Gazette - Disaster relief fraud

COVER SECTION

Lessons learned from Hurricane Katrina

By the Hon. David R. Dugas
United States Attorney for the Middle District of Louisiana
Hurricane Katrina Fraud Task Force Joint Command Center

David R. Dugas
Only the rooftops of these flooded homes in New Orleans were visible eight days after Hurricane Katrina struck. Fraudsters were already at work taking advantage of disaster money and public empathy.

Hurricane Katrina slammed into the Mississippi Gulf Coast in the early morning hours of Monday August 29, 2005. The combination of wind and storm surge destroyed 69,000 homes in Mississippi and devastated entire coastal communities in that state.

Louisiana was spared the worst of the hurricane-force winds, but experienced a significant storm surge. New Orleans, Louisiana, lies mostly below sea level and is protected by an elaborate system of levees and pumps. Soon after the winds abated, word filtered out of New Orleans that the Industrial Canal levee had failed. That was followed by reports of other levee breaches and widespread flooding throughout the city. By nightfall, 80 per cent of the city of New Orleans had flooded and over 200,000 homes were destroyed. Over 1.8 million people fled or were rescued from the devastation of Hurricane Katrina and relocated throughout the United States.

Hurricane Katrina Fraud Task Force

The U.S. Department of Justice created the Hurricane Katrina Fraud Task Force on September 8, 2005, just 10 days after Hurricane Katrina made landfall. The Department anticipated that massive devastation would spawn fraud that would be both multi-faceted and multi-jurisdictional. The challenge for the Task Force was to devise a structure that could co-ordinate thousands of investigations by dozens of federal and state law enforcement agencies and Inspectors General offices in multiple jurisdictions.

The Task Force is led by Alice Fisher, the Assistant Attorney General for the Criminal Division of the Department of Justice, in co-ordination with the Inspectors General and the heads of the key federal law enforcement agencies in Washington, D.C. The National Command Center in Baton Rouge, Louisiana, provides day-to-day co-ordination, lead collection, lead screening, streamlining of investigations, and data management. The districts most affected by the hurricanes created district working groups led by the U.S. Attorneys’ offices in those districts. Districts without working groups designated points of contact to interact with the Command Center and the Task Force.

Post-Katrina fraud

The scope of the fraud following Hurricane Katrina mirrored the scope and reach of the disaster recovery efforts. Residents of the affected area evacuated to every state in the nation. Massive search-and-rescue operations required unprecedented logistical support. Food, water, ice, fuel, generators, communications, medical supplies, temporary housing and transportation had to be brought in to the devastated area to support the relief efforts. Over 100 million cubic yards of debris had to be cleared, utilities repaired, roads re-opened and governmental facilities repaired or replaced before the rebuilding effort could begin.

The first anti-fraud lesson learned from Hurricane Katrina was not a new one, but was driven home by the scope and breadth of the fraud: fraud follows the money. Most disaster relief programs were afflicted by fraud that started as soon as the money began flowing to the affected areas.

Fraudulent schemes

The first fraudulent schemes appeared within days of the disaster. Fraudulent charity schemes attempted to solicit money from a concerned public eager to contribute to any charity that was assisting the victims of the disaster. In Florida,

a fraudulent website called www. AirKatrina.com solicited donations for purported medical relief and evacuation flights into the affected areas. In Bakersfield, California, workers hired by the American Red Cross to staff an emergency call center began submitting fraudulent emergency relief applications for themselves, their friends and associates. Over 80 defendants have been charged with fraud related to this call center.

The Federal Emergency Management Agency (FEMA) received over 2.5 million applications for individual emergency assistance from evacuees in all 50 states. Some of those applications were fraudulent. In Oregon, Florida, Illinois, Pennsylvania, California and numerous other states, individuals who were not living in the affected areas and were not affected by the hurricanes nevertheless submitted false applications to FEMA or the American Red Cross claiming to be displaced victims of the disaster needing emergency assistance. To date, prosecutions against such individuals have been brought by 41 of the 93 U.S. Attorneys’ offices across the United States.

In many cases, the fraudulent applications were successful because the flood of applicants prevented the relief agencies from verifying each application. As criminals realized this vulnerability, the schemes expanded. Some submitted multiple fraudulent applications. Others recruited individuals and submitted fraudulent applications on their behalf in exchange for kickbacks. In Georgia, one individual submitted 51 fraudulent applications for Disaster Unemployment Assistance to the Louisiana Department of Labor. In Florida, Louisiana, Mississippi, Alabama, Texas, and even as far away as Oregon, prosecutions have been brought against organized rings accused of systematically exploiting the emergency relief programs.

In some cases, the fraud was committed or facilitated by insiders. In one such scheme, a fire chief and several co-workers who volunteered to work at FEMA’s primary emergency operations medical center in Baton Rouge were charged with stealing over $500,000 of emergency medical supplies. The fire chief was also charged with attempting to kill one of his cohorts whom he believed was co-operating with law enforcement in the investigation of the theft.

In Louisiana, prosecutions have been brought against FEMA employees for soliciting bribes from contractors in exchange for allowing overbilling under emergency relief contracts.

Investigative techniques

The challenge in dealing with fraud following a disaster is often more logistical than tactical. Fraud typically follows familiar patterns of “lying, cheating and stealing” that most trained law enforcement officers know how to investigate. However, the scope of the fraud can overwhelm law enforcement agencies in the affected area and surprise law enforcement agencies located in areas remote from the disaster zone. Finding, deploying and maximizing the resources needed to combat that fraud can be the first and greatest challenge that faces law enforcement officials following a disaster.

In order to investigate disaster fraud, law enforcement agents need investigative leads, access to evidence, and the resources to conduct the necessary investigations and prosecutions. The best sources of leads and evidence will be the public and the internal data and records of the disaster relief agencies.

Because the sheer volume of tips and leads can result in overlapping and potentially conflicting investigations by multiple agencies, a task force or working group is needed to co-ordinate investigations. If the disaster is large enough, then a dedicated command center can serve as a centralized lead-collection, screening, and referral vehicle to ensure that overlapping and conflicting investigations are avoided. The task force and its command center can also serve as a central repository for information on where to find and how to obtain the evidence needed to conduct investigations. The task force can establish protocols to streamline evidence collection and assist investigating agents in locating witnesses and documents.

In the case of the Hurricane Katrina Fraud Task Force, the public has provided many of the best leads through hotlines created by the Task Force and answered at the Command Center. The Command Center receives and screens all leads and complaints of disaster fraud from all sources, verifies information through agency databases, collects records that are relevant to the fraud allegations and refers each lead to the appropriate law enforcement field office with a package of information that will assist the agency in conducting its investigation. All leads and referrals are logged in the Command Center’s database and cross-checked against the database to avoid duplication of investigations. The Command Center has screened and referred almost 14,000 leads that have resulted in the prosecution of over 830 defendants to date.

For law enforcement officials charged with investigating disaster fraud, I recommend following three basic principles.

First, do not reinvent the wheel. Your agents, officers and prosecutors know how to do their jobs. Your job is to make sure that they have what they need to do their jobs. Try to provide that within existing and familiar structures and protocols.

Second, do no harm. Do not create a task force or working group that merely overlays an extra level of supervision or command. In the Hurricane Katrina Fraud Task Force, the Command Center collects, screens and analyzes leads and refers the leads to investigative agencies; however, it does not manage the investigations or ask agents to report on the status of investigations.

Third, leverage your assets through co-operation, communication and co-ordination. A task force can add considerable value by avoiding conflicting or overlapping investigations, distributing leads based on agency expertise and resources, facilitating multi-agency investigations and providing subject matter expertise to assist agents and prosecutors with the unique aspects of disaster fraud cases. With proper communication and a co-operative attitude, the whole of the task force can quickly become greater than the sum of its parts. When that happens, the agencies and the public they serve reap the benefits.