October 31, 2016

Schumer, Gillibrand: Clock Has Ticked For 27 Months But DHS IG Report On Failures Of Flood Program Is Nowhere To Be Found; Senators Rally For Release Of Full Report On Four Year Anniversary, Critical NFIP Changes On Behalf Of Homeowners Relies On Full Report Senators Want Made Public

Four Years After Superstorm Sandy, Failed Claims Process Has Left Tens Of Thousands Of New Yorkers Without The Protection And Compensation They Deserve; Senators Demand Findings That Would Allow Them To Push For More Reforms

Both Senators Have Relentlessly Pushed Reforms & Schumer Grilled FEMA At Committee Hearing But More Needs To Be Done; Senators Want Report Released ASAP 

Schumer, Gillibrand: Flood Of Questions Remain On FEMA & Its Agents Response To Sandy—And We Want Those Answers  

Washington D.C. – U.S. Senators Charles E. Schumer and Kirsten Gillibrand today called on the Department of Homeland Security (DHS) Office of Inspector General (IG) to prioritize and provide a timeline for completing an investigation into mismanagement, failures in oversight, and potential fraud in the National Flood Insurance Program (NFIP) immediately after the storm. In the aftermath of Superstorm Sandy, thousands of New York homeowners were underpaid on their flood claims, potentially as the result of a fraudulent scheme to intentionally underpay policyholders by altering engineering reports. Despite referrals of concerning activity and the 2014 launch of an investigation, the DHS IG has given no indication as to the status of the investigation or the potential conclusions that the IG may make with regard to the allegations of fraud and other concerning activity.   

“We request, as soon as possible, assurances in writing from you that this investigation is being prioritized,” Senators Schumer and Gillibrand wrote in the letter. “We also request a timeline of when you anticipate that your investigation will be completed and a report will be issued.  Our constituents deserve to know that an investigation is moving forward and that there will be accountability for those who were involved with carrying out or enabling the intentional underpayment of flood insurance claims and the mismanagement of the National Flood Insurance Program claims process more broadly. We simply cannot allow these victims who have already been through so much to once again have a claims process fail to provide the protection and compensation they deserve.” 

In July 2014, at a Senate Banking Subcommittee Hearing entitled “The Flood Insurance Claims Process in Communities After Sandy: Lessons Learned and Potential Improvements,” Senator Schumer raised several pieces of concerning evidence related to potential fraud and mismanagement directly to Federal Emergency Management Agency (FEMA) Administrator Craig Fugate. At that time Administrator Fugate assured Senator Schumer that he was aware of these matters and had referred the issues to the DHS IG’s office who would be conducting a thorough investigation. Further, in December 2014, Senator Gillibrand personally requested Secretary of Homeland Security Jeh Johnson and Administrator Fugate to refer allegations of fraud to the DHS Inspector General. Schumer and Gillibrand were given assurances that an investigation into fraud allegations was ongoing, however, there has yet to be any report or indication that a report from the DHS IG is forthcoming soon. It has now been 27 months since the Inspector General’s Office was made aware of these issues.

The full text of the letter is below:

Mr. John Roth

Inspector General

Department of Homeland Security 

Dear Mr. Roth,

The end of this month marks the fourth anniversary of Superstorm Sandy.  It has also been nearly two years since the Department of Homeland Security was first made aware of allegations that National Flood Insurance Program (NFIP) policyholders who submitted claims following Superstorm Sandy were defrauded by individuals altering engineering reports.  This resulted in those policyholders receiving intentional underpayments on their flood claims.  We asked Administrator Fugate to investigate these issues once we became aware of those allegations, and were told that he had personally referred the matter to your office for further investigation.  Since then, a US magistrate judge has referred to this conduct as “reprehensible gamesmanship”; the news programs 60 Minutes and PBS’ Frontline have reported on the fraudulent engineering reports; and the Federal Emergency Management Agency (FEMA) has created a claims review process that has, at the time of writing the letter, paid more than an additional $110 million in flood claims of policyholders that should have been paid to them initially. That does not even include the additional $164 million that has paid to Sandy victims through the settlement of litigation matters.  Furthermore, FEMA and DHS have jointly agreed to disbar the firm HiRise Engineering because of the actions of its employees following Superstorm Sandy.  Yet, we have heard nothing of substance from you or your office related to your investigation into this fraud and the many other concerning issues that have been raised in the aftermath of Sandy. 

We request, as soon as possible, assurances in writing from you that this investigation is being prioritized.  We also request a timeline of when you anticipate that your investigation will be completed and a report will be issued.  Our constituents deserve to know that an investigation is moving forward and that there will be accountability for those who were involved with carrying out or enabling the intentional underpayment of flood insurance claims and the mismanagement of the NFIP claims process more broadly. 

Additionally, we are concerned about more recent allegations of fraud that have been brought to our attention regarding FEMA’s Sandy Claims Review process.  It is our understanding that your office has been made aware of these allegations by attorneys representing our constituents, and we hope that you will gather any necessary information and conduct an appropriately full and thorough investigation. 

Specifically, we have been informed that a number of adjusters hired by FEMA have signed affidavits as whistleblowers, alleging that they were instructed to reduce payments below what policyholders were entitled to receive under their flood insurance policies for damage sustained as a result of Superstorm Sandy.  Additionally, it is our understanding that FEMA, or its contractors, may have hired individuals who were previously employed by engineering firms, such as HiRise Engineering, to review claims as part of the Sandy Claims Review process, despite the fact that these claims were initially handled by engineers of that firm immediately after the storm. This is concerning because, as we noted previously, FEMA has since disbarred this firm based specifically on conduct by its employees while assessing claims after Sandy.   

The Sandy Claims Review process was created to address and remediate the systemic and fraudulent underpayment of Sandy claims by the Write Your Own insurance companies and their contractors, including HiRise and others like US Forensic, LLC.  Given the history and unfortunate precedent set with regard to the fair consideration and payment of these flood insurance claims, we want to be sure that similar issues do not arise again and if they do that they are immediately investigated and addressed. If some of these allegations are true, it would be nothing short of a tragedy, and a cruel victimization of our constituents who have been told to put faith in this review process set up and run by their government. Therefore, we want to be sure that you are aware of these claims and fully expect that your office will take all fraud allegations related to the Sandy Claims Review process seriously.  We simply cannot allow these victims who have already been through so much to once again have a claims process fail to provide the protection and compensation they deserve.

We appreciate your attention to these urgent matters.  

Sincerely,

Charles E. Schumer                                         Kirsten Gillibrand

United States Senator                                     United States Senator