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N.Y. Attorney General: Nation's Flood Insurance Program Defrauding Taxpayers

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A new report by the New York Attorney General's office finds that a lack of accountability in the nation's flood insurance program is costing taxpayers millions. The office also announced 50 felony charges against an engineering firm for allegedly writing fraudulent reports in the aftermath of Superstorm Sandy.

The report comes after NPR and the PBS series Frontline aired a year-long investigation called "Business of Disaster," which uncovered how private insurance companies made millions in profit after Sandy while homeowners suffered.

In the years following the storm, tens of thousands of homeowners came forward saying the National Flood Insurance Program shortchanged them, dragged them through years-long delays and hid information from them.

The New York attorney general's office has now found flood insurance does not cover what it promises in its ads, that many engineers and others hired to evaluate damage were not qualified and that homeowners were wrongly prevented from seeing copies of their own reports.

"It certainly is not transparent to the general consumer," says Robert Miller, an assistant attorney general who helped write the report.

Miller and other investigators found FEMA, which runs the flood program, is not keeping track of the fees it pays engineers and insurance companies to manage the policies on its behalf.

The report says: "This lack of transparency and accountability can and does lead to inflated costs, defrauding the federal government of possibly millions."

"Every dollar matters," Miller says. "And these parties are fiscally responsible to the taxpayers."

The attorney general's office yesterday also announced a 50-count indictment charging HiRise Engineering, one of the largest engineering firms handling Sandy claims, with writing allegedly fraudulent reports.

According to prosecutors, the original reports that engineers in the field wrote were then altered by HiRise employees who had never been to the home. The altered reports, which often claimed there was little or no damage the homeowner could be compensated for, were then submitted to insurance companies and FEMA.

Officials from the attorney general's office say investigators also uncovered evidence of other crimes which fall outside New York state's jurisdiction. They say they have submitted those findings to the U.S. Department of Justice to follow up.

Homeowner Doug Quinn fought FEMA and his insurance company for years after the storm. He's still not home. He says he wants to see the program fixed before another group of storm victims have to go through the same process.

"Vindication is of small comfort at this point because the fact is this should have all been worked out years ago," Quinn says.

FEMA officials say they are adding oversight and transparency and plan to let homeowners have access to their reports if they ask for them.

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