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The Associated Press March 18, 2010, 5:57PM ET

US AG asked to block release of auctioned trailers

U.S. Attorney General Eric Holder was asked Thursday to block the distribution of tens of thousands of FEMA trailers sold through government auctions.

U.S. Rep. Bennie Thompson, D-Miss., chairman of the House Homeland Security Committee, said in a letter to Holder on Thursday that flooding the market with more than 100,000 units produced for the Federal Emergency Management Agency in the wake of the deadly 2005 hurricane season could cripple the market. He wants the Justice Department to re-evaluate its decision to allow the trailers to be sold.

Thompson said there's also a safety issue. Many of the trailers, already contaminated with formaldehyde, now have mold and mildew after being exposed to weather conditions for nearly five years, he said.

The Justice Department approved the sales after determining they didn't violate antitrust laws, according to the letter. But Thompson said the federal agency's method was flawed.

"An analysis that examines each individual sale does not consider the 'big picture' and thus cannot purport to scrutinize the effect on the market," Thompson wrote.

Justice Department spokesman Charles Miller said Holder's office would respond to the letter.

Not all of the sold trailers have reached the buyers yet.

FEMA bought 145,699 travel trailers and mobile homes at a cost of about $2.7 billion to provide shelter to survivors of hurricanes Katrina and Rita. More than 130,000 had been offered for auction, said FEMA spokesman Brad Carroll.

The U.S. General Services Administration auctioned large lots of trailers that had been staged in Mississippi, Alabama, Louisiana and Arkansas earlier this year. Thompson said those sales totaled 103,000 units.

He said he's concerned because the industry estimated a total of 159,500 travel trailers were sold in 2009, and 203,500 are expected to be sold this year.

Thompson said "dumping" more than 100,000 more used units in the stream of commerce would create a "substantial and negative effect on the price and supply of trailers."

Bill Gapow, executive director of Recreational Park Trailer Industry Association, Inc., said he's more concerned about unsuspecting buyers.

"There's concern that they could end up in the general marketplace. They could be traded in on a brand-new unit. The dealer may or may not realize that the unit was a FEMA trailer," Gapow said.

Some dealers say they're feeling the effect of smaller lot sales held last year by GSA.

Jimmy Bankston, owner of Reliable RV Center in Biloxi, said that before Katrina he was averaging about 40 sales a month. Now, he's selling less than half that. Bankston said people are buying the auctioned units because they get a better deal.

Units sold at auction average about $1,300, said J.D. Harper, executive director of Arkansas Manufactured Housing Association. He said the cheap prices have led to upstart operations.

"Just outside of Little Rock, an abandoned manufactured home lot that's been vacant for several years now has a temporary office and has an inventory of travel trailers that are showing up for sale," Harper said. He said some of the dealers aren't licensed to sell the units.

In Louisiana, gas inspectors have come across resold FEMA units that have had problems with the propane systems. Terry McLain, who works for the state's LP Gas Commission, said some of the units may have been sold without being tested.

"If someone didn't know and they turned it on, you have a massive gas leak that could end up an explosion," said McLain.

Henderson Auctions, based in Livingston, La., conducts gas pressure checks of its units before they're sold, said Janet Henderson Cagley, co-owner of the business. She said gas technicians are when the units are sold at auction.

Henderson Auctions bought "a very large lot" through the GSA auction and has been selling units for $2,000 to $15,000, depending on the model, Cagley said.

The company has sold about 6,000 within the past six months.

So far, there have been few complaints, she said.

"Many of them don't even look like they've been lived in," Cagley said. "People have been very satisfied."

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