Thursday, June 15, 2006

A FEMA official angered a congressional panel yesterday when she discounted a congressional study that concludes that up to $1.4 billion of the individual aid paid out after Hurricanes Katrina and Rita was misspent for fraudulent reasons.

Donna Dannels, acting deputy director of recovery for the Federal Emergency Management Agency, told a House hearing that the congressional conclusions “represent a fraction of the overall assistance provided.”

However, the congressional Government Accountability Office (GAO), using statistical analysis, estimates that 16 percent of the individual assistance distributed after the two hurricanes last year was misspent.

Among the items bought with purchase cards intended for storm relief:

• An all-inclusive, one-week Caribbean vacation in the Punta Cana resort in the Dominican Republic.

• Five season tickets to New Orleans Saints professional football games.

• Videos of “Girls Gone Wild.”

• Bottles of Dom Perignon champagne at $200 a bottle.

Miss Dannels told a House Homeland Security subcommittee that the GAO looked only at .01 percent of the 2.5 million applications for assistance and said FEMA only learned of the new estimates last week.

In a sharp exchange, Rep. Christopher Shays, Connecticut Republican, told Miss Dannels: “The amount of fraud outlined in this report … — I don’t think it’s refutable.”

Miss Dannels’ response was criticized as well by Gregory Kutz, managing director of forensic audits and special investigations for the GAO. He said FEMA may be having trouble accepting the results because its director, R. David Paulison, previously testified the fraud rate was only 2 percent to 3 percent.

The GAO concluded that FEMA, which has been criticized for mismanaging Katrina hurricane relief, paid for such items as season tickets for the New Orleans Saints, a vacation in the tropics and even sex-change surgery. One man spent 70 days at a Hawaiian hotel at government expense; another recipient gave a New Orleans cemetery as his address. Several prisoners got government money for “relocating.”

GAO special agent John Ryan said that once an applicant receives the assistance there’s no control over how it’s spent. FEMA said it has identified more than 1,500 cases of potential fraud and has referred those cases to the Homeland Security Department’s inspector general. The agency said it has identified $16.8 million in improperly awarded disaster-relief money, but the GAO said it had determined that FEMA had likely paid out between $600 million and $1.4 billion.

The investigative agency said it found refugees who were lodged in hotels often were paid twice, because FEMA gave them rental assistance and paid hotels directly. California hotels received $8,000 to house one person, who also received three rental-assistance payments for both disasters.

In another instance, FEMA paid a person $2,358 in rental assistance, while paying $8,000 for the same person to stay 70 nights in a Hawaii hotel at more than $100 per night.

“Our forensic audit and investigative work showed that improper and potentially fraudulent payments occurred mainly because FEMA did not validate the identity of the registrant, the physical location of the damaged address, and ownership and occupancy of all registrants at the time of registration,” GAO officials said.

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