The Scams of the Century After the Storm of the Century

July 6, 2007 — -- After the destruction caused by Hurricanes Katrina and Rita, many victims were overwhelmed by the generosity of the American people.

But there is also a darker side to human nature. Nearly two years after the storm, more than 11,000 alleged instances of fraud are under investigation.

The number of dollars stolen, victims deprived and taxpayers robbed -- not to mention the number of cases the government is still dealing with -- is staggering.

One of those most greatly affected is Warren Paisant -- a New Orleans resident who just moved into his rebuilt house. He's the only one on his street who has returned, and he is angry.

He wants to tell those who committed fraud: "You have a hell of a nerve. People here can't get back into their homes because of the money you took."

His anger might be directed at someone like Walter Ray Stall. Stall claimed he lost everything in New Orleans. Federal workers gave him $2,000 -- but it turns out he actually lives in Texas. Stall is now serving a 10-year sentence in federal prison.

"Every dollar that went to somebody who was defrauding the government didn't go to somebody who really needed that aide," said Ryan Alexander, president of watchdog group Taxpayers for Common Sense.

Of the nearly $7 billion in federal emergency aid spent to help victims of Hurricanes Katrina and Rita, an estimated $1 billion was either stolen or wasted, according to a report by the Government Accountability Office.

"The reaction of the government was to throw as much money as you can as quickly as possible and don't worry about it if these people really deserve it or need it," said Tom Schatz, president of Citizens Against Government Waste.

Prosecutors face a huge challenge. More than 100 fraud complaints still pour in each a week -- on top of the thousands of others still being processed. "The numbers are unprecedented, but the effort is unprecedented," said David Dugas, the U.S. attorney in Baton Rouge.

Watchdog groups wonder if the government will be able to handle all the cases before the statute of limitations runs out in the next three years. The Justice Department defends its efforts, saying 700 people have so far been convicted.