Tiny Whitefish Energy Flops After Huge $300 Million Puerto Rico Contract Surfaces

File this one under "T" for That Was Fast. Last month the now notorious company Whitefish Energy nailed down an unusual $300 million contract to help restore power to Puerto Rico after Hurricane Maria tore through the island's power grid. As of last week, the contract appears to have evaporated and Whitefish could be in serious trouble, along with anyone else who signed off on the deal. Aside from any nefarious scheming involved, the whole episode has turned into a case study on how not to do corporate crisis management.

Was Whitefish Ready For Its Closeup?

For those of you new to the topic, Whitefish Energy is named after its hometown of Whitefish, Montana. With -- apparently -- only two full-time employees and a handful of small contracts under its belt, the company won a $300 million no-bid contract to repair transmission lines in Puerto Rico.

The company has maintained that its experience, though limited, was a good fit for the island's mountainous terrain. The company also claimed that its business model of hiring subcontractors enabled it to ramp up operations quickly.

Nevertheless, Whitefish had never handled any business remotely on the scale of the Puerto Rico operation. That is evident from an October 19 statement released by the company announcing the contract.

Typically, a corporate public statement concludes with an "about us" boilerplate that lists scope of operations, experience and/or other qualifications.

The October 19 statement concludes with a single line:

Word of the contract began to spread last week and became a major national news story, in large measure because of the difference between Whitefish's previous experience and the size of the contract.

More trouble brews for Whitefish

In hindsight, Whitefish might have been able to mitigate the damage by including more details about its relevant experience and business model in its initial statement.

Anecdotal accounts indicate that the company was in fact making progress on transmission line repairs, and Whitefish detailed its work on a followup statement issued last weekend, on October 29:

...In less than a month we brought 350 workers with specific expertise in this task and were on track to have more than 500 linemen on the island by this week if allowed to continue.  We also brought over 600 pieces and 2,500 tons of equipment, including 400 trucks, cranes and excavators, as well as five helicopters.

The Whitefish Energy team completed significant work on two major transmission lines that crossed over the mountains of Puerto Rico and some critical work on very remote parts to the south which are only accessible by helicopter and heavy equipment. Those efforts led to the restoration of power to hospitals, businesses and residents of Manati, and very shortly, another 500,000 people in the city of San Juan will have power because of the extension of our work on transmission lines east of Manati...

However, the issue of Whitefish's experience was only part of the problem. Another factor that raised eyebrows was the acquaintance between the company's leadership and Secretary of the Interior Ryan Zinke, who both share the town of Whitefish as their home.

Although Zinke initially portrayed it as a nodding acquaintance, the ties seem to run deeper: one of Zinke's sons worked for Whitefish CEO Andy Techmanski on a summer-job basis, and apparently Techmanski contacted Zinke at the Interior Department (the contact reportedly occurred after the contract was awarded).

As reporters dug into the company's history, additional ties between the company and the Trump Administration emerged. The Daily Beast reported that Whitefish is financed by the private equity firm HBC Investments, the founder of which is a major Republican donor named Joe Colonnetta:

...Colonnetta contributed $20,000 to the Trump Victory PAC during the general election, $2,700 to Trump’s primary election campaign (then the maximum amount permitted), $2,700 to Trump’s general election campaign (also the maximum), and a total of $30,700 to the Republican National Committee in 2016 alone.

Colonnetta’s wife, Kimberly, is no stranger to Republican politics either; shortly after Trump’s victory, she gave $33,400 to the Republican National Committee, the maximum contribution permitted for party committees in 2016.

To ice the cake of problems for Whitefish, the contract itself ended up in the hands of journalist Ken Klippenstein and was promptly subject to close examination. Among the many unusual and onerous clauses in the contract was one that apparently prohibits any authoritative audits.

Stay off social media!

Hindsight or not, it's difficult to see how Whitefish could mitigate a brewing scandal involving financial ties to the beleaguered Trump administration and a contract that seems designed to protect the company against any and all oversight.

Whitefish certainly did itself no favors when it initially reacted to the brewing scandal by tweeting a threat to pull out of Puerto Rico. The company later apologized -- on Facebook, not via Twitter -- but by then it was too late.

The company is now subject to multiple investigations including the House Energy and Commerce Committee and Natural Resources Committee, the Department of Homeland Security’s Office of Inspector General. FEMA is also upset.

In a bad sign for Whitefish, the House committees are acting on a rare bipartisan basis, with Republican leadership on point.

As of October 29, the Governor of Puerto Rico requested PREPA, the Puerto Rico Electric Power Authority, to cancel the contract, and the agency is apparently working toward that end.

It looks like Whitefish could still enjoy a hefty payout. The contract includes a 30-day cancellation notice and continuation of work already under way.

However, it looks like Whitefish faces a long, hard slog to restore its name and grow its business.

Image: Whitefish Energy via Facebook.