South Florida Sun-Sentinel

FORT LAUDERDALE, Fla. – Federal officials, charged with disbursing billions of dollars in relief after one of the nation’s worst natural disasters – Hurricane Katrina – are vowing to crack down on fraud by assigning about 350 auditors, investigators and inspectors to catch people and companies who try to cheat the government.

But in a continuing investigation of disaster spending by the Federal Emergency Management Agency, the South Florida Sun-Sentinel has found that the agency has rarely pursued individual wrongdoers in court and has made only feeble attempts to recover money given to undeserving applicants.

The newspaper reported last month that FEMA awarded at least $330 million nationwide over five years to more than 210,000 people in areas with little or no known damage. In city after city, applicants told of faking damage and claiming money for items they never owned – all with little fear of consequences.

In Detroit, State Police launched an investigation in late 2000 after learning that 50,000 city residents were applying for FEMA aid after heavy rains flooded homes and businesses in suburbs to the south. City emergency managers were concerned that residents were “taking advantage” of disaster aid after a rainstorm that resulted in only four complaints of basement flooding in the city.

Within weeks, the police compiled a report citing “fraudulent applications” as a factor in the payouts and quoting the city emergency manager as saying that “he didn’t believe the majority of the people registering for assistance actually had any damage,” according to investigative records obtained by the newspaper last week.

“We talked to FEMA. … We expressed concerns about the high dollar amount,” said Lt. Ralph Hobrat of the police department’s Emergency Management Division.

Yet money continued to pour into the city, eventually reaching $168.5 million. At the time, state officials described it as one of the largest individual disaster payouts in history.

Of the more than 87,000 residents who collected FEMA aid, none was prosecuted, according to the U.S. Attorney’s Office in Detroit. Federal fraud investigators said they had records of action in only one case, the intercept of a $1,037 check mailed to a person who didn’t live at the address where the claim was filed.

State officials knew of no money being returned to taxpayers.

FEMA officials did not respond to questions about their response to the Detroit concerns or how much in fraudulent and wasteful payments they had recouped from past disasters.

In California, federal prosecutors knew of no charges related to wildfires in 2003 that enabled more than 5,000 Los Angeles area residents to collect $5.2 million from FEMA for flames at least 25 miles away. Residents claimed they needed money to clean soot from their homes and belongings.

As director of the California Governor’s Office of Emergency Services, Dallas Jones said he would have known if FEMA recovered any money. Jones left last year, seven months after the fires raged through southern California.

“Up until May of last year, I wasn’t aware of any (recoupments) at all,” he said.

After a tornado ripped through a 1.5-square-mile area of Miami-Dade in March 2003, FEMA awarded $14.5 million – $9 million of it to residents up to 37 miles from the damage, the Sun-Sentinel found. State records show FEMA recouped about $146,000. The U.S. Attorney’s Office in Miami said no one was charged with fraud.

In general, FEMA adheres to a “pay first, ask questions later,” approach in which it quickly disburses aid to disaster victims for housing repairs, transportation, medical costs and damaged belongings. The money typically is given based on the applicant’s statements and inspection of the applicant’s home.

Recipients sign releases saying they must repay the agency if they later obtain insurance benefits or other funds to cover their housing repair costs. After each disaster, FEMA identifies people who were overpaid or paid in error.

“Once the money is out there, recovering the money is very, very difficult,” said H. Douglas Hoell Jr., director of the North Carolina Division of Emergency Management. “People don’t really have the money to repay it.”

And according to Richard Skinner, inspector general for Homeland Security, federal prosecutors are reluctant to take on such cases.

Skinner told a House Energy and Commerce subcommittee on Sept. 28 that prosecutions of individuals who defraud FEMA are rare because the most people can collect is about $26,000, which normally “doesn’t rise to a threshold” that U.S. attorneys are interested in prosecuting.

It was only after media attention and outrage by members of Congress that Skinner’s office launched an audit last year of FEMA payouts related to Hurricane Frances. Nearly 13,000 people in Miami-Dade collected $31 million for the storm, which made landfall 100 miles to the north, sparing the county.

The government charged only 16 people in Mimi-Dade with fraud, obtaining guilty pleas from 14. On Friday, prosecutors announced the indictment of nine others. All are Broward County residents accused of filing false FEMA claims after Frances.

Even when prosecutions occur, taxpayers are not guaranteed of recovering the misspent funds in a timely fashion, the Sun-Sentinel found.

In the case of a Homestead, Fla., woman who collected $24,755 for a sewer backup that occurred weeks before Hurricane Frances, a judge ordered her to repay the government $50 a month. At that rate, the full sum won’t be recovered for 41 years.

After the busy hurricane season of 2004, FEMA took the unusual step of forming a Recoupment Task Force to “identify and pursue recovery of erroneous or fraudulent awards,” according to Inspector General work papers related to the Miami-Dade Hurricane Frances audit.

But the task force “does not seem to be a very serious undertaking, judging from the fact that there is no trace of any official notification regarding its make up or mission,” the Inspector General concluded.

The head of the task force did not respond to a message left on his office phone Friday.

Last week, FEMA said it is trying to collect $30.3 million from Floridians, most of whom also received insurance money for damages FEMA covered after last year’s four hurricanes.

Of the $30.3 million, the agency has so far recovered about $5 million.

Eventually, unpaid debts older than 180 days or more are turned over to the Treasury Department’s Financial Management Service. The service sends payment letters to people, advises credit bureaus of the debt, enlists the aid of private collection agencies and garnishes tax refunds or federal benefits.

Since 1999, the service has recovered $7.9 million for FEMA from vendors, homeowners and renters. About $17 million in FEMA debt is outstanding, according to the Treasury Department.

Reclaiming money from individuals is not easy, federal officials said.

After Hurricane Lili struck Louisiana in 2002, FEMA gave $64 million to more than 52,000 applicants. The sum included $15.4 million to residents of East Baton Rouge Parish where wind gusts reached only 47 mph and rain totaled at most 3.18 inches. State records show FEMA was seeking repayment statewide of $57,913, as of Oct. 29, 2003.

At that point, documents show FEMA had collected $8,743 from two people. One of the individuals had paid only $15.