*Before Katrina Hit, Louisiana disaster preparedness officials were
under indictment for waste, mismanagement and missing funds...*
http://www.latimes.com/news/nationworld/nation/la-na-money17sep17,1,5736422.story?coll=la-headlines-nation&ctrack=1&cset=true
*Excerpts: *Senior officials in Louisiana's emergency planning agency
already were awaiting trial over allegations stemming from a federal
investigation into waste, mismanagement and missing funds when Hurricane
Katrina struck.
And federal auditors are still trying to track as much as $60 million in
unaccounted for funds that were funneled to the state from the Federal
Emergency Management Agency dating back to 1998.
In March, FEMA demanded that Louisiana repay $30.4 million to the
federal government.
The problems are particularly worrisome, federal officials said, because
they involve the Louisiana Office of Homeland Security and Emergency
Preparedness, the agency that will administer much of the billions in
federal aid anticipated for victims of Katrina.
Earlier this week, federal Homeland Security officials announced they
would send 30 investigators and auditors to the Gulf Coast to ensure
relief funds were properly spent.
Details of the ongoing criminal investigations come from two reports by
the inspector general's office in the U.S. Department of Homeland
Security, which oversees FEMA, as well as in state audits, and
interviews this week with federal and state officials.
The reports were prepared by the federal agency's field office in
Denton, Texas, and cover 1998 to 2003. Improper expenditures previously
identified by auditors include a parka, a briefcase and a trip to Germany.
Much of the FEMA money that was unaccounted for was sent to Louisiana
under the Hazard Mitigation Grant program, _intended to help states
retrofit property and improve flood control facilities, for example_.
The $30.4 million FEMA is demanding back was money paid into that
program and others, including a program to buy out flood-prone
homeowners. As much as $30 million in additional unaccounted for
spending also is under review in audits that have not yet been released,
according to a FEMA official.
One 2003 federal investigation of allegedly misspent funds in Ouachita
Parish, a district in northern Louisiana, grew into a probe that
sprawled into more than 20 other parishes.
Mark Smith, a spokesman for the Louisiana emergency office, said the
agency had responded to calls for reform, and that "we now have the
policy and personnel in place to ensure that past problems aren't repeated."
He said earlier problems were largely administrative mistakes, not due
to corruption.
But federal officials disagreed. They said FEMA for years expressed
concerns over patterns of improper management and lax oversight
throughout the state agency, and said most problems had not been corrected.
They point to criminal indictments of three state workers as evidence
the problem was more than management missteps. Two other state emergency
officials also were identified in court documents as unindicted
co-conspirators.
"The charges were made after some very extensive reviews by FEMA
investigators and other authorities, who identified issues they felt
were of the severity and magnitude to refer them to the U.S. attorney's
office," said David Passey, the spokesman for FEMA's regional office in
Texas.
Passey, while acknowledging that the state had made some administrative
changes, said it had not completed the kind of overhaul FEMA said was
needed.
"It concerns us a lot. We are devoted to the mission of helping people
prepare for, prevent and recover from disasters and we want these
federal funds this taxpayer money to be spent and used well and in
accordance with the rules," he said.
Keith Ashdown of Taxpayers for Common Sense, a Washington watchdog
group, said recent Louisiana history showed that FEMA "money earmarked
for saving lives and homes'' was instead squandered in "a cesspool of
wasteful spending."
Louisiana's emergency office receives money directly from FEMA. It
passes on much of the funding to local governments that apply for
assistance.
The audit reports said state operating procedures increased the
likelihood of fraud and corruption going undetected.
For instance, a Nov. 30, 2004, report by Tonda L. Hadley, a director in
the Denton field office, examined $40.5 million sent to the Louisiana
agency, mostly for the Hazard Mitigation program. The report found that
the state's emergency office did not have receipts to account for 97% of
the $15.4 million it had awarded to subcontractors on 19 major projects.
The report also said the Louisiana agency had misspent $617,787 between
May 2000 and September 2003.
Questionable expenditures identified by the inspector general included
$2,400 for sod installation, several thousand dollars for a trip to
Germany by the deputy director, $1,071 for curtains, and $595 for an
L.L. Bean parka and briefcase. The inspector general also challenged
unspecified spending for camera equipment, professional dues and a 2002
Ford Crown Victoria.
The day before the report was issued, the U.S. Attorney's Office for the
Western District of Louisiana obtained an indictment against Michael L.
Brown, deputy director of the Louisiana office of emergency
preparedness. (Brown is no relation to former FEMA director Michael D.
Brown who resigned this week.) Louisiana's deputy director oversaw the
state's Hazard Mitigation program.
Brown was charged with conspiring to obstruct the inspector general's
investigation and for making a false statement to a federal investigator.
Michael C. Appe, another senior state agency official, also was charged
with obstructing the audit. Months earlier, Appe had been appointed as
head of a "surge team" to review projects funded with FEMA money. The
team's mission was to help spot abuses.
Both Appe and Brown hold the rank of colonel for their roles in
overseeing elements of the state National Guard.
Appe was arrested in Baton Rouge last November, as was Daniel J.
Falanga, the state agency's flood-mitigation officer. Falanga was
accused of committing perjury before a grand jury investigating misuse
of FEMA funds.
All three men have pleaded not guilty to the charges and deny
wrongdoing, according to their lawyers. Trial dates remain uncertain
because the hurricane disrupted court schedules.
According to the indictment, Brown and Appe conspired in 2000 to use
$175,000 in FEMA funds to cover a shortfall in a related agency's
budget. Later, when the inspector general began investigating the
agency's use of FEMA money, the two men conspired to create a fake,
backdated memo to cover up the earlier diversion of funds, the
indictment says.
State agency spokesman Smith said Brown had traveled to Germany, but to
attend a conference. He declined to answer questions about alleged
improper spending, citing the pending trial. Smith said at the time,
state officials believed the trip to Germany was a proper expenditure.
Brown's lawyer, Elton Richey, said his client tried to spend federal
disaster funds wisely despite job turnover and confusion between state
agency officials and FEMA overseers. He said FEMA kept changing the rules.
Marty Stroud, a lawyer who represents Appe and Falanga, said, "There are
no charges that anyone in this case enriched himself at the expense of a
federal program."
Hadley, of the inspector general's office, issued a second report on
Feb. 25, 2005, which tracked state spending of FEMA money to pay for
"extraordinary costs," a special category used for the administration of
disaster assistance programs. It said the agency had improperly spent
$247,166 for items such as a car, computers, membership dues and travel
to seminars.
In addition to alleged misspending reported in the two audits, FEMA has
asked for the return of $10.7 million allocated to a program for buying
property in high-risk flood areas. Most of that money was passed on to
local communities to determine which property owners would benefit.
FEMA alleged the Louisiana agency had not properly monitored
expenditures, and failed to ensure that properties receiving the funds
were eligible.
About $2.8 million of the refund sought by FEMA went to consultant fees.
Most of that money went to Aegis Innovative Systems, a Baton Rouge firm
hired by many parishes to administer the flood buyout program. Aegis
owners include Mark Howard, a former official at the Louisiana agency.
State Sen. Reggie Dupre said it appeared that parishes employing Aegis
were especially successful in winning money from the state emergency
preparedness agency.
"It smells like a horrible brother-in-law deal to me, " he said in a
phone interview.
An Aegis attorney did not respond to a request for comment.
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