With three powerful hurricanes, devastating wildfires, strong hail, flooding, tornadoes, and drought, the U.S. spent a record $306 billion on disaster relief in 2017.
After a disaster, the government (FEMA), Red Cross, insurance companies, and other agencies must move quickly to help victims obtain food, water, shelter, and medical assistance. These hectic times can create the perfect storm for fraudsters to swoop in and take advantage of the post-disaster chaos to try to get more than their share of government money.
Unscrupulous individuals and businesses might persuade disaster fraud victims to claim excessive damages in order to increase their bottom line. Some contractors may team up with federal agencies to repair homes and structures and charge for work not performed or overcharge for shoddy work using substandard materials. Some insurance companies have been known to cheat the government.
In 2009, the federal government alleged that Lighthouse Disaster Relief and its partners knowingly breached their contract to build and operate a basecamp that would house and feed first responders in the Hurricane Katrina rescue and clean-up efforts. The defendants allegedly lied to FEMA employees in order to obtain premature payment for their pending work. After payment was received, however, the defendants did not build or staff a basecamp sufficient to house the number of first responders called for in their contract. As a result, the U.S. government required them to accept a $4 million judgment under the False Claims Act.