After Explosive '60 Minutes' Story: NJ, NY Sens Call for Congressional Oversight Hearings of FEMA-Run Flood Insurance Program Ridden with Evidence of "Widespread Fraud"

After Explosive '60 Minutes' Story: NJ, NY Sens Call for Congressional Oversight Hearings of FEMA-Run Flood Insurance Program Ridden with Evidence of "Widespread Fraud"

60 Minutes Aired Last Night Months-Long Investigation Into "Torrent of Fraud” and “Allegations That Thousands of Homeowners Were Denied Their Flood Insurance Claims After Hurricane Sandy Because of Fraudulent Engineer’s Reports”

In New Interview, FEMA Admits to Being Aware of Potential Fraud Being Committed By Private Engineering Firms Involving Denied Claims in 2013, Pledged in July 2014 Senate Hearing to Begin DHS Investigation Into Fraud, Yet Nothing Done Until Months Later

NEWARK, NJ – U.S. Senators Bob Menendez and Cory Booker (both D-N.J.), and Kirsten Gillibrand and Charles E. Schumer (both D-N.Y.) today called on the Senate Committee on Banking, Housing & Urban Affairs to hold new oversight hearings of the flood insurance claims of homeowners impacted by Superstorm Sandy through the National Flood Insurance Program (NFIP), which is run by the Federal Emergency Management Agency (FEMA). According to federal court records and recent news reports, including a months-long investigation aired by 60 Minutes last evening, evidence supports allegations that private insurance companies denied the flood insurance claims of thousands of homeowners Superstorm Sandy because of fraudulently altered engineering reports. The Senators have serious concerns about when FEMA learned of the potential fraud, what steps FEMA took to address it, and FEMA’s general oversight of those that run the NFIP program on its behalf.

In a letter sent today to the Chairman and Ranking Member of the Senate Committee on Banking, Housing & Urban Affairs, the four New York and New Jersey Senators wrote asking for an oversight hearing, “to further examine FEMA’s handling of the Sandy claims process and its oversight of the private insurance companies that facilitate the program on its behalf… It is shocking to us that FEMA officials received specific allegations of fraudulent activity that served as the basis for claimants being denied the coverage they had paid for, including homeowners who lost their homes, and either did not appropriately investigate these claims or simply looked the other way…[these] serious allegations and the questions that they raise are highly troubling, and we believe that Congress, in its oversight capacity, has responsibility to hold further hearings so that these questions can be fully addressed in an open and transparent manner.” Senators Schumer and Menendez are members of the Senate Banking Committee.

The 60 Minutes report is a detailed months-long investigation into, “allegations that thousands of homeowners were denied their flood insurance claims after Hurricane Sandy because of fraudulent engineer’s reports.” While there has been no evidence that FEMA actively engaged in or promoted such fraud, its acknowledged existence within the FEMA-run NFIP program is extremely troubling. More than 1,000 property owners have lawsuits pending in U.S. Eastern District of New York against insurers over flood insurance claims that were denied in the wake of Superstorm Sandy.

According to Eastern District Magistrate Judge Gary Brown, a case brought by Deborah Ramey, from Long Beach, against Wright National Flood Insurance Co., “exposed reprehensible gamesmanship by a professional engineering company that unjustly frustrated efforts by two homeowners to get fair consideration of their claims,” that he added was “concealed by design” and, “Worse yet, evidence suggests that these unprincipled practices may be widespread.”

After concluding that the engineering report used to deny Ms. Ramey’s claim had been purposefully altered, Judge Brown ruled in November2014 that all drafts of engineering reports must be produced to the court, an order initially appealed by FEMA, until the four New York & New Jersey Senators insisted that FEMA and the private insurance companies comply with the judge’s order during a meeting with Administrator Fugate, who then agreed to withdraw the appeal.

In a new interview last night with Brad J. Kieserman, Deputy Associate Administrator for Insurance at FEMA, he said FEMA was aware of potential fraud involving a denied insurance claim in “late 2013” – yet no investigation was initiated to the Senators' knowledge. In a July 2014 hearing, chaired by Senate Menendez in the Senate Banking Committee, Administrator Fugate pledged to refer concerning evidence of potential fraud to the Inspector General of the Department of Homeland Security (DHS IG) and request that the IG launch an investigation, yet according to news reports, that investigation did not begin until months later in December.

Further, evidence has been presented in federal court that is cause for concern over the current lack of FEMA oversight over the “Write-Your-Own” insurance companies who service NFIP claims, and the subcontractors who they hire to assist them. For example, the founder of U.S. Forensics LLC, one of the engineering firms alleged to have materially altered engineering reports, testified in court that his company was not licensed to practice in the State of New York at the time that U.S. Forensics was writing engineering reports for homes following Superstorm Sandy. Additionally, news reports show that an executive of U.S. Forensics was named in multiple civil lawsuits for altering engineering reports following Hurricane Katrina.

New York State Attorney General Eric Schneiderman has opened a criminal probe into two engineering firms alleged to have altered engineering reports - U.S. Forensic of Metairie, Louisiana, and GEB HiRise of Uniondale. Senators Menendez and Booker have called on the New Jersey State Attorney General to launch its own investigation.

The full text of the Senators’ letter to Chairman Shelby and Ranking Member Brown is below:

Dear Chairman Shelby and Ranking Member Brown:

We are writing to bring to your attention serious concerns with regard to how flood insurance claims have been handled by the Write-Your-Own insurance companies (WYOs) and FEMA following Superstorm Sandy, and request that you call an oversight hearing at the earliest possible time to further examine FEMA’s handling of the Sandy claims process and it's oversight of the private insurance companies that facilitate the program on its behalf.

As you may be aware, on February 18, 2015 a team of investigators from the New York State Attorney General’s office raided the New York offices of one of the engineering companies alleged to have fraudulently altered engineering reports that were used to deny New York homeowners' legitimate insurance claims resulting from damage caused by Superstorm Sandy. We are also concerned that firms that prepared insurance reports for homeowners in New Jersey may have also purposely falsified documents to lower their payouts.

Further, that same day new evidence was presented at a hearing in the U.S. District Court for the Eastern District of New York showing that FEMA was made aware of these alleged fraudulent engineering reports in January 2014. It is shocking to us that FEMA officials received specific allegations of fraudulent activity that served as the basis for claimants being denied the coverage they had paid for, including homeowners who lost their homes, and either did not appropriately investigate these claims or simply looked the other way.

On July 30, 2014, the Banking Committee’s subcommittee on Housing, Transportation and Community Development, chaired by Senator Menendez, held a hearing during which Senators Schumer, Gillibrand and Booker raised concerns about FEMA's oversight of the flood insurance program and the practices of the private insurance companies who administer the program on their behalf directly with Administrator Fugate. The Administrator agreed to refer the allegations and concerning evidence to the Department of Homeland Security’s Inspector General and the United States Department of Justice for further investigation. However, according to news reports, the matter was not referred to DHS investigators until November 2014, approximately 4 months after the hearing. This lack of urgency is inexcusable and casts further doubt into FEMA's interest in addressing the many questions concerning the mismanagement of the National Flood Insurance Program (NFIP).

As mentioned above, we are also concerned that there is a lack of oversight over the “Write-Your-Own” insurance companies who service NFIP claims, and the subcontractors who they hire to assist them. For example, the founder of U.S. Forensic LLC, one of the engineering firms alleged to have materially altered engineering reports, testified in court that his company was not licensed to practice in the State of New York at the time that U.S. Forensic was writing engineering reports for homes following Superstorm Sandy. Additionally, we are very concerned about reports that an executive of U.S. Forensic was named in multiple civil lawsuits for altering engineering reports following Hurricane Katrina. It is troubling that an engineering firm with serious allegations such as these would be allowed to assist in handling claims for a federal program with seemingly little to no accountability or heightened scrutiny.

These serious allegations and the questions that they raise are highly troubling, and we believe that Congress, in its oversight capacity, has responsibility to hold further hearings so that these questions can be fully addressed in an open and transparent manner. Thank you for your consideration of this request, and we look forward to continuing to work with you on this critical issue.

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