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At the end of August of 2005, Hurricane Katrina, a category 5 hurricane, hit the Gulf Coast and caused phenomenal damage to Florida and Louisiana- destroying a large amount of the city of New Orleans. By September of 2005, the Department of Justice established the Hurricane Katrina Task Force. The purpose of this Task Force was to detect and prosecute individuals who were trying to take advantage of disaster relief. Hurricane Katrina was not only the deadliest, but the most expensive natural disaster in US history. Nevertheless, due to the tireless work of the FBI Task Force, millions of dollars were saved from potential frauds and the perpetrators continue to be brought to justice.
To this day, the full extent of the fraud that was committed in respect to Hurricane Katrina still remains vastly unknown, but over 1,300 individuals have been indicted for Katrina-related crimes across 43 federal judicial districts across the country. The task force received over 36,000 complaints since 2005, close to 22,500 of those complaints were referred to law enforcement for possible investigation, and 4,800 of those complaints were forwarded onto the FBI. (FBI, 2009)
The array of crimes that have been committed have ranged from emergency-benefit fraud, identity theft, procurement fraud, and public corruption. Politicians and business owners alike took advantage of poorly crafted contracts, skimming off the top and receiving kickbacks from mismanaged projects- taking millions of dollars meant for victims of Hurricane Katrina.
Frauds discovered by the Task Force include examples such as two brothers claiming to raise money for the Salvation Army for hurricane victims, but instead were funneling the money through Paypal into their private bank account. They stole over $48,000 before their accounts were frozen. In 2007, they both were sent to prison for nine years. In 2014, the former New Orleans Mayor Ray Nagin was sentenced to 10 years in prison for corruption and bribery some of which occurred during the hurricane response he became the 17th local politician sentenced since the storm, according to the New Orleans Advocate. (Westwood, 2015) In 2008, the longest prison sentence for Hurricane Katrina related fraud was handed down to a woman who was sentenced to 43 years in prison for filing of false claims for Hurricane Katrina disaster assistance, theft of funds intended for victims of Hurricane Katrina, threatening a witness from another Hurricane Katrina case, conspiracy, drug distribution, weapons charges, and making false statements to federal authorities , in addition to successfully stealing $80,000 from FEMA, with the intent of stealing over $500,000. (Govtech.com, 2008)
These cases were all solved with the joint cooperation of local police and the FBI Task Force. They would work together in order to initiate the investigation and then hand it off to the U.S. Attorneys office, which would efficiently and effectively prosecute the fraudsters. This allowed the Task Force to act quickly and aggressively to bring to justice those who would further harm the victims of these natural disasters. (Govtech.com, 2008) The Task Force was chaired by Acting Assistant Attorney General Matthew Friedrich of the Criminal Division and included a wide range of government department including but not limited to: the FBI, the IRS, the US Postal Service, the SEC, the Presidents Council on Integrity and Efficiency, and numerous Inspectors General. (U.S. Department of Justice, 2007)
For all these cases of fraud, it was essential to have accountants and auditors involved- their expertise in identifying red flags was imperative for sorting through all the complaints. Public corruption and government fraud cased increased by 243% between 2006 and 2008, according to Special Agent David Welker, who was in charge of the New Orleans office, and being able to catch the perpetrators early prevented an economic loss estimated at more than $55 million. (FBI, 2009) According to the New York Times in early 2006, Hurricane Katrina ‘produced one of the most extraordinary displays of scams, schemes and stupefying bureaucratic bungles in modern history.’ (Westwood, 2015)
Following the aftermath of Katrina, there was a lot of government criticism. The Federal Emergency Management Agency (FEMA) was in such a rush to create disaster relief agreements that more than 80% of the $1.5 billion contracts awarded out were incomplete and included open-ended or vague terms. (H. Rpt. 109-377- A Failure of Initiative: Final Report ) These failures of attention to detail and moving forward with hasty, sloppy work allowed people to take advantage of all the money flooding in and for people to game the system put in place by FEMA.
Unfortunately for FEMA, their own workers were not immune to the temptation of endless fraud possibilities. One former FEMA manager was faced with an ethical dilemma in which he discovered he could: embezzled a 39 foot travel trailer, meant to be used as emergency housing, as well as his own government vehicle by means of his exploiting position. Moreover, when he discovered that he was under surveillance, he attempted to corrupt the investigation. He was indicted for embezzlement as well as obstruction of justice.
‘Whenever a natural disaster strikes, there will always be unscrupulous people willing to take advantage of victim assistance and rebuilding efforts,’ said Matthew Friedrich. ‘Those who would try to profit from the misfortunes of disaster victims should know that the Department of Justice, federal investigative agencies, and inspectors general will continue their aggressive pursuit of disaster fraud.’ (Govtech.com, 2008) Furthermore, there have also been many cases of public corruption associated with Katrina, said David Welker. When it comes to criminal activity and public officials trying to siphon off funds meant for projects to rebuild the area, he said, we maintain a zero tolerance policy. We wont stop pursuing these cases no matter how much time passes. (FBI, 2009)
Three important skills that the fraud examiners used to solve these cases were being a good listener and communicator, being objective in all cases, and having a keen analytical ability. It would be important to be a good communicator and listener in order to hear the complaints come in, and get all the relevant facts in case of an investigation in the future. Objectivity is important for auditors to weed out the good tips from the less substantial tips, as well as being objective about the possible players. In many instances there were higher level politicians and even government workers who were caught stealing, not just civilians taking advantage of mismanaged process. And lastly, being able to analyze transactions and identify red flags in their early stages was crucial to uncovering fraud. The auditors and fraud examiners were able to zero in on wire fraud, misappropriation, kick backs and identity theft via stolen social security numbers.
In conclusion, Hurricane Katrina not only physically devastated areas surround the Gulf Coast, economically and financially devastated the people of Louisiana and Florida. People of all types of questionable integrity swarmed the area, hoping to make their fortune of the misfortune of others. And while it was true that the governments response to the disaster was a failure on many counts, the proactive strategies of the FBI Task Force, along with the cooperation of the local law enforcement, were able to limit and stop many fraudulent activities in addition to bringing the criminals to justice.
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