[Vision2020] Defrauding FEMA

[Phil Nisbet]

For those who wonder why there was no food or water in New Orleans;

September 17th, 2005 11:28 am
Louisiana Officials Indicted Before Katrina Hit


Federal audits found dubious expenditures by the state's emergency 
preparedness agency, which will administer FEMA hurricane aid.

By Ken Silverstein and Josh Meyer / Los Angeles Times

WASHINGTON — Senior officials in Louisiana's emergency planning agency 
already were awaiting trial over allegations stemming from a federal 
investigation into waste, mismanagement and missing funds when Hurricane 
Katrina struck.

And federal auditors are still trying to track as much as $60 million in 
unaccounted for funds that were funneled to the state from the Federal 
Emergency Management Agency dating back to 1998.

In March, FEMA demanded that Louisiana repay $30.4 million to the federal 
government.

The problems are particularly worrisome, federal officials said, because 
they involve the Louisiana Office of Homeland Security and Emergency 
Preparedness, the agency that will administer much of the billions in 
federal aid anticipated for victims of Katrina.

Earlier this week, federal Homeland Security officials announced they would 
send 30 investigators and auditors to the Gulf Coast to ensure relief funds 
were properly spent.

Details of the ongoing criminal investigations come from two reports by the 
inspector general's office in the U.S. Department of Homeland Security, 
which oversees FEMA, as well as in state audits, and interviews this week 
with federal and state officials.

The reports were prepared by the federal agency's field office in Denton, 
Texas, and cover 1998 to 2003. Improper expenditures previously identified 
by auditors include a parka, a briefcase and a trip to Germany.

Much of the FEMA money that was unaccounted for was sent to Louisiana under 
the Hazard Mitigation Grant program, intended to help states retrofit 
property and improve flood control facilities, for example.

The $30.4 million FEMA is demanding back was money paid into that program 
and others, including a program to buy out flood-prone homeowners. As much 
as $30 million in additional unaccounted for spending also is under review 
in audits that have not yet been released, according to a FEMA official.

One 2003 federal investigation of allegedly misspent funds in Ouachita 
Parish, a district in northern Louisiana, grew into a probe that sprawled 
into more than 20 other parishes.

Mark Smith, a spokesman for the Louisiana emergency office, said the agency 
had responded to calls for reform, and that "we now have the policy and 
personnel in place to ensure that past problems aren't repeated."

He said earlier problems were largely administrative mistakes, not due to 
corruption.

But federal officials disagreed. They said FEMA for years expressed concerns 
over patterns of improper management and lax oversight throughout the state 
agency, and said most problems had not been corrected.

They point to criminal indictments of three state workers as evidence the 
problem was more than management missteps. Two other state emergency 
officials also were identified in court documents as unindicted 
co-conspirators.

"The charges were made after some very extensive reviews by FEMA 
investigators and other authorities, who identified issues they felt were of 
the severity and magnitude to refer them to the U.S. attorney's office," 
said David Passey, the spokesman for FEMA's regional office in Texas.

Passey, while acknowledging that the state had made some administrative 
changes, said it had not completed the kind of overhaul FEMA said was 
needed.

"It concerns us a lot. We are devoted to the mission of helping people 
prepare for, prevent and recover from disasters and we want these federal 
funds — this taxpayer money — to be spent and used well and in accordance 
with the rules," he said.

Keith Ashdown of Taxpayers for Common Sense, a Washington watchdog group, 
said recent Louisiana history showed that FEMA "money earmarked for saving 
lives and homes'' was instead squandered in "a cesspool of wasteful 
spending."

Louisiana's emergency office receives money directly from FEMA. It passes on 
much of the funding to local governments that apply for assistance.

The audit reports said state operating procedures increased the likelihood 
of fraud and corruption going undetected.

For instance, a Nov. 30, 2004, report by Tonda L. Hadley, a director in the 
Denton field office, examined $40.5 million sent to the Louisiana agency, 
mostly for the Hazard Mitigation program. The report found that the state's 
emergency office did not have receipts to account for 97% of the $15.4 
million it had awarded to subcontractors on 19 major projects.

The report also said the Louisiana agency had misspent $617,787 between May 
2000 and September 2003.

Questionable expenditures identified by the inspector general included 
$2,400 for sod installation, several thousand dollars for a trip to Germany 
by the deputy director, $1,071 for curtains, and $595 for an L.L. Bean parka 
and briefcase. The inspector general also challenged unspecified spending 
for camera equipment, professional dues and a 2002 Ford Crown Victoria.

The day before the report was issued, the U.S. Attorney's Office for the 
Western District of Louisiana obtained an indictment against Michael L. 
Brown, deputy director of the Louisiana office of emergency preparedness. 
(Brown is no relation to former FEMA director Michael D. Brown who resigned 
this week.) Louisiana's deputy director oversaw the state's Hazard 
Mitigation program.

Brown was charged with conspiring to obstruct the inspector general's 
investigation and for making a false statement to a federal investigator.

Michael C. Appe, another senior state agency official, also was charged with 
obstructing the audit. Months earlier, Appe had been appointed as head of a 
"surge team" to review projects funded with FEMA money. The team's mission 
was to help spot abuses.

Both Appe and Brown hold the rank of colonel for their roles in overseeing 
elements of the state National Guard.

Appe was arrested in Baton Rouge last November, as was Daniel J. Falanga, 
the state agency's flood-mitigation officer. Falanga was accused of 
committing perjury before a grand jury investigating misuse of FEMA funds.

All three men have pleaded not guilty to the charges and deny wrongdoing, 
according to their lawyers. Trial dates remain uncertain because the 
hurricane disrupted court schedules.

According to the indictment, Brown and Appe conspired in 2000 to use 
$175,000 in FEMA funds to cover a shortfall in a related agency's budget. 
Later, when the inspector general began investigating the agency's use of 
FEMA money, the two men conspired to create a fake, backdated memo to cover 
up the earlier diversion of funds, the indictment says.

State agency spokesman Smith said Brown had traveled to Germany, but to 
attend a conference. He declined to answer questions about alleged improper 
spending, citing the pending trial. Smith said at the time, state officials 
believed the trip to Germany was a proper expenditure.

Brown's lawyer, Elton Richey, said his client tried to spend federal 
disaster funds wisely despite job turnover and confusion between state 
agency officials and FEMA overseers. He said FEMA kept changing the rules.

Marty Stroud, a lawyer who represents Appe and Falanga, said, "There are no 
charges that anyone in this case enriched himself at the expense of a 
federal program."

Hadley, of the inspector general's office, issued a second report on Feb. 
25, 2005, which tracked state spending of FEMA money to pay for 
"extraordinary costs," a special category used for the administration of 
disaster assistance programs. It said the agency had improperly spent 
$247,166 for items such as a car, computers, membership dues and travel to 
seminars.

In addition to alleged misspending reported in the two audits, FEMA has 
asked for the return of $10.7 million allocated to a program for buying 
property in high-risk flood areas. Most of that money was passed on to local 
communities to determine which property owners would benefit.

FEMA alleged the Louisiana agency had not properly monitored expenditures, 
and failed to ensure that properties receiving the funds were eligible.

About $2.8 million of the refund sought by FEMA went to consultant fees. 
Most of that money went to Aegis Innovative Systems, a Baton Rouge firm 
hired by many parishes to administer the flood buyout program. Aegis owners 
include Mark Howard, a former official at the Louisiana agency.

State Sen. Reggie Dupre said it appeared that parishes employing Aegis were 
especially successful in winning money from the state emergency preparedness 
agency.

"It smells like a horrible brother-in-law deal to me, " he said in a phone 
interview.

An Aegis attorney did not respond to a request for comment.

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