Wednesday, December 20, 2006

Katrina Relief or "Goldmine"?


More information about the fraud experienced during the Hurricane Katrina “Clean-up” came out this past week and it is now estimated over $1 Billion has been stolen or misdirected already.

“WASHINGTON, Dec 6 (Reuters) - Fraud involving payments supposed to help victims of Hurricanes Katrina and Rita likely exceeds earlier estimates of $1 billion and only a tiny fraction of the money has been recovered, according to a U.S. government report released on Wednesday.”

Now fraud of this type has happened before and will happen again I am sure. It unfortunately shows that when you send a check to the major disaster relief organizations your money may not always make it to those who it was intended for. This does not mean we should stop sending money to help those who need aid but it is interesting to see how different organizations apply that money you send. I recently finished a book by Marvin Olasky “The Politics of Disaster” which compares the performance of the Salvation Army to the American Red Cross disaster relief efforts…

Now I don’t believe it is “Official Policy” for the government to endorse any one private relief organization but it is obvious that the Red Cross has the major media machine to get themselves in the “Spotlight” when check writing time comes around…

“of $2.7 billion donated for hurricane relief through November 21, 2005, the Red Cross received $1.52 billion, compared with $270 million for the distant second-place organization, the Salvation Army”.

Unfortunately as relief organizations get bigger they tend to become less efficient in how they deliver the intended aid. There are numerous reports out there of how the Red Cross were not able to provide help due to “stacks of paperwork” holding up their operations but the Salvation Army trucks were already on-site and giving aid.
This poor performance was not limited to relief agencies and the vast majority of the abuse took part in the “Government Assisted” aid provided. This is the part where our tax-money is used and abused in the rush to provide aid to those who take advantage of the system. We as a country must take care of our citizens in need but we must also take steps to prevent fraud and abuse…

Just some of the facts reported on Katrina fraud:

“The GAO cited incidents in which FEMA gave $17 million in housing assistance to individuals who had already obtained free housing in the form of trailers or apartments and $20 million that went to people who improperly claimed for help for both storms that ravaged the U.S. Gulf Coast area.”

“Katrina alone caused $80 billion in damage, killed 1,500 people and displaced hundreds of thousands more. More than $100 billion was set aside by Congress to help the region recover from the 2005 storms.”

“The GAO also said that 42 out of 145 laptops bought to help with FEMA operations during the hurricanes were presumed lost or stolen, and many Global Positioning System tracking devices were also lost or stolen.”

“A hotel owner in Sugar Land, Tex., has been charged with submitting $232,000 in bills for phantom victims. And roughly 1,100 prison inmates across the Gulf Coast apparently collected more than $10 million in rental and disaster-relief assistance.”

"This started off as a disaster-relief program, but it turned into a cash cow," said Representative Michael McCaul, Republican of Texas, a former federal prosecutor and now chairman of a House panel investigating storm waste and fraud.

“The mobile homes, costing $34,500 each, were supposed to provide temporary housing to hurricane victims. But after Louisiana officials balked at installing them inland, FEMA had no use for them. Nearly half, or about 10,000, of the $860 million worth of units now sit at an airfield in Arkansas, where FEMA is paying $250,000 a month to store them.”

"There are tools that are available to get money quickly to individuals and to get disaster relief programs running quickly without seeing so much fraud and waste," said Gregory D. Kutz, managing director of the forensic audits unit at the G.A.O. "But it wasn't really something that FEMA put a high priority on. So it was easy to commit fraud without being detected."

“One Louisiana Department of Labor clerk, Wayne P. Lawless, has been charged with issuing about 80 fraudulent disaster unemployment benefit cards in exchange for bribes of up to $300 per application. Mr. Lawless, a state contract worker, announced to one man he helped apply for hurricane benefits that he wanted to "get something out of it," the affidavit said. His lawyer did not respond to several messages left at his office and home for comment.”

“First, because the Red Cross did not keep track of the hundreds of thousands of recipients they were only required to provide a ZIP code from the hurricane zone to check in FEMA frequently sent rental assistance checks to people getting free hotel rooms, the G.A.O. found.”

“In turn, some hotel managers or owners, like Daniel Yeh, of Sugar Land, exploited the lack of oversight, investigators have charged, and submitted bills for empty rooms or those occupied by paying guests or employees. Mr. Yeh submitted $232,000 in false claims, his arrest affidavit said. His lawyer, Robert Bennett, said that Mr. Yeh was mentally incompetent and that the charges should be dismissed.”

“And Tina M. Winston of Belleville, Ill., was charged this month with claiming that her two daughters had died in the flooding in New Orleans. But prosecutors said that the children never existed and that Ms. Winston was living in Illinois at the time of the storm. The public defender representing Ms. Winston did not respond to a request for comment.”

“Charities also were vulnerable to profiteers. In Burbank, Calif., a couple has been charged with collecting donations outside a store by posing as Red Cross workers. In Bakersfield, Calif., 75 workers at a Red Cross call center, their friends and relatives have been charged in a scheme to steal hundreds of thousands of dollars in relief.”

“Congressional investigators, meanwhile, have referred another 7,000 cases of possible fraud to prosecutors, including more than 1,000 prison inmates who collected more than $12 million in federal aid, much of it in the form of rental assistance.”

“There are bigger cases of government waste or fraud in United States history. The Treasury Department, for example, estimated in 2005 that Americans in a single year had improperly been granted perhaps $9 billion in unjustified claims under the Earned-Income Tax Credit. The Department of Health and Human Services in 2001 estimated that nearly $12 billion in Medicare benefit payments in the previous year had been based on improper or fraudulent complaints.”


Andrew from Middlebrook said...

The government response to Katrina is proof positive to me that large scale government programs breed large scale abuse and fraud. And this is not a partisan issue - I don't blame Bush. It is simply the nature of government. Big government.

RightsideVA said...


"And this is not a partisan issue - I don't blame Bush"

And it is not a partisan issue and it is good to see somebody say that. The book "The politics of disaster" was a very good read and showed that the church groups did the best job and continue to do a great job at recovery down there and everywhere. The Red Cross at one time was a very good operation but unfortunately got too big and too many influences pulling it in many directions.

Read the book if you get the chance.

Merry Christmas ~RightsideVA~

Bubba said...

The rain washed out my flower bed. Anybody got the number for FEMA handy?

My tulip bulbs need a trailer or a hotel until next fall.