The Briefing June2013

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Disaster Fraud: Resources for Law Enforcement

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Whether natural or man-made, a disaster can take a tremendous toll. From lives lost to property destroyed, a catastro-

phe can alter the fabric of a community for years. Times like this can bring out the best in people, as they help their neigh-bors and fellow citizens through the ordeal.

Unfortunately, the af-termath of a disaster can also bring out the worst in some people. Scammers exploit the pain and suf-fering of victims by pro-viding substandard and unlicensed repair work and even stealing their identities. Scammers may also trick caring bystand-ers into donating money to fake charities. Some-times, even the victims try to take advantage of the situation by filing false insurance claims.

Severe weather has dominated the news head-lines in recent weeks. A devastating May 20 torna-do in Moore, OK, killed two dozen and damaged or destroyed 1,200 homes, according to official ac-counts. The tornado stayed on the ground for 40 minutes and ripped through a 17-mile-long stretch of heartland, at times reaching a mile wide. And, just two weeks later, on May 31, a second top-of-the-scale tornado struck near Oklahoma City.

So far this year, the National Weather Service has identified more than 3,500 severe storms (tor-nados, hail and wind events) that have damaged communities and cost lives nationwide. Hot and dry weather in some parts of the country has al-ready led to an earlier-than-expected start to the summer wildfire season as well.

The 2013 Atlantic hurricane season, which be-gins this month, will be “above normal and pos-sibly extremely active,” according to the National Oceanic and Atmospheric Administration. Fore-casters expect to see 13 to 20 tropical storms this season, with up to 11 developing into hurricanes.

As many as six could become major storms. Weather experts put the chance of a hurricane making landfall along the U.S. coast this summer at 96 percent.

Claims from natural di-sasters annually reach into the billions of dollars. An un-known percentage of them are fraudulent. Appeals from charities raise hundreds of millions to aid victims, but not all pleas for money come from legitimate sources.

The U.S. Department of Justice Disaster Fraud Task Force coordinates efforts to investigate and prosecute di-saster fraud at the federal lev-el. In its most recent progress report (for Fiscal Year 2011), the Task Force noted that 1,439 people were charged with various fraud-related of-fenses stemming from Hurri-canes Katrina and Rita alone.

More recent storms will spur their own federal prosecutions. In FY2011, federal courts ordered nearly $20 million in repayment of funds or resti-tution as a result of disaster fraud.A Guide for Law Enforcement

This issue of NW3C’s The Briefing is designed to serve as a resource guide for law enforcement. The ensuing pages contain valuable informa-tion that agencies can use to inform citizens and businesses in their communities about disaster fraud in all its forms – identity theft, fake chari-ties, insurance fraud and bogus repair schemes. It features detailed explanations of each type of fraud as well as prevention tips. There are also a number of important links for disaster fraud and online fraud resources.

The public is law enforcement’s most valu-able partner in the effort to prosecute and pre-vent these types of crimes. We encourage you to share this information in your communities. Use this guide as a handout at public meetings or at crime prevention events. Also, please link to this information on your agency website.

Identity TheftMany disaster scams involve defrauding victims of their money. However, scammers do not stop there. They may pose as charity or law enforce-ment representatives to obtain sensitive informa-

tion from victims, stealing their identities in the process. In the aftermath of a natural disaster, they may search the rubble for computers lost or left behind, and extract personal data. Prevent identity theft with the following tips:

• Be careful about sharing information. If someone claims to be a law enforcement agent, ask to see identi-fication. Do not provide information to email requests without verifying the sender.

• Never open links from emails sent by unfamiliar users. They could contain viruses that compromise your computer and allow hackers to access personal and financial information.

• Protect computers and digital devices. Even if they appear to be severely damaged or destroyed, a hack-er may be able to retrieve information. Make sure to permanently erase all data before donating or destroying the device. In many areas, local law en-forcement will sponsor drives to collect and destroy unwanted computers.

Tips for Fraud VictimsDespite everyone’s best efforts, disaster victims may still fall for scams. If this happens, victims should follow these guidelines: • Monitor checking and credit card ac-counts. Contact the bank or credit card issuer in

the event of suspicious activity.• Gather evidence. Take pictures of poor-quality con-

struction. Refer to the signed contract if a contractor does not finish the job.

• Report the crime. According to the 2010 National Public Survey on White Collar Crime, conducted by

the National White Collar Crime Center, less than 12 percent of white collar crime victimizations were re-ported to law enforcement. This includes repair and insurance fraud, identity theft and charity scams. 1. Report online scams to the Internet Crime Com-

plaint Center at www.ic3.gov. 2. Report charity scams to the National Center for

Disaster Fraud by telephone at 1-877-NCDF-GCF (1-877-623-3423), by fax at 225-334-4707 or by email at disaster@leo.gov.

3. Report repair scams to the state insurance fraud bureau and the local office of consumer affairs.

4. Report insurance fraud to the National Insurance Crime Bureau at 1-800-TEL-NICB (1-800-835-6422).

5. Report federal assistance fraud to the Federal Emergency Management Agency (FEMA) Fraud Hotline at 1-800-323-9603. For hurricane-related fraud, contact the Hurricane Relief Fraud Hotline at 1-866-720-5721.

Repair FraudWhen a disaster occurs, almost everyone needs to make property repairs. This means long lines at hardware stores and lumber yards, supply shortages and a backlog of cases that keeps in-surance companies and repair contractors from

responding quickly to a call. Then, one day, someone claiming to be a contractor comes to the victim’s door, ready to do the necessary work at a fraction of the expected cost. The work may be of poor quality, and the victim may end up paying much more than anticipated because of “unexpected” costs. To avoid being a victim:

• Inspect the damage. Have a reputable profession-al, such as an insurance company adjuster, per-form an extensive overview of the property before soliciting contractors.

Law Enforcement Guide: Identifying & Preventing

Disaster FraudFraud takes place when an individual or company deceives vic-tims in order to obtain money or information. Fraud is one of the most common types of white collar crime, and it takes many forms. The National White Collar Crime Center (NW3C) has de-veloped this resource guide to provide information to help iden-tify, avoid or recover from the many types of fraud that may oc-cur in the days after a disaster.

June 2013

Bureau of Justice AssistanceU.S. Department of Justice

This project was supported by Grant No. 2011-BE-BX-K002 awarded by the Bureau of Justice Assistance. The Bureau of Justice Assistance is a component of the Office of Justice Programs, which also includes the Bureau of Justice Statistics, the National Institute of Justice, the Office of Juvenile Justice and Delinquency Prevention, the Office for Victims of Crime, and the Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering, and Tracking. Points of view or opinions in this document are those of the author and do not necessarily represent the official position or policies of the U.S. Department of Justice. The National White Collar Crime Center (NW3C) is the copyright owner of this document. This information may not be used or reproduced in any form without express written permission of NW3C. For questions or additional information, please contact Kimberly Williams, Communications Manager, at 1-800-221-4424 ext. 3320 or kwilliams@nw3c.org. NW3C TM and IC3® are trademarks of NW3C, Inc. and may not be used without written permission. ©2013. NW3C, Inc. d/b/a the National White Collar Crime Center. All rights reserved.

• Use trustworthy contractors. Most states require con-tractors to obtain a license and maintain a consumer protection list. Also, check with the local Home Build-ers Association or state contractor licensing board. to see if any complaints exist against the potential contrac-tor. Verify that the contractor has the proper licenses and insurance. Be wary of contractors that show up uninvited, are using unmarked vehicles or claim to cut costs by using leftover materials from another job.

• Get multiple bids. While it might be tempting to take the first repair offered in the wake of a disaster, solicit quotes from other contractors to get the best value for the work needed. However, be cautious of especially low bids, as that may signal a scam. Also, do not pay for the right to accept a bid. Trustworthy contractors will not charge for an estimate.

• Get it in writing . . . before any work begins. Do not sign a contract containing blanks, as this allows a scam-mer to add additional information or inflate prices. Be sure to retain a copy of the signed contract.

• Do not make payment in full before work is complet-ed. Do not provide more than a 20 percent payment before work begins. Do not pay extra if a contractor claims that material costs have increased. Insist that the job be finished in accordance with the signed contract.

• When in doubt, pass. Deals that are too good to be true usually are. Do not sacrifice quality of work for a quick fix.

Insurance FraudAfter a disaster, victims contact their insurance companies who send out adjusters to evaluate prop-erty damage and help with the claims process. To ensure proper compensation for a loss, a public ad-juster can negotiate a payment from the insurance

company in exchange for a portion of the settlement. The Fed-eral Emergency Management Agency (FEMA) also provides as-sistance to victims who live in a federal disaster area. However, there are scammers who use this claims process to commit fraud. They may file inflated claims on behalf of their victims, refer a repair to a contractor who is also part of the scam, or accept a fee for work they fail to do. Even victims themselves may attempt to defraud the insurance company, FEMA or the National Flood Insurance Program with false or inflated claims. To avoid this type of fraud:

• Find a reputable insurance adjuster. The National As-sociation of Public Insurance Adjusters™ has a directory of adjusters at www.napia.com. Thirty-seven states and the District of Columbia require an adjuster to have a

valid license. Check with the state insurance depart-ment to see if the adjuster is licensed or has a history of complaints.

• Do not pay an adjuster to file a claim. Adjusters are paid with a portion of the settlement after it has been issued.

• Do not join in on the scam. Fraudulent adjusters may ask their victims to go along with an inflated claim, of-fering part of the settlement as a kickback. However, this makes the victim subject to prosecution.

• Report mistaken claims. Contact the insurance compa-ny for private insurance claims that need to be correct-ed. For federal disaster assistance corrections, contact FEMA at 1-800-621-FEMA (3362). Making false claims will result in heavy fines and possible prison sentences.

Charity ScamsDisasters prompt well-meaning people to donate time and money to organizations that promise to deliver needed goods to victims. This is also an opportunity for scammers to pose as representa-tives of legitimate charities or causes, hoping to get money or personal data from victims.

Avoid charity scams by following these steps: • Beware of unsolicited emails. An email that looks as

if it was sent by a trusted charity may actually be com-ing from scammers who copy the legitimate organiza-tion’s logo and trademarks to obtain money or sensitive information from victims. This is known as phishing. Do not click on any links or download documents in-cluded in the email, as they may contain viruses. Be suspicious of emails containing misspellings or poor grammar. To donate money online, visit an established charity’s website.

• Do research before donating. To evaluate a charity, go to Charity Navigator at http://www.charitynavigator.org.

• Know the scams. Check out www.lookstoogoodtobetrue.com for information on charity-related scams.

Resources• Internet Crime Complaint Center: www.ic3.gov• Federal Emergency Management Agency: www.fema.gov• National Center for Disaster Fraud: http://www.justice.gov/

criminal/oilspill/about/ncdf.html• Disaster Fraud Task Force: http://www.justice.gov/criminal/disasters/ • Federal Trade Commission: www.ftc.gov• Charity Navigator: www.charitynavigator.org• Scambusters: www.scambusters.com• National Insurance Crime Bureau: www.nicb.org• Coalition Against Insurance Fraud (disaster fraud page):

www.insurancefraud.org/disaster_fraud_a.htm

June 2013