Video: Massive FEMA fraud

By Chip Reid Correspondent
NBC News
updated 6/14/2006 8:05:42 PM ET 2006-06-15T00:05:42

The Pagoda Hotel in Honolulu, Hawaii, famous for its koi ponds and Japanese gardens, is a short walk from world-renowned Waikiki Beach. For 10 weeks, the Pagoda was home for someone who claimed to be a victim of hurricane Katrina.

In fact, though, according to a report released Wednesday by the Government Accountability Office, the alleged victim lived in North Carolina when Katrina hit.

But the Federal Emergency Management Agency (FEMA), without even checking, paid his hotel tab of $8,000. And there's more — he also applied for rental assistance. FEMA, apparently unaware it was also paying his hotel bill, paid him $2,358 more.

"This is an affront to the American taxpayer," said Rep. Michael McCaul, R-Texas, at Wednesday's hearing before the House Homeland Security Committee.

Federal investigators told Congress there are thousands of examples of so-called scam artists who bilked FEMA for about $1 billion following hurricanes Katrina and Rita.

"There are bad actors there who are going to milk the system, and that's exactly what happened," said McCaul.

Last month in Florida, more than two dozen suspects were charged in federal court with posing as Katrina victims, allegedly defrauding FEMA of more than $150,000. All have pleaded not guilty.

FEMA insists it is aggressively investigating and says it's identified more than 1,500 cases of potential fraud and has referred them for possible criminal prosecution.

But in New Orleans Wednesday, firefighter Paul Lalla said he got his FEMA money legitimately and is outraged that so many did not.

"That's a criminal act," he said. "They should go to jail, easy — that's stealing, I mean, [it's like] going in a bank and robbing.”

They took money, he says, that should have gone to those in need.

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