As billions of dollars in government assistance flow into Los Angeles County in the aftermath of its devastating wildfires, attempts to pilfer those funds are all but inevitable. When disaster strikes, history shows fraud is sure to follow, as earnest efforts to expeditiously cut through red tape leave openings for bad actors. So far, roughly $750 million in federal funds already have been set aside, including $33 million paid to residents impacted by the wildfires and $550 million to the U.S. Army Corp of Engineers. The state has earmarked another $2.5 billion for recovery efforts, including funding for shelters for evacuees, hazardous waste removal and expedited building permits. County officials already are gearing up for a fight against those who would try to exploit the situation as early estimates of total damages climb toward $250 billion. “We’re about to have billions of dollars of federal money descend on Los Angeles County; there are people who look at that as the opportunity of a lifetime to rip it off,” said newly elected District Attorney Nathan Hochman before offering a warning at a press conference last week. “We will go after you if you want to, in anyway, rip off the money that is destined for true wildfire victims.” Task force formed Hochman’s office, along with Homeland Security, the FBI, the ATF, the U.S. Attorney’s Office, the Los Angeles City Attorney’s Office, the LAPD and the Sheriff’s Department have formed a Joint Regional Fire Crimes Task Force specifically to investigate and prosecute “criminal actors seeking to exploit the wildfire crisis,” according to Homeland Security. Those investigations will include “misuse of aid programs administered by government agencies,” including FEMA and the Small Business Administration, officials said. “Far too often, during tragic events like the Los Angeles-area wildfires, we have seen greedy individuals seek to line their pockets and divert critical funds from those most in need,” stated Eddy Wang, special agent in charge of Homeland Security Investigations Los Angeles. Headlines from around the country provide sobering examples of what Los Angeles should expect: “Los Angeles-area man pleads guilty to fraudulently seeking millions of dollars in COVID-related tax credits for non-existent business,” reads a press release from the U.S. Attorney’s Office. “Six indicted for claiming benefits for properties destroyed in Paradise Camp Fire,” states another. “PG&E Accuses Ex-Employees Of Taking Bribes To Funnel Business To Camp Fire Cleanup Contractor,” reports the Bay City News Foundation. “A disaster-recovery loan agent stole hurricane victims’ identities to enrich herself, feds allege,” writes CNN. ‘You’re going to have fraud’ Unfortunately, “wherever you have humans and you have money, you’re going to have fraud,” said Rebecca Shea, director of the U.S. Government Accountability Office’s forensic audits and investigative services team. It can’t be eliminated completely, but agencies can take steps to better prepare, detect and respond to it, she said. Disasters amplify that risk to “perfect storm” levels as there is significant pressure to get funds out quickly and so many people are in a vulnerable state and often missing documentation due to their circumstances, Shea said. Identity theft can lead to significant delays when legitimate victims and impacted businesses seek assistance. The GAO reported in July 2023 that the federal government has made “an estimated $2.4 trillion in improper payments” out of emergency assistance programs since 2003. But that doesn’t mean fraudulent activity won’t get detected. Whistleblowers, including contractors who missed out on bids, play key roles in exposing criminal activity, but so too does the Internal Revenue Service, which might flag, for example, a contracting administrator living a lifestyle well beyond their salary, Shea said. Closely tracking data points, such as the costs of bids across a period of time, also can trigger a deeper investigation, she said. Those detection methods have to constantly evolve, Shea said. “Once you close a loophole, someone finds another way to open an opportunity for fraud,” she said. Chris Currie, director of the Government Accountability Office’s Homeland Security and Justice Team, said those investigations often can lead back to the very people tasked with safeguarding the funds. “In every disaster, there are high-profile, publicly elected officials and civil servants that are indicted for fraud because of these things,” Currie said. “When they catch these things early on, they try to make an example of people, too.” Contracts tempt corruption The sheer volume of contracts during disaster response, clean-up and recovery tempts corruption, he said. “With all of these contracts going through and all of these dollars being funneled, public officials become highly susceptible to being enticed to steer contracts certain people’s way or to cut a few corners in the process to make sure someone gets a contract,” he said. Currie pointed to debris removal as a common service where fraud occurs. Contractors, sometimes paid by the truck or by weight, can cut corners to maximize their profits, including by dumping debris illegally to speed up return trips. There often is a “real disconnect” in the expectations for how long that process will take. It is complex and cumbersome, particularly due to toxic materials that can be left behind by burned electric vehicles and household items, Currie said. “One of the classic fraud schemes after disaster is trucks half filled,” he said. “It is very traumatic to have this debris in your community, there is a tremendous amount of pressure for speed that creates a lot of opportunity for potential fraud, or even just mismanagement and improper payment.” Diligent monitoring, either through spot checks or checkpoints, can help, Currie said. Using established partners, such as the Army Corps of Engineers, can add an additional layer of protection, he said. Last week, Los Angeles County Supervisor Kathryn Barger announced the Army Corps will handle the debris removal in the burn areas of the Palisades and Eaton fires. The county is encouraging residents to fill out right-of-entry forms authorizing the Corps to perform work on their properties. Some safeguards already in place Los Angeles County does have one advantage. A system already is in place to monitor contractors and investigate misuse, said Robert Campbell, head of the Los Angeles County auditor-controller’s Audit and Contract Monitoring Divisions, as well as the Office of County Investigations. These teams not only go after fraud, they help establish best practices to avoid it, he said. “This isn’t something that could have been stood-up for a disaster,” Campbell said. “It is a structure that had to have been in place before.” Currently, 55 employees are available, at the request of any county department, to monitor contracts, Campbell said. Another 20 investigators — capable of carrying out law enforcement investigations, including serving search warrants — work in the Office of County Investigations, he said. “We are ready not only to respond to requests from the departments that are engaged in this incident response, but also to proactively come forward with additional resources and services as we see this developing,” Campbell said. “Overall, while there isn’t a way to guarantee that all fraud will be prevented, we do have a strong process and infrastructure in place to detect it quickly and to respond to it aggressively so that we limit the losses in the overall scope of the fraud.” As part of its investigations, the department operates a toll free fraud hotline at 800-544-6861 and allows for anonymous reporting by phone, text and through its website: fraud.lacounty.gov. “Public tips are a vital resource to identify fraud against the County and our programs,” Campbell said. Though fraud can, and likely will, occur due to the inherent complexities of responding to a disaster, Currie said it is important to remember that these types of government assistance programs are not new and the federal agencies involved have longstanding measures in place to detect and counter fraud. And those systems are constantly improving, he said. “The programs for individuals, the programs to help state and local governments absorb these costs, they’ve been around and they’re used every day all over the country,” he said. Massive fraud in other tragedies During Hurricane Katrina, about 20% of the requests for individual assistance were fraudulent. Officials have estimated the response to Katrina resulted in $2 billion lost to fraud. However, the number of fraudulent individual assistance cases dropped to 5% or less during Hurricane Sandy, Currie said. There were still large scale instances of fraud there, however. The New York City Department of Transportation had to return $5.3 million to the federal government after improperly claiming 132 vehicles had been damaged by Sandy in 2012, though many were out of commission before the storm struck. More recently, the Camp Fire in 2018 decimated the northern California community of Paradise, killing 85, destroying more than 18,000 structures and racking up $16.5 billion in damages. In the aftermath, like other disasters around the country, the community became a target. Contractors promised fast turnarounds and then skipped town with insurance checks, leaving wildfire victims with little more than foundations. Debris removal left craters in neighborhoods as companies tried to hit higher pay-by-weight quotas. Utility employees allegedly took bribes to funnel work to specific vendors. Grifters collected assistance for destroyed homes they never lived in. “We had a shortage of resources, we had a shortage of contractors and people wanted to get back home,” said Steve Crowder, mayor of Paradise. “You’d get these scumbags here who’d say, we’ll have you home in six months, and people couldn’t wait to turn their insurance money over to them.” Crowder warned that anyone looking to rebuild after the wildfires in Los Angeles should verify contractors’ licenses and never pay more than 10% upfront as a deposit. “That’s something that needs to get out there right away,” he said. “You will have these people there.” Though Paradise had its share of scams and waste, Crowder spoke positively of the community’s experiences with FEMA and the California Office of Emergency Services. Debris removal following wildfires in Sonoma County in 2017 took two years to complete, he said. It only took nine months in Paradise, though the scale was much larger, he noted. FEMA adapts and evolves after each disaster, and Crowder believes the oft-maligned agency learned from Paradise, too. “Unfortunately,” he said, “they’re getting a lot of practice.”