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Rampant disaster fraud endangers claims by innocent victims

The devastation caused by Hurricane Katrina in Louisiana prompted a nationwide relief effort for disaster victims. In the years that followed, over 30,000 Katrina-related complaints were filed with the National Center for Disaster Fraud. In November 2014, the federal agency reported it continued to receive complaints nine years after the massive storm.

Disaster recovery money comes from charities, insurance companies and government agencies. Unfortunately, some charities and appeals for donations are not legitimate. Post-disaster wrongdoing also takes the form of unscrupulous individual or business practices to profit from victims' losses, outright theft of disaster relief funds and fraud in the form of false or multiple claims for government benefits and insurance.

More than $15 billion was paid by the Federal Emergency Management Agency for Hurricane Katrina relief. Fraudulent payments made up about $6 billion of that amount. Scams targeting victims, insurers and the government were in operation from the time the hurricane landed.

The U.S. Department of Justice set up a multi-agency Hurricane Katrina Fraud Task Force shortly after the disaster. Punishments for disaster fraud were strengthened in 2008 with the signing of the Emergency and Disaster Assistance Fraud Penalty Enhancement Act. Convictions for making false loss claims for disaster aid can include fines of up to $250,000 and prison terms as long as 10 years.

The government's wariness about fraud places people who make errors while filing benefits or insurance claims at risk. It can be difficult to add up and prove damages caused by something as destructive as a natural disaster. An estimate is often the best you can do, unless you have photographic evidence and receipts for everything you owned.

FEMA allows applicants to amend and withdraw applications for benefits to avoid fraud charges, although that doesn't guarantee the government won't prosecute. Criminal defense attorneys assist defendants unfairly charged with trying to cheat the government or an insurance company.

Source: National White Collar Crime Center., "Disaster Fraud," accessed April. 02, 2015

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