One Billion in Fraudulent Claims for Hurricane Relief

June 14, 2006— -- A Hawaii vacation, season football tickets, Dom Perignon champagne ordered at a strip club, even a sex change operation -- these items are not what federal assistance to hurricane victims was supposed to pay for, but that's exactly what happened.

Close to $1.4 billion worth of fraudulent charges were laid out today in a scathing report from the Government Accountability Office (GAO), the investigative arm of Congress.

"This was an assault on the American taxpayer, first and foremost," says Rep. Michael McCaul -- the Texas Republican chairman of the House Homeland Security subcommittee holding hearings today on the investigation. The GAO estimates a whopping 16% of all the applications for assistance for "victims" of Hurricanes Rita and Katrina turned out to be bogus.

The Federal Emergency Management Agency (FEMA) doled out money to scammers using phony addresses, including post office boxes, UPS stores, and a cemetery as their damaged property addresses. Even prisoners, using a warden's phone, successfully applied for financial relief.

To show just how easy it was to defraud FEMA, the GAO had an undercover agent use a bogus address to apply for rental assistance. And FEMA paid $2,348, even after the agency learned from its inspector the address was phony. As proof, investigators provided a copy of the US Treasury check to lawmakers.

FEMA is already under a blistering attack for its slow response to the hurricanes. FEMA spokesman Aaron Walker defended these latest charges, saying, "FEMA makes its highest priority during a disaster to get help quickly to those in desperate need of our assistance."

Maybe a little too quickly, say members of Congress. "I don't think a whole lot of thought was put into place," claims Rep. McCaul, "in terms of controls, in terms of verification that these people are who they say they are, that they live where they say they live...there are people out there who are not honest and when they see billions of dollars, they are going to milk it."