WASHINGTON — A Caribbean vacation. Pro football tickets. "Girls Gone Wild" videos. Fees for a divorce lawyer. A diamond ring. A sex-change operation.
This list is not a celebrity spending spree, but a chronicle of the fraud committed by Americans who said they were victims of Hurricane Katrina at a cost to the federal government of as much as $1.4 billion, according to a report issued Wednesday by the Government Accountability Office.
For The Record
Los Angeles Times Friday July 21, 2006 Home Edition Main News Part A Page 2 National Desk 1 inches; 61 words Type of Material: Correction
Katrina fraud: A June 15 Section A article on fraudulent spending of Hurricane Katrina relief funds said a Government Accountability Office report had found that money was used to pay for a sex-change operation. That case was not mentioned in the written report, but was part of the GAO's investigation and was referred to the Katrina Fraud Task Force for prosecution.
As many thousands attempted to recover from the loss of their homes in one of the greatest natural disasters to hit U.S. shores, con artists used false addresses -- cemeteries, vacant lots and post office boxes -- and fraudulent Social Security numbers, including some from the dead, to obtain rental assistance checks from the Federal Emergency Management Agency. Some of the fraud was committed from behind bars.
Others went on spending sprees with federal aid designed for immediate food, shelter and clothing.
The GAO assigned auditors to work undercover from February to June to test how easy it was to defraud the federal government. In its report, the GAO estimated that after examining a sample of 247 claims, 16% of FEMA's assistance for housing and emergency provisions was misspent, for a total of $600 million to $1.4 billion lost in fraud.
During a hearing Wednesday before the House Homeland Security subcommittee on investigations, Donna M. Dannels, FEMA's acting director for recovery, said the "questionable purchases" in the GAO investigation totaled "just under $8,000, or 0.02% of nearly $39 million" in aid.
As for the rental assistance checks, she argued that the fraudulent cases represented only "a fraction of the overall assistance provided" -- $6.3 billion in housing payments distributed by the agency.
But her arguments did not sway legislators.
"This is an insult to the victims of Katrina and Rita," said Rep. Michael McCaul (R-Texas), the panel's chairman. "The ultimate victim is the American taxpayer."
The committee's top Democrat, Rep. Bob Etheridge of North Carolina, blamed the White House. "The administration's irresponsible contracting processes and lax oversight have cost taxpayers billions," he said.
Nor did Dannels' statements impress the GAO. Sitting beside her during the hearing was Gregory Kutz, the agency's managing director of forensic audits, who said FEMA was having trouble accepting the results because it had previously estimated the fraud rate at 2% to 3%, not 16% as the GAO now calculates.
