Video: Red Cross fraud

By Tom Costello Correspondent
NBC News
updated 12/27/2005 8:04:20 PM ET 2005-12-28T01:04:20

It’s a case of Katrina fraud that prosecutors say just keeps getting bigger— as much as $400,000 stolen from the Red Cross, and so far, 49 people under indictment.

U.S. Attorney Scott McGregor says that in the coming weeks and months, the total number of indictments may double.

It all started with an unusual number of Katrina evacuees applying for assistance — 2,000 miles away, in Bakersfield, California.

“We did question how so many people got to Bakersfield, Calif., from the states affected by Katrina. That was the first clue we had,” says Steve Cooper, Red Cross senior vice president.

It turns out they weren’t evacuees, but rather subcontracted employees for Speherion Staffing, who were manning the Red Cross call center in Bakersfield. The contractors were hired to speed financial assistance to Katrina victims through Western Union.

“The contract employees working at the call center would call their buddies or their relatives and say 'Here’s a PIN number, get down to the Western Union and collect the money.' It’s that simple,” says McGregor.

Now, investigators are looking at other call centers.

The Red Cross has now distributed some $1.4 billion to between 3 and 4 million Katrina evacuees.  That’s nearly $1,000 per family.  The operation was so large, the Red Cross had to outsource the work.

Philanthropy expert Elizabeth Boris says while she generally gives the Red Cross high marks, the lesson is clear:  “When you hire subcontractors they need to be vetted and overseen in a way that maybe you don’t do for volunteers that have worked with year in and year out,” says Boris.

Today, from the Red Cross was a pledge: “To investigate and prosecute and seek court-ordered restitution from anyone who attempts to defraud the American Red Cross and in turn, the American public.”

The Red Cross say they will send the money — where it's needed.

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