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Catch of the Week: Archdiocese of New Orleans pays $1 million to Resolve Katrina-Related Allegations, Highlighting Importance of Enforcement in Disaster Recovery Fraud

Posted  November 19, 2021

We’ve covered this before: natural disasters and fraud against the government often go hand in hand. The government, through agencies and programs such the FEMA and the federally-backed flood and crop insurance programs, can distribute enormous sums of money very quickly in the wake of hurricanes, floods, tornadoes, and the like.

Distributing lots of money quickly after natural disasters gets immediate help to people affected by these phenomena. Their homes and livelihoods are often destroyed, and delays in getting resources can irreversibly harm them, for example in the case of eviction or foreclosure. However, whenever large sums of money are distributed in relative haste, they also create an attractive target for the unscrupulous.

This set of circumstances sets up a “pay and chase” scheme, where the money goes out, some of it is lost to fraudsters, and then the government tries to recoup dollars lost to fraud after the fact. The same situation has arisen in the COVID-19 pandemic where, again, quick distribution of resources was more important than the perfect allocation of resources. The government has been pursuing Paycheck Protection Program fraud cases since.

One of the government’s key tools in fighting fraud are whistleblowers, who, through a law called the False Claims Act, are incentivized to come forward and can receive an award of 15%-30% of any money they assist in recovering. It’s sound policy: whistleblowers, unlike traditional law enforcement, are uniquely positioned to see inside of organizations that are defrauding the government. Bringing that information forward stops fraud and helps ensure accountability, and it is why the vast majority of dollars recovered under the Act are attributed to cases brought by whistleblowers.

The brings us to our catch of the week: the Roman Catholic Archdiocese of New Orleans. The Archdiocese allegedly submitted invoices to FEMA that it knew was false – such as the repair of a nonexistent HVAC units or misstatements about the square footage of buildings – pocketing millions in relief funds it was not entitled to. The repairs were part of the federal relief effort in response to Hurricane Katrina and were distributed, in some cases, over a decade ago.

The settlement results from a broader whistleblower case brought by a former project manager of an architectural and engineering firm called AECOM, which worked with various entities in the New Orleans area, including the Archdiocese, to help rebuild after Katrina. According to the whistleblower’s allegations, AECOM urged its clients to submit inflated invoices to FEMA to garner more federal funds. In 2020, another of AECOM’s clients, Xavier University of Louisiana, paid $12 million to settle related allegations. Litigation against AECOM itself is ongoing.

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Tagged in: Catch of the Week, Certifications, FCA Federal, Flood Insurance, Government Programs Fraud,