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Sandy Fraud Claims Spur FEMA Review

Monday, March 16, 2015

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Facing thousands of fraud accusations, the Federal Emergency Management Agency will reopen and review every flood insurance claim—up to 144,000 in all—filed by owners of homes damaged or destroyed in Superstorm Sandy.

The review announcement follows an admission March 1 by FEMA official Brad J. Kieserman on CBS News' 60 Minutes that homeowners in FEMA's National Flood Insurance Program were cheated out of compensation because engineers' reports were altered to minimize the damage to their homes.

Bob Kaible via 60 Minutes

Bob Kaible received less than one-third of the insured amount of his home because of an engineering report that found the home "not structurally damaged." The original report had concluded the opposite.

The October 2012 storm killed 71 people and caused more than $65 billion in damage, most of it in New York and New Jersey.

'I've Seen Evidence of It'

"I'm not gonna sit here and conceal the fact that it happened," said Kieserman, who took over FEMA's flood program just a few weeks earlier. "'Cause in the last three weeks, I've seen evidence of it."

"You say you've seen evidence of these fraudulent reports?" asked reporter Sharyn Alfonsi.

"Yes," said Kieserman, adding that he had referred the matter to the FEMA's inspector general.

The news program also interviewed engineers who produced original versions of inspection reports they had written, comparing the originals to later versions that softened or reversed their conclusions.

Some reports of structural damage were changed to conclude there had been no structural damage. Others blamed damage on soil settlement or ordinary wear and tear.

'It's Not My Report'

When homeowner Bob Kaible confronted engineer George Hernemar over his reported conclusion that Kaible's home was "not structurally damaged," Hernemar replied "it's not my report" and took a picture of his original—which reported "structural damage to the house."

NJ Governor's Office / Tim Larsen

In Seaside, NJ (pictured), and elsewhere, Superstorm Sandy caused more than $65 billion in damage and left 71 dead in october 2012.

Kaible received just $79,000 of his $250,000 policy for a house that may cost $350,000 to rebuild, he told CBS.

Another engineer also told the program that his report had been altered to reverse his conclusions.

"I wanted to call [the homeowners] from day one," said Andrew Braum. "I wanted to tell them that this is not me. I didn't do this."


Since the storm, about 2,000 homeowners have filed suit over lack of insurance reimbursements or extreme underpayments.

In February, lawyers for the plaintiffs told The New York Times that they had uncovered more than 500 doctored engineering reports that were used by insurance companies to deny claims.

A federal judge in the lawsuit cases had ordered the reports turned over in November, saying the alterations could be "widespread," The Times reported.

Political Pressure

FEMA's review was announced Wednesday (March 11) by U.S. Sens. Robert Menendez and Cory Booker of New Jersey and Charles Schumer and Kirsten Gillibrand of New York, after a meeting with FEMA administrator Craig Fugate.

The senators initially raised questions in a July 2014 hearing "about FEMA's policy of penalizing some insurers for making overpayments more than for making underpayments," the Associated Press reported.

60 Minutes; FEMA

Sharyn Alfonsi of 60 Minutes reported widespread allegations of fraud involving engineering reports of residential damage after Sandy. Brad J. Kieserman (right), who just took over FEMA's flood program, admitted that reports had been altered.

Earlier this year, Menendez and U.S. Rep. Frank Pallone of New Jersey introduced a bill to stop FEMA from demanding repayment of what the agency called overpayments to some 3,000 Sandy victims in New Jersey and New York, the AP noted.

Menendez called the planned review "a significant turnaround for the thousands of Sandy survivors who have been victimized not only by the storm, but by FEMA, insurance companies and their subcontractors who systemically lowballed claims."

Process Underway

FEMA is now developing its review process for homeowners who request it. Claims will not be reviewed automatically.

Meanwhile, Fugate has accepted the resignation of David Miller, the associate administrator for the Federal Insurance and Mitigation Administration, which oversees the flood insurance program, the International Business Times reported. A former official in the program has also retired, IBI reported.


Tagged categories: Fraud; Government; Rehabilitation/Repair; Renovation; Residential Construction; Residential contractors

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