Lessons Learned from Katrina Begins Second Day of the Fraud Conference

The second day of AGA’s Second National Internal Control and Fraud Conference began Tuesday with a session entitled “After the Storm: Lessons From Katrina.” Richard Skinner, Inspector General, U.S. Department of Homeland Security, began by saying that a year ago at the Fraud Conference, he discussed the ongoing chaos in New Orleans at what was then just a year after the storm.

Now two years later, he said, “things have settled down and we have some perspective.” The fraud, they have found, is enormous. “We’re continuing to look at it very hard.”

Skinner was quick to say that when they refer to the “Gulf Coast,” it should include Florida, Alabama and Texas, three states that were overlooked by many in the aftermath but were also hit hard by Hurricanes Katrina and Rita.

He provided a list of the top six U.S. disasters (by damages in billions):

• 2005, Hurricane Katrina, $118

• 2001, September 11th, $20

• 1994, Northridge Earthquake, $7

• 1998, Hurricane Georges, $2

• 2004, Hurricane Ivan, $2

• 1992, Hurricane Andrew, $1.8

In the area of lessons learned from Katrina, Skinner said the IG community is still focusing on the fraud, waste and abuse that occurred in the aftermath and are realizing a lot of what occurred was outside of the control of the federal government. The roles of federal, state and local government, he said, were not clearly defined. “Everyone wanted things to happen yesterday, and nothing happens that fast.”

Some politicians took advantage of the opportunity to embarrass other administrations, he said, acknowledging that he was sticking his neck out with that comment. Inflexible laws, budget constraints and clashing cultures served to tie the hands of many who had good intentions, he said.

“I am not saying we couldn’t have done better,” Skinner said. “We could have. We really fell on our face.”

He identified the six functions that must be addressed before the next disaster strikes:

• Command and control

• Coordination of federal government disaster response efforts

• Logistics support

• Reliability of communications systems

• IT support systems

• Acquisition management

“We weren’t ready for anything this big and we need to fix that,” Skinner said.

“We didn’t have to tools to manage properly and people took advantage of that.”

David R. Dugas, United States Attorney for the Middle District of Louisiana, U.S. Department of Justice, continued the presentation by discussing the prosecutions of people who took advantage of the opportunity presented by the disaster to perpetrate fraud.

“Unprecedented is the word I use to describe everything related to Katrina,” Dugas said. “The failure associated with Katrina was, quite simply, a failure of imagination.” No one in the federal government had imagined a disaster on the magnitude of Katrina was possible, and as a result, we were woefully unprepared to deal with it.

He discussed being in his office in Baton Rouge on the Friday before the storm made land fall the following Monday. At that time, Katrina was a tropical storm that no one was even paying attention to. By the time the full magnitude registered, what should have been a 72-hour evacuation plan had to be done in 18 hours. A lot of people got left behind, he said, because bus drivers had to choose whether to drive the buses or get their own families out. They chose their families and left.

“In three days, this storm went from nonexistent to the worst natural disaster to hit our nation by a factor of 10, and no one was prepared,” Dugas said. The Coast Guard, which has been held up by many as a shining of example of what went right after Katrina, rescued more people after the storm than it had in its entire existence prior to Katrina.

“If you are involved in internal controls and don’t look at Katrina,” Dugas said, “then you can’t know how bad it can get.”

In prosecuting the rampant fraud that occurred in the wake of the storm, he said there have been 768 defendants and 631 indictments in 41 judicial districts—more than 40 percent of the U.S. Attorney offices in the country have brought fraud charges related to Katrina, Rita and Wilma. The fraud was not contained to the Gulf Coast region, either.

He documented charity fraud and individual assistance fraud cases originating in Oregon, Florida, Canada and Nigeria to name just a few places.

Criminals from all over the country and the world as well as insiders from agencies such as FEMA came out of the woodwork to take advantage of the opportunity presented by the disaster.

If this happens in your jurisdiction, Dugas posed to the attendees, “can your internal controls withstand it?” Developing the necessary controls is “a tough challenge. I’m glad I don’t have to do it. I just prosecute them.”

—By: Marie S. Force