Former Commerce Secretary Thrasher, Governor’s Office trade barbs over RISE program

Photo courtesy of the West Virginia Governor’s Office Gov. Jim Justice, left, and former Commerce Secretary Woody Thrasher at a press conference in 2018.
CHARLESTON — It has been 11 months since Woody Thrasher, the former secretary of the West Virginia Department of Commerce, resigned at the request of Gov. Jim Justice. Now, the Republican candidate for governor is speaking out about the program that led to his ouster, while the Governor’s Office pushes back.
Thrasher sat down Thursday for his first interview regarding the RISE West Virginia disaster relief program since he resigned June 14, 2018.
“At the time, I did not make comment on that because I thought it was awfully important for the program to go forward because it impacted a thousand families or so,” Thrasher said at the offices of the engineering firm he started with his father in the 1980s.
“I did not want to be disruptive at the time of my dismissal over that program,” Thrasher said. “I was certainly upset with how it had been handled and felt at some point in time it would be important for me to set the story straight.”
Thrasher inherited RISE when he took office as commerce secretary Jan. 16, 2017. Parts of southern and central West Virginia were rocked by massive floods starting June 22, 2016, sweeping away homes, businesses and people across multiple counties.
On Oct. 28, 2016, the U.S. Department of Housing and Urban Development awarded the first of more than $149 million in Community Development Block Grant funds for disaster recovery — the first time West Virginia had received this kind of funding. The first award of $17 million became the seed that would become RISE West Virginia, managed by the department’s Development Office.
Under former Gov. Earl Ray Tomblin, former Commerce Secretary Keith Burdette requested emergency purchasing authority to accept bids for consulting companies to help the state develop an action plan for the funding to submit to HUD. The company would also need to help the state with guidance, design, and development on how to best use the funding. On Dec. 12, 2016, the state selected Horne LLP as the consulting firm to help RISE use the massive influx of federal dollars.
“That’s a lot of money, and it warranted me paying attention to it,” Thrasher said.
When Thrasher came into the Commerce Department for the first time, he was briefed on the divisions under his supervision, including the RISE program. Thrasher Engineering, the company the secretary ran before putting it in a blind trust to run Commerce, had years of experience dealing with block grant funding through HUD for water and sewer projects in cities and towns across West Virginia.
And the Commerce Department itself had never received more than a couple million dollars at a time for HUD projects. This was brand new territory for Thrasher and the Commerce staff at the time.
“It was brand new for everybody,” Thrasher said. “It was brand new for the Tomblin administration, brand new for my staff that was used to dealing with $20 million to $30 million dollars a year. Now they had an additional $150 million. I think that Gov. Tomblin and Keith Burdette were wise to get a consultant on board.”
Thrasher said he shared the concerns later brought up about the costs of some of the task orders, including a July 17, 2017, task order agreement with Horne for $17.5 million. According to Thrasher, the dollar amounts of those agreements were not to exceed the amount agreed to, meaning they could also be less.
According to a Legislative Audit of the RISE program released June 24, 2018, of the eight task order agreements between Commerce and Horne, six of the agreements were entered into illegally. State code requires contracts for more than $25,000 to go before the Purchasing Division and the Attorney General’s office for approval.
“I was satisfied with the fee structure,” Thrasher said. “It was not perfect. It was the first time we’ve ever done that in the State of West Virginia. I noticed some of the environmental reviews seemed to take a little bit longer. But I was overall very pleased with the progress that project was making. I felt like we were in the right direction.”
On Feb. 28, 2018, Horne and the State Development Office requested authorization from the Purchasing Division to make a change order to the contract with Horne, a request that was rejected on April 4. The Purchasing Division, and its reasoning for the rejection, said that Commerce was requesting a change order for work already completed, that the work in task order agreements one through eight were not defined, and that those task orders should have been competitively bid.
By April 4, the Development Office had been invoiced for $1.3 million by Horne and had already been paid $100,000.
“One of the things that came up during the course of sort of understanding that program was we recognized we needed to modify the agreements we had with Horne,” Thrasher said. “Those change orders were significantly large than the original contract. As an old-time engineer and contract manager when change orders come through, you raise a red flag.”
According to Thrasher, that’s when he reached out to the Department of Administration and the Division of Purchasing to review the change order. But the State Auditor’s Office determined that Feb. 28, 2018, was also the start of an operational pause placed the RISE program while it reviewed the Horne contracts.
“These were not problems that have occurred. They were ‘let’s make sure we have this stuff in the right order going forward,'” Thrasher said. “It wasn’t like any money had been spent or any wrongdoing had taken place. We have very stringent purchasing requirements in this state and there are some good reasons for that.”
However, according to the June 2018 legislative audit and the State Auditor’s Office, money had been spent. The state didn’t receive HUD approval to spend money from the $149 million until Feb. 20, 2018, but RISE had already spent more than $400,000 between Jan 1, 2018, and Feb. 12, 2018, on invoices for construction companies.
RISE entered into seven contracts between July and August 2017 with four construction companies for $71 million for home rehabilitation, reconstruction, demolition, and mobile home placement. According to the State Auditor’s Office, no homes were renovated or built between when the contracts were inked and when the operational pause was lifted in June 2018.
“The West Virginia Development Office did not comply with the Purchasing Division statutes and rules when entering into these seven construction contracts,” the audit stated. “While there is evidence to suggest the Requests for Proposals were publicized … each contract was required to be processed through the Purchasing Division.”
Around the same time Thrasher was meeting with the Purchasing Division, staff with the Governor’s office asked for a briefing. Thrasher said Brian Abraham, general counsel for Justice, and Senior Adviser Bray Cary told Thrasher to halt the program.
“This was the first time I had ever had any interest from the administration on the program,” Thrasher said. “At the end of that presentation, Bray Cary said ‘you are to cease all work on this program.’ I said you can’t do that. We had just gotten approval from HUD to begin to rebuild these homes … we had construction crews that had already been mobilized on site the day of the meeting.”
Abraham, speaking to reporters Thursday, said the Governor’s Office had good reason to call for an operational pause.
“When we looked into the documents and the formation of those original contracts, there were some discrepancies,” Abraham said. “When we asked for all of the documents to be brought to our office, I pointed out to the governor there were some serious situations where contracts had been entered into that shouldn’t have been. That very day (Justice) told me to take it to the Legislative Auditor and get them involved.”
On March 26, Thrasher asked his staff to draft a memo detailing issues with having the RISE program on pause. The memo claimed that 55 homes were in the construction phase at the time of the pause as well as 40 mobile homes stationed and ready for placement. According to the State Auditor’s Office during testimony in June 2018, no homes were renovated or built between when the contracts were inked and when the operational pause was lifted that same month.
That same memo first raised the alarm about the possible redirection of HUD funding to things unrelated to unmet home needs, such as infrastructure and economic development. Two days later, HUD sent a letter to Abraham raising concerns about redirecting the CDBG monies to economic development and infrastructure before all unmet housing needs were met.
“The state’s suspension of its housing recovery activities, potential uncertainty surrounding the state agency that will ultimately be responsible for administration of the … grant and the prospect of a substantial reallocation of … funds from housing to economic development or infrastructure activities, necessarily raises questions,” the HUD letter stated.
Abraham wrote back to the HUD official on April 6, 2018, saying that the state had no intentions of using the CDBG money for anything before the housing needs were met and without the permission of federal officials.
“I believe you have been provided false and misleading information from a source obviously not associated with either the intent or actions of the State of West Virginia regarding our housing needs,” Abraham wrote.
Abraham said Thursday they believed that the Department of Commerce was working behind the back of the Governor’s Office during the pause. During the pause, the Governor’s Office also conducted an internal review of RISE using outside counsel — an investigation they brought to the FBI and the U.S. Attorney’s Office for the Southern District of West Virginia. Last week, U.S. Attorney Mike Stuart announced a federal investigation into the misuse of federal grant dollars related to the 2016 flood.
“We found out that individuals over there were trying to work around us, over us, and under us,” Abraham said. “It eventually became known to us and we put a stop to it, but they made every effort to thwart what we were doing.”
In May 2018, Commerce Deputy Secretary and General Counsel Joshua Jarrell and Development Office Executive Director Kris Hopkins left the agency. On June 4, 2018, West Virginia National Guard Adj. Gen. James Hoyer was put in charge of RISE. On June 14, 2018, Justice asked for the resignation of Thrasher. He was followed shortly afterward by Mary Jo Thompson, director of community development in the Department of Commerce, and Russell Tarry, director of the West Virginia Office of Economic Opportunity.
Thrasher still believes the sudden interest in RISE by the Governor’s Office was an effort to gobble up some of the $149 million and use it for pet projects by the Justice administration.
“We had to agree to disagree. I couldn’t agree that those funds would be used for infrastructure until we knew housing needs had been satisfied,” Thrasher said. “Now you see there was a real move to have those monies diversified. The governor even referenced it in his State of the State address.”
Thrasher does not dispute the results of the various audits that have looked at how the RISE program was run. He stresses that any mistakes made were in the interest of getting flood victims back in their homes and not for anyone’s personal gain.
“This was the first time this had every happened,” Thrasher said. “It’s not surprising to me at all that there were I’s dotted and t’s crossed that hadn’t happened and there were changes that need to be made. I fully accepted that. What I do know is there was no inappropriate activity, no misuse of funds at all. We were simply getting it all cleaned up.”
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The Woody Thrasher File
* Co-founder, Thrasher Engineering (1983)
* Native of Harrison County
* Graduate of West Virginia University
* Father of three sons
* Former secretary of the Department of Commerce (2017-2018)
* Candidate for the 2020 Republican primary for governor