Profiting from Katrina

Catastrophes can be profitable. Just ask those who have been rebuilding Iraq – such as Bechtel National, Fluor, and Halliburton -- after our government trashed the country to protect the US from non-existent WMDs. But that is old news.

What’s new is that the former FEMA director, Joseph Allbaugh, whose college roommate, Brownie, was so recently lauded for his performance as Allbaugh’s replacement by the current oval office occupant, is now a lobbyist for companies that have already won a heaping $700 million piece of the $62 billion Gulf Coast reconstruction pie.

After leaving FEMA in March 2003, Allbaugh, who managed the 2000 Bush-Cheney campaign, founded Allbaugh Co., a lobbying-consulting firm with many clients in the disaster-relief business, including:

• the KBR division of Halliburton (HAL); and
• the Shaw Group (SGR), a provider of engineering, design, construction, and maintenance services to government and the private sector.

These Allbaugh connections have paid off to the tune of $700 million – here’s how:

• Halliburton won a $500 million contract this week to rebuild naval and marine facilities destroyed by Katrina. Halliburton, who’s former CEO was recently heckled in New Orleans, has received $10.7 billion for its 2003 and 2004 work for rebuilding Iraq. HAL’s stock is up 75% since January 2001; and
• Shaw Group won two $100 million contracts this week to rebuild houses destroyed in the wake of Katrina. A director of Shaw Group, Charles Roemer, was governor of Louisiana from 1988 to 1992. Shaw Group’s stock has doubled in the last year.

Investors who bought into the W-Industrial Complex (WIC) index back in January 2001, which has since climbed 153% while the S&P 500 lost 8%, could have gone along for this administration’s special blend of corporate welfare. It may not be too late to get on board.