Misdirected penalty

July 28, 2006

In the chaotic aftermath of Hurricane Katrina, the Bush administration was so eager to compensate for initial bungling that imperiled thousands of Gulf Coast residents, it began passing out cash aid to victims almost indiscriminately.

So many people took advantage of this invitation to fraud that federal investigators estimate that 16 percent of the emergency assistance money - about $1 billion - was misspent on bogus victims and duplicate payments, with uses of the funds including football season tickets, divorce lawyers, and - most famously - a sex-change operation.

Tighter controls on dispensing the money, which the Federal Emergency Management Agency announced this week, are certainly justified and long overdue. Yet FEMA's simultaneous move to reduce emergency aid to a maximum of $500 per household from $2,000 and to require states to cover one-fourth of the amount spent on their residents amounts to punishing the innocent.

A more reasonable approach would have the flexibility to gauge a family's immediate needs while verifying identities to establish qualification for the emergency help. And aid shouldn't be conditioned on the wherewithal of a state to contribute.

Some other details of FEMA's new controls also raise alarms. For example, it has contracted for verification services from ChoicePoint, a private data broker that last year mistakenly sold information on 145,000 people to identity thieves posing as small-business clients. The company has since instituted new precautions, but the government should be wary of taking chances.

A delicate balance is necessary to ensure that scam artists are turned away but people in need get timely help.

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