Small Business Administration officials issued nearly $18 million in hurricane disaster loans to businesses without verifying whether they actually had the ability to repay the government.
Agency officials ignored borrowers’ living expenses and inexplicably set different criteria for the same types of loans, according to an inspector general report.
Loan officers are supposed to assess a borrower’s income and credit score to ensure they can repay the loan before handing them taxpayer dollars.
But after Hurricane Sandy swept through the northeast in October 2012, the government agency struggled to vet properly the recipients of more than 500 of the 2,532 loans it gave to the storm’s victims, the report said.
The inspector general’s findings Monday coincided with a call from four New York and New Jersey senators for Congress to investigate allegations of Federal Emergency Management Agency fraud first reported Sunday by CBS News’ “60 Minutes.”
“As you may be aware, on February 18, 2015 a team of investigators from the New York State Attorney General’s office raided the New York offices of one of the engineering companies alleged to have fraudulently altered engineering reports that were used to deny New York homeowners’ legitimate insurance claims resulting from damage caused by Superstorm Sandy,” said Sens. Robert Menendez, Cory Booker, Chuck Schumer and Kirsten Gillibrand in a letter to the Senate Committee on Banking, Housing and Urban Affairs.
“We are also concerned that firms that prepared insurance reports for homeowners in New Jersey may have also purposely falsified documents to lower their payouts,” said the four Democrats.
The senators expressed concerns that FEMA may have become aware of the fact that insurance companies doctored engineering reports in order to deny the claims of homeowners who were hit by Superstorm Sandy, but chose not to interfere.
Menendez and Booker of New Jersey, and Schumer and Gillibrand of New York also raised questions about an engineering firm involved in the scandal, U.S. Forensic LLC.
The letter suggested Forensic’s founder was not licensed to operate in New York after Superstorm Sandy but that he wrote a series of engineering reports for homes in the wake of the storm.
“[W]e are very concerned about reports that an executive of U.S. Forensic was named in multiple civil lawsuits for altering engineering reports following Hurricane Katrina,” the letter said. “It is troubling that an engineering firm with serious allegations such as these would be allowed to assist in handling claims for a federal program with seemingly little to no accountability or heightened scrutiny.”
Brad Kieserman, a top FEMA official, told CBS’ “60 Minutes” he had noticed evidence of fraud for more than a year in the reports companies used to deny insurance payments to homeowners.
“I’m not going to sit here and conceal the fact that it happened. Because in the last three weeks, I’ve seen evidence of it,” Kieserman said.
While FEMA Administrator Craig Fugate admitted to problems in the National Flood Insurance Program that had kept Sandy victims from receiving their full benefits during a July 2014 hearing in which he said he had referred the matter to the agency’s inspector general for investigation, the watchdog did not launch its probe until December, Menendez said.
