Three years after, Hurricane Katrina fraud cases continue to mount

WASHINGTON -- This week, three years after Hurricane Katrina, federal investigators charged five people with taking part in schemes to bilk the government for disaster-related benefits they didn't deserve.

Andrew Ealy III, of Gonzales, La., was charged Wednesday with fraud for using false receipts and invoices to make claims for more than $200,000 in small business loans.

Marion Felders and Latrisha Green, both of Hammond, La., were indicted on three counts of wire fraud for making false claims they were jobless as a result of the storm. Thaddeus Johnson Jr., and Susan Johnson, both of Clinton, La., were indicted on nine counts of using phony rent receipts to get hurricane-related housing aid.

They are just the latest in more than 900 prosecutions brought by the Hurricane Katrina Task Force, a U.S. Department of Justice operation created to clean out the breeding ground of fraud left behind by the 2005 storm.

"Disaster fraud targets disaster relief programs, disaster victims and members of the public who want to assist disaster victims by contributing to charitable relief organizations," U.S. Attorney and task force director David R. Dugas said.

The task force cases include false websites asking for the public's donations, misinformation in relief applications to government agencies, contractors taking advantage of agencies, and hotel managers requesting funds for vacant rooms they claim to be providing shelter for displaced, all surfacing at the end of a disaster. Among them are:

-- Investment fraud. In 2006, a Texas man told investors he was using their money to purchase and refurbish Federal Emergency Management Agency trailers, but never did and failed to return the investors' money.

-- Embezzlement. In June, a former FEMA manager in Alabama was indicted on charges of embezzling a trailer and government vehicle and attempting to "corruptly influence the ongoing investigation against him."

-- Individual assistance fraud- In January, an Alabama woman was sentenced to 43 years in prison for 22 counts including false claims for relief assistance, theft of funds, and conspiracy. According to the task force, her intent was to steal more than $500,000 in FEMA funds.

The tendency for fraud to emerge after natural disasters has much to do with the influx of calls disaster relief agencies receive.

Overwhelmed by those calls, FEMA often times did not verify information, potentially opening the door for fraud, Dugas of Baton Rouge said.

In addition to the phone calls, FEMA was bombarded with 2.5 million applications for relief.

With the help of reports by the public to the natural disaster fraud hotline, Dugas said the task force has found disaster relief agency workers as well as others looking to make a buck. Dugas said about 10 percent of the defendants worked for relief outfits, including FEMA itself.

In a similar case, the task force prosecuted 86 American Red Cross employees in Bakersfield, California for submitting applications with false information for personal financial gain.

In an attempt to prevent internal fraud, Melissa Temme of the Salvation Army said the organization uses extensive background checks for new hires and an auditing system to detect donations and disbursements.

Although the Salvation Army suffered no internal fraud, careful planning did not prevent the organization from falling victim to an Internet scam.

For using a false Web site, two brothers in Texas were sentenced to prison last year after receiving nearly $48,000 in donations via PayPal, an on-line pay service. The domain name the brothers registered in 2005, according to the Department of Justice, was "www.salvationarmyonline.org," and took donations for Hurricanes Katrina and Rita.

The organization is redesigning their websites to have a uniform look as an anti-fraud measure.

(Distributed by Scripps Howard News Service, http://www.scrippsnews.com)