More Than $1 Billion In FEMA Hurricane Aid Spent On Diamonds, Vacations

Government Accountability Office finds $1.4 billion in potential fraud.

Diamonds, fireworks, a $200 bottle of champagne at Hooters, $300 worth of "Girls Gone Wild" videos, more than two months at a hotel in Hawaii, an all-inclusive, one-week Caribbean vacation and five season tickets to New Orleans Saints football games.

Paris Hilton's AmEx bill for a month? Try just some of the items that added up to more than $1 billion in potential fraud and waste in assistance payments after hurricanes Katrina and Rita, according to an audit by the Government Accountability Office.

CNN reports that debit cards given to people displaced by the storms were used to buy all of the above, as well as a sex-change operation. $1,000 went to a Houston divorce lawyer, $600 was spent in a strip club and $400 was used to purchase "adult erotica products," all of which the auditors concluded were "not necessary to satisfy legitimate disaster needs."

The GAO found that up to $1.4 billion in disaster relief payments by the embattled Federal Emergency Management Agency — nearly a quarter of the total paid out — were improper and potentially fraudulent because the recipients provided incomplete or incorrect information when they registered for assistance. The findings are from testimony that will be delivered at a hearing on Wednesday (June 14) by the House Homeland Security subcommittee on investigations.

But it gets worse.

Those were just the potentially fraudulent claims the GAO investigated that involved registered items, not other forms of fraud, which could be even more costly.

FEMA spokesperson Aaron Walker told The Associated Press on Tuesday that the agency's priority in a disaster is "to get help quickly to those in desperate need of our assistance. ... Even as we put victims first, we take very seriously our responsibility to be outstanding stewards of taxpayer dollars, and we are careful to make sure that funds are distributed appropriately."

FEMA came under heavy criticism for its slow and uncoordinated response to Katrina last August and the confusing manner in which it doled out assistance in the weeks and months following the devastating hurricane (see "Federal Agency Delayed Katrina Response, According To Internal Memo").

So far, FEMA said it has found more than 1,500 cases of potential fraud after the hurricanes and has taken those cases to the Homeland Security inspector general.

Among the other issues the GAO study found, according to CNN:

  • FEMA provided housing assistance to people who were not displaced, including at least 1,000 prison inmates.
  • FEMA lost track of 750 debit cards, worth a total of $1.5 million. It recovered half that money, but can still not account for 381 cards worth more than $750,000.
  • Investigators estimated that 16 percent of FEMA's disaster-relief payments were made to people who submitted invalid registrations, totaling anywhere from $600 million to $1.4 billion in bogus claims. Issues with those registrations ranged from people signing up for assistance using Social Security numbers that didn't exist or belonged to other people, to aid applications with bogus addresses for damaged property or addresses for damaged property where the applicants did not live when the hurricanes struck. In one case, FEMA paid nearly $2,360 to a man whose allegedly damaged property was in a cemetery, while other payments were made to people who listed post office boxes as their damaged residences, including a $20,000 check cut to a Louisiana prisoner whose damaged "home" was a P.O. box.
  • More than 1,000 registrations used the names and Social Security numbers of prison inmates.
  • As part of the audit, the GAO sent out an undercover registrant who submitted a vacant lot as a damaged address. FEMA paid the registrant $6,000, making the payments after being notified by one of its own inspectors, as well as an inspector for the Small Business Administration, that the damaged property could not be found.
  • In once case, FEMA paid an individual $2,358 in rental assistance, while at the same time paying about $8,000 for the same person to stay 70 nights at more than $100 per night in a Hawaii hotel.
  • In another, an individual used 13 Social Security numbers — including his or her own — to receive $139,000 in payments on 13 separate registrations for aid, with all the payments sent to a single address.

The GAO study concluded that the potentially fraudulent payments occurred because, in the rush to provide immediate assistance to victims of the storms, FEMA did not validate the identity of registrants and the locations and ownership of purportedly damaged property before it began making payments. It also didn't require hotels to collect Social Security numbers and FEMA registration information, allowing some people to stay in free hotel rooms while also collecting rental assistance.

"It is shocking and appalling," said Republican Representative Michael McCaul, chairman of the subcommittee that will conduct the hearing, according to The New York Times. "When you have federal and state prisoners applying for the taxpayers' money — while they are in prison — and then the disaster aid, that is a real assault on the American taxpayer. I don't have any tolerance for that."