A state judge in Baton Rouge, La., has determined that a custom motorcycle shop that sold almost $120 million worth of trailers to the Federal Emergency Management Agency (FEMA) for hurricane relief does not have to pay a fine for selling travel trailers without a license, according to a story in the Sept. 19 issue of New Orleans’ Times-Picayune.
The decision also appears to let the politically connected Bourget’s of St. Rose, La., off the hook for potentially hundreds of thousands of dollars in Louisiana sales tax, say attorneys on both sides who have read the judge’s unsigned ruling.
Judge Wilson Fields, brother of state Sen. Cleo Fields, D-Baton Rouge, heard oral arguments on the case last month and sided with Bourget’s, according to the attorneys. As of Friday, Judge Fields had not signed his ruling, and thus it had not been made a public record.
Once official, the ruling would nullify the fine levied in January by the Louisiana Recreational and Used Motor Vehicle Commission, which hit Bourget’s with a $46,000 penalty after it determined the firm sold 211 new trailers to FEMA. At the time it made the sale after Hurricane Katrina, Bourget’s had no license to sell new trailers, the commission ruled.
That means the cycle dealer should have paid sales tax on its purchases, according to a written opinion from the Department of Revenue, because only licensed dealers are exempt from paying it. Bourget’s sold the 211 trailers to FEMA for $6.4 million, according to commission records.
Further, the company inked a second, much larger deal for $98 million on Sept. 17 of last year, according to Department of Homeland Security records.
That’s a full month before receiving its license. It’s unclear whether the company bought additional trailers under that contract during that month, but, by the logic of the revenue department, it would owe sales tax on those purchases as well.
Last fall, Bourget’s secured a license on Oct. 18, within days of seeking one, a turnaround time some dealers called remarkably fast for the commission.
Bourget’s then promptly landed a no-bid deal with FEMA for thousands of additional trailers. FEMA records show that it has paid Bourget’s nearly $120 million to date, making the chopper boutique by far the biggest travel trailer vendor in Louisiana since Hurricanes Katrina and Rita set off a temporary housing bonanza.
Bourget’s owners, Glen and Gary Smith, said last year that they won the contracts because they worked closely with FEMA teams at the Katrina emergency staging area and because they had satellite businesses that had done FEMA work on previous disasters.
The Smith brothers are sons of Henry Smith, treasurer of the Louisiana Democratic Party’s executive committee. Glen and Gary Smith are also the uncle and father, respectively, of state Rep. Gary Smith Jr., whom Gov. Kathleen Blanco appointed to the House Special Committee on Disaster Planning, Crisis Management, Recovery and Long-Term Revitalization.
It remains unclear whether the state legislator had any financial stake in the FEMA deals. Last year, Gary Smith Jr.’s uncle said the representative was listed as the registered agent because, as a lawyer, he handled the incorporation papers. But records maintained by the commission show that Rep. Smith had both a salesman’s and a buyer’s license for 2005 at Bourget’s.
The commission, which handed out the fine, had planned to consider the tax question during its January hearing on Bourget’s case, but it was subsequently shelved.
In court, Bourget’s argued that because its new travel trailer sales license was good from Jan. 1 to Dec. 31, 2005 – even though Bourget’s didn’t get one until October 2005 – any sales it made during that calendar year would be retroactively exempt from taxes.
Robert Tarcza, attorney for Bourget’s, said he expected Judge Fields’ ruling to be filed formally this week, and while he agreed Bourget’s won, “on the fundamental points,” he noted Fields rejected Bourget’s request for legal fees and the testimony of an additional witness.
Last year the commission asked the Department of Revenue to look at the case, and Secretary Cynthia Bridges said taxes would be owed.
“The department determines that use tax is owed on all 211 vehicles purchased by the dealer for resale to FEMA,” she wrote on Nov. 30, 2005. The exact amount remains undetermined because such figures are up to the department, not the commission, according to Robert Hallack, a contract attorney representing the commission.
Early Bourget’s-to-FEMA sales reflect handsome markups Bourget’s applied to many units, including some that were outside the express size parameters the agency applied to other dealers, according to commission records and four RV dealers who handled FEMA contracts. FEMA specified trailers must be between 28 and 35 feet long. Such trailers usually retail for between $16,000 and $20,000. In the past, FEMA spokespeople have said the agency tries to cap its per-trailer cost at $20,000.
Yet commission records show Bourget’s sold 21- and 25-foot trailers to FEMA for between $20,178.50 and $24,793. Other units sold for even higher prices, records show, including a 26-footer for $26,863.
What’s more, one dealer who reviewed the commission’s sales records said it appeared Bourget’s may have realized profits in excess of 40% on the initial deals. Steve Bordelon, owner of Steve’s RV, which Katrina wiped out in St. Bernard Parish and who filed the initial complaint against Bourget’s last year, called the prices breathtaking.
“He’s making like 10 grand or better on most of those,” Bordelon said. “It seems like he’s just selling them for as much as he could, maybe back when FEMA didn’t know and he could name his price.”