FEMA hurricane cards bought jewelry, erotica
Federal audit finds $1 billion in potential fraud
Wednesday, June 14, 2006; Posted: 11:30 a.m. EDT (15:30 GMT)
WASHINGTON (CNN) -- A $200 bottle of champagne from Hooters and $300 worth of "Girls Gone Wild" videos were among items bought with debit cards handed out by FEMA to help hurricane victims, auditors probing $1 billion in potential waste and fraud have found.
The cards -- given to people displaced by Hurricanes Katrina and Rita -- also bought diamond jewelry and a vacation in the Dominican Republic, according to the Government Accountability Office audit.
The GAO uncovered records showing that $1,000 from a FEMA debit card went to a Houston divorce lawyer; $600 was spent in a strip club and $400 was spent on "adult erotica products," all of which auditors concluded were "not necessary to satisfy legitimate disaster needs."
The GAO found that at least $1 billion in disaster relief payments by the Federal Emergency Management Agency were improper and potentially fraudulent because the recipients provided incomplete or incorrect information when they registered for assistance. (GAO report)
The GAO said the scope of the problem may be even larger, because it only looked at the validity of registration information and not at other forms of potential fraud.
FEMA acknowledged its shortcomings late Tuesday.
Spokesman Aaron Walker said FEMA has "revamped the registration process" and has a contract with a company that will verify immediately the identity and address of anyone for assistance.
"We are confident in the system we have in place at this point," Walker said. "We are prepared for the upcoming season."
The GAO also found that FEMA provided housing assistance to people who were not displaced, including at least 1,000 prison inmates, and also provided rental assistance to people who were simultaneously living in free hotel rooms.
Results of the GAO's audit will be presented Wednesday to an investigative panel of the House Homeland Security Committee. FEMA is part of the Department of Homeland Security.
The GAO also found that FEMA lost track of 750 debit cards, worth a total of $1.5 million.
After inquiries from the GAO, FEMA recovered about half of that money, which had not been distributed by JPMorgan Chase, the bank hired to run the program. But the agency still cannot account for 381 cards, worth about $760,000 total, which JPMorgan Chase says it distributed, according to the GAO.
GAO investigators estimated that 16 percent of FEMA's disaster relief payments were made to people who submitted invalid registrations, to the tune of about $1 billion. Because the figures were calculated using a statistical sample, however, the agency said the amount could range from $600 million to as much as $1.4 billion.
Among other problems found with the registrations, according to the GAO study:
People signed up for assistance using Social Security numbers that didn't exist or belonged to other people.
Aid applications contained bogus addresses for damaged property, or gave addresses for damaged property where the applicants did not live when the hurricanes struck. In one case, FEMA paid nearly $2,360 to a man whose allegedly damaged property was in a cemetery.
Payments were made to people who listed post office boxes as their damaged residences.
People submitted duplicate registrations, which FEMA did not detect.
More than 1,000 registrations used the names and Social Security numbers of prison inmates. According to the GAO, in one instance, FEMA paid $20,000 to a Louisiana prisoner who listed a post office box as his damaged property.
As part of its audit, the GAO used an undercover registrant who submitted a vacant lot as a damaged address.
FEMA paid the registrant $6,000 and even made payments after being notified by one its own inspectors, as well as an inspector for the Small Business Administration, that the damaged property could not be found, the GAO investigators found.
The GAO concluded that the potentially fraudulent payments were made because FEMA did not validate registrants' identities and the locations and ownership of purportedly damaged property.
While conceding that FEMA acted out of the need to provide assistance quickly, GAO investigators said the agency's own policies required additional verification before continuing payments.
The GAO study also found FEMA improperly provided rental assistance to people who were staying in hotels paid for by FEMA because the agency did not require hotels to collect Social Security numbers and FEMA registration information.
Without that information, FEMA could not verify if people were staying in hotels when they applied for rental assistance.
And because that information doesn't exist, GAO auditors said they could not determine how many people might have double-dipped -- or how much it cost the government.
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