Hurricane Katrina left wake of destruction – and 'shocking' legacy of fraud

NEWYou can now listen to Fox News articles!

Hurricane Katrina, one of the most punishing storms ever to hit the United States, left billions of dollars in damage -- and a battered landscape ripe for con-artists looking to make a buck off the devastation.

And did they ever.

In the 10 years since Katrina made landfall on Aug. 29, 2005, Gulf Coast residents who lost everything and those trying to help them have had to contend with greedy opportunists who set up fake charities to siphon off disaster relief money, engaged in bid-rigging and inflated insurance claims.

“Shocking and appalling” is how Rep. Michael McCaul, R-Texas, described the scale of scams at the time.

One year after the storm hit, the Government Accountability Office released a report that claimed $1.4 billion in disaster relief payments made by FEMA either broke protocol or were potentially fraudulent. While the full scope of fraud tied to Katrina may never be known, by 2011, the Hurricane Katrina Fraud Task Force had prosecuted 1,439 people in half the country’s 94 federal judicial districts.

And the FBI says that, of the $80 billion in government funding carved out for reconstruction efforts, up to $6 billion may have gone out to insurance fraudsters.

The scale of the fraud was, in a sense, on par with the scale of devastation. With winds up to 140 mph, the super storm tore through the Gulf Coast as it uprooted homes, flooded streets and breached levees. In the end, the Federal Emergency Management Agency put the total damage done by Katrina at $108 billion – making it the costliest hurricane in U.S. history.

It was in this shaky, never-before-seen, post-storm environment that the fraudsters set up shop.

The need to distribute aid quickly after Katrina – as well as Hurricanes Rita and Wilma that followed -- made it virtually impossible to verify every claim filed. Requests for reimbursement were routinely rubber-stamped while a program set up by the American Red Cross and financed by FEMA to provide free hotel rooms to those displaced by the storm quickly spun out of control.

The scale of schemes and caliber of criminals tied to Katrina ranged from high-ranking public officials like former New Orleans Mayor Ray Nagin to Tina Marie Gilmore, an Illinois woman who tried to collect $4,358 in federal benefits by falsely claiming she watched her two daughters drown.

The 34-year-old told authorities she was so devastated after watching her two little girls -- ages 5 and 6 -- die before her eyes, she couldn’t eat, sleep, go to work or be in the same room as other children. A little digging revealed Gilmore didn’t even live in New Orleans when Katrina roared through. Her last name wasn’t Gilmore – it’s Winston – and she never had kids. The money she siphoned was spent on a double-wide trailer and a 50-inch television set.

The case, experts say, underscores the depth of deceit people went to during the post-Katrina money grab.

“The reason we’re seeing such widespread fraud is individuals were evacuated to all 50 states,” David Dugas, a U.S. attorney in Baton Rouge, La., and director of a Hurricane Katrina Fraud Task Force command center, told The Associated Press. “Everybody knew what was going on. Therefore, criminals knew what was going on.”

Families hit by Katrina were eligible for up to $26,200 in financial aid, including $2,000 in emergency cash and about $790 a month for temporary housing. Free hotel rooms were also offered to help those Katrina had made homeless.

The emergency cash program was the most commonly exploited, according to auditors. In the year after Katrina, emergency aid was used to buy football tickets, “Girls Gone Wild” videos and even a two-month hotel stay in Hawaii on the taxpayers' dime, according to an analysis by the Government Accountability Office.

Other schemes followed.

FEMA, which took a public beating for its gross mismanagement of the situation, approved cash and housing assistance to more than 1,000 prisoners who had worked the system. One inmate used a post office box to collect $20,000.

The Department of Justice began aggressively going after those taking advantage of the system. In 2008, 14 current and former Mississippi inmates were indicted by a federal grand jury for making false claims in an effort to scam the system.

Among the most notable falls from grace was New Orleans’ own mayor. Nagin, a cable TV executive, ran in 2002 as an outsider fed up with the slow, inept political machine that barely kept the city functioning.

His impatience with the past and blunt assessments endeared him to many in the area.

But the city’s love affair ended when Nagin himself was charged, tried and convicted of corruption tied to Katrina. He was found guilty on 20 of 21 charges dealing with bribery, money laundering and tax evasion and sentenced to a decade behind bars.

During sentencing, U.S. District Judge Ginger Berrigan, called out the “the seriousness” of Nagin’s crime.

"Nowhere is this more harmful than the city of New Orleans where the perception of public corruption stubbornly persists," she added.

The list of elected officials who were caught up in corruption schemes included St. Tammany Parish Councilman Joe Impastato, who was accused of receiving kickbacks, and Renee Gill Pratt -- a former New Orleans City Council member and state representative whom prosecutors said took vehicles donated to the city after Katrina and used city money to pay inflated rents in a building owned by her friend.