Red Cross Workers Accused of Katrina Fraud In the past three months, 50 people have been indicted in Bakersfield, Calif., for allegedly siphoning hundreds of thousands from a Red Cross program.
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Red Cross Workers Accused of Katrina Fraud

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Red Cross Workers Accused of Katrina Fraud

Red Cross Workers Accused of Katrina Fraud

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In the past three months 50 people have been indicted in Bakersfield, California, for allegedly siphoning hundreds of thousands of dollars from a Red Cross program. This incident is one in a series of cases that have highlighted a flawed response to the devastating hurricanes. Earlier this month Congress held a hearing with numerous charity organizations to evaluate the response to Katrina and to propose reforms for the National Response Plan for disaster relief. We want to hear from you if you gave money for disaster relief or are confident it's being used well or not. Our number is 1 (800) 989-TALK.

Stacy Palmer is the editor in chief of The Chronicle of Philanthropy. She joins us to look at how charities are handling the large-scale donations and the role they play in disaster relief. She joins me here in Studio 3A.

Hi. How are you?

Ms. STACY PALMER (Editor In Chief, The Chronicle of Philanthropy): Happy to be here.

SEABROOK: Good. Tell us about the indictments in Bakersfield.

Ms. PALMER: Well, they were very widespread. Apparently people are bilking hundreds of thousands of dollars from the Bakersfield Center, and it was a call center that the Red Cross hired some people to manage. And apparently it was very easy to manipulate the system, and people figured out how to do it. So those indictments are under way. Six people have pleaded guilty already.

SEABROOK: What kind of money are we talking about? How much?

Ms. PALMER: Hundreds of thousands of dollars. Now that's a small amount compared to all of the millions of dollars that were donated to the Red Cross after Hurricane Katrina, but still it's not an insignificant sum. And if you made a donation, you're not going to be very happy that your money went on to the criminal folks. The Red Cross is trying to get it back, of course, and they're hopeful that they will be able to do that.

SEABROOK: Have there been other cases of fraud, especially with the Red Cross or other responses to Hurricane Katrina?

Ms. PALMER: Yes, indeed. There are a number of things that the Red Cross has been doing to look and make sure that fraud isn't happening, but they're doing a lot of their own audits and they have found cases where people have tried to bilk the system. The other thing that's happened is that some people have set up fraudulent Web sites, too, pretending that they are the Red Cross and saying, you know, `Give to us,' even though you're not ending up giving to the Red Cross as well. So fraud happens in a lot of different ways. Sometimes it's people pretending to be Hurricane Katrina evacuees. And then other cases people just pretending to raise money for charity.

SEABROOK: So-called spoof Web sites where you go and put in your credit card number and happily give them money and they turn out not to be the Red Cross.

Ms. PALMER: Exactly.

SEABROOK: So how do these things happen? I mean, do they just crop up in any disaster or is this specific to Katrina?

Ms. PALMER: It's happened with every disaster, but what federal officials say is that people are getting more sophisticated about it with this disaster and in part technology has made it really simple to come up with a lot of frauds. And, you know, the larger scale of the disaster, the more people, unfortunately, con artists, come out and figure out that there are some ways to take advantage of a very difficult situation.

SEABROOK: And this is what we would call large-scale. I mean, donations for hurricane relief have reached $2.7 billion. How do, you know, small, relatively--you know, non-profit charities--granted the Red Cross is not small, but non-profit charities, how do they deal with money in such large scale?

Ms. PALMER: That is actually one of the big problems is that there is so much of it flowing in so fast. And non-profit groups have not had a good reputation for being very careful about setting up systems in general. There have been a lot of cases of fraud, sometimes among their own employees, of people taking money. And donors don't really like to pay usually for the kind of systems that charities need to be able to set up secure systems so it's not usually a big priority. Of course, they're very upset when they see their money taken away. But in some ways what we need to do as smart donors is realize that we need to encourage the charities to invest in those kinds of systems to make sure there is no fraud.

SEABROOK: That's fascinating. You know, when we were talking about this show--we were talking about how most Americans at this point anyway know that they should look at how much each charity spends on administrative expenses and so on and sort of target a charity that most of their money or a greater percentage of their money will actually be going to the recipients of, you know, relief aid. But you're saying that sometimes that administrative expense can be used to combat fraud.

Ms. PALMER: Exactly. The administrative cost, when it's used well, obviously, we're not talking about first-class air travel or spending, you know, on lavish offices or that kind of thing, but it also can be used to make sure that the charity is well-managed and well-run and uses very sophisticated systems.

SEABROOK: OK. Let's go to the phones real quick. Monique(ph) in Miami, Florida. Hi. You're on TALK OF THE NATION.

MONIQUE (Caller): Hi, there.


MONIQUE: Yes, I'm not a member of a church, but I go infrequently to a local church and I make my Katrina donation through the church. The minister at my church is acquainted with the minister of a church right in the middle of, you know, the hardest-hit area in New Orleans. And this church started a program right after the hurricane of directly helping people in their neighborhood with relief, with finding jobs, with getting food, with, you know, just direct, you know, church-to-person help so I directed my money there. Half the money went to the national church organization and half directly to this New Orleans church. Personal...

SEABROOK: So, Monique, you feel better about your donation then?

MONIQUE: Well, yes, and that's why I did that as opposed to giving through a larger organization like the Red Cross because I could see, I could hear exactly where it was going. I found the church on the Web, I could, you know, see their beautiful organ and, you know, I just--I, you know, like the idea of going directly to that church.

SEABROOK: Thanks for our call, Monique. Tell me, you know, Stacy Palmer, is--can people feel safer when they're doing something a little bit more local or, I mean, do they--should they just trust the bigger organizations more?

Ms. PALMER: It depends. Certainly when you know about an organization, you know who's running it and you know who's in charge, and you know that they're going to be very trustworthy, then that's great. Give directly to them. But sometimes groups that can have really good intentions don't necessarily have a great deal of management expertise or know how to make sure that things are well-run. So you need to make sure that it's not just that these are nice people and helpful people, but people who really know what they're doing in terms of providing aid and managing your money well. So ask those kinds of questions, even of the local groups. So it's not that it's small vs. large. It's just easier to get a handle certainly on those small groups.

SEABROOK: We're talking about the Red Cross and other charity organizations dealing with huge amounts of money after the hurricanes. You're listening to TALK OF THE NATION from NPR News.

Congress held a hearing earlier this month with the Red Cross and other non-profit groups to evaluate the response to Hurricane Katrina. Stacy Palmer, were there any concrete resolutions that came out of that hearing? What happened?

Ms. PALMER: Congress raised a lot of questions, and obviously members from the Gulf Coast were very upset that some people didn't get help and especially in regions where the Red Cross doesn't operate. They felt that something was wrong and that something needed to be done to fix the system. They also raised questions about how people collaborate and how non-profit groups were sharing information, and they felt that that wasn't going very well and that some of the things that we learned after September 11th when we thought maybe we should figure out how to do some of this disaster relief stuff better, had not got implemented far enough. So they're going to be looking and they're asking government experts to come up with some ideas about what are some of the fixes that need to happen.

SEABROOK: OK. Let's go to Rupa(ph) in Dayton, Ohio. Hi. You're on TALK OF THE NATION.

RUPA (Caller): Hello?

SEABROOK: Hi. Go ahead.

RUPA: My question is--I had donated to the Pakistan earthquake relief fund to the American Red Cross, and some of my co-workers were afraid to donate, because of any links to--or perceived links to terrorism. Has anybody else had that problem? Is it OK to just donate to local charities in Pakistan?

SEABROOK: Thanks for your call, Rupa. Stacy Palmer, are any of these problems of fraud specific to the Red Cross?

Ms. PALMER: No. And fraud can happen really anywhere. It's just--we focus on the Red Cross because they get so many of the donations. They got the lion's share of donations after this disaster, and they do pretty much after every kind of thing. Charities in the United States have to follow special guidelines to make sure that money isn't getting in the hand of terrorists, and they're very careful about that. And in some cases, some of the things that charities have said is that some of those rules stymie them from being very effective in their response, so they're actually working with the Justice Department to find some ways around it; that only they're effective and they're still safeguarding your money. But giving to a United States charity that's following those rules is a pretty safe way of making sure that you're not putting money in the hands of terrorist organizations.

SEABROOK: In fact, the current National Response Plan designates the Red Cross as the main organization in disaster relief, but there are proposals out there to require or to ask for at least greater coordination among non-profits to try and get rid of some of these problems. Has there been any headway on this?

Ms. PALMER: A little bit. After September 11th, groups realized they had a problem and they started developing some responses, but clearly, they aren't very far along because the response after Katrina, for example, was to a pilot project that really hadn't been tested very well, and that was one reason it didn't work. There were a lot of technology glitches. They really weren't prepared for the fact that there wasn't going to be Internet access or telephone access, and so, you know, it wasn't very easy to use a system that relied on those kinds of things to coordinate. So some of the same problems you see with the government response, the charity response has really been hamstrung, and we really need to find some ways to move a lot faster and put more resources into it so that we really are prepared for the next disaster.

SEABROOK: Seems like that's a problem across the federal government, charitable organizations. It's almost as if no one was prepared for this, even a few years after September 11th. The radios didn't work on the federal government's side. The charities are having trouble dealing with these huge donations. I mean, is there just a level of fraud that comes with any of this, or could something help the situation?

Ms. PALMER: One thing could--you know, if the--some easy measures were put in place and also if Congress was making sure that between disasters, charities were held accountable for making sure that they were reducing problems with fraud and proving their ability to respond, those kinds of things. And one thing that happens is this all fades out of our memory and is not the hot topic for anybody to pursue on Capitol Hill and so, you know, we go from disaster to disaster, don't really learn all of the lessons that could be learned. We learn some of them, but not all of them.

SEABROOK: So what do you think, as you look at these organizations, is the biggest problem that needs to be tackled?

Ms. PALMER: The biggest problem they need is they need expertise in terms of how to make sure that their systems work really well, and that might be stuff that they pay for, but it also could be donated. They need logistics expertise. They need the kinds of people at companies who are figuring out how to fight fraud. When you look at what's being done on identity theft, for example, some of that same expertise probably could help the Red Cross, and that's one thing that they really ought to take advantage of.

SEABROOK: OK. Let me ask you one final question then. Does the federal government regulating these charities--will that help?

Ms. PALMER: It certainly could help in terms of their accountability, whether the federal government has the ability to test them, but just knowing that the federal government is checking up on you, that's a good monitor internally for the organization to do a good job, so it certainly could help.

SEABROOK: The federal government, of course, has its own problems dealing with now close to a hundred billion dollars going to Katrina.

Ms. PALMER: Exactly. So it's not sure that that's going to be the solution.

SEABROOK: OK. Stacy Palmer, editor of The Chronicle of Philanthropy, thank you so much for joining us today in Studio 3A.

Ms. PALMER: My pleasure. Thank you.

SEABROOK: And, of course, you can find more tips for evaluating charities at our Web site,

This is TALK OF THE NATION from NPR News. I'm Andrea Seabrook in Washington.

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