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Red Cross Investigating Fraud, Other Katrina-Related Claims

Pressed by Congress, the American Red Cross said Friday it is investigating claims that volunteers engaged in widespread theft in the wake of Hurricane Katrina.

"Any conduct that violates either the law or Red Cross code of conduct is not tolerated," said spokesman Chuck Connor, adding that any criminal wrongdoing uncovered by the group's conduct and ethics office will be turned over to law enforcement officials.

Allegations of wrongdoing go far beyond what the statement said were "inevitable ... departures from standard procedures" after such a catastrophe, according to the chairman of the Senate Finance Committee.

Sen. Charles Grassley, R-Iowa, has said volunteers may have committed criminal fraud. The accusations include improperly diverting relief supplies and violating Red Cross rules by using felons as volunteers in the disaster area. Grassley has threatened to rewrite or revoke the organization's charter if it does not overhaul its operations.

In a statement Friday, Grassley said he hopes the Red Cross' investigation will embrace whistleblowers and provide a top-to-bottom review of the group's leadership, oversight and openness.

Especially worrying, Grassley said, was the Red Cross' failure to take seriously the concerns of volunteers reporting the thefts "until I drew attention to them."

"The Red Cross needs to change its mind-set so it addresses volunteers' concerns swiftly and appropriately, regardless of whether a Senate committee chairman is asking questions," Grassley said.

The New York Times reported Friday that more than a dozen Red Cross volunteers described an organization that had few cost controls, little oversight of its inventory and no system of basic background checks for its volunteers.

The volunteers cited little direct evidence of criminal activity, but the magnitude of the missing goods had convinced them that the operations were being manipulated for private gain.

In one case, a kitchen manager swapped 300 prepared meals for parking spaces for Red Cross emergency response vehicles without creating any record of the transaction.

The Red Cross had 235,000 volunteers working in the Katrina disaster area, nearly six times the previous peak of 40,000. The sheer number collapsed the normal vetting process, the volunteers said.

The charity has said it responded to Katrina the best it could in circumstances almost unimaginable, while acknowledging that it stumbled in "technology, logistics and coordination."

That admission was not good enough for Grassley, who said he is set to meet next week with American Red Cross board of governors chairwoman Bonnie McElveen-Hunter.

"I hope to understand better what the timeline is for a complete review and reforms," Grassley said.

The inquiry comes after the Red Cross has seen two presidents resign in a little more than four years. Both resignations came after clashes with the board of governors on the tail of major disasters: Dr. Bernadine Healy stepped down shortly after the Sept. 11, 2001 terror attacks and, more recently, Marsha Evans quit following Hurricane Katrina.