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Feds blow millions in Katrina aid fraud

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February 14, 2006

The government continued to showcase its incompetence in the wake of Hurricane Katrina, squandering millions of dollars in Katrina disaster aid, including handing $2,000 debit cards to people who gave phony Social Security numbers and used the money for such items as a $450 tattoo, auditors revealed Monday.

Federal money also paid for $375-a-day beachfront condos and 10,777 trailers that were stuck in mud and unusable.

Overcharges, poor accounting and abuses will take “months or years” to rectify, the Government Accountability Office and the Homeland Security Department’s inspector general concluded in preliminary reports on how billions of dollars in taxpayer money is being spent.

The Federal Emergency Management Agency recognizes it “made many, many mistakes,” and is working on improvement, said Homeland Security inspector general Richard Skinner. “But they’re not where they should be. In some cases, the government will have little legal recourse to recoup payments to contractors for payments.”

Separately, the Justice Department said Monday that federal prosecutors had filed fraud, theft and other charges against 212 people accused of scams related to Gulf Coast hurricanes.

Forty people have pleaded guilty so far, the latest report by the Hurricane Katrina Fraud Task Force said. Many defendants were accused of trying to obtain emergency aid, typically a $2,000 debit card, issued to hurricane victims by FEMA and the American Red Cross.

The GAO report found that up to 900,000 of the 2.5 million applicants who received aid under the emergency cash assistance program _ which included the debit cards given to evacuees _ based their requests on duplicate or invalid Social Security numbers, or false addresses and names.

In other instances, recipients improperly used their debit cards intended for food and shelter for $400 massages, a $450 tattoo, a $1,100 diamond engagement ring and $150 worth of products at “Condoms to Go.”

The reports called for stronger controls to verify the eligibility of disaster victims who apply for aid over the phone and Internet, better planning of emergency supplies for hurricanes and improved accounting of FEMA’s vast inventory of temporary housing.

Senators decried the problems.

“Once again, FEMA failed to adequately plan for the very type of disaster that occurs virtually every year,” said Susan Collins, R-Maine, who chairs a Senate panel reviewing the government’s response to the storm.

Joseph Lieberman, D-Conn., said hurricane victims and taxpayers alike were being “ripped off.” “It’s unacceptable and ultimately infuriating. We need to do everything we can to insist that FEMA and DHS prepare for the next disaster,” he said.

The White House and Homeland Security officials defended administration actions against the criticism that is still going strong more than five months after the storm.

“I reject outright the suggestion that President Bush was anything less than fully involved,” White House homeland security adviser Frances Fragos Townsend said.

And Homeland Security Secretary Michael Chertoff rebuffed the idea that his department was preoccupied with terror threats at the expense of natural disasters.

Chertoff announced the creation of a full-time FEMA response force of 1,500 new employees and the establishment of a more reliable system to report on disasters as they unfold.

The audits released Monday do not try to estimate a total dollar figure on waste and abuse, but GAO auditor Gregory Kutz told senators during a hearing that it was “certainly millions of dollars; it could be tens or hundreds of millions of dollars.”

That includes money for hotel rooms for evacuees that were paid at retail cost. Among the charges: $438 rooms in New York City and beachfront condominiums in Panama City, Fla., at $375 a night.

FEMA also may have bought too many temporary homes, including 10,777 units that currently sit empty in sinking mud in Hope, Ark.

Meanwhile, a one-day “snapshot” investigation found a handful of cases where hurricane victims improperly sold free military foodstuffs known as “Meals-Ready-to-Eat” on eBay.

The reports weren’t negative. An initial review by Skinner found that FEMA’s decision to sign a contract with Carnival Cruise Lines for Hurricane Katrina housing shortly after the Aug. 29 storm “was reasonable under the urgent circumstances.”

The six-month, $236 million deal with Carnival for three full-service cruise ships _ which initially sat half empty for several weeks on the Gulf Coast _ had been criticized by lawmakers of both parties as a prime example of wasted spending in Hurricane Katrina-related contracts.

However, Skinner said the decision appeared to be an economical choice “in a high-cost area such as New Orleans so long as occupancy remains high.” A review of the contract’s specific terms was continuing.

Some lawmakers expressed concern about the integrity of the total $9.2 billion in Katrina contracts awarded so far. Of more than 700 FEMA contracts valued at $500,000 or greater, more than half were awarded without competition, often to politically connected companies such as Bechtel Corp. and AshBritt Inc.

Audits of those no-bid contracts are under way.

“We want to go after individual people, but we also want to go after the big fish that conduct fraud as well,” said Sen. Carl Levin, D-Mich.