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Correction to This Article
A Dec. 27 article on alleged fraud by employees of Spherion Corp. who handled financial assistance for Hurricane Katrina evacuees at a Red Cross call center in Bakersfield, Calif., misidentified the company that hired Spherion. The company was ACS Inc., not 2XCL Training LLC.
Fraud Alleged at Red Cross Call Centers
Contract Workers in Calif. Stole From Katrina Aid Program, Indictments Say

By Jacqueline L. Salmon
Washington Post Staff Writer
Tuesday, December 27, 2005

Nearly 50 people have been indicted in connection with a scheme that bilked hundreds of thousands of dollars from a Red Cross program to put cash into the hands of Hurricane Katrina victims, according to federal authorities.

Seventeen of the accused worked at the Red Cross claim center in Bakersfield, Calif., which handled calls from storm victims across the country and authorized cash payments to them. The others were the workers' relatives and friends, prosecutors said last week.

The scam came to light when Red Cross officials noticed that a suspiciously high number of people were picking up Red Cross money at Western Union outlets near the Bakersfield center, even though few evacuees were in the area.

The Red Cross called law enforcement authorities. Forty-nine people in the Bakersfield area have been indicted in the past three months for filing false claims with the center.

More indictments are expected soon, said Stanley A. Boone, an assistant U.S. attorney in Bakersfield.

The incident reveals a sometimes chaotic system that the Red Cross cobbled together after the devastating storm get cash to desperate evacuees. Many had fled their homes with only the clothing they wore and what they could carry.

Before winding up the program two weeks ago, the Red Cross gave out $1.3 billion to evacuees in more than 1.4 million households. It was the charity's largest cash-assistance program ever -- double the amount of cash it distributed after the Sept. 11, 2001, terrorist attacks, according to financial statements.

"We went in knowing that we had a great need, almost an incomprehensible need," said Michael Brackney, manager of the Red Cross's client services program.

But charity experts say that in this era, when a highly visible disaster can trigger an outpouring of hundreds of millions of dollars, relief groups are under enormous pressure to disburse the money as quickly as possible or risk the ire of donors.

In the wake of the Sept. 11 attacks, when the Red Cross was criticized for attempting to use some of the money to prepare for future disasters, donors have little tolerance for diverting funds to other causes, say those who study charitable giving. But that presents challenges to charities that usually are careful to parcel out aid based on need.

"Sometimes they have so much money, there is no obvious, easy way to give it out," said C. Eugene Steuerle, a senior fellow at the Urban Institute who conducted studies of the money donated to charities after Sept. 11.

In the days after Katrina tore through the Gulf Coast, Red Cross officials realized they faced a gargantuan task. Hundreds of thousands of evacuees fleeing the storm would need money quickly. Some left their homes with no identification, no cash and no access to their local banks.

Red Cross workers usually meet individually with victims of disaster -- whether a house fire or a hurricane -- to determine how much money will be needed to get through the first few days. But with more than 1 million evacuees headed to 47 states, Brackney said, "the scope became apparent, and we realized we had to enact nontraditional means for getting assistance to people." Otherwise, Red Cross officials calculated, it might have taken until March to get all the cash to those who needed it.

Red Cross officials decided to give aid to those who lived in Zip codes designated by the Federal Emergency Management Agency as the most severely damaged areas. They also set up call centers to field most of the claims -- the first time in its history it had done so.

Regardless of the damage suffered or individual needs, payments to evacuees were the same: $360 for a single-person household to a maximum of $1,565 for households with more than four people.

To run the call centers, the charity contracted with a North Carolina company, 2XCL, which in turn subcontracted with a Florida staffing company, Spherion Corp., to hire hundreds of temporary workers to handle calls to the Bakersfield center and smaller call centers in Falls Church and Niagara Falls, N.Y. Red Cross also arranged with Western Union to issue cash to evacuees after they had been approved for assistance through the call centers.

The call centers, however, soon became overwhelmed. Up to 16,000 calls a day flooded the Bakersfield center, where 450 Spherion employees and Red Cross volunteers were on duty.

A Red Cross volunteer from Bowie who worked in the Bakersfield call center said the facility's call agents had to use three or four awkward database systems to determine eligibility. It made it relatively easy to cheat by filing multiple claims, said the woman, who asked that her name not be used because she is an active volunteer.

Some evacuees remained on hold as long as eight hours while waiting for an available call center agent. Sometimes they fell asleep.

"We would have to get on the phone and yell: 'Hello! Hello! Hello!' " said Jen Elliott of Bowling Green, Ohio, a volunteer who worked in the Bakersfield call center in September. If they were unable to wake up callers, they would have to hang up, she said.

The work was stressful, workers said. Some frustrated evacuees who had spent days trying to get through cursed and shouted at the workers.

Some Spherion employees, according to criminal complaints filed in the cases, found ways to manipulate the system to their advantage.

Information provided by victims -- such as names, addresses and birthdates -- was supposed to be verified by call center agents before evacuees were issued a claim number that they could submit to a Western Union office to receive payment.

But word spread through the center, prosecutors said, that the system's security could be circumvented. Some Spherion call center workers started creating files for themselves and for others, obtaining claim numbers and picking up cash at Western Unions, prosecutors said.

In one fairly typical case, according to the indictments, three Spherion workers -- 23-year-old Robert Johnson, 19-year-old Aminah Randle and 20-year-old Candice Brown -- allegedly set up false accounts for one another and for several relatives and friends. All have been charged with wire fraud.

Johnson's sister, Nashima Johnson, was arrested after she picked up relief funds at a Western Union outlet in a check-cashing store in Bakersfield. The store manager recognized her as a regular who had lived in Bakersfield for several years and called the FBI.

Among those indicted, six people have pleaded guilty.

Red Cross officials emphasize that no Red Cross workers have been accused in the fraud and that the amount stolen was a tiny fraction of their cash program. They plan to seek restitution.

But they say they have learned from the experience. They are testing systems for the next hurricane season that offer more security but also speed up the process for victims.

"We knew we ran the risk of putting assistance in the hands of potentially unscrupulous individuals not affected by the hurricanes," Joe Becker, a Red Cross official, told a congressional Ways and Means subcommittee at a hearing this month on the charity response to Katrina. "We concluded that it was a reasonable business risk and mitigated the risks as possible."

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