Data mining helps uncover fraud in disaster relief

GAO used technique to locate FEMA payments that were based on duplicative registration data.

A government watchdog relied on data mining to uncover an estimated $1 billion of improper or fraudulent payments for assistance in the aftermath of hurricanes Katrina and Rita last year.

The Government Accountability Office reported its findings on the fraud to the House Homeland Security Investigations Subcommittee on Wednesday. GAO found that the lack of "upfront controls" and inadequate data checks at the Federal Emergency Management Agency led to the improper disbursement of anywhere from $600 million to $1.4 billion to alleged hurricane victims who registered for federal assistance.

As of February 2006, FEMA has delivered some $6.3 billion in aid under its individual and household program, which included a $2,000 debit card to individuals to help cover immediate needs, such as clothing, food and shelter.

"The need to provide assistance quickly led FEMA to issue payments ... without first validating the identity and damaged property addresses," and without validating that losses were related to the hurricanes, said Gregory Kutz, GAO's managing director of forensic audits and special investigations.

In Louisiana and Mississippi, where hurricane damages were widespread, ownership and occupancy of property that were exempt from inspections underwent electronic verification. But after closer investigation, GAO was able to determine that some addresses used were not those of homes but of post-office boxes, a cemetery and even a parcel store.

Through the use of data-mining technologies, GAO uncovered FEMA payments that were based on duplicative registration data. Of the sample of payments studied by GAO, an estimated 16 percent were based on invalid registration information.

In one case, an individual using 13 different Social Security numbers, one of which belonged to the person, received 26 payments totaling $139,000. By searching public records, GAO found that of the 13 addresses that person claimed as damaged property, eight were bogus addresses or were publicly owned.

Matching information from FEMA registrations to a database of federal and state prison inmates, furthermore, GAO found more than 1,000 registrants used names and Social Security numbers belonging to prisoners who were not displaced by the storms. In one case, a Louisiana inmate received more than $20,000 for registering a post-office box as damaged property.

Using information stored on data bases linked to JPMorgan Chase bank, which issued the FEMA debit cards, GAO also was able to determine purchases that fell outside of FEMA's regulations, which are to meet legitimate disaster needs.

Some of those purchases included diamond jewelry, $2,000 in football tickets, a divorce lawyer, $300 worth of "Girls Gone Wild" videos and $600 for a visit to a gentleman's club. One of the questionable uses was $2,000 in donations to a faith-based charity.

"Pursuing collection activities after disaster-relief payments have been made is costly, time-consuming and ineffective," GAO wrote. The office urged FEMA to address the weaknesses in its registration process to reduce the risk of fraud. GAO will refer potential cases of fraud to a task force to investigate and issue indictments where necessary.