Expect Los Angeles’ Multibillion-Dollar Fire Recovery to Bring Fraud, Abuse, and More Misfortune

When Disaster Strikes, Fraud is Sure to Follow

As billions of dollars in government assistance flow into Los Angeles County in the aftermath of its devastating wildfires, attempts to pilfer those funds are all but inevitable. When disaster strikes, history shows fraud is sure to follow, as earnest efforts to expeditiously cut through red tape leave openings for bad actors.

So far, roughly $750 million in federal funds already have been set aside, including $33 million paid to residents impacted by the wildfires and $550 million to the U.S. Army Corp of Engineers. The state has earmarked another $2.5 billion for recovery efforts, including funding for shelters for evacuees, hazardous waste removal, and expedited building permits.

County officials already are gearing up for a fight against those who would try to exploit the situation as early estimates of total damages climb toward $250 billion.

Task Force Formed

Hochman’s office, along with Homeland Security, the FBI, the ATF, the U.S. Attorney’s Office, the Los Angeles City Attorney’s Office, the LAPD, and the Sheriff’s Department have formed a Joint Regional Fire Crimes Task Force specifically to investigate and prosecute “criminal actors seeking to exploit the wildfire crisis,” according to Homeland Security. Those investigations will include “misuse of aid programs administered by government agencies,” including FEMA and the Small Business Administration, officials said.

‘You’re Going to Have Fraud’

Unfortunately, “wherever you have humans and you have money, you’re going to have fraud,” said Rebecca Shea, director of the U.S. Government Accountability Office’s forensic audits and investigative services team. It can’t be eliminated completely, but agencies can take steps to better prepare, detect, and respond to it, she said.

Disasters amplify that risk to “perfect storm” levels as there is significant pressure to get funds out quickly and so many people are in a vulnerable state and often missing documentation due to their circumstances, Shea said. Identity theft can lead to significant delays when legitimate victims and impacted businesses seek assistance.

Contracts Tempt Corruption

The sheer volume of contracts during disaster response, clean-up, and recovery tempts corruption, he said.

“With all of these contracts going through and all of these dollars being funneled, public officials become highly susceptible to being enticed to steer contracts certain people’s way or to cut a few corners in the process to make sure someone gets a contract,” he said.

Some Safeguards Already in Place

Los Angeles County does have one advantage. A system already is in place to monitor contractors and investigate misuse, said Robert Campbell, head of the Los Angeles County auditor-controller’s Audit and Contract Monitoring Divisions, as well as the Office of County Investigations. These teams not only go after fraud, they help establish best practices to avoid it, he said.

Massive Fraud in Other Tragedies

During Hurricane Katrina, about 20% of the requests for individual assistance were fraudulent. Officials have estimated the response to Katrina resulted in $2 billion lost to fraud.

However, the number of fraudulent individual assistance cases dropped to 5% or less during Hurricane Sandy, Currie said. There were still large-scale instances of fraud there, however. The New York City Department of Transportation had to return $5.3 million to the federal government after improperly claiming 132 vehicles had been damaged by Sandy in 2012, though many were out of commission before the storm struck.

Conclusion

As Los Angeles County begins the long and complex process of rebuilding and recovery, it is crucial to remain vigilant against fraud and abuse. The sheer scale of the disaster and the influx of federal funds make it a perfect storm for scammers and con artists. While it is impossible to eliminate fraud completely, law enforcement agencies and government officials can take steps to detect and respond to it.

FAQs

Q: What is the estimated total damage from the wildfires in Los Angeles County?
A: Early estimates put the total damage at around $250 billion.

Q: How much federal funding has been set aside for the recovery efforts?
A: Roughly $750 million has been set aside, including $33 million paid to residents impacted by the wildfires and $550 million to the U.S. Army Corp of Engineers.

Q: What is the Joint Regional Fire Crimes Task Force?
A: The task force is a collaboration between law enforcement agencies, including the FBI, the ATF, and the LAPD, to investigate and prosecute “criminal actors seeking to exploit the wildfire crisis.”

Q: How can residents protect themselves from fraud?
A: Residents can verify contractors’ licenses and never pay more than 10% upfront as a deposit.