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Avoiding Fraud and Abuse in Disaster Reconstruction Efforts

587518390The recent series of natural disasters has left a staggering toll of ruin and loss. The instinct of all involved, citizens, businesses and government, is to clear the debris, restore energy and communications, and rebuild and repair infrastructure and buildings as quickly as possible.


Indeed, the recovery work itself is a cathartic experience that expresses hope in a restored future and the determination to get there.


Unfortunately, massive recovery efforts contain the seeds of their own failures, presenting fertile opportunity for fraud, waste and abuse. The combination of immense human suffering and destruction on a vast scale creates a need for a recovery which is both fast and effective; in the rush to respond, cost considerations are often understandably of secondary importance. Yet, when recovery efforts conclude and costs are scrutinized, revelations of fraud and abuse can be an unwelcome conclusion to the painful process.


Recovery, of course, takes place on a vast range of scales from municipal infrastructures to individual homeowners and businesses. In each scenario, there are common essential players:
  • Appraiser;
  • Financial source (insurance, bank or government);
  • Contractor(s); and
  • Owner.
No matter how communal the sense of urgency to recover and restore, there will be conflicting interests and opportunities for a corruption of the process. The array of such opportunities is almost endless. Appraisers and contractors can demand illicit compensation for faster or more preferable results. Owners can offer such payments to secure preferred treatment. Carriers and government can lose paperwork and mishandle claims and applications. Contractors without sufficient experience or with fraudulent intent can appear, sign contracts, collect what they can up front and then disappear, leaving more despair and frustration in their wake.


For all of these reasons, the involvement of an independent Integrity Monitor has been deemed critical by many experienced public and private entities faced with such daunting recovery efforts.


For example, after Superstorm SandyNew York City financed emergency repairs to private residences damaged by the storm. The City contracted with Integrity Monitors and assigned one to each of the eight prime contractors engaged to coordinate and make those repairs.


Groups of smaller businesses can similarly benefit from having an Integrity Monitor observe the activities of contractors performing repairs in post-disaster settings. The Integrity Monitor will focus on the accuracy of invoices and estimates for contract change orders, safety and environmental compliance, and the backgrounds of contractors and subcontractors. On major construction and disaster recovery efforts, the incremental cost of an Integrity Monitor is minimal, but it can save far more than its cost. Indeed, it has been shown that simply having an Integrity Monitor onsite often has a considerable deterrent effect.


Unfortunately, natural disasters will continue to happen and they will exact their toll on communities. But, those responsible for the recovery would be well advised to consider how Integrity Monitors might be engaged to ensure that the heartache caused by the disasters is not exacerbated by a corruption of recovery efforts.

About the Author

Kenneth C. Citarella, JD, MBA, CFE, CIPP/US
Senior Managing Director, Investigations & Cyber Forensic

Kenneth C. Citarella has more than 30 years of experience investigating and prosecuting white collar crime and computer crime. Previously, he had a distinguished 28-year career as a prosecutor in the Westchester County, New York District Attorney’s Office. He has worked as part of the Guidepost Solutions Integrity Monitor team in the New York City Rapid Repair program overseeing Superstorm Sandy-related reconstruction projects. He joined the firm in 2010 as a project manager to investigate fraudulent claims for the Gulf Coast Claims Facility in its administration of the $20 billion BP compensation fund. Kenneth can be reached at