New Jersey Representative, Citing Fraud, Calls on Congress to Investigate FEMA

April 29, 2016

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WASHINGTON — A representative from New Jersey called on Thursday for a congressional investigation into the Federal Emergency Management Agency’s flood insurance program, alleging that wrongdoing by the agency had prevented thousands of victims of Hurricane Sandy from receiving the payouts they were entitled to in order to rebuild.

The representative, Tom MacArthur, shared new revelations from whistle-blowers that the agency’s process to re-examine insurance claims from the devastating storm — after allegations of fraud arose last year — had itself been plagued by fraud.

Representative MacArthur, a Republican serving the Third Congressional District, said he had been provided three affidavits outlining accusations of impropriety from several whistle-blowers who had worked on a review process set up by FEMA last year to take a renewed look at flood insurance claims after revelations that engineers assessing damage had altered their reports.

Joined by about two dozen people whose homes or businesses had been damaged or destroyed by the hurricane, Mr. MacArthur criticized what he said was a lack of internal controls at FEMA that had permitted an environment in which adjusters were told to deny claims and hide damage, leading to reduced insurance payouts.

“I have seen doctored engineering reports with my own eyes,” he said. “I have seen doctored adjusters’ reports with my own eyes, where an adjuster wrote something was caused by flood and somebody else inserted the word ‘not’” caused by flood.

One of the whistle-blowers, Jeff Coolidge, an experienced insurance claims adjuster, said he reviewed approximately 1,000 flood claims, while working as a contractor for FEMA last fall — almost all of which he said he was required to deny or underpay.

“I left the Sandy review process because it is a sham,” Mr. Coolidge said. “I was literally losing sleep because I didn’t want to be a part of that fraud anymore.”

About 142,000 homeowners filed claims with FEMA after Hurricane Sandy ravaged the New York region in 2012. Reports of wrongdoing were documented by The New York Times and “60 Minutes” along with other news organizations last year, prompting an outcry from many New York and New Jersey lawmakers. In an acknowledgment that its handling of claims made to FEMA’s National Flood Insurance Program may have been flawed, the agency said policyholders could seek a new review. A criminal inquiry opened last year by the New York State attorney general, Eric T. Schneiderman, a Democrat, is continuing.

“I called for the resignation of the FEMA director, and I call for it again today not because I want a scalp but because there has to be accountability,” said Mr. MacArthur, whose district includes parts of Burlington and Ocean Counties. “There has to be. Somebody has to answer for this.”

Rafael Lemaitre, a spokesman for FEMA, said it had “absolutely no incentive” to shortchange policyholders. He said the agency was working to make things right and overhaul the program.

“The bottom line is that these survivors have been through too much already, and the last thing they need more than three years after Sandy is to deal with being underpaid by their insurance company,” he said in a statement. “Survivors always come first, and that is why we’ve set up an unprecedented process to review these claims and pay out every penny owed to policyholders under their policies.”

Over $50 million had gone to policyholders, he added, “and we’re working as quickly as possible — literally in shifts — to continue to make things right.”

The House Financial Services Committee held a hearing last June on the oversight of Hurricane Sandy flood insurance claims. Mr. MacArthur said members of the committee he had spoken with were open to the possibility of new hearings.

Gert Sofman, 59, of Highlands, N.J., who was among the victims at the news conference on Thursday, said she had been largely denied government assistance rebuilding the organic snack shop she ran with her daughter on the grounds that her business had not made enough money to meet their requirements because it had been open for only three months.

On top of that, Ms. Sofman said she also lost her house, leaving behind an empty lot — which she had to continue to pay thousands of dollars to insure.

“Since Sandy, I have paid over eight grand in flood insurance on a house that they would not pay on,” she said. “So where does that eight grand go? I’m homeless.”

Senator Chuck Schumer, Democrat of New York, said he would be in favor of a House or even Senate investigation into what he called “very serious allegations of fraud and criminal activity.”

“I think FEMA has an obligation to get to the bottom of them quickly and take strong action,” Mr. Schumer said on Thursday.

The senator said the National Flood Insurance Program needed to be reformed to prevent the problems after Hurricane Sandy from happening again, a change he said should lead to removing private insurance companies from the program who are “in cahoots” with assessors.

“They’re still on the job in these places,” he said, “and that’s a disgrace.”