White House disavows Puerto Rico contract with Whitefish Energy

Last Updated Oct 27, 2017 5:21 PM EDT

WASHINGTON -- The White House said Friday the federal government had no involvement in the decision to award a $300 million contract to help restore Puerto Rico's power grid to a tiny Montana company in Interior Secretary Ryan Zinke's hometown. 

Trump spokeswoman Sarah Huckabee Sanders said the president had asked Zinke about the contract and that the cabinet secretary said he had nothing to do with it. 

"He had no role in that contract," Sanders said of Zinke. "This was a state and local decision made by the Puerto Rican authorities and not the federal government."

The administration is seeking to distance itself from the issue amid a growing number of investigations and a bipartisan chorus of criticism from Capitol Hill. 

In a statement Friday, Zinke said he "had absolutely nothing to do with Whitefish Energy receiving a contract in Puerto Rico." He called the allegations "completely baseless."

"I welcome all investigations into the allegations, and encourage the Inspector General to investigate this matter fully," Zinke said.

The Department of Homeland Security's inspector general, an agency watchdog, confirmed Friday that federal auditors will review the Whitefish contract. 

"As part of their standard procedure, they will conduct vetting to look for the presence of any inappropriate relationships," said Arlen Morales, a spokeswoman for the inspector general's office.

A pick up from Montana-based Whitefish Energy Holdings is parked as workers help fix the island's power grid, damaged during Hurricane Maria in September, in Manati

A pick up from Montana-based Whitefish Energy Holdings is parked as workers help fix the island's power grid, damaged during Hurricane Maria in September, in Manati, Puerto Rico, Oct. 25, 2017.

ALVIN BAEZ / REUTERS

The Federal Emergency Management Agency (FEMA) said in a statement earlier Friday that any language in the controversial contract saying the agency approved of the deal with Whitefish Energy Holdings is inaccurate. The contract, which was awarded by PREPA, said the utility would not pay costs unallowable under FEMA grants, but it also said, "The federal government is not a party to this contract." 

FEMA said it has not approved any reimbursement requests from the utility for money to cover ongoing repairs to the island's power grid following Hurricane Maria

The agency said its initial review raised significant concerns about how Whitefish got the deal and whether the contracted prices were reasonable. The 2-year-old company had just two full-time employees when the storm hit Sept. 20. It has since hired more than 300 workers. 

The Interior Department has denied that Zinke, a former Montana congressman, played any role in the contract award. Zinke knows Whitefish CEO Andy Techmanski "because they both live in a small town where everyone knows everyone," a spokeswoman said. Zinke's son had a summer job at a Whitefish construction site. 

Asked if Zinke had any involvement in the contract, a spokesman for Whitefish said "absolutely not."

Multiple congressional committees have launched investigations into the deal, the terms of which have triggered questions from both Republicans and Democrats. 

Sen. Claire McCaskill of Missouri, senior Democrat on the Senate Homeland Security and Governmental Affairs Committee, said the Whitefish contract "raises every red flag in the book." The homeland security panel will hold a hearing on the issue next week, and officials should be ready to answer tough questions, the senator said. 

Democrats also raised questions about the role of HBC Investments, a key financial backer of Whitefish Energy. The Dallas-based company's founder and general partner, Joe Colonnetta, has contributed thousands of dollars to Trump and other Republicans, including Energy Secretary Rick Perry, a former Texas governor, and Texas Sens. John Cornyn and Ted Cruz. Colonnetta also gave to President Trump's inauguration. 

A Whitefish spokesman called Colonnetta's political donations "irrelevant." ''If one of the investors supported President Trump, that has nothing to do with anything," spokesman Chris Chiames said.

PREPA director Ricardo Ramos has praised the work performed by Whitefish so far, saying the company's was the only offer the utility received that did not require a down payment. The power company is $9 billion in debt and was already struggling to provide service amid ongoing power outages before hurricanes Irma and Maria hit last month. 

A federal control board that oversees Puerto Rico's finances said this week it had appointed a former military officer to oversee the work. Retired Air Force Col. Noel Zamot will be responsible for speeding up reconstruction efforts and overseeing coordination with the board, Puerto Rico's government and the federal government. 

It was not immediately clear whether Zamot would have the authority to void Whitefish's contract, although under the contract the utility can suspend or terminate the contract "for any or no reason" after providing written notice to Whitefish and compensating the company for actual expenses. 

Board spokesman Jose Luis Cedeno did not return calls or messages Friday from The Associated Press seeking comment. Power company spokesman Carlos Monroig also did not respond to requests for comment. 

About 75 percent of the U.S. territory remains without power more than a month after the Category 4 storm made landfall. 

Zamot told Puerto Rico radio station WKAQ 580 on Friday that once a judge confirms him as chief transformation officer of Puerto Rico's Electric Power Authority, he will review all of the agency's contracts. 

"We're going to be incredibly transparent," he said, declining further comment on any issues related to Whitefish.