Tuesday, December 13, 2005

The second wave of Katrina's disaster: Waste, Fraud and Corruption

The Project on Goverment Oversight has a great site dedicated to waste, fraud and corruption associated with Katrina disaster relief.

The site includes links to Contractor Misconduct, News Articles of Interest, Examples of Waste or Fraud in Katrina Spending and much more.

Here's an example of what the Department of Homeland Security has to offer; specific cases the Department of Justice is prosecuting:

The Wall Street Journal had a page 1 article (requires paid subscription) (HT: BizzyBlog via email) reviewing the criminal investigations associated with the hurricane response to date:

WASHINGTON -- The number of federal criminal investigations tied to the government response to Hurricane Katrina has passed the 1,000 mark, and is likely to rise as more relief money becomes available to those claiming to be storm victims, say the lead auditors.

Less than three months after the storm ravaged Louisiana and Mississippi, the $63 billion in federal money allocated for relief efforts in the Gulf Coast has triggered a large wave of apparent criminal activity, Homeland Security Inspector General Richard Skinner said. He added that the 1,000 cases now under active investigation represent the largest number of fraud probes stemming from a natural disaster in U.S. history. Yesterday, for instance, a Red Cross volunteer in Texas and his sister appeared before a federal judge on charges they stole more than 100 debit cards meant for Katrina victims.


Mr. Skinner said most of the investigations involve fraudulent claims submitted by individuals who didn't live in storm-affected areas or who owned property there that wasn't touched by Katrina. But he painted a more detailed picture of the forms of wrongdoing investigators are uncovering than has previously been made public, noting his investigators and auditors are looking into procurement fraud by contractors receiving Katrina-related work, as well as organized rings apparently submitting fake claims for federal money on a large scale.

Mr. Skinner, whose investigators and auditors are probing Katrina-related fraud cases among individuals in states from California to Georgia, also warned illegal activity could rise as aid levels increase. Katrina victims have been eligible for only approximately $2,000 per family in federal money, but they will soon be able to receive as much as $24,200 more for a maximum of $26,200 per family.

"When the larger dollars start going out, you tend to see a lot more leads start coming in," he said. "We're expecting to see another, larger wave of fraud cases."

The surge in Katrina-related fraud cases would come as Congress and the White House continue to squabble over the proper way to police the money. There are at least seven proposals circulating on Capitol Hill for Katrina oversight, with ideas like creating a new federal chief financial officer for all Katrina spending.

The Bush administration has resisted calls to create a new oversight position, preferring to leave Mr. Skinner in charge of the overall auditing effort. The initial Katrina relief legislation gave Mr. Skinner's office an additional $15 million to bolster its ability to oversee storm-related spending, and in September he appointed Matthew Jadacki, formerly chief financial officer of the National Weather Service, to lead a new Office for Hurricane Katrina Oversight.

Mr. Jadacki, who also attended the interview, said he has approximately 70 staffers on the ground in the Gulf Coast overseeing the spending first-hand.

A sharp increase in criminal investigations would further strain the government's procurement and auditing arms at a time when they are being tested by the war in Iraq, the massive run-up in federal spending on homeland security and hurricane-relief efforts. Mr. Skinner's team includes more than 500 investigators and auditors drawn from the Department of Homeland Security and agencies ranging from the Pentagon to the Labor Department, and those numbers could grow as relief efforts give way to the costlier and longer-term effort to rebuild the storm-ravaged regions.

Critics of the oversight structure said they weren't surprised by the apparent surge in fraud claims. "It's what you expect when you have this much money poured so quickly into a chaotic situation that lacks sufficient oversight," said Republican Rep. Jim Kolbe of Arizona. "It's simply not possible for [Mr. Skinner's office] to watch the Katrina money given all the other duties he already has."

In the interview, Messrs. Skinner and Jadacki said oversight efforts had improved markedly since the storm, when harried officials at the Federal Emergency management Agency relaxed safeguards designed to protect against fraud as part of an attempt to speed benefits to hurricane victims.

They cautioned the size and geographic impact of the storm -- which affected more than 1.2 million people, many of whom have settled far from the hurricane zone -- is complicating their work.

"When you have people dispersed across the country, you have the potential for [Katrina-related] fraud in almost every state," Mr. Jadacki said. The two men declined to share details about their investigations for fear of jeopardizing the ongoing criminal probes, but said several cases involved contractors who have received federal money to clear away debris, provide emergency supplies or handle other relief and recovery tasks.

They said they remain concerned about possible procurement fraud by government officials charged with disbursing federal money, but refused to say whether they were already investigating specific officials.

They also said they are seeing increasing evidence that criminals are forming organized rings designed to submit numerous fake claims as a way of maximizing the amounts of money they can fraudulently receive from the government. Mr. Skinner declined to offer specific examples of the organized rings under investigation, but said that in previous disasters, con artists gathered personal information from residents of hurricane-hit regions whose personal property hadn't actually been affected by the storm and submitted a raft of fake claims, splitting the proceeds.



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