Prosecutors crack down on Katrina fraud - billions maybe wasted or stolen

NEW ORLEANS (Reuters) - Federal prosecutors on Thursday announced a coordinated initiative to fight fraud related to Hurricane Katrina and said billions of dollars in hurricane relief funds were at risk of being wasted or stolen.

The anti-fraud command center will include representatives from the FBI, tax authorities, Secret Service and state and local police. The storm-battered Gulf Coast region is preparing for an influx of federal money that could top $200 billion.

"We all know why we are here," assistant FBI director Chris Swecker said at a meeting of officials to kick off the coordinated fraud investigations. "This is as much about deterrence as it is conducting investigations."

"Fraud will not go unpunished," said U.S. Attorney General Alberto Gonzales, who joined a meeting of police, prosecutors and government investigators in New Orleans.

Federal criminal charges have already been brought against 42 people, including Red Cross employees in California, for attempting to steal disaster relief funds related to Hurricane Katrina, officials said.

Of those, 17 have been indicted for impersonating evacuees from the U.S. Gulf Coast in order to claim $2,000 federal relief grants, Richard Skinner, inspector general of the Department of Homeland Security, told reporters.

He said many more such prosecutions were pending. "We have a boatload in the pipeline. There are going to be many, many more arrests coming down the road," he said.

The biggest share of funding for rebuilding is still to be spent, and money will be funneled through local governments that may be unprepared for tracking hundreds of millions of dollars, officials said.

"If you go into some of these small towns down the coast of Mississippi, there is no accounting system," Skinner said.

Already some $200 million to $300 million is being spent through Hurricane Katrina-related contracts and grants every day and the total bill could reach $200 billion, he said. "What you have is a recipe for waste and abuse."

The Bush administration has said a team of government department inspector generals would review all federal expenditure.

"This was all done in such an expedited manner everyone more or less didn't go by the normal standards," Skinner told Reuters.

The Hurricane Katrina Fraud Task Force, to be based in Baton Rouge, already has 350 federal investigators working full time with another 170 staff to join in coming weeks, he said.

Some officials in Louisiana, including New Orleans Mayor Ray Nagin and Lt. Gov. Mitch Landrieu, both Democrats, have bristled at the suggestion that endemic local corruption could become a drag on the state's recovery.

"New Orleans does not have a corner on the market in public corruption," Landrieu told a congressional committee on Tuesday.

Asked about that view, Skinner said: "In my experience, I don't care where you're at, whether you're in New York or Florida, California or Louisiana, after disasters, when you have this kind of money being pumped into the community this fast, there are going to be people who are going to try to take advantage of it."

...billions of dollars in hurricane relief funds were at risk of being wasted or stolen.

Hurricane Katrina made landfall August 29, 2005 - less than one month ago...

Report: FEMA overpaid at least $174 million to Katrina victims
10/20/2005, 6:39 p.m. CT
The Associated Press

FORT LAUDERDALE, Fla. (AP) — The Federal Emergency Management Agency issued overpayments of at least $174 million in its rush to distribute emergency payments to Hurricane Katrina victims, a newspaper reported Thursday.

In three Louisiana parishes FEMA issued checks worth at least $70 million, representing more payments than there were households. In 36 parishes and counties in Louisiana, Mississippi and Alabama, FEMA awarded $102 million to at least 51,000 more applicants than local officials said were displaced by the storm, the South Florida Sun-Sentinel reported.

FEMA intended the aid for displaced families, one payment per household, the newspaper said.

The alleged overpayments occurred while the federal agency was eliminating red tape to dispense $2,000 checks and debit cards to help victims pay for living expenses after they were forced from their homes by the Aug. 29 storm and rising floodwaters.

Nicol Andrews, spokeswoman for FEMA in Washington, said there were thousands of students from five universities in New Orleans who were displaced by Katrina, and families that were split up and therefore legally entitled to more than one payment.

"The agency had to make a calculated risk as to whether or not we put the needs of disaster victims ... up against the ideal of dotting every single 'i' and crossing every single 't'," Andrews said. "We don't tolerate fraud."

In Iberville Parish, Louisiana, the storm knocked down trees and power lines, but caused no major damage 70 miles from where Katrina made landfall, officials said.

However, the federal government paid $1.6 million to 819 parish residents after reviewing $1.46 billion in FEMA claims paid through Sept. 22, the newspaper reported.

Fewer than 300 Mobile County residents needed the emergency aid, rather than the 17,050 who collected $34.1 million, said Mobile police Lt. Christon Dorsey, a member of a hurricane-fraud task force.

Although 25 families were displaced by Katrina in Pike County, Miss., 2,494 collected nearly $5 million, Civil Defense Director Richard Coghlan said.

"I'll tell you, it was Christmas," Coghlan said. "We're talking plasma TVs. We're talking stereos. We're talking bicycles."

The Department of Homeland Security was investigating whether overpayments were made in Louisiana parishes, said Inspector General Richard Skinner of the Department of Homeland Security.

The Department of Homeland Security's own probes could result in some of the first disaster contracts that were awarded without competitive bidding to be reopened even if there is no evidence of criminal abuse, he said. "This was all done in such an expedited manner everyone more or less didn't go by the normal standards," Skinner told Reuters.

Well, if they had gone by the normal standards, the work still wouldn't have been started in many cases, and the damage would be much greater.

I've been working on a project in MS for seven weeks now which we entered into on an emergency basis so we could start work. More than a little scary that some bean-counters will show up and decide whether and how much we'll be paid for work that has already been completed.

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