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Hurricane Fraud

In the wake of the devastation caused throughout the Gulf Coast by Hurricane Katrina, members of the public have been receiving e-mails that purport to solicit contributions for victims of Katrina. Some of these e-mails contain references to website names that sound as though they are affiliated with legitimate charitable causes, such as the American Red Cross.

Some of these e-mails may be sent by people with a sincere desire to help, and may contain accurate information. Others, however, bear strong indications that they are fraudulent and that the senders will not provide the donations to the victims, but will keep the money for themselves. In addition, law enforcement authorities are concerned that, as with disaster scenarios of the past, criminals will operate bogus charities by telephone, and will call members of the public, falsely promising to send donations to Katrina disaster-recovery efforts.

It is a federal felony for anyone to engage in fraud schemes that use the U.S. mail, interstate telephone or wire communications, or credit cards (18 U.S.C. §§ 1341, 1343, 1029), including schemes to defraud would-be donors to charitable causes. Punishment for these types of felonies can lead to terms of up to 30 years in prison. It is also a federal felony for anyone to falsely or fraudulently hold himself or herself out as a member of or an agent for the American National Red Cross for the purpose of soliciting or collecting money (18 U.S.C. § 917). In addition, fraudulent solicitations for supposedly charitable causes may violate other federal or state consumer protection laws.

Hurricane Fraud: Hurricane Katrina

Massive Storm, Massive Cost

  • Hurricane KatrinaIn late August 2005, Hurricane Katrina made landfall along America's Gulf Coast.
  • The storm caused approximately $100 billion in economic damages.
  • Approximately 1.6 million insurance claims were filed, totaling $34.4 billion in insured losses.
  • Of the $80 billion in government funding appropriated for reconstruction, it is estimated that Insurance Fraud may have accounted for as much as $6 billion.

Disaster Fraud Schemes

  • False or exaggerated claims by policyholders.
  • Misclassification of flood damage as wind, fire, or theft.
  • Claims filed by individuals residing hundreds of miles outside the disaster-zone.
  • Bid-rigging by contractors, falsely inflating the cost of repairs.
  • Contractors requiring upfront payment for services, then failing to perform the agreed upon repairs.
  • Charity fraud scams designed to misappropriate funds donated for disaster relief.

The Government Response

  • House in ruinsOn September 8, 2005, the Attorney General created the Hurricane Katrina Fraud Task Force (HKTF).
  • The HKTF was designed to deter, investigate, and prosecute disaster-related federal crimes.
  • The HKTF has a zero-tolerance policy for fraud related to Hurricane Katrina.
  • In one Katrina-Related fraud case alone, the FBI received more than 70 indictments and over 60 guilty pleas (as of March 2007).