As Hurricane Ida recedes into meteorological history, investigators are bracing for what may be the storm’s final impact – a wave of federal disaster frauds.
Ida’s deadly thrashing of New Orleans and the nearby Gulf Coast, followed by flooding that killed dozens in the Middle Atlantic and Northeast, began on the 16th anniversary of Hurricane Katrina. That catastrophic storm’s death and destruction was followed by massive frauds.
A 2006 Government Accountability Office report estimated that the nation’s emergency aid agency made between $600 million and $1.4 billion in potentially fraudulent payments to applicants who used invalid information following Katrina and a second hurricane.
The frauds included millions of dollars sent to applications with the names and Social Security numbers of people who were federal or state prison inmates during the storms, as well as debit card payments for a Caribbean vacation, tickets to pro football games, and adult entertainment, the GAO found.
Trying to head off a repeat of such scams, the National Center for Disaster Fraud, a U.S. Department of Justice unit created 16 years ago in response to Katrina, is checking for initial complaints of Ida-related fraud. The effort follows the Federal Emergency Management Agency’s Tuesday release of information outlining how those who suffered Ida-related losses may seek federal assistance to pay for losses not covered by their insurance carriers.
“The fraudsters have probably already started, and they’ll probably be in full swing within a couple of weeks,” said Paul Pugliese, a Louisiana-based federal prosecutor and the disaster fraud center’s associate executive director. “This may be the most significant hurricane we’ve had in a while. So, I expect there will be a lot of fraud complaints.”
A complaint total in the “low double digits” had been logged at the disaster center’s calling and data center at Louisiana State University as of Friday, with more expected, said Pugliese.
That prediction is based on experiences from Katrina and other past major storms.
During the month after Katrina and Hurricane Rita, another major 2005 hurricane that belted the Texas Gulf Coast, FEMA received more than 2.5 million applications for disaster assistance. Fraud allegations emerged soon after the agency rushed funds to applicants.
The National Center for Disaster Fraud served as a central point for receiving those complaints and relaying them to federal prosecutors, a newly created Disaster Fraud Task Force, and other government regulators. Through the end of federal fiscal year 2011, the coordinated investigation process produced charges against 1,439 people in 1,350 criminal cases stemming specifically from Katrina- and Rita-related fraud complaints.
The first type of alleged disaster fraud that emerged after Katrina and subsequent major storms was identity theft by foreign criminal organizations or individuals, said Pugliese. In some cases, the alleged criminals obtained the birth dates and Social Security numbers of people who lived near the storms and used the information to apply for federal aid in those people’s names.
Some of the identity fraud victims discovered the alleged fraud because they subsequently applied for federal disaster relief, only to learn that scammers had beaten them to it.
In other cases, Americans who weren’t eligible and lived far from disaster areas allegedly made up fake addresses and applied for federal aid. That’s what happened in some cases after Hurricane Katrina, when FEMA provided $2,000 in expedited disaster assistance to help eligible families pay for immediate needs after the storm.
“There’s a desire to get money into the hands of true victims,” said Pugliese. “The more you escalate that process the more you have a potential for fraud.”
Cynthia Magee lived in San Diego, California, thousands of miles from Katrina’s devastation. However, applying with a non-existent New Orleans address, she obtained $14,000 in FEMA aid for expedited aid, rental assistance, and other aid, federal court records and an announcement by federal prosecutors show. Magee also obtained thousands of dollars in Red Cross debit cards by visiting Mississippi and Texas offices run by the aid organization and claiming to have been victimized by the storm.
She pleaded guilty to fraudulently obtaining disaster aid and in 2011 was sentenced to a 27-month prison term. A federal judge also ordered Magee to pay $20,572 in restitution.
In all, the Center for Disaster Fraud received and helped coordinate investigations of more than 31,000 Katrina-related complaints. During recent years, the center has helped coordinate investigations of scams from other storms, plus more than 100,000 complaints related to alleged COVID pandemic frauds, said Pugliese.
Since its founding, the disaster fraud center has received more than 220,000 complaints in all.
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Based on that experience, the disaster center urges people whose lives have been upended by storms and other major calamities to guard against becoming victimized twice.
Double check the names and locations of all purported aid agencies. Never provide birth dates, Social Security numbers or bank account information in response to unsolicited callers or emails. Don’t click on electronic links in unsolicited emails offering disaster aid. And monitor financial accounts for signs of fraud.
“We’re trying to get the message out now, before people get scammed,” said Pugliese.