There is more trouble ahead for the National Flood Insurance Program, as a prominent state attorney general’s office has released a report accusing NFIP of wasting millions of taxpayer dollars. The office has also filed 50 felony charges against an NFIP-affiliated engineering firm for writing doctored reports in the wake of Hurricane Sandy.
The New York attorney general’s office said flood insurance does not offer coverage as advertised and does not police the engineers and others hired to evaluate damage. In fact, homeowners were wrongly prevented from seeing copies of their own reports following Sandy, the report alleges.
“It certainly is not transparent to the general consumer,” said Robert Miller, an assistant attorney general who assisted with the research.
Miller and other investigators took on the Federal Emergency Management Agency, which oversees NFIP, after it was discovered that some engineering companies had crafted fraudulent reports eliminating flooding as the cause of damage during Sandy. Doing so allegedly drove up fees collected by the engineering companies and private insurance carriers, and spared NFIP from sinking further into debt.
The office believes FEMA does not exercise sufficient oversight over these private companies, failing to keep track of the fees it pays and the way firms manage policies.
“This lack of transparency and accountability can and does lead to inflated costs, defrauding the federal government of possibly millions,” the report said.
The attorney general’s office also levied a 50-count indictment against HiRise Engineering, one of the largest firms handling Sandy claims. According to prosecutors, the reports written by HiRise engineers were later altered by employees who had never been to the home. The changes claimed little to no damage for which the homeowner could expect compensation.
Officials suggest HiRise’s crimes extend to outside New York’s jurisdiction, and have submitted its findings to the US Department of Justice for follow up.
The report and indictments come amid ongoing debate over the future of NFIP and the involvement of private firms, including insurance carriers and engineering companies. Last month, a bipartisan group of 23 US Representatives called on FEMA to increase its oversight of private insurers, including implementing a rule allowing it to find out how much money companies are making through their participation in the flood program.
Such a rule is at least four years overdue, said New Jersey Representative Frank Pallone, Jr.
“It is inexcusable that FEMA has failed to provide proper oversight of those entities – especially when Congress has already empowered and required the agency to do so,” the legislator told NJ.com.
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