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Www.mcglinchey.com Hon. David R. Dugas Humanitarian Assistance Authorities: When Disasters and Crises Strike: Tackling Fraud ASMC Conference Orlando, Florida.

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Presentation on theme: "Www.mcglinchey.com Hon. David R. Dugas Humanitarian Assistance Authorities: When Disasters and Crises Strike: Tackling Fraud ASMC Conference Orlando, Florida."— Presentation transcript:

1 www.mcglinchey.com Hon. David R. Dugas Humanitarian Assistance Authorities: When Disasters and Crises Strike: Tackling Fraud ASMC Conference Orlando, Florida June 3, 2010

2 Disaster Fraud Challenges Federal, State and Local Agencies as well as private charities respond with time sensitive disaster relief The disaster may destroy government facilities and infrastructure, making delivery of aid more difficult Victims are scattered, vulnerable and limited in their ability to access relief programs Those offices most impacted by the disaster will be the front line of the relief efforts If the disaster is large enough it will attract the attention of criminals around the globe Public demand for action may encourage waiver or abandonment of internal controls and authentication

3 The Hurricane Katrina Experience  Multiple disaster relief programs trying to disburse relief to over 1,800,000 victims scattered around the country  FEMA received over 2.5 million applications for individual assistance from virtually every state in the nation  Unprecedented consequence management challenges  Time critical response because of the number of people stranded and displaced  International attention focused on response  Pre-exiting systems and procedures were overwhelmed by the sheer scope and size of the disaster  Individual Assistance benefits were awarded based on unverified applications, contracts were sole-sourced, often to companies with no prior experience

4 The Fraud Cycle The Fraud Follows the Money –Charity Fraud - starts at or even before the disaster strikes and targets the public –Emergency Response and Assistance fraud - begins as soon as the relief efforts are deployed and attacks the relief programs –Exploitation by Insiders - The risk is increased because of the number of volunteers and temporary workers. Attacks all phases. –Program Fraud - attacks the recovery efforts and can last through the entire recovery

5 The First Wave - Charity Fraud Charity Fraud Schemes –Begin at or shortly before the time a disaster strikes –Lifecycle extends from onset to four to six weeks thereafter –Exploits the outpouring of private and public support for victims –Includes fraudulent websites –Targets a concerned public wanting to help –Scope is national and international

6 Charity Fraud  How quickly does it start?  5,000+ suspicious domain names registered before and after Katrina made landfall  100+ domain names registered before Gustav made landfall in 2008

7 Charity Fraud  How quickly does it start?  In September of 2005 two individuals were arrested in Burbank, California for impersonating American Red Cross workers soliciting contributions for Hurricane Katrina relief.

8 Charity Fraud  How quickly does it start?  In October of 2005 a man in Aventura, Florida was charged with operating a fraudulent website, www.AirKatrina.com, and soliciting donations for relief flights to Louisiana. The website included false descriptions of scenes of destruction and suffering that he supposedly saw when flying relief supplies into the affected areas.www.AirKatrina.com

9 Charity Fraud  In 2008 a man was charged in Houston, TX with a fraudulent investment scheme where he solicited money from investors to buy and refurbish FEMA travel trailers for re-sale back to the government at a significant profit.

10 Emergency Assistance Fraud –Begins as soon as the public is informed that the government and private entities are providing assistance for victims and businesses –Frauds extend for several months after disaster –Progresses from individual claims to multiple claims to organized rings

11 Emergency Assistance Fraud  In Portland, Oregon 10 Portland, Oregon residents were indicted and charged with submitting false and fraudulent applications for Hurricane Katrina individual assistance to FEMA

12 Emergency Assistance Fraud  In Washington, DC an individual was sentenced to 102 months in prison for fraudulently obtaining over $100,000 in disaster relief funds by submitting false applications using identities of other individuals and having the checks mailed to private mailboxes that the defendant obtained.

13 Emergency Assistance Fraud  In the Middle District of Florida 26 people were charged with submitting false claims to FEMA. The defendants submitted multiple false claims totaling $170,000 and were successful in collecting over $150,000 is disaster assistance benefits.

14 Emergency Assistance Fraud  In Alabama a Montgomery man was sentenced to 7 years in prison for leading an organized ring of fraudsters who submitted fraudulent disaster assistance claims.

15 Emergency Assistance Fraud Also in Alabama a Montgomery woman was sentenced to 43 years in prison for filing false claims for Hurricane Katrina disaster assistance, theft of funds intended for victims of Hurricane Katrina, threatening a witness from another Hurricane Katrina case, conspiracy, drug distribution, weapons charges, and lying to federal authorities. She was successful in obtaining over $80,000 from FEMA, but the judge found that her intent was to steal over $500,000.

16 Emergency Assistance Fraud  Eight Houston, TX defendants were sentenced in 2008 for a conspiracy to submit more than 70 false applications for disaster relief on behalf of residents of an apartment complex that was not affected by the hurricanes.

17 Emergency Assistance Fraud  5 Houston residents were charged with conspiring to submit more than 100 fraudulent applications to FEMA for disaster relief benefits. The defendants were also charged with using Social Security numbers of others in an effort to hide their scheme.

18 Emergency Assistance Fraud  An Alabama woman plead guilty to making 28 fraudulent disaster relief claims and receiving over $267,000 in benefits.

19 Exploitation by Insiders Individuals Use Their Positions to Exploit Relief Programs –Volunteers, temporary workers and emergency contracting rules increase the risk –Government Agencies and Charities FEMA, Army Corps of Engineers, LA Dept. Of Labor, American Red Cross

20 Exploitation by Insiders  The United States Attorney’s Office for the Eastern District of California and the FBI uncovered a scheme by workers at the American Red Cross call center in Bakersfield, CA to defraud the American Red Cross of funds intended for Hurricane Katrina victims by submitting or soliciting others to submit fraudulent claims. Over 80 persons were charged.

21 Exploitation by Insiders  Four FEMA employees in Baton Rouge, LA were charged with stealing air conditioning units intended for use with the travel trailers that FEMA used for temporary housing for storm victims.

22 Exploitation by Insiders  A Fire Chief and two other individuals have plead guilty to stealing $500,000 in medical equipment from an EMT staging area set up by FEMA in Baton Rouge following Hurricane Katrina. The Fire Chief also plead guilty to attempting to murder a federal witness. The defendant was sentenced to 14 years in prison.

23 Program Fraud and Public Corruption Attacks the recovery and reconstruction efforts –Begins as soon as the programs are deployed –Continues for months or years –Often includes public corruption and corrupt influence of the contracting process –Anti-fraud measures in this phase can substantially reduce the loss

24 Program Fraud The owner of a hotel in Texas and was sentenced to 30 months in prison for filing false claims totaling at least $232,000 in connection with FEMA’s Short Term Lodging Program.

25 Program Fraud In Texas two church pastors were charged with submitting false claims to FEMA under an emergency lodging program administered by Harris County Office of Homeland Security and Emergency Management. The indictment alleges that the defendants were paid over $320,000 by FEMA.

26 Program Fraud  Three individuals plead guilty to conspiracy to defraud the United States by submitting fraudulent debris removal load slips in the amount of $716,677. One of the defendants owned a debris removal company working in Mississippi after Hurricane Katrina and the other two individuals worked for a debris removal monitoring company and signed false debris load slips for loads of debris that were not delivered by the contractor.

27 Program Fraud  Two individuals plead guilty to conspiracy to commit bribery involving debris removal in Mississippi. One defendant was a quality assurance representative for the U.S. Army Corp of Engineers and the other was a contractor responsible for debris removal following Hurricane Katrina. The Corp employee accepted cash bribes in exchange for creating false load tickets for loads that the contractor did not haul or dump.

28 Public Corruption  A St. Tammany Parish, Louisiana Councilman pleaded guilty to illegal solicitation in connection with a debris removal contract in St. Tammany Parish in which the defendant allegedly solicited a kickback. The contractor reported the solicitation to the FBI and cooperated in the investigation.

29 Public Corruption  Two FEMA employees were convicted of soliciting bribes from a base camp operator in exchange for allowing the base camp operator to inflate his daily meal charges. The base camp operator reported the solicitation and cooperated in the investigation.

30 Public Corruption  A Corps of Engineers construction official plead guilty to agreeing to accept $299,000 in bribes and kickbacks in exchange for providing inside information to a subcontractor on the bids submitted for a contract to repair a portion of the levee system that protects New Orleans. Another Corps employee and a subcontractor were later indicted on the same scheme. The prime contractor reported the solicitation.

31 Hurricane Katrina Fraud Task Force  Over 1,300 defendants charged in 47 federal judicial districts  Over 28,000 complaints received and screened by the National Center for Disaster Fraud

32 Lessons Learned  Prevention, Detection and Prosecution  Using the lessons learned from the Katrina Fraud Task Force prosecutions, disaster relief agencies have improved internal controls and verification procedures  La. Road Home program incorporated many of these improvements  The lessons learned and applied appear to have reduced disaster fraud for disasters after Hurricane Katrina

33 Contact Information David R. Dugas Of Counsel McGlinchey Stafford PLLC 301 Main Street, 14 th Floor Baton Rouge, LA 70825 (225) 382-3732 ddugas@mcglinchey.com www.mcglinchey.com


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