Mises Wire

Greed and Katrina

Greed and Katrina
Greed for political power can be more harmful to a population’s overall well-being than the capitalist “greed” an entrepreneur might have for a larger market share or the “greed” a worker might have within capitalism for a larger income. As a case in point, recent disclosures about the level of corruption and fraud related to the relief efforts involving Hurricane Katrina show a pattern of dishonesty and “greed” among all sectors, among businesses, government and the general population. Some examples cited by The New York Times illustrate the wide-ranging nature of the corruption:
  • An estimated 1,100 prison inmates across the Gulf Coast collected in excess of $10 million in rental assistance and disaster-relief money. Crime pays! FEMA, in addition, distributed millions of tax dollars to people who used names and Social Security numbers belonging to state and federal prisoners.
  • A hotel owner in Sugar Land, Texas, has been charged with submitting $232,000 in invoices for evacuees who allegedly never stayed at his hotel, billing FEMA for purportedly empty rooms or rooms occupied by paying guests or hotel employees.
  • An Illinois woman who was living in Illinois at the time of the storm sought relief benefits by claiming she had watched her two daughters drown in the flood waters of New Orleans. The children never existed.
  • A Department of Labor employee in Louisiana, appropriately named Wayne Lawless, has been charged with handing out nearly 100 falsified disaster unemployment benefit cards in exchange for kickbacks of up to $300 per card.
  • In New Orleans, two FEMA officials have pleaded guilty to pocketing $20,000 in bribes in exchange for inflating the count on the number of meals a contractor was serving to relief workers.
  • With the $2,000 debit cards distributed by FEMA for disaster relief, an estimated 5,000 people have double dipped, receiving both the $2,000 plastic card and a second $2,000 by check or electronically.
  • Two men, one a representative of the Army Corps of Engineers, have pleaded guilty to taking kickbacks in exchange for approving payments for removal of nonexistent loads of hurricane debris. In contrast, with loads of debris that were not nonexistent, a councilman in St. Tammany Parish, Louisiana, has been charged with attempting to extort $100,000 from a debris-removal contractor.
  • One creative scam artist is charged with collecting 26 federal disaster relief checks totaling $139,000 by using 13 Social Security numbers and fake claims of damage at bogus addresses. Others collected and pocketed hurricane relief donations by posing as Red Cross workers. All told, what the above represents is “one of the most extraordinary displays of scams, schemes and stupefying bureaucratic bungles in modern history,” reports the Times, “costing taxpayers up to $2 billion.”
The $2 billion guesstimate might well prove to be just the proverbial tip of the iceberg. Commenting on the extent of fraud and waste in FEMA’s response to Katrina, Gregory D. Kutz, a director of audits at the General Accounting Office, stated, “I still don’t think they fully understand the depth of the problem.” By the time the Katrina accounting is over, it won’t be surprising if the fraud and boondoggles hit $5 billion. The question: How high does the price of ineptitude and corruption have to go before we all begin to understand the depth of the problem?
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