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Top FEMA official was executive at company accused of hurricane claims fraud

091317 - Hurricanes FEMA Maurstad - Shepherd pic
Several whistleblowers have alleged that while they were doing claims work for a company that was lowballing payouts for victims of Hurricane Sandy, they were pressured in various ways to lower their claims totals. (AP Photo/Mike Groll)

A top official in charge of the Federal Emergency Management Agency's insurance programs was previously an executive for a company that whistleblowers accused of lowballing payouts for victims of Superstorm Sandy.

David Maurstad is currently FEMA's assistant administrator for federal insurance. He was hired to that career position in 2016, in the last year of the Obama administration, and according to FEMA's leadership page, he now oversees the National Flood Insurance Program.

Maurstad's LinkedIn page says he was senior vice president of OST, Optimal Solutions and Technologies, from September 2011 to February of 2016.

Several whistleblowers have alleged that while they were doing claims work for OST related to homes hit by Sandy, they were pressured in various ways to lower their claims totals. Those whistleblowers have written sworn affidavits that have been used in FEMA arbitration hearings, and some of the whistleblowers have interviewed personally with members of Congress.

For example, one whistleblower wrote that OST's work on the Sandy claims, "was an elaborate process designed to justify minimal payments to policy holders irrespective of the actual merits of their claims."

FEMA this week downplayed those charges against one of its top officials, and asserted that Maurstad "had no interaction" with OST in his first year back with the agency. FEMA also said Maurstad was never specifically called out for problems in the company.

"FEMA is aware of allegations, at least several of which are anonymous," a FEMA spokesperson told the Washington Examiner by email. "Regardless of the merits of the allegations, none of them alleged malfeasance by Mr. Maurstad."

Maurstad's biography on the FEMA website does not directly name OST as a former employer, but alludes to that time by saying, "he served in executive management positions with an A&E [accident and emergency] firm and an integrated IT, engineering and management solutions firm."

OST's work on Sandy is not just routine claims work. The company won a contract to execute the Sandy Claims Review (SCR) which was a set-aside project intended to review the claims by homeowners who felt they still had not received a fair deal after FEMA admitted in a '60 Minutes' interview that widespread fraud had occurred in the original round of claims. That fraud included adjusters who were purposefully ignoring evidence in order to lowball claims, or in some cases, instances of claims that were changed in the peer review process.

The Sandy project originally delivered to OST in 2015 was meant to take 90 days to complete. FEMA confirmed to the Washington Examiner that the project was still underway even today, and that OST was still working the project in 2017.

August Matties is the attorney for about 1,300 people who are still fighting FEMA over their Sandy claims in the SCR process. At a Wednesday press conference, Matties blasted OST.

"One reason that I know FEMA is doing this [dragging out the process], is they are paying hundreds of millions of dollars to OST Inc., Mackenzie Consulting, and other government contractors, to administer the claims review process," Matties said.

"So get this straight in your head. Five years after Hurricane Sandy, a process is set up to try and make homeowners whole who were the victims of fraud. Those homeowners may get a couple hundred million dollars, FEMA admits that they underpaid that much. But FEMA will have payed government contractors multiples of that to figure it out. What's wrong with this picture? When is this mess going to end? This is the proverbial 'swamp' of Washington that people talk about."

After the press conference, Matties named Maurstad directly.

"First, the Sandy Claims Review process has turned out to be more profitable for his former company than it was for Sandy victims," Matties told the Washington Examiner. "That's sinful."

New Jersey Republican Rep. Tom MacArthur, who was also at the press conference on behalf of Sandy victims and is pushing for major reforms to the NFIP, drew a more cautionary tone about Maurstad.

"Not every person involved in the process should be painted with the same brush," MacArthur told the Washington Examiner. "I have no idea about David Maurstad. I don't know who he is, I don't know what he's been involved in. But just because somebody was at a company that was involved – look, they may be the best person. They may be the person who knows exactly what needs to be fixed."

OST was singled out in a 2010 report by the Department of Homeland Security's inspector general for "revolving door" issues between FEMA and outside companies. The IG's report said FEMA seemed unconcerned with the loyalty issues created by revolving door employment issues, and said FEMA dismissed the issue "with little concern for the divisive atmosphere it generates."

Maurstad was at FEMA in 2010, and was a political appointee of President George W. Bush in 2001, when he was nominated to be FEMA's Region VIII director. His revolving door relationship is of note because unlike other one-step examples where a former government staffer might go to work at the contracting or lobbying agency, Maurstad went from FEMA to OST and back again to FEMA.

FEMA defended these employment circumstances.

"To describe that as a revolving door is a very generalized statement that does not take into account, for example the limited pool of qualified individuals with relevant experience, the specific skills and qualities that individuals bring to their jobs, the government's need to hire the best qualified individuals for employment regardless of their background, the competitive process normally required to hire a government employee, and the commitment to public service associated with federal employment," the spokesperson said.

Maurstad was also the focus of a 2005 lawsuit in which victims of Hurricane Isabel alleged that FEMA and the National Flood Insurance Program were systematically lowballing claims.

A report from Insurance Journal said, "The complaint blasts Maurstad, acting NFIP director, for allowing the wrongful conduct to go on despite pleas from state officials and for also declaring at one point that the NFIP ‘is not insurance and never has been,' referring to it instead as a form of government aid."

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