Cashing in on a Tragedy

Apr 02, 11:29 AM

Current Headlines: By Sharon Cohen THE ASSOCIATED PRESS

An Illinois woman mourns her two young daughters, swept to their deaths in Hurricane Katrina's floodwaters. It's a tragic and terrifying story. It's also a lie.

An Alabama woman applies for disaster aid for hurricane damage. She files 28 claims for addresses in four states. It's all a sham.

Two California men help stage Internet auctions designed to help Katrina relief organizations. Those, too, are bogus.

More than 18 months after Hurricane Katrina decimated the Gulf Coast, authorities are chipping away at a mountain of fraud cases that, by some estimates, involve thousands of people who bilked the federal government and charities out of hundreds of millions of dollars intended to aid storm victims.

So far, more than 600 people have been charged in federal cases in 22 states and the District of Columbia.

"The reason we're seeing such widespread fraud is individuals were evacuated to all 50 states. Katrina was a national phenomenon," says David Dugas, U.S. attorney in Baton Rouge, La., and director of a command center that's part of a special Hurricane Katrina Fraud Task Force. "Everybody knew what was going on. Therefore, criminals knew what was going on."

Major disasters and fraud frequently go hand in hand. It happened after the Sept. 11 terrorist attacks and Hurricane Andrew's devastating sweep through Florida in 1992. People tried to cash in, falsely claiming to be victims.

After Katrina, the same thing happened: Disaster aid was sent to inmates who applied from prison and to people who claimed property damage and provided addresses of vacant lots or cemeteries, among many abuses documented in Government Accountability Office reports.

"We found several dozen schemes. There are probably a lot more out there," says Gregory Kutz, a GAO investigator who has testified about Katrina fraud six times on Capitol Hill. "The real clever ones cover their trail and disappear, and they'll never be caught."

While many people filed bogus claims, the growing roster of the accused goes beyond the usual con artists. It includes employees of the Federal Emergency Management Agency and the Army Corps of Engineers, other public officials, business owners, even temporary workers for the Red Cross.

The GAO has referred more than 22,000 potential cases of fraud to the Katrina task force, though Dugas says the majority probably will not pan out. In a recent audit, the GAO also concluded FEMA had recovered less than 1 percent of some $1 billion investigators claim was fraudulent aid.

A recent Associated Press analysis of government data obtained under the federal Freedom of Information Act suggested the government might not have been cautious enough as it doled out nearly $5.3 billion in aid to storm victims. The analysis found the government made more home grants than the number of homes in one of every five neighborhoods after Katrina.

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