Bogus Basements and Fake Foundations: The $100 Million Hurricane Katrina Whistleblower Case

Qui tam cases are not limited to healthcare fraud. In fact, the false claims act was originally passed to respond to widespread fraud in the procurement of weapons and materials for the Union Army. The Union Army would contract for horses and get donkeys instead.

Dante’s eighth circle is reserved for fraudsters, and you wouldn’t think it gets much worse than defrauding the army that is literally fighting slavery.

The Archdiocese of New Orleans, Xavier University, Dillard University, the New Orleans public school system, and AECOM (an engineering firm) to Civil War profiteers: hold my beer. AECOM apparently came up with a scheme to cheat Hurricane Katrina victims out of hundreds of millions of dollars meant to replace and rebuild buildings destroyed by the hurricane.

The scheme: AECOM — which helped institutions prepare estimates of the damage Katrina caused in order to qualify for federal “public assistance” grants — took advantage of a FEMA policy called the “50% Rule.” AECOM, along with these institutions, manipulated repair and replacement estimates so FEMA would pay for full replacement of a facility when it should have paid only for much less expensive repairs. In other cases, the Archdiocese and others inappropriately added millions of dollars to the cost estimates for building replacement, thereby substantially increasing the funding that FEMA paid.

Xavier claimed damage to a gymnasium slab and claims of damage to the basement of the student center, which had no basement.

The Archdiocese, after declaring bankruptcy due to the coronavirus pandemic and a flood of lawsuits over alleged molestation by priests, collected about $46 million in overpayments from FEMA. The largest chunk of that, more than $36 million, was paid out after the archdiocese claimed that the four top floors of two assisted-living centers had been catastrophically damaged when that was not true. Wonder if Dante would have to create a new circle for stacking fraud on top of molestation?

AECOM had to provide pictures of the damage it was repairing to FEMA. When they couldn’t use any real pictures–for example, because the basement they were repairing didn’t exist–it downloaded pics from the internet. Sure, there’s lots of pictures of Katrina-related damage on the internet, you know, because there was lots of damage that needed to be fixed. Very little need to make up fake damage.

The whistleblower: Robert Romero, a former project manager for the engineering firm, AECOM. Romero reported the fraud, perpetrated by his supervisor. In a twist from the typical version of events, AECOM fired the supervisor and asked Romero to look into the fraud. Score +1 for AECOM. Romero did as asked and reported back to AECOM’s management his suspicion that the supervisor had engaged in widespread fraud. In response…and this is critical…AECOM did nothing. Score -$100 million for AECOM. For his trouble, Romero will get more than $2.4 million. Good for him.

If you think you have seen fraud at your workplace, feel free to reach out: quitam@markowitzherbold.com. We can help.