Some of the more than 10,000 mobile homes at the Hope, Ark., airport.

Easy money?

Disaster relief | With Katrina relief providing a bonanza for scammers, reformers ask: Can FEMA change?

Issue: "Unto the breach," July 22, 2006

WASHINGTON, D.C.- We are almost one month away from the anniversary of last year's Katrina disaster. For the past 11 months, taxpayers have labored in the wake of the costliest hurricane in U.S. history, plucking billions from their wallets, wiping away sweat from hundreds of thousands of volunteer hours, and marshaling millions of words to discuss FEMA fraud and bureaucratic bungle.

A question frequently asked: Can Washington officials sorting through hundreds of thousands of specialized cases ever get it right? When FEMA rules are too tough, critics rip into it for making sufferers' lives more miserable; when they're too easy, huge rip-offs occur. But lately it's the rip-offs that have people up in arms. New accounts come in every day, seemingly faster than the government can prosecute offenders.

For starters, there's the story of Kenneth R. McClain. According to the Justice Department, McClain and several unnamed cohorts swindled FEMA out of hundreds of thousands of dollars in the four months following Katrina. Using 27 aliases, McClain allegedly had disaster relief funds sent to 21 different UPS stores across Texas that he said were his residences. Packages were then forwarded to a Homestead Studio Suites hotel in Dallas, where McClain was paying a homeless man to stay each night and collect mail in the morning.

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Hundreds of stories are like these: A defendant in Texas allegedly submitted more than 50 fraudulent online applications for emergency relief aid, raking in about $65,000 that she split with family members living in Dallas and Mississippi. Nine Portland, Ore., residents allegedly obtained FEMA rental-assistance checks-despite living 2,600 miles from the storm-by simply claiming they were displaced by the disaster. A New Orleans man allegedly fled to Conroe, Texas, paid people there in cash or drugs for their names and Social Security numbers, then applied for aid using their information. Another Louisiana man allegedly received 50 FEMA-funded unemployment debit cards after putting the same address and last name of either "Ramirez" or "Garcia" on every application.

To boot, congressional reports say $5.3 million went to applicants who used P.O. boxes as their damaged homes, and FEMA has admitted that some "evacuees," in fact, were incarcerated at the time of the storm. Another applicant, perhaps with a sick sense of humor (but one not immediately fatal for his claim), allegedly listed a cemetery as his home address.

Onlookers gasped at the exploitation of compassion when Tina Marie Winston of Belleville, Ill., defrauded FEMA with a tearjerker about two children she never had drowning in Katrina floodwaters. Yet the idea was hardly novel: Walter Ray Stall, a Wal-Mart worker from Palestine, Texas, conned the people of nearby Tyler with his similarly tragic tall tale.

He claimed that his wife and 3-year-old son drowned after the levees broke in New Orleans and that he narrowly escaped death by swimming to the Superdome, where he hitchhiked to Tyler-a place, incidentally, from which he was never more than an hour away. Station KLTV covered his amazing story, announcing that "devastating stories of how Hurricane Katrina tore families apart" abounded, but "there was none like [this] one." Churches and charities began donating big bucks-until Stall's sister and mother, who lived in the area, heard about the news program and exposed him.

If these stories move some to label the government officials incompetent or naive, there are worse barbs: One Louisiana Labor Department clerk, whose real last name is Lawless, allegedly accepted bribes of several hundred dollars each to give about 80 unemployment debit cards to fraudulent claimers. A councilman from Louisiana's St. Tammany Parish allegedly pressured a contractor into splitting the pay 50-50 from a debris-removal contract of which he had inside knowledge. A subcontractor in Mississippi allegedly bribed a U.S. Army Corps of Engineers employee who was stationed at a dumpsite to create false load tickets for debris the subcontractor never dumped.

And if all that further stupefies, investigators say these stories are the good news-after all, these are the cases they know about and can prosecute. Investigators estimate fraud alone-not counting the now-infamous stories of FEMA waste-at $1.4 billion, or up to 16 percent of all relief assistance. Gregory Kutz, who is investigating FEMA for the Government Accountability Office (GAO), summed up FEMA's anti-fraud program this way: "[I]t wasn't really something that FEMA put a high priority on. So it was easy to commit fraud without being detected."

Kutz's office says as much as 21 percent of the $6.3 billion victims received directly may have been distributed improperly . Red Cross officials alone say they are looking into 7,100 possible cases of fraud. Congress has added to the pile another 7,000, and federal investigators remark almost optimistically that many of the crimes carry a five-year statute of limitations.


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