Archdiocese of New Orleans to Pay $1 Million to Settle FEMA Fraud Claims

The Archdiocese of New Orleans has agreed to pay more than $1 million to the federal government to resolve allegations that it filed false claims for disaster relief money after Hurricane Katrina, dealing another blow to an embattled institution that filed for bankruptcy last year amid a growing tide of sexual abuse allegations.

The accusations, part of a whistle-blower lawsuit filed by the former employee of an engineering firm, claim that the archdiocese received at least $46 million in fraudulent aid from the Federal Emergency Management Agency after Katrina devastated the city in 2005.

The archdiocese is one of several New Orleans institutions, including Xavier University, that worked with AECOM, a California-based engineering firm, following the storm. Robert Romero, a former project manager for the company, filed the whistle-blower suit in 2016, accusing the firm of inflating repair estimates for the archdiocese and others.

The suit says that FEMA paid the archdiocese $10 million more than it should have to replace a school cafeteria building that only required repairs, and $36 million for two assisted living buildings that the archdiocese said had suffered catastrophic flood damage on the upper floors, when they only sustained wind damage.

The archdiocese had previously denied those accusations but declined to comment on Tuesday on the settlement with the government, which did not require it to admit participating in fraud. The agreement, which was approved by a federal judge as part of the bankruptcy proceedings for the archdiocese, was earlier reported by Nola.com and announced by the Justice Department on Monday.

Xavier previously agreed to pay $12 million to resolve the accusations against it, the Justice Department said, and the lawsuit against AECOM is ongoing. The firm did not immediately respond to requests for comment on Tuesday but had previously said it would “vigorously defend” its work.

The federal government joined Mr. Romero’s complaint in 2020 and later added the Louisiana Department of Education as a defendant, accusing it of also misrepresenting damage to obtain fraudulent funds.

“Unfortunately, when there is government money, there is often fraud,” said Jeffrey Dickstein, a lawyer representing Mr. Romero who is also a former federal prosecutor. “And when there is a lot of government money, there is a lot of fraud.”

AECOM has been a FEMA contractor since 1997, according to the company’s 2007 annual report. FEMA came under significant fire after Hurricanes Katrina and Rita for the extent of fraudulent or improper payments made by the agency, which were estimated to total anywhere from $600 million to $1.4 billion, according to the U.S. Government Accountability Office.

“In the exigency of a catastrophe like a hurricane, there’s every motivation to say: Get the money out quickly, we cannot have the homeless or people starving and dying in the streets,” said Seth Kretzer, a Houston criminal defense lawyer who has previously represented clients accused of fraudulent FEMA claims.

Investigations of fraud allegations can take years, and the accused rarely face prosecution. “Companies pay these big fines,” Mr. Kretzer said, “and none of the executives get indicted.”

But some emergency response experts worry that issues with fraud have pushed FEMA to be increasingly stringent about relief funds, with a negative impact on disaster survivors.

“The folks that made fraudulent claims in New Orleans — they don’t represent the majority of New Orleanians,” said Laurie Schoeman, a disaster recovery specialist for Enterprise Community Partners, a nonprofit group. “Yet now the majority of people are now having to deal with a cautiousness that wasn’t there before.”

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