb. Steven Englebright (D-Setauket), who voted for the bill. "A series of new abuses from LIPA tends to underscore the premise that we needed positive change."
Sen. Charles Schumer (D-N.Y.) said Sunday, "If laws were broken or wrong was done, heads should roll, plain and simple. Every excess dollar paid to a contractor is an additional dollar out of the pocket of the ratepayer and taxpayer, and that is unacceptable."
LIPA chairman Lawrence Waldman said the authority would cooperate with the probe.
"Obviously LIPA will fully and completely cooperate with any investigations to get to the bottom of any and all of these matters," Waldman said Sunday. He added that the authority has already taken actions to reduce the number of consultants it uses, "but any additional suggestions [offered by the Moreland Commission], we'll take."
The Moreland Commission found that nearly half of LIPA's budget for consultants between 2008 and 2011 -- about $28 million -- went to Chicago-based Navigant, which billed LIPA at rates as high as $300 to $500 an hour. One top-level Navigant managing director billed LIPA for $4.5 million between 2008 and 2012.
The commission also found that Navigant consultants billed LIPA for hotel rooms well above the state cap of $295 a day and charged LIPA for an air club membership, an engineering license and expensive air travel, including a trip to Puerto Rico in a chartered seaplane that the panel said didn't appear to be justified.
Calls to Navigant were not returned. A spokesman for the U.S. attorney's office in Brooklyn would not comment.
David Calone, a former prosecutor for the Eastern District and a former LIPA trustee, said the referral to federal prosecutors indicates the seriousness of the investigation.
"It means that they think there's a possibility of criminal activity," said Calone, who said he never met Navigant consultants during his tenure at LIPA.
Nassau County Executive Edward Mangano said, "I support the Moreland Commission's efforts to protect ratepayers and root out waste within the utility." Suffolk County Executive Steve Bellone was unavailable for comment, according to his spokeswoman.
Current LIPA trustee Matthew Cordaro said the authority's lack of utility experience has long forced it to rely on consultants to help run the business, and run the risk of conflicts.
But Cordaro took issue with the timing of the release of the commission's report -- one day after Cuomo's bill to overhaul LIPA was approved by the State Legislature.
"One thing that troubles me today is why it took so long for the state to release these findings, especially since the governor had on his desk for many months a report from the state Inspector General on LIPA," he said.
Assemb. Al Graf (R-Holbrook) said in an email that Long Island Association president Kevin Law, who appeared with Cuomo when his LIPA legislation was introduced in May, was chief executive at the utility during at least part of the time questions have been raised about Navigant contracts.
Law, who worked at LIPA from 2008 through 2010 and is not mentioned in the Moreland Commission report, didn't return a call and message seeking comment. A Cuomo spokesman declined to comment.
Michael Hervey, now a consulting director at Navigant, took on the interim chief executive role when Law departed in 2010. He also declined to comment.