Clamping Down on Storm Fraud

In the latest crackdown on fraud related to Hurricane Katrina, police officials Friday vowed to “nip in the bud” attempts by people to illegally obtain Red Cross aid with phony stories of being hurricane victims or by seeking a second payment.

Police Chief Harold L. Hurtt said he had assigned undercover officers -- some posing as Red Cross volunteers -- to look for people trying to cheat the system by using false names and other deceptions to get a Red Cross debit card, worth up to $1,560.

For several days, thousands of evacuees have formed long lines at St. Agnes Baptist Church, where the Red Cross is interviewing applicants for aid.

Hurtt said 25 arrests had been made and more were expected. In one case, a 16-year-old boy tried to get a debit card by claiming he was the head of a household and had four children.

Some of those arrested were seeking a second card, and others had dubious claims of being victims of the hurricane.

“We’re taking a zero tolerance position on this issue,” Hurtt said.

Federal officials have announced the nationwide Hurricane Katrina Fraud Task Force to focus on other fraudulent schemes, including phony charities, identity theft, inflated or bogus insurance claims, and efforts to defraud the Federal Emergency Management Agency.

The FBI is reviewing about 4,000 websites that say they are soliciting donations for Katrina victims.

Of the 2,000 that have been examined, about 60% are foreign, raising suspicions about their legitimacy, officials said.

Dozens of fraud inspectors from the Department of Homeland Security have been dispatched to the Gulf Coast to oversee how federal money is spent in the recovery effort.

Katrina victims have been warned to watch for unlicensed contractors and people seeking to prey on them, and not to count their money in public if they use a Red Cross or FEMA card to get cash.

Scams are common after disasters as victims struggle to repair their lives and the public rushes to provide assistance.

Red Cross and officials with FEMA concede that given the number of Katrina victims who fled with little or no money or documents, it is nearly impossible to thoroughly check their background before providing an emergency allocation.

FEMA provides up to $2,000 per household, either through debit cards, checks or direct bank deposits. The Red Cross also provides debit cards, with the limit determined by the size of the family and its remaining assets.

FEMA officials said that although they asked the recipients to promise not to spend the money on alcohol, tobacco or firearms, there was little practical way to check to see if the promise was kept.

By making the recipients promise to obey the rules, “we think we’ve done our duties as stewards of taxpayers’ money,” said FEMA spokeswoman Barbara Ellis.

Gregory Smith, deputy director of the Red Cross in the Houston area, said recipients of Red Cross debit cards were asked to make a similar promise, but no attempt was made to audit their use of the cards. The money, he said, is considered “a gift from the people of the United States.”

“It is the choice of the individual receiving these funds to use these funds wisely or not,” he said.

So far, Smith said, the Red Cross has allocated $45 million to Katrina evacuees in the Houston area, which has received more displaced people than any other in the nation.

He said that before the Red Cross gave a debit card or check to someone, the name was entered into a database to ensure it was the first payment. He declined to detail the efforts made to determine if the person’s claim was valid, lest that information be used by people to defraud the system.

Beyond the $2,000 emergency assistance, FEMA can provide up to $26,500 per family for damage done to their home. A FEMA inspector must examine the house before that money is distributed.

As of Friday, Ellis said, FEMA had 873 housing inspectors at work in Louisiana, 435 in Mississippi and 2,283 in Alabama. Their reports are expected within seven to 10 days so checks can be written.

As with the debit cards, the lack of documents such as deeds and insurance policies -- possibly destroyed by the hurricane -- complicates the issue of providing housing assistance. “I’m not really sure we’ve worked through that,” Ellis said.

At the St. Agnes Baptist Church site being used by the Red Cross, Houston police officers in uniform, plain clothes and on horseback monitored the lines looking for familiar faces or other suspicious signs.

Warning signs have been posted that using fraud to obtain benefits is a crime.

Police said they’re beginning to learn the tricks being used by some to get Red Cross cards. There seems to be a specific time when most fraudulent attempts are made: noon.

“We have a theory,” said Lt. Craig Williams. “That’s when the crooks are waking up and coming in to get additional money.”