Wednesday, June 14, 2006

Human nature being what it is, the debit cards issued by the Federal Emergency Management Agency were probably bound to be abused by the unscrupulous. However, lawmakers on a House Homeland Security investigations subcommittee probably weren’t ready yesterday for the sheer turpitude the government inadvertently financed with those cards and other payments.

The sorry picture emerging from the unveiling this week of a Government Accountability Office audit shows that porn videos, strip-club visits, Caribbean vacations, a bottle of Dom Perignon, a divorce and football tickets were among the many things tax dollars purchased in the wake of Hurricanes Katrina and Rita. Fraud was literally rampant.

Of course, most of the money reached its intended recipients to buy much-needed food, shelter and emergency supplies in the wake of an unprecedented disaster. Government managers came up with the debit-card idea and others in what sounded like a comparatively efficient subsidy mechanism. It was that, but the controls were clearly too loose.

Payments estimated at $1 billion — 16 percent of the total — were deemed “improper and potentially fraudulent” by the GAO, meaning that the recipients gave false, incomplete or otherwise invalid information while applying for disaster relief. The total could be as high as $1.4 billion. No one knows for certain because the scope of the problem is too large for GAO to know except by estimates based on its statistical sample. The GAO says “our estimate likely understates the total amount of improper and potentially fraudulent payments because we did not test our samples for all potential reasons why a disaster assistance payment could be fraudulent or improper.”

One enterprising felon in Louisiana got FEMA money from his jail cell. “FEMA paid the inmate over $14,000 mailed to an address in Texas that he listed as his current address,” the report states. False addresses, invalid Social Security numbers, fake identities and bogus disaster stories were the means this malefactor and others used to get money.

For the record, FEMA also financed a two-month stay at Honolulu’s Pagoda Hotel at a cost of $8,000; $2,200 for an “all-inclusive 1 week Caribbean vacation resort in Punta Cana, Dominican Republic”; $2,000 for five New Orleans Saints season tickets; $600 spent in Legends, a Houston “gentlemen’s club”; $300 spent in a San Antonio Hooters restaurant; and $300 worth of “Girls Gone Wild” pornographic videos. Some “emergency.”

We bring all this up to make the commonplace observation that other people’s money — surely that’s how the spenders viewed it — is always worth less than one’s own. This is a classic example of how government programs brought out the worst in people.

As lawmakers scrub the GAO audit, we encourage them and the executives at FEMA and Homeland Security to pay close attention to the stunning fraud and use it as a guide to make the necessary reforms.

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