Letter to Richard Shelby, Chairman of the Committee on Banking, Housing and Urban Affairs, and Sherrod Brown, Ranking Member on the Committee on Banking, Housing and Urban Affairs - Hurricane Sandy Insurance Fraud

Letter

Dear Chairman Shelby and Ranking Member Brown:

We are writing to bring to your attention serious concerns with regard to how flood insurance claims have been handled by the Write-Your-Own insurance companies (WYOs) and FEMA following Superstorm Sandy, and request that you call an oversight hearing at the earliest possible time to further examine FEMA's handling of the Sandy claims process and it's oversight of the private insurance companies that facilitate the program on its behalf.

As you may be aware, on February 18, 2015 a team of investigators from the New York State Attorney General's office raided the New York offices of one of the engineering companies alleged to have fraudulently altered engineering reports that were used to deny New York homeowners' legitimate insurance claims resulting from damage caused by Superstorm Sandy. We are also concerned that firms that prepared insurance reports for homeowners in New Jersey may have also purposely falsified documents to lower their payouts.

Further, that same day new evidence was presented at a hearing in the U.S. District Court for the Eastern District of New York showing that FEMA was made aware of these alleged fraudulent engineering reports in January 2014. It is shocking to us that FEMA officials received specific allegations of fraudulent activity that served as the basis for claimants being denied the coverage they had paid for, including homeowners who lost their homes, and either did not appropriately investigate these claims or simply looked the other way.

On July 30, 2014, the Banking Committee's subcommittee on Housing, Transportation and Community Development, chaired by Senator Menendez, held a hearing during which Senators Schumer, Gillibrand and Booker raised concerns about FEMA's oversight of the flood insurance program and the practices of the private insurance companies who administer the program on their behalf directly with Administrator Fugate. The Administrator agreed to refer the allegations and concerning evidence to the Department of Homeland Security's Inspector General and the United States Department of Justice for further investigation. However, according to news reports, the matter was not referred to DHS investigators until November 2014, approximately 4 months after the hearing. This lack of urgency is inexcusable and casts further doubt into FEMA's interest in addressing the many questions concerning the mismanagement of the National Flood Insurance Program (NFIP).

As mentioned above, we are also concerned that there is a lack of oversight over the "Write-Your-Own" insurance companies who service NFIP claims, and the subcontractors who they hire to assist them. For example, the founder of U.S. Forensic LLC, one of the engineering firms alleged to have materially altered engineering reports, testified in court that his company was not licensed to practice in the State of New York at the time that U.S. Forensic was writing engineering reports for homes following Superstorm Sandy. Additionally, we are very concerned about reports that an executive of U.S. Forensic was named in multiple civil lawsuits for altering engineering reports following Hurricane Katrina. It is troubling that an engineering firm with serious allegations such as these would be allowed to assist in handling claims for a federal program with seemingly little to no accountability or heightened scrutiny.

These serious allegations and the questions that they raise are highly troubling, and we believe that Congress, in its oversight capacity, has responsibility to hold further hearings so that these questions can be fully addressed in an open and transparent manner. Thank you for your consideration of this request, and we look forward to continuing to work with you on this critical issue.