Fake Claims, Price Gouging, Bogus Contractors: How Fraudsters Steal Disaster Aid


As the scale and frequency of major disasters escalate, millions of dollars in federal, state and insurance payments intended for recovery efforts are being stolen by fraudsters taking advantage of chaos and the pipeline of aid flowing into the stricken areas.

Last year, Olanrewajua A. Beyioku, also known as “Papa Smith Morgan,” was charged with wire fraud after allegedly devising a scheme to defraud the American Red Cross. The Gary, Indiana, resident used reference codes intended for nine households affected by Hurricane Harvey to obtain $3,600 in relief funds.

Beyioku was one of 3,300 identified cases of fraudulently collecting reference codes that resulted in a loss of more than $1.3 million to the Red Cross.

After Gulf Coast flooding in 2016, Renata Foreman of Independence, Louisiana, submitted false claims from multiple locations and made more than 50 fraudulent applications using stolen identities to obtain Disaster Unemployment Assistance funds from the Louisiana Workforce Commission. In March, Foreman, 39, was sentenced to 111 months in federal prison, and five years of supervised release for multiple counts of wire fraud and aggravated identity theft.

In West Virginia, one woman embezzled more than $18,000 in Federal Emergency Management Agency benefits for the June 2016 flood in Clay County. Pamela Taylor, 57, falsely claimed her primary residence was damaged from the flood when it was not. She has paid $18,000 in restitution and was sentenced in May to 10 months in prison, two months of home confinement and a $10,000 fine.

“As you can imagine, fraud follows the money,” said U.S. Attorney Brandon Fremin, the executive director of the National Center for Disaster Fraud. “So when HUD (Housing and Urban Development) or FEMA or other federal agencies start to put money into those affected areas, that’s when the bulk of the fraud seems to follow. The fraudsters know when the money arrives. So they know that it’s now time for them to operate.”

Losses to disaster fraud are estimated at 10% of disaster-related insurance payouts and FEMA spending, according to a report by the National White Collar Crime Center in West Virginia. More precise losses are difficult to quantify due to the challenges of identifying, reporting and prosecuting fraud.

“It’s next to impossible to actually determine how much fraud there is,” said Richard Brody, a certified fraud examiner and professor of accounting at the University of New Mexico.

Disaster fraud comes in the form of identity theft, price gouging and fake claims made to insurance companies and the federal government, including FEMA. Contractor, charity and insurance fraud also can be prolific during times of disaster.

In the aftermath of a disaster, fraud against FEMA is commonly committed by submitting fraudulent claim applications for disaster relief benefits, often claiming damage that did not occur. In some cases, fraudsters impersonate FEMA or other federal officials to deceive affected individuals.

“There should be a red flag there that nobody from FEMA is going to ask you for a check,” Fremin said. “That’s a big red flag, and that should be a huge indicator that something is amiss.”

Months after Hurricane Michael last October, residents of Panama City say fraudulent contractors flooded the Florida Panhandle days after the storm, persuading people to sign questionable contracts that ultimately set back their recovery.

Some residents say they signed over their insurance benefits believing a contractor would do the work they were hired to do, only to find months later the job was never done or that they were charged too much.

Michael’s Destruction

Hurricane Michael was a Category 5 storm that swamped the northwestern tip of the Panhandle near Panama City, a town of nearly 37,000, leaving behind shattered homes and ruined pavement along U.S. 98. Hundreds of toppled trees littered adjacent Mexico Beach, where neighborhoods and homes were reduced to foundation slabs.

“Bringing the physical structures back to the way they were, people recovering, that can take years,” said Fredric Kerstein, a former Florida prosecutor. “When you’ve got two out of every three homes in your community that are destroyed, you’re not going to have enough contractors to do the work properly, and that’s part of the problem. That’s why everything is delayed. Recovery is a long process.”

On June 1, nearly eight months after Hurricane Michael, dozens of Panama City residents met at a tent structure serving as the temporary home of St. Dominic Catholic Church, which was destroyed in the storm.

Mass was not held that day. Instead, representatives from local law enforcement and insurance companies met with citizens and victims of disaster fraud. They included two locals, Ted Mahoney and Greg Dossie, who experienced drastically different outcomes.

In an interview at his home, which is still gutted, unrepaired and uninhabitable, Mahoney said he and his family are the victims of fraud.

In the hours before Michael, Mahoney waited out the storm in his house in Lynn Haven, just north of Panama City. His wife, Jennifer, and two children……..Read More>>


Source:- insurancejournal