FEMA Paid $1.5 Billion in False Aid, Report Says

A report from the Government Accountability Office says FEMA wrongly paid out nearly $1.5 billion in assistance to victims of Hurricanes Katrina and Rita. Congressional investigators found numerous examples of waste and abuse and say nearly 16 percent of monies paid out was unwarranted.

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ROBERT SIEGEL, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

MICHELE NORRIS, host:

And I'm Michele Norris.

The government has given out as much as $1.4 billion in fraudulent assistance to the victims of Hurricanes Katrina and Rita. That's what investigators from the Government Accountability Office told lawmakers today on Capitol Hill.

As NPR's Allison Keyes reports, some representatives were up in arms. One called it an obscene squandering of taxpayer dollars.

ALLISON KEYES reporting:

Some lawmakers shook their heads in disbelief as GAO's Managing Director of Forensic Audits and Special Investigations, Gregory Kutz, listed some of the bills FEMA was duped into paying.

Mr. GREGORY KUTZ (General Accounting Office): One individual stayed at a vacation resort in Orlando from September 2005 to November of 2005. The total cost to FEMA was $12,000.

KEYES: Kutz says others hoodwinked the Federal Emergency Management Agency through debit cards meant to help Katrina victims.

Mr. KUTZ: Examples include five New Orleans Saints 2006 season tickets, a $200 bottle of Dom Perignon champagne purchased at Hooters restaurant. And Girls Gone Wild videos.

KEYES: Kutz says undercover government investigators found no meaningful controls set up to detect or prevent fraud. He also testified that some of the problem could have been avoided if FEMA had done what he calls Fraud Prevention 101 before the storms, things like making sure those who apply for help had valid Social Security numbers or that applicants really lived where they claimed to, and that such addresses were in the affected area.

Ms. DONNA DANNELS (Acting Deputy Director of Recovery, FEMA): FEMA's challenge is again to find the appropriate balance of providing timely assistance while taking the necessary precautions to ensure against fraud, waste and abuse.

KEYES: FEMA's Acting Deputy Director of Recovery, Donna Dannels, told lawmakers the agency had a terrible choice to make in the face of chaos.

Ms. DANNELS: We just made the calculated decision that we were going to help as many people as we could, and that we would have to go back and identify those people who we either paid in error or that defrauded us and deal with that.

KEYES: But lawmakers blasted Homeland Security Secretary Michael Chertoff and FEMA head R. David Paulison for not attending. Mississippi Congressman Bennie Thompson noted that Dannels was essentially a scapegoat, but still questioned her closely.

Representative BENNIE THOMPSON (Democrat, Mississippi): Ms. Dannels, I personally think you've been put under the bus by being brought here. We absolutely need, at a minimum, the FEMA director and optimally, we need the Secretary to answer these questions.

KEYES: Dannels tried to explain that FEMA is already working to solve the problem.

Ms. DANNELS: We are taking many steps -

Representative THOMPSON: I recognize you're under the bus, so now, you know, just -

Ms. DANNELS: So now you're going to drive it a little faster, right?

Representative THOMPSON: Yeah. Yeah.

Ms. DANNELS: I understand.

KEYES: New Jersey Representative Bill Pascrell asked Dannels point blank whether the problem is one of leadership, budget or staffing.

Ms. DANNELS: It's now become a fleet of busses. I would say that there are a large number of things that contribute.

Representative BILL PASCRELL (Democrat, New Jersey): Ms. Dannels, which is it?

Ms. DANNELS: Sir, I think that's a very difficult question to ask a career person.

KEYES: Dannels was emphasizing that she doesn't have the same kind of policy role that a political appointee does. She insisted that FEMA was appreciative of the GAO's findings and that it would continue improving its mechanisms to identify and investigate fraud. But many lawmakers called for further hearings, this time into the possible fraud of contractors who dealt with FEMA during the storms.

Allison Keyes, NPR News, Washington.

NORRIS: And you can read the full GAO report at our web site, NPR.org.

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FEMA Hurricane Aid Spent on Vacations, Sex Change

WASHINGTON (AP) - Houston divorce lawyer Mark Lipkin says he can't recall anyone paying for his services with a FEMA debit card, but congressional investigators say one of his clients did just that.

The $1,000 payment was just one example cited in an audit that concluded that up to $1.4 billion — perhaps as much as 16 percent of the billions of dollars in assistance expended after Hurricanes Katrina and Rita — was spent for bogus reasons.

The Federal Emergency Management Agency also was hoodwinked to pay for season football tickets, a tropical vacation and a sex-change operation, the audit found. Prison inmates, a supposed victim who used a New Orleans cemetery for a home address and a person who spent 70 days at a Hawaiian hotel all were able to get taxpayer help, according to evidence that gives a new black eye to the nation's disaster relief agency.

"I do Katrina victims all the time," Lipkin, the divorce attorney, told The Associated Press. "I didn't know anybody did that with me. I don't think it's right, obviously."

Government Accountability Office officials were testifying before a House committee Wednesday on their findings.

Rep. Michael McCaul (R-TX), chairman of the subcommittee overseeing an investigation of post-hurricane aid, called the bogus spending "an assault on the American taxpayer."

"Prosecutors from the federal level down should be looking at prosecuting these crimes and putting the criminals who committed them in jail for a long time," he said.

Fraudulent Payments of Up to $1.4 Billion

To dramatize the problem, investigators provided lawmakers with a copy of a $2,358 U.S. Treasury check for rental assistance that an undercover agent received using a bogus address. The money was paid even after FEMA learned from its inspector that the undercover applicant did not live at the address.

FEMA spokesman Aaron Walker said Tuesday that the agency, already criticized for a poor response to Katrina, makes its highest priority during a disaster "to get help quickly to those in desperate need of our assistance."

"Even as we put victims first, we take very seriously our responsibility to be outstanding stewards of taxpayer dollars, and we are careful to make sure that funds are distributed appropriately," Walker said.

FEMA said it has identified more than 1,500 cases of potential fraud after Katrina and Rita and has referred those cases to the Homeland Security Department's inspector general. The agency said it has identified $16.8 million in improperly awarded disaster-relief money and has started efforts to collect the money.

The GAO said it was 95 percent confident that improper and potentially fraudulent payments were much higher — between $600 million and $1.4 billion.

Payments for Vacations, 'Girls Gone Wild' Tapes

The investigative agency said it found that people lodged in hotels often were paid twice, because FEMA gave them individual rental assistance and paid hotels directly. FEMA paid California hotels $8,000 to house one individual — the same person who received three rental assistance payments for both disasters.

In another instance, FEMA paid an individual $2,358 in rental assistance, while at the same time paying about $8,000 for the same person to stay 70 nights at more than $100 per night in a Hawaii hotel.

FEMA also could not establish that 750 debit cards worth $1.5 million even went to Katrina victims, the auditors said.

Among the items purchased with the cards:

— An all-inclusive, one-week Caribbean vacation in the Punta Cana resort in the Dominican Republic.

— Five season tickets to New Orleans Saints professional football games.

— Adult erotica products in Houston and "Girls Gone Wild" videos in Santa Monica, Calif.

— Dom Perignon champagne and other alcoholic beverages in San Antonio.

"Our forensic audit and investigative work showed that improper and potentially fraudulent payments occurred mainly because FEMA did not validate the identity of the registrant, the physical location of the damaged address, and ownership and occupancy of all registrants at the time of registration," GAO officials said.

FEMA paid millions of dollars to more than 1,000 registrants who used names and Social Security numbers belonging to state and federal prisoners for expedited housing assistance. The inmates were in Louisiana, Texas, Alabama, Mississippi, Georgia and Florida.

FEMA made about $5.3 million in payments to registrants who provided a post office box as their damaged residence, including one who got $2,748 for listing an Alabama post office box as the damaged property.

The GAO told of an individual who used 13 different Social Security numbers — including the person's own — to receive $139,000 in payments on 13 separate registrations for aid. All the payments were sent to a single address.

(Copyright 2006 by The Associated Press. All Rights Reserved.)

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