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Senators Schumer and Gillibrand have called on the DHS Office of Inspector General to prioritize the completion of an investigation into mismanagement, failures in oversight, and potential fraud in the National Flood Insurance Program immediately after the Superstorm Sandy.
By Michael V. Cusenza
U.S. Sens. Charles Schumer and Kirsten Gillibrand (both D-N.Y.) this week called on the Department of Homeland Security Office of Inspector General to prioritize and provide a timeline for completing an investigation into mismanagement, failures in oversight, and potential fraud in the National Flood Insurance Program immediately after Superstorm Sandy tore through parts of the city and Long Island.
In the aftermath of the historic weather event, thousands of New York homeowners were underpaid on their flood claims, potentially as the result of a fraudulent scheme to intentionally underpay policyholders by altering engineering reports.
Despite referrals of concerning activity and the 2014 launch of an investigation, Schumer and Gillibrand said,the DHS IG has given no indication as to the status of the investigation or the potential conclusions that the IG may make with regard to the allegations of fraud and other concerning activity.
In July 2014, at a Senate Banking Subcommittee Hearing titled “The Flood Insurance Claims Process in Communities after Sandy: Lessons Learned and Potential Improvements,” Schumer raised several pieces of concerning evidence related to potential fraud and mismanagement directly to Federal Emergency Management Agency Administrator Craig Fugate. At that time, Fugate assured Schumer that he was aware of these matters and had referred the issues to the DHS IG’s Office, which would be conducting a thorough investigation.
Five months later, Gillibrand personally requested Secretary of Homeland Security Jeh Johnson and Administrator Fugate to refer allegations of fraud to the DHS Inspector General. Schumer and Gillibrand were given assurances that an investigation into fraud allegations was ongoing; however, there has yet to be any report or indication that a report from the DHS IG is forthcoming soon. It has now been 27 months since the Inspector General’s Office was made aware of these issues, Schumer and Gillibrand noted.
Last year, the CBS television news magazine “60 Minutes” detailed how private engineering companies purposefully altered engineering reports so as to not fully reflect the true impact and damage caused by Sandy to New Yorkers’ homes, which led to the unjust denial or underpayment of flood insurance claims.
Hundreds of flood-damage reports were allegedly falsified, and both engineering firms and insurance companies were placed under investigation by the DHS IG and state Attorney General Eric Schneiderman for possible criminal conduct.
Reached for comment, the DHS IG’s Office told The Forum, “Our office has an open and ongoing criminal investigation into allegations of fraud and FEMA’s management of the National Flood Insurance Program in the aftermath of Superstorm Sandy. Just like any other law enforcement agency, we do not provide details about an ongoing investigation or its potential conclusions while the investigation is underway. This investigation will not result in a public report; rather, we will refer our investigative findings to the relevant prosecutorial authority upon completion of the investigation. In addition to the investigation, we are exercising other forms of oversight to address these and similar concerns. In March 2016, we issued an audit report concluding that FEMA had inadequate oversight of the NFIP Write Your Own Program and making seven recommendations for improvement. In addition, we have recently initiated an audit of the NFIP Sandy Claims Review process, including specific transaction testing to determine whether claims are systemically being underpaid, as well as reviewing the relevant internal controls over the process.”
