Using information exposed last month in an exclusive WWL-TV investigation, U.S. Sen. John Kennedy, R-La., grilled the head of FEMA’s National Flood Insurance Program about the role of two Louisiana firms tied to alleged fraud in handling Hurricane Sandy claims.
Kennedy questioned the NFIP director, Roy Wright, in a Senate Banking Committee hearing in Washington as Congress considers whether to renew the federally backed flood insurance program, which is almost $25 billion in debt after massive payouts from Hurricanes Katrina and Sandy.
WWL-TV aired a story in its “Underwater & Underpaid” series last month that focused on Metairie-based engineering firm U.S. Forensic and Metairie attorney Gerald Nielsen.
A federal judge in New York handling disputed flood claims from Hurricane Sandy ruled that U.S. Forensic “secretly rewrote” a report that originally said Hurricane Sandy caused major structural damage on a home to make it say the storm did not cause the damage. A magistrate judge found U.S. Forensic’s practice of changing reports appeared to be “widespread.”
WWL-TV showed that U.S. Forensic is still handling claims from the massive August flooding across south Louisiana, which is the largest inland flooding event in the 50 years of the NFIP. Kennedy asked Wright why U.S. Forensic is still allowed to collect payments from the federal program after its practices in New York and New Jersey were questioned.
“I cannot prohibit the use of a company unless we have gone through a complete debarment process,” Wright said. “What I can do and have done is fundamentally change the quality control of all the work that is done by engineers so that as the various companies are involved I can be assured of the outcomes.”
Kennedy pressed Wright further: “The federal judge in (New York) accused this particular firm – these are the judge’s words, not mine, of “reprehensible gamesmanship.” That’s not enough to get you off the list?”
“Based on that, we worked and are continuing to supply information to the state’s attorney general in New York and New Jersey who have the law enforcement capabilities to take action against them,” Wright said.
In an interview with WWL-TV, U.S. Forensic managing partner Gary Bell stood by the process of changing engineers’ reports as a part of a normal vetting process called “peer review.”
But the magistrate judge in New York, Gary Brown, questioned the validity of the “peer review.” Bell has not responded to WWL-TV to comment on the Senate hearing.
Judge Brown also sanctioned Nielsen, the attorney who represented the flood insurance company in that case and once represented about 90 percent of the flood insurers in court challenges across the country. The judge said Nielsen repeatedly failed to turn over records to the court, unnecessarily driving up the cost of litigation, which is paid with federal funds.
Nielsen’s clients, Wright National Flood Insurance, had to pay a $1.1 million fine. But Nielsen told WWL-TV that he did nothing wrong in that case.
Nielsen said Brown unfairly tarnished his reputation from a 30-year career protecting the federal flood insurance program from unwarranted claims. He stopped handling cases for the flood insurers during a subsequent federal review of thousands of Hurricane Sandy claims, but for the last two years, FEMA has invited him back to their annual National Flood Conference and Nielsen’s firm is representing insurance companies in litigation.
That raised more questions from Kennedy at Tuesday’s hearing. Again, Wright said Nielsen was not debarred and therefore, the NFIP could not prevent flood insurers from hiring him.
“And you don’t have any influence whatsoever?” Kennedy asked. “You can’t pick up the phone and call these companies and go, ‘Hey, we’ve got some problems here?’”
“Sir, I think the companies know my opinion of these various actors,” Wright responded. “I’ve spoken very plainly about that. But, again sir, folks have a right to due process and I don’t have the ability singlehandedly to remove any one player.”
Nielsen gave this statement in response to Kennedy’s questions:
“I have the greatest respect for Senator Kennedy. I am one of Senator Kennedy’s constituents. Unfortunately, someone submitted false information to Senator Kennedy, and he then based his questions upon that false information. Neither Senator Kennedy, nor anyone from his staff has reached out to me to learn the truth. I publicly invite Senator Kennedy or his staff to contact me. There exists a wealth of information about how the NFIP is being operated, about which Senator Kennedy is unaware. I am available to the Senator or his staff at any time.”
Nielsen didn't say what was false about the information Kennedy cited.
Sen. Robert Menendez, D-N.J., also questioned Wright about Nielsen, noting that Nielsen was paid with federal money to fight storm victims’ claims in court and accusing Nielsen of “bullying, scaring people out of court, hiding documents.”
FEMA told WWL-TV it spent $60 million paying for insurance companies' litigation expenses for Hurricane Sandy. Given that its money and reputation is on the line, Menendez was incredulous that FEMA had no authority to keep insurance companies from hiring Nielsen’s firm.
“We don’t” have that authority, Wright said. “Instead what we have is two things: … FEMA withdrew all of the cases so we could personally manage those with our staff, and secondly, we changed the way the litigation oversight takes place going forward.”
Menendez suggested Congress could give FEMA the power to approve or disapprove of insurance companies’ attorneys to control the litigation costs for the federal program. Wright said he would welcome that.