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Why Are Natural Disasters Breeding Grounds For Corruption?

This story originally appeared on on March 3.

By Juliet Sorensen

Natural disasters are breeding grounds for fraud and corruption. The need for services, whether they be snowplows or rapid reconstruction, is high. Those services must be provided quickly: electricity, gas and water must function, schools and businesses must open and public transportation must run. Returning to life as we know it as fast as possible boosts not only the local economy, but morale.

But such urgent demand can lead to the disregard of quality controls. For example, a lengthy review process for bids and proposals to complete reconstruction may delay a disaster torn city’s recovery and open a door to rubber stamping bids in exchange for payoffs. After Hurricane Katrina devastated New Orleans in August 2005, Ray Nagin and his co-conspirators rapidly approved contracts purporting to rebuild the city — but in exchange for bribes and kickbacks, more than half a million dollars of which went directly to Nagin.

Extreme weather triggers an infusion of reconstruction cash from federal, state and local governments, which a corrupt official can embezzle or bestow on the highest briber. As local government's emergency funds deplete quickly, the state and the Federal Emergency Management Agency (FEMA) may provide supplementary funds for search and rescue, electrical power, food, water, shelter and other basic human needs. In the event of a disaster, FEMA may also provide up to 75 percent of the costs of rebuilding a community's damaged infrastructure.

Past examples show that those funds are at high risk of being misappropriated. While weather alone does not create corruption and fraud, studies have shown it creates conditions in which those crimes can thrive. A 2008 research study found that each additional $100 per capita in FEMA relief was correlated with a 102 percent increase in corruption in a state. A similar study of international data shows parallel results: India, Indonesia and the Philippines, for example, suffer from both extreme weather and high levels of corruption. A new report found that the Philippine economy lost at least $132.9 billion in illicit outflows over the last forty years, money that could have more than covered the $700 million in damage due to last year’s Typhoon Haiyan Disaster relief doesn’t have to equal graft.

And these numbers only stand to increase: The insurance company Munich Re calculated that the number of loss events per year, including storms, quakes, volcanoes and tsunamis, has more than doubled since 1980.

The Department of Justice has recognized the vulnerabilities that come with destruction, and has responded with the establishment of the Disaster Fraud Task Force, created in 2005 to investigate fraud related to Hurricane Katrina and since has expanded to address all types of disaster fraud. The government estimates FEMA was defrauded to the tune of between $600 million and $1.4 billion in its support for communities damaged by 2005’s Katrina and 2006’s Rita.

In an era of climate change, the relationship between corruption and natural disasters must be acknowledged and addressed at all levels of government. State attorneys general must follow the lead of the Department of Justice by not only preparing for disaster management and relief, but also by enacting policies to prevent fraud and corruption in the event of extreme weather. These should include fast-tracking procedures to evaluate bids for emergency services that meet the same standards of integrity and merit used when the sun is shining and temperatures are mild, as well as training local prosecutors and investigators in examining disaster fraud. Disaster fraud is currently a federal crime, but states could also do more to crack down on local offenders by enacting similar laws.

Increasing instances of extreme weather may be unavoidable, but a corresponding epidemic of fraud and waste is not. State and local executives must include in their disaster preparedness laws and policies to address the increased opportunity for fraud and corruption. Public safety in the modern age demands no less.

- Juliet Sorensen is a clinical assistant professor of law at Northwestern University.