Katrina, a hurricane that caused an amazing amount of damage, also resulted in fraudulent claims for people who did not even live in the area or own property. The US Attorney reported in September that more than 1,300 people were charged in federal fraud cases related to the 2005 hurricanes in the five years since the storms struck the Gulf Coast that resulted in only 326 convictions by the FBI and Justice. The full report can be read at http://www.justice.gov/criminal/katrina/docs/09-13-10katrinaprogress-report.pdf and reveals some convictions by other agencies.

The Hurricane Katrina Fraud Task Force the Justice Department reported that its investigators have screened more than 39,000 fraud-related tips and complaints since the 2005 storm season. As of September 1, 2010, 1,360 people have been charged in federal courts with fraud related to hurricanes Katrina, Rita or Wilma. Most of the cases involved attempts to fraudulently obtain disaster aid from the Federal Emergency Management Agency and the American Red Cross and do not include the thousands of fraudulent insurance claims that resulted from Katrina. The task force's report also bragged about the Justice Department's prosecutions of identity theft, procurement fraud and public corruption.

Many people managed to fraudulently obtain money from FEMA and the Red Cross due to the "absence of effective fraud-prevention internal controls and measures,'' according to the report.

The report concluded:

 The Task Force has identified several factors that directly affected its ability to prevent and combat disaster-related fraud:

• Absence of Fraud-Prevention Controls and Measures:  In the wake of Hurricanes Katrina and Rita, the absence of effective fraud-prevention internal controls and measures made it possible for many people fraudulently to obtain emergency benefits from FEMA and the American Red Cross. While it is always vital in any disaster to provide prompt financial support to victims whose jobs or businesses have been severely affected by the disaster, a balance also must be struck between speed of payment and effective measures to verify identities and other information that claimants provide. Both FEMA and the Red Cross have since substantially revamped their internal processes and improved their capabilities to oversee the disbursement of emergency assistance and to facilitate identification of suspicious claims or transactions.
  
• Centralized Process for Intake and Referral of Disaster Fraud Reports: The NCDF's record in handling nearly 40,000 fraud reports on numerous disasters since Katrina demonstrates the value of having a single, integrated process to ensure channeling of all public reports of disaster-related fraud to a single location and promptly deconflicting and referring meritorious reports to law enforcement.
  
• Close Coordination Among Investigative Agencies and Inspectors General: In their responses to Katrina and later disasters, investigative agencies and Inspectors General were able to work efficiently and effectively, in large measure, because they consistently demonstrated a willingness to cooperate as necessary in investigating particular cases and to minimize the potential for overlap or duplication of resources in investigating the same individuals.

 As the public reports alleged frauds related to the Deepwater Horizon oil spill and other disasters in the future, law enforcement will need to build on the lessons of the last five years and encourage donor and grant-making organizations to maintain effective controls, make full use of the NCDF in receiving and processing fraud reports, and maintain close cooperation among agencies in order to sustain its noteworthy record of success in combating disaster-related fraud.

FEMA is not insurance. Its payments are gifts from the US Government to the people damaged in a catastrophe. It, therefore, acts as a charity that all taxpayers in the United States are forced to give. It is time, if FEMA continues to exist, that its personnel must be properly trained to investigate those making claims and avoid making payments to those willing to defraud FEMA because it has so much money and it has proved to be easy to steal from with little or no penalty.  That the task force only investigated 1,300 suspected frauds and have convicted less than 400 is an indication that the Justice Department is not interested in prosecuting fraud.
 
This writer can only assume that if FEMA continues to work as it has in the past the Deepwater Horizon catastrophe will result in billions of dollars of fraudulent claims successfully made.

Barry Zalma, Esq., CFE, is an expert witness and international expert on insurance coverage and fraud.  Readers may write to Mr. Zalma at zalma@zalma.com