Why is anyone surprised?
That’s what some experts are asking in the wake of June revelations that victims of Hurricanes Katrina and Rita in 2005 may have fraudulently spent $1.4 billion of disaster aid on items ranging from lavish vacations to a sex-change operation.
“There’s always going to be this kind of fraud in programs that hand out federal subsidies,” said Chris Edwards, director of tax policy studies at the Cato Institute. “There’s fraud in all these programs. FEMA [Federal Emergency Management Agency] has a long history of handing out disaster relief that gets wasted and abused.”
Edwards noted that since FEMA passed out disaster relief money to victims of Hurricane Frances in 2004, auditors have uncovered 12,000 claims that were paid to persons who were not touched by the storm.
Many Just Charged It
Congress’s Government Accountability Office (GAO) announced in June that a sampling of Katrina and Rita disaster aid spending indicates up to $1.4 billion was misspent, much of it charged to debit cards FEMA handed out to disaster victims.
Items purchased with disaster aid funds included:
- a sex-change operation for a Texas man who filed 19 separate relief applications;
- five season tickets to New Orleans Saints football games;
- legal fees for a divorce;
- expensive jewelry;
- more than two months in a $100-a-night hotel room in Hawaii;
- a one-week vacation in the Punta Cana resort in the Dominican Republic;
- “Girls Gone Wild” videos; and
- Dom Perignon champagne and other alcoholic beverages.
Agencies Duel over Estimates
FEMA officials previously had estimated 2 to 3 percent of disaster aid payments were spent inappropriately. The GAO report estimated about 16 percent of the money was spent inappropriately.
On June 14, during a hearing before the House Homeland Security subcommittee on investigations, FEMA officials defended their handling of disaster relief. Donna Dannels, FEMA’s acting deputy director of recovery, expressed doubt about the accuracy of the GAO estimate, telling subcommittee members the GAO looked only at .01 percent of the 2.5 million applications for assistance.
Her response angered several lawmakers, including Rep. Michael McCaul (R-TX), who said Dannels was “failing to respond” to the fraud allegations.
Gregory Kutz, managing director of forensic audits and special investigations for the GAO, in turn criticized FEMA’s previous fraud estimate of 2 to 3 percent, saying it was too low because “they did not do a representative, statistical sample.”
Congressmen blogging on The Hill expressed outrage at the waste and fraud. McCaul said, “We knew we’d find fraud, but not of this magnitude.” Rep. Chris Shays (R-CT) said, “the fraud in FEMA is extensive and obscene, and those involved in fraud need to return the money and go to jail.”
Rep. Ginny Waite (R-FL) wrote, “Everyone agrees that we need to get emergency aid to people in times of need, but to have more than $1 billion of taxpayers dollars spent on vacations to Hawaii, trips to the casino, and adult videos is unconscionable and unacceptable to me. Unbelievably, some of the aid was sent to federal prisoners in states unaffected by the hurricane.”
Steve Stanek ([email protected]) is managing editor of Budget & Tax News.