The Archdiocese of New Orleans agreed to pay $1 million to federal officials to settle allegations it filed false claims for disaster aid money after Hurricane Katrina. This deal is yet another blow to an institution that filed bankruptcy last year amid growing sexual abuse allegations.
These accusations are part of a whistle-blower suit filed by an ex-employee of an engineering company. They claim that the archdiocese received at most $46 million in fraudulent assistance from the Federal Emergency Management Agency following Katrina’s destruction of the city in 2005.
Following the storm, the archdiocese was one of many New Orleans institutions that worked with AECOM (an engineering firm). Robert Romero, a former manager of the company’s project, filed the whistle-blower lawsuit in 2016. He claimed that the firm had inflated repair estimates for the archdiocese as well as other institutions.
FEMA paid the archdiocese $10M more than it should have for a school cafeteria that needed repairs and $36M for two assisted living buildings. The archdiocese claimed that they had suffered catastrophic flood damage to the upper floors. However, they only sustained wind damage.
The archdiocese had denied these allegations previously but declined to comment Tuesday on the settlement reached with the government. It did not have to admit to fraud. The agreement was approved by a federal court as part of bankruptcy proceedings for the archdiocese. It was previously reported by Nola.com on Monday and then announced by the Justice Department.
Xavier had previously agreed to pay $12M to resolve the accusations against him, the Justice Department stated. The lawsuit against AECOM remains open. The firm declined to comment on Tuesday but had previously said it would “vigorously defend” its work.
The federal government joined Mr. Romero’s complaint in 2020 and later added the Louisiana Department of Education as a defendant, accusing it of also misrepresenting damage to obtain fraudulent funds.
“Unfortunately, when there is government money, there is often fraud,” said Jeffrey Dickstein, a lawyer representing Mr. Romero who is also a former federal prosecutor. “And when there is a lot of government money, there is a lot of fraud.”
AECOM has been a FEMA contractor since 1997, according to the company’s 2007 annual report. FEMA was heavily criticised after Hurricanes Katrina & Rita because of the amount of fraudulent or incorrect payments made by the agency. These payments were estimated to have been anywhere from $600million to $1.4Billion, according to the U.S. Government Accountability Office.
“In the exigency of a catastrophe like a hurricane, there’s every motivation to say: Get the money out quickly, we cannot have the homeless or people starving and dying in the streets,” said Seth Kretzer, a Houston criminal defense lawyer who has previously represented clients accused of fraudulent FEMA claims.
Fraud investigations can take many years and the accused are rarely prosecuted. “Companies pay these big fines,” Mr. Kretzer said, “and none of the executives get indicted.”
However, some experts in emergency response worry that fraud issues have led FEMA to be more stringent about relief funds, which could have a negative effect on disaster survivors.
“The folks that made fraudulent claims in New Orleans — they don’t represent the majority of New Orleanians,” said Laurie Schoeman, a disaster recovery specialist for Enterprise Community Partners, a nonprofit group. “Yet now the majority of people are now having to deal with a cautiousness that wasn’t there before.”
Source: NY Times