Millions in Katrina aid squandered

WASHINGTON — The government squandered millions of dollars in Katrina disaster aid, including handing $2,000 debit cards to people who gave phony Social Security numbers and used the money for such items as a $450 tattoo, auditors said Monday.

Federal money also paid for $375-a-day beachfront condos and 10,777 trailers that were stuck in mud and unusable.

Overcharges, poor accounting and abuses will take "months or years" to rectify, the Government Accountability Office and the Homeland Security Department's inspector general concluded in preliminary reports on how billions of dollars in taxpayer money is being spent.

The Federal Emergency Management Agency recognizes it "made many, many mistakes," and is working on improvement, said Homeland Security inspector general Richard Skinner. "But they're not where they should be. In some cases, the government will have little legal recourse to recoup payments to contractors."

Separately, the Justice Department said Monday that federal prosecutors had filed fraud, theft and other charges against 212 people accused of scams related to Gulf Coast hurricanes.

Forty people have pleaded guilty so far, according to the latest report by the Hurricane Katrina Fraud Task Force. Many defendants were accused of trying to obtain emergency aid, typically a $2,000 debit card, issued to hurricane victims by FEMA and the American Red Cross.

The GAO report found that up to 900,000 of the 2.5 million applicants who received aid under the emergency cash assistance program — which included the debit cards — based their requests on duplicate or invalid Social Security numbers, or false addresses and names.

In other instances, recipients improperly used their debit cards intended for food and shelter for $400 massages, a $450 tattoo, a $1,100 diamond engagement ring and $150 worth of products at "Condoms to Go."

"It was a mess. It was a system that was wide open to fraud," said Gregory Kutz, who led the investigation for the GAO. "All you had to do was call FEMA on the telephone and lie and you could get money. It was just a question of how many people were willing to make false statements."

FEMA representatives defended their procedures, saying the urgency of the situation did not allow for strict identity verification and that they were focused on getting aid to desperate families as quickly as possible.

"It was the right thing to do," FEMA spokeswoman Nicol Andrews said. "We helped thousands of families who were forced from their homes without basic necessities. To slow down that process in order to find out who is trying to cheat the system would have hurt those who the system is designed to help."

However, investigators called for stronger controls to verify the eligibility of disaster victims who apply for aid over the phone and Internet, better planning on emergency supplies for hurricanes and improved accounting of FEMA's vast inventory of temporary housing.

Senators decried the problems.

"Once again, FEMA failed to adequately plan for the very type of disaster that occurs virtually every year," said Sen. Susan Collins, R-Maine, who chairs a Senate panel reviewing the government's response to the storm.

Sen. Joseph Lieberman, D-Conn., said hurricane victims and taxpayers alike were being "ripped off. ... It's unacceptable and ultimately infuriating. We need to do everything we can to insist that FEMA and DHS prepare for the next disaster," he said.

The White House and Homeland Security officials defended administration actions.

Responding to findings in a draft House report that the administration disregarded warnings of Katrina's threat to New Orleans and that the president was slow to engage, White House homeland-security adviser Frances Fragos Townsend said, "I reject outright the suggestion that President Bush was anything less than fully involved."

At a meeting of state emergency-management officials in Virginia on Monday, Homeland Security Secretary Michael Chertoff rebuffed the idea that his department was preoccupied with terrorist threats at the expense of natural disasters.

Chertoff proposed a plan to create a full-time FEMA response force of 1,500 employees, instead of relying largely on volunteers; to push "wrenching change" to integrate FEMA within the Homeland Security Department; to increase capacity of its disaster registration systems to handle 200,000 people a day; and to push claims personnel into the field to serve victims instead of requiring them to use the Internet or telephones.

He is scheduled to testify today before a Senate committee.

The audits released Monday do not try to estimate a total dollar figure on waste and abuse, but the GAO's Kutz told senators during a hearing that it was "certainly millions of dollars; it could be tens or hundreds of millions of dollars."