A Deal Too Good To Be True?: Katrina Victims Say Mortgage Lender Misled Them

September 19, 2007 6:00 PM

Brian Ross and Joseph Rhee Report:

Thousands of homeowners devastated by Hurricanes Katrina and Rita are accusing their mortgage lender of recanting on its promise to suspend their mortgage payments in the immediate aftermath of the hurricanes.

In what they now consider a deal too good to be true, homeowners say Countrywide Home Loans promised they wouldn't have to make payments on their mortgages for three to six months.

World News Video: More Pain Years After Katrina

From its corporate headquarters in California, the country's largest mortgage lender issued a press release about the offer and put it in writing to homeowners, adding, "Late charges will not be assessed."

"There would basically be a freeze on our payment, and our payments would be put on the back end," Donna Hellmer of Hammond, La., told ABC News.

Donna and her husband Andrew didn't make the payments. But then Countrywide sent them a notice of default, demanding the missed payments plus late fees in a lump sum, a total of $4,300 due in 30 days.

Click Here for Full Blotter Coverage.

"They basically told me this was the deal, 'You pay the lump sum, or you're going to be foreclosed on,'" recalled Hellmer, who, along with her husband Andrew, had to take out a new loan to pay Countrywide and keep their home.

The story is one Chad and Rebecca Goodwin of Houston, Texas, know all too well.

They too faced foreclosure and are now suing Countrywide after capturing on tape what their lawyers say is an important admission by a Countrywide representative:

"What they promised me was that it would be tacked on to the end of my loan," Chad says on the call, according to the recording.

"A lot of people were told that, but it wasn't the case," the Countrywide employee says. "Unfortunately, what happened is we were hoping our banks would let us do it, and they wouldn't."

Listen to the Countrywide Call.

According to the Goodwins' lawyer, Jill Bowman, that is just a cover-up. "Quite frankly what happened is they decided not to keep this promise," she told ABC News. "I think because it was going to cost them money."

For the Hellmers in Louisiana, Countrywide's broken promise means paying $200 more a month than they were before Hurricane Katrina.

"They took advantage of people while they were down," she said. "They created more of a financial hardship for us than the hurricane did." 

Countrywide has denied the allegations, and in a statement to ABC News, says it "has been diligently working with customers to develop individual repayment plans."

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September 19, 2007 in Hurricane Katrina | Permalink | User Comments (38)

Mortgage Company Accused of Defrauding Katrina Victims

August 31, 2007 7:14 PM

Joseph Rhee Reports:

Angry homeowners hit hard by Hurricane Katrina are accusing Countrywide Home Loans of reneging on a promise to help them by temporarily suspending their mortgage payments. 

According to a class-action lawsuit filed in Louisiana today, homeowners say the mortgage giant is now demanding any deferred payments be paid up immediately, often with interest and penalties attached. Plaintiffs' attorneys say that as a result, many struggling homeowners have been sent into foreclosure.

In a goodwill gesture after Katrina hit two years ago, Countrywide announced it would suspend mortgage payments for hurricane victims for up to 90 days. Homeowners say they were told by Countrywide agents that any deferred payments would be added to the back end of the loan term, and that no lump sum, interest or penalties would be imposed.

According to the lawsuit, however, homeowners have been notified by Countrywide that they have to either pay the entire deferred amount immediately or restructure their loan in a way that would cost them thousands of additional dollars. 

Click Here for Full Blotter Coverage.

Plaintiff Donna Hellmers of Hammond, La., told the Blotter on ABCNews.com that she was "dumbfounded" by the change in policy, and when she demanded an explanation from a Countrywide agent, she was told "the lender has changed their mind." Hellmers, who said her family faced severe financial hardship after Katrina, accused Countrywide of "taking advantage of people when they're down."

A similar class-action lawsuit was filed against Countrywide earlier this year by Texas homeowners affected by Hurricanes Katrina and Rita. A homeowner in that case reportedly recorded a telephone call with a Countrywide agent who explained the company's apparent change of heart.  According to the agent, "Unfortunately, we were telling people things that we should not have been telling people."

Countrywide Home Loans had no immediate comment on today's lawsuit.

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August 31, 2007 in Hurricane Katrina | Permalink | User Comments (44)

State Farm Agrees to Settle With Angry Katrina Policyholders

January 24, 2007 12:20 PM

Brian Ross and Joseph Rhee Report:

Mississippi homeowners are claiming a "huge legal victory" over the country's biggest insurance company, which they say tried to cheat and defraud them over claims submitted in the wake of Hurricane Katrina.

Under a settlement, State Farm Insurance has agreed to pay out $80 million to settle the lawsuits of over 600 State Farm policyholders, including three homeowners profiled by ABC News, Minh Nguyen, Thomas McIntosh and Dr. Wesley McFarland. 

Dr. McFarland, whose community was devastated by Hurricane Katrina, called the settlement "excellent news," and said the money will help "people's spirits considerably."

In addition, State Farm says it will reconsider the disputed claims of tens of thousands of other homeowners who had not filed suit, another potential payout of at least $50 million. 

The proposed settlement must now be approved by the U.S. district judge hearing the case.  Zach Scruggs of the Scruggs Law Firm, which filed the suits on behalf of policyholders, said plaintiffs could expect to see their money "within weeks."

Click Here for Full Blotter Coverage.

According to Scruggs, settlement talks with State Farm had begun last September, but an agreement had been held up because of a criminal probe of the company by Mississippi Attorney General Jim Hood.  State Farm had wanted an end to the state investigation, and Hood finally agreed to the terms this week. 

As first reported on "The Blotter," at the heart of the lawsuits were claims by independent adjustors Cori and Kerri Rigsby that State Farm supervisors had defrauded policyholders by demanding that engineering damage reports on homes be buried, replaced or changed in order to favor the company. 

In an exclusive interview with ABC News, the Rigsby sisters detailed how outside engineers were pressured to prepare reports concluding that damage caused by Katrina was due to water, which was not covered by State Farm.  Cori Rigsby said she recalled a senior coordinator saying, "Tell them if they don't change their report, we're not paying their invoice."

The Rigsbys, who had worked exclusively for State Farm for eight years, say they made copies of thousands of internal State Farm documents and turned them over to federal and state investigators and to the Scruggs Law Firm.  While the proposed settlement will end the state criminal probe, a federal grand jury continues to investigate charges against State Farm.

According to Jeffrey W. Jackson, State Farm's general counsel, "Our goal has been to resolve these matters quickly, fairly and efficiently."  Jackson said, "This settlement offers policyholders who resided in the areas most impacted by the unprecedented storm an opportunity to have their claims reviewed, share any additional information and, if they choose, have their cases resolved through binding arbitration."

January 24, 2007 in Hurricane Katrina | Permalink | User Comments (9)

'Satisfied' Customer Now Suing State Farm Insurance

November 21, 2006 10:49 AM

Joseph Rhee Reports:

One of State Farm Insurance's "satisfied" customers on the Mississippi Gulf Coast is now suing the company, joining hundreds of other policyholders who allege State Farm defrauded them over their Hurricane Katrina insurance claims.

Thomas McIntosh's case was shown on our 20/20 report, which detailed allegations that State Farm supervisors in many cases demanded that Hurricane Katrina damage reports by buried or replaced or changed so that the company would not have to fully pay policyholders' claims in Mississippi. 

After our report aired, State Farm released a statement saying that McIntosh, in fact, "did receive payment and has declared that he is satisfied with his payment and the way his claims were handled by State Farm."

After learning that we planned to mention McIntosh's case in our report, State Farm asked him to meet with two attorneys representing the company.  McIntosh says the attorneys presented him with what they called two "confidential" versions of an engineering report on his home dated Oct. 20, 2005.  These reports indicated that the damage to the McIntosh home was largely caused by water, which was not covered in his insurance policy. McIntosh says, as a result, he was only paid about $36,000 on his claim despite suffering losses of over $1 million.

After viewing the engineering reports, McIntosh signed a statement written by the attorneys, acknowledging that he was "satisfied" and had "no dispute with State Farm over any insurance issues relating to the adjustment or payment of any claims by State Farm." 

However, after his meeting with the State Farm attorneys, ABC News contacted McIntosh and made him aware of an earlier, pre-existing engineering report on his home.  This report, dated Oct. 12, concluded that "the interior damage of the structure is primarily the result of the failure of the windows, wall and doors due to the wind."  Wind damage is covered under State Farm policies. 

A copy of the first report also included the image of an attached "Post-it" note that read: "Put in wind file - do not pay bill - do not discuss."  State Farm has told ABC that despite an extensive search of its files, it cannot find any record of McIntosh's first engineering report.

McIntosh has retained well-known Mississippi trial lawyer Richard Scruggs and has sued State Farm for allegedly undertaking "a fraudulent, illegal, tortious, and unethical course of conduct."  The lawsuit also states McIntosh only signed the document provided by the State Farm attorneys "out of fear that if he did not cooperate his insurability would be jeopardized."

State Farm has not yet responded to the McIntosh lawsuit.  However, a State Farm spokesman has said that the allegations are contrary to the way the company does business, and only a small percentage of claims have resulted in lawsuits.  Despite the fact that McIntosh is now suing the company, State Farm's statement declaring him a satisfied customer is still posted on the company's website. 

November 21, 2006 in Hurricane Katrina | Permalink | User Comments (25)

Whistleblowers Sued for Speaking Out and Wearing State Farm Jackets on 20/20

October 04, 2006 5:17 PM

Joseph Rhee Reports:

Former State Farm insiders Cori and Kerri Rigsby have been sued after blowing the whistle on what they say was "widespread" fraud at the insurance giant. 

E.A. Renfroe, the outside adjusting firm that assigned the Rigsbys to work at State Farm, has filed a lawsuit accusing the sisters of breaching their employment contracts and violating trade secret laws.  According to Renfroe's suit, one of the violations occurred when the sisters wore their State Farm-issued jackets "on their appearance on national television...on the 20/20 program."

The 20/20 report detailed the Rigsbys' claims that State Farm cheated  many Mississippi policyholders whose homes were destroyed by Hurricane Katrina.  The sisters turned over thousands of internal State Farm documents to criminal investigators and to attorney Richard Scruggs, who is suing State Farm on behalf of homeowners. 

In its suit, Renfroe says the Rigsbys' employment agreements prohibited them from disclosing "any confidential information of Renfroe, its clients or their insureds."  The suit seeks damages "in excess of $75,000" and the return of all documents and materials taken by the sisters.

Scruggs says the lawsuit is an attempt by Renfroe and State Farm to intimidate the Rigsbys and to discover exactly what documents were turned over to authorities. Scruggs, who represented famed tobacco industry whistleblower Jeffrey Wigand, says such lawsuits have the effect of "discouraging people...who are brave enough to stop fraud."

October 4, 2006 in Hurricane Katrina | Permalink | User Comments (20)

Fraud Lawsuits over Altered Katrina Damage Reports to Go to Trial

September 15, 2006 2:48 PM

Joseph Rhee Reports:

A federal judge has refused to throw out lawsuits accusing an engineering company of cheating homeowners in order to keep them from collecting insurance money.  The suits also accuse two independent engineers of assisting the company in preparing falsified insurance damage reports.

The cases involve homes on the Mississippi Gulf Coast that were destroyed during Hurricane Katrina.  According to the lawsuits, a certified engineer, Ken Overstreet, prepared reports that concluded that the damage to three homes he inspected was due in large part to severe winds, which is covered by homeowners' policies.  However, Overstreet says the engineering company, Rimkus, had another engineer rewrite his reports to show the damage was caused exclusively by water, which is not covered.  Overstreet told ABC News that the company signed his name next to the second engineer's name on the alterted reports, "I was never told that that would be completely changed. And then they'd go ahead and sign my name."

In their lawsuits, the homeowners allege that the rewritten engineering reports were used by the insurance companies that hired Rimkus to deny paying their claims in full.  Rimkus tried to have the suits dismissed, claiming that Overstreet's initial reports only amounted to "draft" versions.  Rimkus also told ABC News that even though the second engineer never visited the home sites in question, it was common practice for a report to be rewritten and signed off on without the original engineer's knowledge or permission.

Attorney Randy Santa Cruz, who is representing one of the plaintiffs, disputed Rimkus' claim, saying the rewritten report amounted to an "outright forgery" and that the company attempted to "usurp Overstreet's professional identity." 

U.S. District Court Judge L.T. Senter said the plaintiffs had met the necessary burden to allow the case to go to trial.

September 15, 2006 in Hurricane Katrina | Permalink | User Comments (3)

Outraged Citizens Turn in Katrina Scammers

August 29, 2006 2:51 PM

Dana Hughes Reports:

In the wake of Hurricane Katrina ordinary Americans led the way in donating money to help with the relief effort. Now many citizens are stepping up and leading the way again to help catch criminals who've taken advantage of billions of dollars of Katrina money.

Hundreds of calls have been pouring into Katrina fraud hotlines set up by the Departments of Justice and Homeland Security.

David Dugas, U.S. attorney for the Middle District of Louisiana, heads the Katrina Fraud Task Force out of Baton Rouge. He says that 60 percent of the almost 7,000 cases of fraud under investigation came from hotline tips.  "Many times hotlines aren't that productive," says Dugas.  "Members of the public calling the hotline are clearly outraged about what they're seeing around the country, and I think that's why we're getting so many good calls and so many good leads."

Dugas says people have turned in family members, employees, bosses and friends. "We're receiving reports of all types of fraud," he says. "If the reports have merit, we're chasing every one down."
So far Dugas and his team have prosecuted close to 400 cases, and new indictments are announced almost daily. 

Pastor Randy Millet of St. Bernard's Parish in New Orleans counsels dozens in his congregation who really have lost their homes and loved ones in Hurricane Katrina. He says he can see why so many citizens are furious at scammers.  "It makes Americans, who are good at heart, that want to give and help, they want their tax dollars to help people…it makes them angry," says Millet. "It makes them feel like we've all been betrayed."

Dugas says the hotline has become a bright spot in dealing with the most massive case of fraud this country's ever had. "It's actually encouraging to me that it seems like for every criminal out there, there's some honest citizen who's outraged by the conduct that they're seeing,” he says “and outraged enough to pick up the phone and call law enforcement and give us the information we need to prosecute these people.

Click here to find out how to report Katrina fraud.

August 29, 2006 in Hurricane Katrina | Permalink | User Comments (10)

Billions of Dollars in Damage Followed by Billions of Dollars in Fraud

August 28, 2006 11:20 AM

Brian Ross and Dana Hughes Report:

Tina Marie Winston says she watched in horror a year ago as her two daughters, aged five and six, were swept away and drowned during Hurricane Katrina. She collected $5,600 from FEMA for her "pain and suffering" to help pay for her daughters' burial.

It was a heartbreaking story, but, according to federal prosecutors, it was also a lie.  They say her two daughters did not die.  In fact, they never existed. She was in southern Illinois, 662 miles from New Orleans, when Katrina happened.  She has pled not guilty to federal fraud charges.

Her case is one of some 7,000 suspected cases of fraud by people accused of cashing in on the billions in emergency aid. According to Congressional investigators, more than a billion dollars was handed out to people who found FEMA was an easy target for fraud in the days after the hurricane.

"FEMA received over two-and-a-half million applications for individual assistance. You could call in by telephone, make an application, you could do it on the internet, or you could do it in person, " says David Dugas,  U.S. Attorney for the Middle District of Louisiana who heads the Katrina Fraud Task Force out of Baton Rouge. "And FEMA would send them the assistance because that's what it was for." 

In Biloxi, Miss., prosecutors say an overgrown lot, which had been empty for years, was one of 19 fake addresses used by Lawanda Williams to collect a total of $277,000 in taxpayer money from FEMA.  No one ever checked her information, and she has since pled not guilty.

"Last year, we did not have the ability to perform an identity verification on over half of our registrants," explained David Garrett, the Acting Director of Recovery at FEMA.

Using the same method as Williams, according to prosecutors, Houston hairdresser Michael Green (pictured above) collected some $36,000 from FEMA. He too has pled not guilty, but the controversy surrounding Green isn't only over the money but rather what he allegedly used it for -- a sex-change operation.

Green's lawyer categorically denies that he used the money for a sex-change operation, and in fact, won't confirm Green had the operation at all, but pictures of him show a man with longish dyed hair and large breasts.

Such cases outrage the real victims of Hurricane Katrina.

"It's fraud; it's wrong; it's illegal," says Pastor Randy Millet of St. Bernard's Parish in New Orleans, who counsels dozens in his congregation who really have lost their homes and loved ones in Hurricane Katrina.  "It's a slap in the face to the people who really lost everything."

Federal prosecutors have charged more than 370 people with fraud and are working through a list of some 7,000 leads.  Dugas has a warning for those who think they've gotten away with scamming the system.

"For those who tried and think they got away with it, we have five years to find you," he says, "and bring you to justice."

August 28, 2006 in Hurricane Katrina | Permalink | User Comments (7)

Exclusive: Whistleblowers Say State Farm Cheated Katrina Victims

August 28, 2006 10:25 AM

Brian Ross and Joseph Rhee Report:

State Farm Insurance supervisors systematically demanded that Hurricane Katrina damage reports be buried or replaced or changed so that the company would not have to pay policyholders' claims in Mississippi, two State Farm insiders tell ABC News.

Kerri and Cori Rigsby, independent adjusters who had worked for State Farm exclusively for eight years, say they have turned over thousands of internal company documents and their own detailed statement to the FBI and Mississippi state investigators.

In an exclusive interview with ABC news, that was broadcast on 20/20 and World News, the Rigsby sisters say they saw "widespread" fraud at the State Farm offices in Biloxi and Gulfport, Miss.

"Katrina was devastating, but so was State Farm," says Cori Rigsby.

At one point, they say State Farm brought in a special shredding truck they believe was used to destroy key documents. State Farm says shredding is standard to protect policyholders' privacy.

The sisters say they saw supervisors go to great lengths to pressure outside engineers to prepare reports concluding that damage was caused by water, not covered under State Farm policies, rather than by wind.

They say reports that concluded that damage was caused by wind, for which State Farm would have to pay, were hidden in a special file and new reports were ordered.

Cori Rigsby says she recalls a senior coordinator ordering that an engineering company be told to alter the findings in its report so that State Farm would not have to pay.  "Tell them if they don't change their report, we're not paying their invoice," she remembers the supervisor saying.

A lawyer for State Farm, Wayne Drinkwater, told ABC News he was unfamiliar with the Rigsby sisters but denied State Farm cheated policyholders or pressured outside engineers to reach particular conclusions in their damage reports.

"We, of course, have not been cheating," Drinkwater said. 

The allegations, if proven, would support the suspicions of thousands of homeowners along the Mississippi Gulf Coast who have been unable to collect enough insurance money to rebuild their homes.

Many have filed lawsuits against State Farm and other insurance companies alleging the companies of wrongly denying or low-balling their claims.  The Rigsby sisters' allegations are now a key part of suits filed against State Farm by well-known Mississippi lawyer Dickie Scruggs, famous for taking on the tobacco companies.

See Photos of Katrina, One Year Later - the National Disgrace That Is Still Going On.

If you have had a horrible experience with an insurance company, click here to share your story with us.

August 28, 2006 in Hurricane Katrina | Permalink | User Comments (940)

A Tale of Three Engineering Reports

August 25, 2006 12:52 PM

Joseph Rhee Reports:

Mississippi Gulf Coast resident Minh Nguyen was devastated to learn that State Farm would not pay her claim after her home was destroyed by Hurricane Katrina.  An engineering report commissioned by the company had found the damage was caused by water, which was not covered by her insurance policy.   

Nguyen was shocked when, along with her denial letter, State Farm mistakenly sent her three engineering reports in the mail.  The first two reports had concluded the damage to her home was caused by wind, which is covered in her policy; the third report was the only one that said water damage was to blame.  According to Nguyen, "They tried to cheat me.  They tried to cheat me right here."

An attorney hired by State Farm, Wayne Drinkwater, said the company looked into Nguyen's case and was prepared to offer her more money. "We were calling her and wanting to talk to her because we did think that more was indicated," he said. 

However, Drinkwater said State Farm discontinued its attempts after it discovered Nguyen had hired an attorney.  She is now suing State Farm, along with hundreds of other homeowners who allege that the company deliberately defrauded them in order to avoid paying claims. 

August 25, 2006 in Hurricane Katrina | Permalink | User Comments (34)

U.S. School Kids Donate More to Katrina Relief Than Most Big Corporations

August 23, 2006 3:35 PM

Maddy Sauer Reports:

School children across the United States have raised more money for Katrina relief efforts than many major U.S. corporations, according to a non-profit group, RandomKid, which has tracked donations by children.

Over $10 million was raised by school kids through bake sales, lemonade stands, car washes and other fundraisers, according to RandomKid. That's more than almost every major U.S. corporation gave. More than wealthy oil and petrochemical companies, such as Chevron and ConocoPhillips. It's more than what AT&T and Verizon gave combined. And it's more than major brand name corporations like GE and Coca-Cola gave.

Only five U.S. corporations gave more than what was raised by the school kids, according to recently released report by the Foundation Center, a non-profit organization that has tracked Katrina relief donations.

Among the country's top corporate donors to Katrina relief, Wal-Mart is number one at $17 million, followed by Federal Home Loan Bank of Cincinnati ($15 million), Exxon ($13 million) and Freddie Mac and BP Amoco (just over $10 million each), according to the Foundation Center.

RandomKid is an Iowa-based non-profit group, which was founded after a ten year-old girl, Talia Leman, decided to trick-or-treat for Katrina victims last year. Her efforts inspired kids across the country to create their own methods of fundraising, anything from car washing to bracelet making. RandomKid has continued to track those donations.

In December of last year, the group announced that kids from over 4,000 schools across the country had raised over $5 million for the battered Gulf Coast in just three months.

August 23, 2006 in Hurricane Katrina | Permalink | User Comments (38)

Man Accused of Katrina Fraud Blames It All on Brain Tumor

August 14, 2006 9:52 AM

Joseph Rhee and Vanessa Washington Report:

A Texas hotel owner says his medical condition led him to unintentionally defraud the federal government over Katrina disaster relief claims. 

Daniel Yeh, the owner of the Flagship Hotel in Galveston, Texas, had enrolled in a FEMA program that reimbursed hotels for providing free lodging for Katrina evacuees.  Yeh is accused of filing false claims totaling over $200,000 for guests who were not evacuees.

Yeh is facing trial for 22 counts of wire fraud and 17 counts of filing false claims.  But Yeh's attorney, Robert Bennett, said his client's judgment at the time was severely impaired by a pre-existing brain tumor that led him to misunderstand the rules of the FEMA program.  According to Bennett, "The brain tumor affected his frontal lobe, the center for rational thought -- essentially all executive decision-making."   

At a pre-trial hearing, Bennett claimed Yeh's medical condition made him unable to assist in his own defense and understand the charges brought against him. A court-appointed forensic psychiatrist confirmed Yeh's condition and agreed that he was incompetent to stand trial. 

During the hearing, prosecutors hotly contested Yeh's alleged incompetency. Nancy Herrera of the U.S. Attorney's Office said, "The U.S. presented evidence which showed that during the time that Mr. Yeh was engaging in these claims to FEMA he was teaching a college-level class at the University of Houston."  Herrera added that in December of 2005 Yeh negotiated the sale of a $1.2 million hotel in Oklahoma City. 

A district court judge is expected to decide shortly on whether or not Yeh should stand trial.

According to Bennett, Yeh is no longer running the hotel and has paid the government back for the disputed charges.

August 14, 2006 in Hurricane Katrina | Permalink | User Comments (5)

Billions of Dollars in Donations Post-Katrina, Yet Very Little Relief

August 03, 2006 12:53 PM

Brian Ross and Vanessa Washington Report:

A year ago, Americans donated over $4 billion for Katrina relief. But a new report from a charity watchdog group warns that much of the money was used ineffectively, if at all.

Trent Stamp, President of Charity Navigator, conducted the study.  Stamp traveled to the Gulf Coast to investigate the work of several charities, including the American Red Cross.

He learned that Americans are a giving people in time of need, and the hustlers and con men know it.

Stamp says one of the biggest mistakes made in the days after Katrina was that "charities just didn't stick with what they do best."  Many charities tried to provide cash assistance and "in a lot of cases the cash ended up in the wrong hands."      

What happened with Hurricane Katrina charities and fraud provides powerful lessons for future disaster relief.  Stamp reminds Americans looking to donate money toward relief efforts to avoid the newly formed charities in the days after a disaster.

"I think you need to stick with the brand-names, those charities that have done this kind of work before -- organizations like the Red Cross, the Salvation Army, Direct Relief International, Save the Children -- those types of organizations."

Yet Stamp also notes that even established charities, including the Red Cross, weren't prepared for Hurricane Katrina.

Local officials complained that the Red Cross was often missing from the worst hit areas and displaced residents found it impossible to get through on the hotlines. Red Cross officials have acknowledged that it was overwhelmed by the storm's immensity.

"We need to recognize that the next disaster is probably not going to be a hurricane and a levee break in New Orleans, but it's going to be an earthquake in San Francisco or a fire in Chicago," said Stamp.  "So we need to learn from the past, but we need to make sure that we remember that the next disaster will be something different."

August 3, 2006 in Hurricane Katrina | Permalink | User Comments (17)

Questionable Purchases in Katrina's Wake

July 19, 2006 10:27 AM

Tom Shine Reports:

The Government Accountability Office has listed numerous questionable purchases by government workers using their purchase cards in the wake of Hurricane Katrina. 

Like credit cards, purchase cards allow government employees to buy approved purchases of a certain amount. They are supposed to be a quick, efficient way for government employees to buy needed items. Sometimes retailers even give users a discount, and taxpayer dollars always foot the bills.

A FEMA employee bought over 2,000 sets of canine booties at a cost exceeding $68,000. The booties were designed to protect the paws of dogs helping investigators go through rubble and debris left by Hurricane Katrina.

But there was one problem. Dogs in the gulf region were "not accustomed to wearing booties" so the supply of dog clothes went unused, and GAO says the booties now sit in FEMA storage facilities. 

Among other wasted funds, a Coast Guard  employee abused his purchase card when he bought a beer brewing kit for $230 and spent another $800 on ingredients to "brew 532 bottles of beer, or 12 batches."   

The  employee told the GAO it took two hours to brew, bottle and label each of the 12 batches, and the GAO estimates that at a "conservative approximate hourly labor rate of $15, it would cost over $13  to buy a six-pack of Coast Guard beer."

But the guard told the government investigators that the beer with "Coast Guard-themed" labels functioned as an "ice-breaker" for discussion at official parties. There is no indication that any of those suffering from the misery of Katrina ever enjoyed a nice cold bottle of taxpayer-funded Coast Guard-themed beer.
 
FEMA paid a vendor $208,000, or twice the retail price, to deliver 20 flat bottom boats with motors and trailers for operational needs in  New Orleans following  Katrina.

The GAO says the vendor did not own any boats himself and had to get them from another source. He charged FEMA for all 20 of them, even though he failed to pay his source for 11 of the 20.

There are many more examples, including questionable purchases by the Secret Service totaling $7,000 worth of iPods and iPod Shuffles and a FEMA purchase of an $8000 SAMSUNG 63-inch plasma TV.

July 19, 2006 in Hurricane Katrina | Permalink | User Comments (23)

Katrina Contractors Stiffing Migrant Workers

July 18, 2006 12:52 PM

Tahman Bradley Reports:

The Department of Labor is investigating worker exploitation in the Gulf Coast and attempting to recover millions of dollars in back wages to compensate workers.   

Tens of thousands of migrant workers are being lured to Katrina-ravaged areas by government and private contractors who pay as low as thirty dollars a day, if they pay at all, say non-profit groups working in the region.

When the workers arrive, they find they have nowhere to live, and many of them work in hazardous places without protective gear. 

Judith Browne of the Advancement Project says migrant workers often keep quiet, fearing deportation if they complain.

"Many of them are living under a state of fear," she said. "The contractors are turning around and having immigration officials deport them."

To combat worker exploitation, the Department of Labor tells ABC News, they have recovered in excess of $1 million dollars in back wages for employees in hurricane-related cases since last November. They also say employers have agreed to pay an additional $2 million more.   

"The Department of Labor has been aggressively on the lookout for potential exploitation of workers in the Gulf Coast Area," says a statement released by the Department of Labor.

Some migrant workers, even illegal immigrants may benefit from the Department of Labor's wage recovery efforts, but it's unclear how large that number is. Department of Labor sources tell ABC News they do not ask workers about their citizenship status, but they do enforce labor laws. 

While the government is trying to compensate workers treated unfairly, it is also still unclear what the government is doing to improve work place conditions for migrant workers in the Gulf Coast area. 

July 18, 2006 in Hurricane Katrina | Permalink | User Comments (20)