Louisiana Voice

By Robert Burns

Guest Columnist

It has been over a decade since Hurricane Katrina made landfall on August 29, 2005. When the levees broke, much of the lower sections of New Orleans flooded. Many people were left without any form of housing because their previous homes had been inundated with water.

That’s when the Federal Government (FEMA) sprang into action. Recognizing the massive need for housing assistance, FEMA ordered an astounding 120,000 travel trailers, at a cost of $2.7 billion, from 60 different suppliers. For the next several years, these FEMA trailers would serve as temporary homes for the tens of thousands of residents who’d lost their homes as they rebuilt or, in some cases, opted to relocate and be bought out by FEMA.

Soon after, many residents complained of temporary memory loss, irritating sore throats, sneezing episodes, and similar ailments. The culprit was determined to be formaldehyde, which the National Institute for Health assessed prolonged exposure at rates exceeding eight parts-per billion (ppb) to be a known carcinogenic risk. Formaldehyde testing began to be conducted by the Center for Disease Control, and those results showed average formaldehyde levels of 40 ppb, or more than five times the level considered safe for extended exposure. Some tests revealed readings 40 times the acceptable level. Concerned about the health risks to the public, FEMA suspended sales of the trailers to the public in July of 2007, almost two years after Katrina made landfall. That moratorium expired on January 1, 2010.

FEMA then had a problem on its hands. Incurring storage costs of $130 million a month, the agency needed to unburden itself of its cumbersome inventory of unoccupied trailers. FEMA opted to hand them off to the General Services Administration which, in turn, auctioned them off in massive quantities per lot for a total price of $133 million, approximately seven cents on the dollar for what FEMA originally paid for the trailers. Buyers purchased the trailers for just under $1,000 per unit on average.

Henderson Auctions, located in Livingston, Louisiana, purchased approximately 23,000 of the FEMA trailers, or about one-sixth of all the trailers deployed. To facilitate the acquisition, the principals of Henderson Auctions, Jeff Henderson and Janet Henderson Cagley, the two children of Henderson Auctions’ founder Marvin Henderson, formed a company called the Lottie Group.

Lottie served to pool the resources of several investors to purchase the trailers for the purpose of liquidating them individually to consumers through successive auctions of hundreds at a time since the ban on sales to the public had been lifted. Accomplishing that turned out to be a tricky proposition, however, when the FDA announced that anyone caught reselling contaminated FEMA trailers could face criminal prosecution. The reselling process was also problematic because some states, Mississippi in particular, strictly forbade the resell of the FEMA trailers due to health concerns over the formaldehyde issue.

The first obstacle faced by Lottie and Henderson Auctions was where to store the 23,000 trailers. That problem was solved by the purchase of the old Evangeline Downs racetrack in Carencro in Lafayette Parish. An entity controlled by Jeff Henderson and Janet Henderson Cagley, Evangeline Properties, LLC, recently sold the old Evangeline Downs property for $11 million in a transaction in which their father, Marvin, notarized the Act of Sale for the sellers when, as a convicted felon, he is ineligible to hold a notary license.

The Louisiana Auctioneer Licensing Board (LALB) recently addressed the issue of Henderson’s apparent illegal notarizations but concluded that its hands are tied. The matter has been referred (by the Louisiana Secretary of State) to Livingston Parish District Attorney Scott Perrilloux for appropriate action.

As part of the sales agreements between GSA and buyers such as Lottie/Henderson, GSA insisted upon agreements being signed that the trailers would not be sold for housing purposes but rather only for “storage or recreational” use.

GSA placed stickers on the trailers in all caps declaring the trailers were “NOT TO BE USED FOR HOUSING.” Lottie/Henderson began conducting a series of auctions entailing several hundred trailers at each auction and, despite the fact that representations were made that the trailers were being sold “as is, where is” with all faults and that they should only be purchased for recreational uses such as hunting camps, it didn’t stop many environmentalist bloggers fromlambasting the auctions as well as criticizing the local media for failing to even point out the potential health risks associated with purchasing the trailers.

Selling the FEMA trailers to the public turned out to be a task that took more than three years for Lottie/Henderson to accomplish. Along the way, and in an effort to expand the geographic marketing to consumers in states beyond the Gulf Coast, Henderson reached out to some fellow auctioneers to sell many of the trailers. Once, Charles Easler of South Carolina, a long-time friend of Marvin Henderson, agreed to assist in the effort by accepting over 300 trailers to be auctioned from his facility in South Carolina. That episode, however, didn’t turn out as initially planned as Henderson filed suit against Easler on December 21, 2015 alleging that his one-time friend failed to make payments or account for approximately 60 of those trailers. Easler denied all of Henderson’s allegations.

Meanwhile, amidst all the banking transactions entailed with the trailer sales, Lottie/Henderson found itself in the crosshairs of its own bank, First Guaranty Bank (FGB) of Hammond.  Lottie/Henderson sued, claiming that FGB officials failed to adequately safeguard against their account usernames and passwords from being obtained to execute nearly $1 million in allegedly fraudulent wire transfers. The dates, amounts, and beneficiaries of the alleged fraudulent transfers are summarized in the following table:

* JAH is a limited liability corporation doing business as Henderson Auctions.

The lawsuit was not filed until September 22, 2014, well beyond the one-year prescription period to file suit since the final alleged loss was on October 3, 2011. FGB attorneys openly wondered the same, asserting prescription in their answer as one of 27 itemized defenses to the lawsuit. FGB attorneys also claimed that “Plaintiffs are the cause of any loss they have suffered due to their negligence, inattention, failure to investigate, lack of review, lack of management, and/or lack of supervision of the operations of JAH Enterprises, Lottie Group, LLC, including the actions of its members.”

So, where did all these FEMA trailers end up and how are they being used? Environmentalist journalist Heather Smith revealed in her documentary that a good number of these trailers have managed to find their way to North Dakota where the trailers are being routinely utilized as permanent housing for cashiers, fry cooks, and others who have become transplants in North Dakota. Several trailer tenants interviewed said they were lured to North Dakota by the prospect of $17-per-hour jobs as Wal-Mart cashiers (vs. $7-per-hour in their home states). One of the tenants acknowledged that the $1,200 rent on his FEMA trailer is high, but added that it’s the only housing he can afford where costs are so high because of the oil boom in North Dakota.

The VIN of one tenant’s travel trailer was traced in order to learn its origin. It was one of the 23,000 trailers purchased by Henderson Auctions.

The trailer of one tenant was tested and the occupant was told that his formaldehyde count is 30 ppb, or nearly four times the level considered safe for extended exposure. Tenants were encouraged to vent their units clean air from outdoors to dilute the concentrations of formaldehyde—hardly an option for the frigid North Dakota winter months. Shapiro questioned if the $17 per hour wage was worth the health risks to which these FEMA trailer tenants are unwittingly exposing themselves.

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