More theft of Red Cross Katrina funds


49 people have been indicted for participating in a scheme that defrauded the Red Cross out of hundreds of thousands of dollars earmarked for Katrina victims. 17 of the people worked at a Red Cross claim center in Bakersfield, CA. This call center received calls from victims and authorized payments to them. The remaining fraudsters were friends or family members of the call center employees.

The cam was discovered when Red Cross employees noticed an unusually high number of claimants picking up funds near the call center, when they believed few Katrina evacuees were actually living in that area.

The Red Cross’s programs for Katrina evacuees paid out $1.3 billion. Because donors want to see their money put to work immediately, the Red Cross generally doles out funds fairly quickly. Further, many of the evacuees left their homes with no money, no clothing, and no access to their local banks. The call centers were set up to quickly distribute money, in lieu of the Red Cross’s usual policy of meeting face-to-face with disaster victims. Funds were dispersed in the amount of $360 for a single-person household, to a maximum of $1,565 for households with more than four people.

The cumbersome system set up to verify eligibility was full of loopholes which allowed call center employees to file fake claims. As word spread through the call center about lack of security in the payment system, workers began logging claims for themselves, friends, and family.

None of the fraudsters were employees of the Red Cross, rather they were employed by companies that contracted to handle the call center operations. Of those indicted, 6 people have already pleaded guilty. Additional indictments are expected.

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