Red Cross probes Katrina improprieties


The American Red Cross, the largest recipient of donations after Hurricane Katrina, is investigating wide-ranging accusations of impropriety among volunteers after the disaster.

John F. McGuire, the interim president and chief executive of the Red Cross, and Sen. Charles E. Grassley, an Iowa Republican who is chairman of the Senate Finance Committee, said some of the actions might have been criminal.

The accusations include improper diversion of relief supplies, failure to follow required Red Cross procedures in tracking and distributing supplies, and use of convicted felons as volunteers in the disaster area in violation of Red Cross rules.

There is no known official estimate of the cash or the value of supplies that might have been misappropriated, but volunteers said it was in the millions of dollars. The Red Cross received roughly 60 percent of the $3.6 billion that Americans donated for hurricane relief efforts.

McGuire said the investigation started "a number of weeks ago."

"We're in the middle of this, and we're looking at a range of possible problems," he said, "from issues between a few people that are really nothing other than bad will, to failure to follow good management principles and Red Cross procedures that have caused a lot of waste, to criminal activity."

He said the organization would do everything in its power to hold wrongdoers accountable: "We need to bring this through to the proper and right conclusion. We owe that to donors and the people who needed our services."

Among the specific problems identified by volunteers were the disappearance of rented cars, generators and about 3,000 of 9,000 air mattresses donated by a private company, as well as the unauthorized possession of Red Cross computer equipment that could be used to reload cash cards and manipulate databases.

McGuire said the investigation was being conducted by a team from his organization's ethics and compliance arm. When it is done, he said, any finding of criminal activity would be turned over to law enforcement authorities.

A phone call to the attorney general's office in Louisiana was not returned, nor was an e-mail to an official in the Department of Homeland Security who had been contacted by a volunteer looking into the accusations several months ago at the request of the Red Cross.

In interviews over the past two weeks, more than a dozen Red Cross volunteers from around the country described an organization that had virtually no cost controls, little oversight of its inventory, and no mechanism for basic background checks on volunteers given substantial responsibility.

Though there was little direct evidence of criminal activity, the volunteers said the magnitude of the missing goods had convinced them that Red Cross operations were being manipulated for private gain.

"I can't find any other reason for what was going on," said Anne Tolmachoff, a volunteer from Louisiana. "Otherwise, it just didn't make any sense."

While the Red Cross has drawn harsh criticism for failures in responding to Katrina and for failing to address long-standing governance problems, the concerns brought by volunteers raise new questions about its ability to prevent fraud and theft and protect its resources amid the chaos of a major disaster.

Grassley has threatened to rewrite or revoke the organization's charter if it does not thoroughly overhaul its operations.

"The allegations from Red Cross volunteers are wide-ranging and include possible criminal misconduct," said Grassley, who in February demanded to know what the Red Cross was doing to address complaints from volunteers. "The Red Cross needs to change its mind-set so it addresses volunteers' concerns swiftly and appropriately, regardless of whether a Senate committee chairman is asking questions."

In one case mentioned by volunteers, a kitchen manager swapped 300 prepared meals for parking spaces for Red Cross emergency response vehicles without creating any record of the transaction.

"When a swap takes place, those products become untraceable," said Jerome H. Nickerson Jr., a Maryland lawyer who was assigned by the Red Cross, as a volunteer, to look into accusations of theft and fraud in the disaster area. "It's the disaster relief equivalent of money laundering."

Nickerson and his partner in the inquiry, Michael A. Wolters, a security guard from Wisconsin who uncovered wrongdoing during an earlier three-week tour in Texas shortly after Hurricane Katrina, filed a report Dec. 5 with the Safety and Security division at Red Cross headquarters.

In it, they alleged "a breathtaking systematic failure" by senior managers to enforce inventory control procedures and "outright contempt for well-established internal fiscal controls."

But they said the report had been ignored until a reporter for The New York Times began speaking with other volunteers who had seen similar questionable actions.

McGuire said the organization pursued every tip about potential wrongdoing and noted that it had an internal hot line, called Concerned Connection, that volunteers could use.

"The vast majority are misconceptions or cases of `I don't like somebody so I'm going to say something,'" he said. "The key for us is to know whether we've got a problem in the Red Cross system and procedures, whether we've got well-intentioned people who just wasted stuff or whether we have a criminal problem."

Still, several volunteers said Red Cross managers in the disaster area pooh-poohed their concerns and intervened to prevent them from documenting the problems they had encountered.

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