Miss. investigation focuses on misuse of Katrina funds

At least 1,000 cases of fraud reported in areas not hit hard by storm


JACKSON, Miss. -- When the federal government and the nation's largest disaster relief group offered a helping hand after Hurricane Katrina blew through here, tens of thousands of people grabbed it.

But in giving out $62 million in aid, the Federal Emergency Management Agency and the American Red Cross overlooked a critical fact: The storm was hardly catastrophic here, 160 miles from the coast. The only damage sustained by most of the nearly 30,000 households receiving aid was spoiled food in the freezer.

That at least some relief money has gone to those perceived as greedy, not needy, has set off recriminations in this poor, historic capital where the payments of up to $2,358 set off spending sprees on jewelry, guns and electronics.

Though the bulk of the money appears to have been given out legally, the U.S. attorney's office is investigating at least 1,000 reports of fraud, including accusations that people lied about claims of damage or where they lived. State and local officials are criticizing FEMA and the Red Cross for doling out money without safeguards, but they also blame their fellow citizens.

"The donors all across this nation thought they were giving money to put food in the mouths of people who had nothing and clothes on the backs of people who had lost everything," said state Rep. John Raymond Reeves, who represents Jackson. "But that is not what happened here. Free money was being handed out."

And friends have turned against friends. When word of the Red Cross and federal money got out in Jackson's neighborhoods, many rushed to apply. Huge lines formed at Western Union outlets, discount stores and other places that issued or cashed the relief checks.

Erica Thompson, 32, tried unsuccessfully to persuade her friends not to join in. "People can take a good thing and abuse it," Thompson said while doing her wash at a coin laundry in Jackson this week. "It's not right."

Some of those who accepted the aid, though, feel no embarrassment. "I needed that money," said Lynn Alexander, 30, whose apartment lost power in the storm but was not damaged. She collected $900, she said, from the Red Cross. "It helped me put gas in my car, wash my clothes and buy food."

What happened in Jackson and its suburbs -- in Hinds, Madison and Rankin counties -- might not be unique. Emergency officials elsewhere in Mississippi and in parts of Louisiana have also questioned how so much federal aid could have been authorized, given the limited damage they documented.

FEMA, which is leading the $62 billion Katrina relief effort, has been criticized as responding slowly to the disaster and then wasting recovery money. In defending the payments in the Jackson area, the agency and the Red Cross cited the tensions between moving quickly to help the desperate, and moving carefully to avoid aiding the undeserving.

"This is the challenge we perpetually face," said Nicol Andrews, a FEMA spokeswoman. "We chose to err on the side of the victim."

Charles D. Connor, a senior vice president at the Red Cross in Washington, said his group had a similar imperative. People who brought in a form of identification were eligible for aid. Connor acknowledges that that apparently resulted in aid being offered to some who did not need it.

After Hurricane Katrina devastated coastal communities on Aug. 29, it moved steadily inland toward Jackson. Still, the region was largely spared. In Jackson and three nearby counties, only 50 to 60 homes were declared uninhabitable, directors of local emergency departments said. About 4,000 sustained damage, they said.

Immediately after Hurricane Katrina made landfall, the Bush administration declared a disaster area along 15 Mississippi coastal counties, as well as 31 parishes in Louisiana. Residents there were eligible for federal emergency grants, housing assistance and money for repairs, medical bills and other costs.

But by Sept. 7, at Mississippi's request, the disaster zone was expanded as far as 220 miles inland, reaching 32 counties, including several that never experienced sustained hurricane-force winds. Ultimately, the declared area would be expanded again, reaching 47 counties. Before the rush subsided, the Red Cross gave $32 million to area residents, including about 25,400 of the 92,000 households in Hinds County, home to Jackson, according to statistics first published in The Clarion-Ledger and confirmed by Paxton of the local Red Cross chapter.

FEMA received 42,313 applications from Hinds County and 17,352 claims from Madison or Rankin counties. To date, 16,407 of those applications have been approved, resulting in a payout of $20.3 million in disaster grants, as well as $9 million in rental assistance and other aid, agency records show. Most of the federal money was intended for people whose homes were uninhabitable, but it was distributed before any home inspections were conducted.

Lee Montgomery, the manager of Terry Road Pawn Shop in Jackson, said many of those cashing relief checks at his business immediately bought jewelry, firearms, DVD movies and electronics.

Bob Parks, owner of a Hinds County pharmacy and a Western Union agency, said he watched in disbelief as hundreds of Jackson-area residents arrived at his store to cash relief checks.

"Surely the Red Cross has to have a better use of funds," Parks said.

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