Congress Investigates Hurricane Relief Fund Fraud Hurricane relief funds helped pay for a vacation to Hawaii, a sex-change operation and season tickets to football games, according to a government audit. Madeleine Brand discusses the fraud and how the government plans to deal with the problem with Rep. Mike McCaul (R-TX). McCaul's House subcommittee is holding hearings Wednesday about the misuse of relief funds.
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Congress Investigates Hurricane Relief Fund Fraud

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Congress Investigates Hurricane Relief Fund Fraud

Congress Investigates Hurricane Relief Fund Fraud

Congress Investigates Hurricane Relief Fund Fraud

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Hurricane relief funds helped pay for a vacation to Hawaii, a sex-change operation and season tickets to football games, according to a government audit. Madeleine Brand discusses the fraud and how the government plans to deal with the problem with Rep. Mike McCaul (R-TX). McCaul's House subcommittee is holding hearings Wednesday about the misuse of relief funds.

MADELEINE BRAND, host:

This is DAY TO DAY. I'm Madeleine Brand. More than a billion dollars of taxpayer money was lost to fraud after hurricanes Katrina and Rita. That's the conclusion of the Independent Government Accountability Office. It actually sent in undercover agents who posed as victims and received money. The report also says that Federal Emergency Management Agency sent money to prison inmates, to people who gave multiple fake Social Security numbers. It paid for luxury vacations, football tickets, and even Girls Gone Wild videos. A House sub-committee took up the issue today. The Committee is chaired by Republican Congressman Michael McCaul of Texas. I spoke with him earlier.

Representative MICHAEL MCCAUL (Republican, Texas): We've been working with these federal investigators since February. At the time, the initial estimates - according to the FEMA director - were supposed to be somewhere between 10 to 100 million dollars. When they came back and discovered that there was a billion dollars in fraud, I was very shocked and appalled. And not so much even the amount of money, but where the money was going. This money was going to prisoners, both the federal and state level - to literally thousands of prisoners who applied while in jail - deceased individuals' names and Social Security numbers had been used to obtain benefits, damaged property, included a cemetery and a vacant lot. There're numerous examples of how out of control this federal assistance program has become.

BRAND: I think one of my favorites was a sex-change operation, actually, when he went for that. Some of it sounds so outrageous it's almost laughable, but a billion dollars - that is serious money.

Representative MCCAUL: It's very serious money, particularly as you're seeing cuts the Homeland Security grants going out to the states. And it's an affront on the American taxpayer, them having this hearing to expose what's happened that put some - sunlight, they say, is the best disinfectant - and try to put some controls in place before the next hurricane hits.

BRAND: And a billion dollars out of how much that was spent?

Representative MCCAUL: It was 16 percent of the total of the amount spent. This is in the Federal Disaster Relief Assistance Program.

BRAND: Is there some explanation in the fact that there is a lot of chaos after a huge disaster like Hurricane Katrina? That the goal is to just get the aid out as quickly as possible and then check it later, but that the immediate need is so great that you don't have time to make sure that the person asking you for money is actually on the level?

Representative MCCAUL: And I think that's what happened. In fact, we're looking at legislation. I think there is a way to put a database, if you will, that cross-references with the Social Security Administration. You can still do this expeditiously and yet stop this kind of fraud from taking place.

BRAND: Do you think it's possible to repair FEMA, or does it just need to be rebuilt from the bottom up?

Representative MCCAUL: Well, we have a reform bill out of Homeland Security Committee that we are pushing that does reform FEMA that puts the FEMA director at a cabinet-level status.

BRAND: So, what it was before, in other words.

Representative MCCAUL: Yes, in a lot of respects. One of the problems was as well is that Secretary Chertoff reallocated resources out of FEMA and put it to other parts of the agency. And we, in this bill, require him to make this an all-hazard agency that's both for natural disaster, but also for manmade - if God forbid we have a terrorist attack - you're going to have a similar response in place.

BRAND: Congressman Michael McCaul, thank you for joining us.

Representative MCCAUL: Well, thank you so much.

BRAND: Congressman McCaul is Chairman of the House Homeland Security Sub-Committee on Investigations. It's holding a hearing today on fraud at FEMA.

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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.)