AP Impact:
FEMA asks for return of disaster aid

[May 11, 2011]  CEDAR RAPIDS, Iowa (AP) -- After the raging Cedar River filled his home with 13 feet of water and ruined most of his possessions, Justin Van Fleet pleaded for help from the Federal Emergency Management Agency to get back on his feet.

Dead broke and living in a FEMA trailer following the 2008 flood, Van Fleet repeatedly submitted paperwork and made countless phone calls arguing his case. After seven months, the agency finally gave him more than $20,000, which he said gave him his life back and allowed him to move into a house.

Then in March, a letter arrived from the government with a shocking message: He should never have gotten the money. And he had just 30 days to pay it all back.

The agency is asking Van Fleet and thousands of other Americans who were victims of natural disasters to return more than $22 million in government aid, acknowledging it mistakenly made payments to many people who were ineligible.

FEMA is required by law to recover improperly spent money, but most of the people who were helped say they used the cash years ago, and they don't want to be financially punished because of the agency's errors.

"It literally felt like everything is being taken away from me again," said Van Fleet, a 28-year-old call center worker. "It's like going through the flood again."

Documents obtained by The Associated Press show that FEMA is seeking payments from more than 5,500 people who were affected by 129 separate disasters since 2005, including floods, tornados, hurricanes and other calamities from Arkansas to American Samoa. The agency is still reviewing records, and more repayment requests could go out soon, including to victims of Hurricane Katrina.

FEMA admits the payments were largely its own fault -- the result of employees who misunderstood eligibility rules, approved duplicate assistance for costs that were already covered by insurance or other sources, or made accounting errors. But the agency is still obligated to try to recover the money.

"We are committed to being responsible stewards of taxpayer dollars," spokeswoman Rachel Racusen said.

People who are asked to make repayments have several options. They may appeal the matter, apply for a hardship waiver that would forgive the debt or establish a payment plan. But after a spring marked by devastating tornadoes and floods, the agency's missteps illustrate the potential risk of accepting federal help.

The FEMA aid packages ranged from a few hundred dollars to as much as $27,000. In Van Fleet's case, the agency concluded that the aid was a duplication of benefits since he had flood insurance.

Van Fleet said his insurance payout went directly to his mortgage since the same company provided that policy and his home loan. And the mortgage aid didn't help him since he could neither rebuild nor sell the house, which was deemed worthless and slated for demolition by the government.

According to Van Fleet, two FEMA representatives who visited him at the trailer in 2008 said he should qualify for assistance because he did not receive an insurance payout. They explained how to appeal, and he prevailed on the third try. Now he is prepared to fight the agency again, and he is not alone.

Gary Guglielmana, 69, said the inside of the Mountain View, Ark., home where he and his wife retired was ruined when the White River flooded in March 2008. The couple initially received disaster aid of $1,200, and appealed for more. But they doubted they would qualify because they would be unable to get flood insurance, a requirement of federal aid, after their community opted out of the National Flood Insurance Program.

Guglielmana said a FEMA official told them not to worry. After an inspection of their house, the couple was qualified for another $26,000. They used the money to repair their home. In March, they received a letter telling them to pay back everything.

"That money really helped. We got the house back together, and we've been living in it since then," said Guglielmana, a retired general contractor. "And now they want the check back like we've been sitting on it for all this time. It makes no sense."

After being contacted by the Guglielmanas, Democratic Sen. Mark Pryor of Arkansas introduced a bill last month that would give FEMA discretion to waive debts in cases involving the agency's mistakes. The measure will be considered Wednesday by the Senate committee on homeland security, and Pryor said he hopes to make it law this year despite concerns about federal debt.

"I think most people would see this as a matter of fairness," Pryor said, recalling how Dorothy Guglielmana cried during a phone call with him. "This is not the victim's fault. They did nothing wrong. They just followed FEMA's directions."

Since 1982, the agency has been required by federal law to try to recoup improper payments. But until this spring, collection efforts had been on hold for nearly four years after a federal judge ordered the agency to give victims better, clearer notice about the process and their appeal rights.

A new process was still awaiting approval by FEMA Agency Administrator Craig Fugate when the Department of Homeland Security's inspector general criticized the agency last December for failing to collect $643 million in improper payments to victims of Katrina and subsequent disasters. That figure amounted to roughly 9 percent of the $7 billion the agency has given out since Katrina in 2005.

The inspector general's report called on Fugate to authorize a way to get the money back. So FEMA adopted a new process that it says is fairer for those affected, and the letters soon started going out.

FEMA insists it has fixed many of the problems in the aid program. The agency has slashed its error rate involving disaster payments from 14.5 percent after Katrina to about 3 percent in 2009, Racusen said.

FEMA's National Processing Service Center in Texas continues to review tens of thousands of other cases that might involve improper payments and plans to send out more notices in the coming months.

Racusen said the agency started the reviews for newer disasters that were smaller in scope and has not yet notified anyone affected by Katrina or Hurricanes Rita and Wilma.

Van Fleet is working with Iowa Legal Aid's office in Cedar Rapids to appeal his case. Guglielmana hopes the Pryor bill passes and the matter goes away.

Ray Holmquist of Elmwood Park, Ill., said he and his wife have applied for a hardship waiver to try to get out of paying $5,400, but he doubts it will be granted. The retired businessman said their home in the western Chicago suburb was damaged when the Des Plaines River flooded last year.

"They give you money. They say, 'Hey, take it. Happy days. You deserve it. You're a taxpayer. It's your tax dollars and you live in a flooded zone.' And then all of a sudden the guidelines change," he said. "I hate the injustice of the whole thing."

[Associated Press; By RYAN J. FOLEY]

Foley can be reached at http://twitter.com/rjfoley.

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