KATRINA'S AFTERMATHLouisiana Officials Indicted Before Katrina HitFederal audits found dubious expenditures by the state's emergency preparedness agency, which will administer FEMA hurricane aid.By Ken Silverstein and Josh MeyerTimes Staff Writers September 17, 2005 WASHINGTON — Senior officials in Louisiana's emergency planning agency already were awaiting trial over allegations stemming from a federal investigation into waste, mismanagement and missing funds when Hurricane Katrina struck. And federal auditors are still trying to track as much as $60 million in unaccounted for funds that were funneled to the state from the Federal Emergency Management Agency dating back to 1998. In March, FEMA demanded that Louisiana repay $30.4 million to the federal government. The problems are particularly worrisome, federal officials said, because they involve the Louisiana Office of Homeland Security and Emergency Preparedness, the agency that will administer much of the billions in federal aid anticipated for victims of Katrina. Earlier this week, federal Homeland Security officials announced they would send 30 investigators and auditors to the Gulf Coast to ensure relief funds were properly spent. Details of the ongoing criminal investigations come from two reports by the inspector general's office in the U.S. Department of Homeland Security, which oversees FEMA, as well as in state audits, and interviews this week with federal and state officials. The reports were prepared by the federal agency's field office in Denton, Texas, and cover 1998 to 2003. Improper expenditures previously identified by auditors include a parka, a briefcase and a trip to Germany. Much of the FEMA money that was unaccounted for was sent to Louisiana under the Hazard Mitigation Grant program, intended to help states retrofit property and improve flood control facilities, for example. The $30.4 million FEMA is demanding back was money paid into that program and others, including a program to buy out flood-prone homeowners. As much as $30 million in additional unaccounted for spending also is under review in audits that have not yet been released, according to a FEMA official. One 2003 federal investigation of allegedly misspent funds in Ouachita Parish, a district in northern Louisiana, grew into a probe that sprawled into more than 20 other parishes. Mark Smith, a spokesman for the Louisiana emergency office, said the agency had responded to calls for reform, and that "we now have the policy and personnel in place to ensure that past problems aren't repeated." He said earlier problems were largely administrative mistakes, not due to corruption. But federal officials disagreed. They said FEMA for years expressed concerns over patterns of improper management and lax oversight throughout the state agency, and said most problems had not been corrected. They point to criminal indictments of three state workers as evidence the problem was more than management missteps. Two other state emergency officials also were identified in court documents as unindicted co-conspirators. "The charges were made after some very extensive reviews by FEMA investigators and other authorities, who identified issues they felt were of the severity and magnitude to refer them to the U.S. attorney's office," said David Passey, the spokesman for FEMA's regional office in Texas. Passey, while acknowledging that the state had made some administrative changes, said it had not completed the kind of overhaul FEMA said was needed. "It concerns us a lot. We are devoted to the mission of helping people prepare for, prevent and recover from disasters and we want these federal funds — this taxpayer money — to be spent and used well and in accordance with the rules," he said. Keith Ashdown of Taxpayers for Common Sense, a Washington watchdog group, said recent Louisiana history showed that FEMA "money earmarked for saving lives and homes'' was instead squandered in "a cesspool of wasteful spending." Louisiana's emergency office receives money directly from FEMA. It passes on much of the funding to local governments that apply for assistance. The audit reports said state operating procedures increased the likelihood of fraud and corruption going undetected. For instance, a Nov. 30, 2004, report by Tonda L. Hadley, a director in the Denton field office, examined $40.5 million sent to the Louisiana agency, mostly for the Hazard Mitigation program. The report found that the state's emergency office did not have receipts to account for 97% of the $15.4 million it had awarded to subcontractors on 19 major projects. The report also said the Louisiana agency had misspent $617,787 between May 2000 and September 2003. Questionable expenditures identified by the inspector general included $2,400 for sod installation, several thousand dollars for a trip to Germany by the deputy director, $1,071 for curtains, and $595 for an L.L. Bean parka and briefcase. The inspector general also challenged unspecified spending for camera equipment, professional dues and a 2002 Ford Crown Victoria. The day before the report was issued, the U.S. Attorney's Office for the Western District of Louisiana obtained an indictment against Michael L. Brown, deputy director of the Louisiana office of emergency preparedness. (Brown is no relation to former FEMA director Michael D. Brown who resigned this week.) Louisiana's deputy director oversaw the state's Hazard Mitigation program. Brown was charged with conspiring to obstruct the inspector general's investigation and for making a false statement to a federal investigator. Michael C. Appe, another senior state agency official, also was charged with obstructing the audit. Months earlier, Appe had been appointed as head of a "surge team" to review projects funded with FEMA money. The team's mission was to help spot abuses. Both Appe and Brown hold the rank of colonel for their roles in overseeing elements of the state National Guard. Appe was arrested in Baton Rouge last November, as was Daniel J. Falanga, the state agency's flood-mitigation officer. Falanga was accused of committing perjury before a grand jury investigating misuse of FEMA funds. All three men have pleaded not guilty to the charges and deny wrongdoing, according to their lawyers. Trial dates remain uncertain because the hurricane disrupted court schedules. According to the indictment, Brown and Appe conspired in 2000 to use $175,000 in FEMA funds to cover a shortfall in a related agency's budget. Later, when the inspector general began investigating the agency's use of FEMA money, the two men conspired to create a fake, backdated memo to cover up the earlier diversion of funds, the indictment says. State agency spokesman Smith said Brown had traveled to Germany, but to attend a conference. He declined to answer questions about alleged improper spending, citing the pending trial. Smith said at the time, state officials believed the trip to Germany was a proper expenditure. Brown's lawyer, Elton Richey, said his client tried to spend federal disaster funds wisely despite job turnover and confusion between state agency officials and FEMA overseers. He said FEMA kept changing the rules. Marty Stroud, a lawyer who represents Appe and Falanga, said, "There are no charges that anyone in this case enriched himself at the expense of a federal program." Hadley, of the inspector general's office, issued a second report on Feb. 25, 2005, which tracked state spending of FEMA money to pay for "extraordinary costs," a special category used for the administration of disaster assistance programs. It said the agency had improperly spent $247,166 for items such as a car, computers, membership dues and travel to seminars. In addition to alleged misspending reported in the two audits, FEMA has asked for the return of $10.7 million allocated to a program for buying property in high-risk flood areas. Most of that money was passed on to local communities to determine which property owners would benefit. FEMA alleged the Louisiana agency had not properly monitored expenditures, and failed to ensure that properties receiving the funds were eligible. About $2.8 million of the refund sought by FEMA went to consultant fees. Most of that money went to Aegis Innovative Systems, a Baton Rouge firm hired by many parishes to administer the flood buyout program. Aegis owners include Mark Howard, a former official at the Louisiana agency. State Sen. Reggie Dupre said it appeared that parishes employing Aegis were especially successful in winning money from the state emergency preparedness agency. "It smells like a horrible brother-in-law deal to me, " he said in a phone interview. An Aegis attorney did not respond to a request for comment. |