Green Articles
Port officials bypass ethics rule
But special exclusion could be in danger
By Jen DeGregorio : Times-Picayune : March 9, 2008
Thomas Westfeldt, one of seven commissioners on the Dock Board of the Port of New Orleans, sat out when his colleagues voted recently to begin designing a $30.5 million cargo facility for a struggling local shipping company.
That is because Westfeldt owns about 10 percent of the company, New Orleans Cold Storage, a poultry exporting firm his grandfather helped found more than a century ago. Westfeldt's family members also own shares, although Westfeldt declined to say which relatives or how much stake they hold.
Such a conflict of interest could bar Westfeldt from serving on another state board or commission, whose members cannot do business with the boards on which they sit. But the Port of New Orleans enjoys a unique exception to the state ethics code that lets commissioners profit directly from port business, as long as they recuse themselves from voting on matters that present a conflict. Proponents argue that the looser restriction helps the port lure better-qualified board members at a time when New Orleans faces stiff competition from other Gulf State cargo hubs.
But with Baton Rouge possessed by the spirit of reform, critics wonder how much longer the port can maintain its special status. The Dock Board exemption survived a recent special legislative session that tightened ethics standards for lawmakers and state governing bodies. However, legislators may seek to rein in the port when the regular session begins March 31.
"It's going to be an uphill battle for the port to keep the exemption," said House Speaker Jim Tucker, R-Algiers. "I think in this new environment, it is a problem to have members serving on the board who have direct business relationships with the entity that they serve on."
Gov. Bobby Jindal will also have his eye on the port and a host of other exceptions to the ethics code that the special session failed to address, said spokeswoman Melissa Sellers. For example, members of housing authorities and certain parish planning or zoning commissions can recuse themselves on matters that may present a conflict of interest, although they are barred from directly contracting with a board on which they sit.
It is unclear whether Dock Board members would be asked to step down if the loophole is closed. The state Board of Ethics reviews cases on an individual basis, said Kathleen Allen, an attorney for the board. Regardless, port officials may put up a fight against efforts to change the group's standing. They say they see no problem with deals like the one for New Orleans Cold Storage.
"My hope is that we are allowed to maintain our status," said Dock Board Chairman H. Daniel Hughes. "If you take that away . . . that would in my opinion put us at a competitive disadvantage."
Like Westfeldt, Hughes also does business with the port. His company, Dixie Machine Welding & Metal Works, leases the Andry Street Wharf.. Hughes recused himself when the board voted last July to approve the rental agreement between his company and the port.
Other Dock Board commissioners have strong ties to the maritime industry, although they deal less directly with the port than Westfeldt or Hughes. Commissioner James Campbell is the president of the New Orleans chapter of the International Longshoreman's Association, the union that represents stevedores who work for many of the terminal operators that lease port docks.
A.J. Gibbs heads the Crescent City Port Pilots' Association, an organization comprising the river pilots commissioned by the state to escort ships between New Orleans and Pilottown in Plaquemines Parish. Two lawyers and a banker also sit on the board.
Past Dock Board commissioners have also had alliances with the port. Among the more prominent board members were Angus R. Cooper II, whose Cooper/T. Smith Corp. once provided stevedoring services for the port, and Donald T. "Boysie" Bollinger, whose company leased a shipyard along the Industrial Canal from the port.
The Dock Board governs all aspects of port business, including overseeing leases, approving expenditures greater than $25,000 and hiring the agency's top executive: the president and CEO. Such a hefty task is best left to those who know the inner workings of the marine industry, said Gary P. LaGrange, president and CEO of the Port of New Orleans.
"It makes the port much more effective," LaGrange said.
Yet some wonder whether expertise should come at the expense of the board's independence. The state's other 30 public ports must abide by ethics rules and were not granted the same exemption as the Port of New Orleans.
"The code of ethics doesn't seem to hamper the other (port) boards," said Joseph Accardo, executive director of the Ports Association of Louisiana. "The same standard should apply to everyone."
Rules changed in '80s
The push to loosen ethics requirements for the Port of New Orleans began in early 1985, when Dock Board President Alvin Bertel Jr. resigned after the state ethics commission threatened to investigate him. Bertel was the head of Hayes/Dockside Inc., a warehousing company that worked with the port.
Bertel's resignation came just a month before his five-year term expired and months after the resignation of his predecessor, Joseph Domino, a West Bank businessman who had also come under the scrutiny of the ethics commission.
Critics said the resignations were a sign that state ethics laws, which had been strengthened in 1980, had gone too far. Sen. Francis Lauricella, D-Harahan, sparked a movement to ease requirements for the Dock Board.
"We are precluding the experience of people needed to operate the Dock Board for the good of the citizens of New Orleans," he said at the time.
Two months after making his statement, Lauricella received backup from a legislative report that stated Louisiana ports had lost market share to ports in other Gulf states. To stay competitive, the report recommended relaxing ethics laws to allow maritime leaders on port authority boards. With the document in hand, and some political wrangling, Lauricella persuaded the Legislature to grant the exemption for the Dock Board.
But there were naysayers. Accardo, the ports association director who was serving in the Legislature at the time, voted against the bill, which he thought set "a very bad precedent."
"I just didn't want a different standard for different boards," Accardo said.
Other port boards were not afforded the same luxury, but sticking to state ethics rules has not hurt them, Accardo said. It is relatively easy to find board members with maritime expertise who do not engage directly in port business, he said.
The Port of South Louisiana has managed to remain the top tonnage port in the United States, all while keeping its seven-member board free of conflicts, said Executive Director Joel Chaisson.
"From the standpoint of the Port of South Louisiana, it's an easy requirement," he said.
While Accardo questions the exception for the Port of New Orleans, he said he has never questioned the port's moral compass.
"All of the people who have served on the board have been good businesspeople with good backgrounds," he said. "I have no reason to believe that any of them ever did anything wrong."
Eugene Schreiber, managing director of the World Trade Center of New Orleans, said his organization supported the port exemption in 1985. A rigorous nomination process and term limits for board members lessens the opportunity for abuse of power, he said.
The Port of New Orleans board consists of seven members -- four from Orleans Parish, two from Jefferson Parish and one from St. Bernard Parish -- who each serve an unsalaried five-year term. The governor has appointment power but must select from a list of nominees generated by more than a dozen civic organizations, including the World Trade Center, Greater New Orleans Inc. and the New Orleans Board of Trade.
But Schreiber admits that "times have changed," noting the push for more transparency in government.
In 2004, Tucker and Rep. Karen Carter Peterson, D-New Orleans, filed bills that sought to overturn the port's special status. The bills died, but Tucker said he thinks such a similar push could survive this year.
Special treatment claimed
Some port transactions could raise eyebrows when viewed in light of standards for other state boards and commissions. Westfeldt's connection to New Orleans Cold Storage, in particular, strikes even Dock Board commissioners as a tricky situation.
"Make no mistake, that is a conflict of interest," said Hughes, the board chairman.
But New Orleans Cold Storage is one of the port's oldest and most important tenants and would receive assistance regardless of Westfeldt's board membership, port officials say.
"The importance of New Orleans Cold Storage goes back pre-Hurricane Katrina, pre-Tommy Westfeldt," Hughes said.
The 2005 storm caused hardship for many port tenants, some of whom say they were given short shrift while New Orleans Cold Storage received favorable treatment.
"We've gotten no help," said Joel Dupre, CEO of Southern Scrap Material Co., a metal recycler and scrap dealer located along the Industrial Canal in eastern New Orleans.
The hurricane blocked the canal's main shipping artery, the Mississippi River-Gulf Outlet, making it difficult for Southern Scrap to bring in the old ships it disassembles at its yard. Dupre wants to relocate to a riverfront wharf, but he said port officials have not supported his plans. He plans to move the shipbreaking side of his operation out of the city and is considering relocating the rest of his business as well.
"New Orleans Cold Storage got state money that we never had access to," Dupre said. "It just seems that the port should have been pitching for all of their tenants that way."
The port has lobbied hard for New Orleans Cold Storage since Katrina, which wrecked cargo facilities along the Industrial Canal where the company operates. In 2006, the Legislature approved $30.5 million to build the company a new cargo facility at Gov. Nicholls Street. The port also subsidized rent for New Orleans Cold Storage between February 2006 and July 2007, at which point the state began paying the subsidy. A clause in the port's lease with New Orleans Cold Storage promises to reimburse the company in the event that it cannot move cargo at its Industrial Canal terminal, said port spokesman Chris Bonura.
Katrina's winds and waters damaged the port's Jourdan Road container terminal, where the exporter loads giant, metal boxes full of frozen chicken onto vessels for shipment overseas. About 50 million pounds of chicken were also left to rot for more than a month inside the company's warehouses, which required a hazardous materials team cleanup.
The MR-GO blockage has forced New Orleans Cold Storage to truck chicken blast-frozen at Jourdan Road to cargo ships docked along the river at Poland Avenue. The port agreed to subsidize the company's rent to mitigate the expense.
New Orleans Cold Storage would have no incentive to stay in New Orleans without the promise of the new blast freezer and cargo facility at Gov. Nicholls Street Wharf, port officials say. And while the facility is meant to keep an important port tenant in the city, officials say it is also an investment in port infrastructure. The facility will technically belong to the port, and New Orleans Cold Storage will lease it. Lease terms have not been disclosed.
The port did offer assistance to all of its tenants in the months after the storm, offering to freeze rent payments for companies that agreed to extend their leases for a period that would recoup payments lost during the freeze.
Still, critics say it is troublesome that a company co-owned by a board member has benefited so heavily from the port's largesse while other businesses, such as Southern Scrap, have had to leave New Orleans due to post-storm financial difficulties.
International Shipholding Corp. moved its CG Railway business to Mobile, Ala. APM Terminals vacated its France Road lease, shifting the Maersk cargo that it once handled to the port's riverfront Napoleon Avenue facility. Bollinger Shipyards has stopped work at its shipbuilding and conversion yard on the Industrial Canal and plans to officially move out by the end of the year.
"A lot of people would argue . . . that by recusing yourself, you're still on the board, you still have access," Schreiber said.
Westfeldt, who joined the Dock Board in August of 2006, said he steps out of the room when board members begin discussing plans for New Orleans Cold Storage. Records also indicate that he has recused himself from voting on other matters involving the company.
"I always recuse myself from any votes or anything," said Westfeldt.
Other Dock Board members have recused themselves from voting on a variety of measures, sometimes due to direct conflicts and other times due to looser links to deals before the board.
Gibbs recused himself twice He did not vote on a measure last February regarding the port's lease with Lake Pontchartrain Properties, a company owned by a fellow river pilot. A year earlier, records indicate that Gibbs recused himself on a resolution to approve a lease with Coastal Cargo Company Inc. for a Napoleon Avenue wharf. Gibbs, however, does not remember recusing himself in that instance and said the record of his recusal was an "error."
Other members have had to exercise their right of recusal more frequently. Campbell, for example, has recused himself at least 14 times since he was appointed to the board in November of 2004. As president of the longshoreman's association, Campbell typically recused himself when the board considered matters involving terminal operators, which require stevedoring services.
"The responsibility bears on all of us to make sure this is clean and aboveboard," Campbell said.
Westfeldt's connection to New Orleans Cold Storage represents a more obvious conflict between the businessman's personal interests and those of the Port of New Orleans. But LaGrange, the port's executive director, said the company needs special attention because it employs hundreds of people and brings a significant amount of cargo through the city.
"We're doing what we statutorily were designated to do: retaining jobs," LaGrange said.
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Jen DeGregorio can be reached at jdegregorio@timespicayune.com or (504) 826-3495.