TRACKING SUPERSTORM SANDY: A MORE RESILIENT NEW YORK THROUGH TRANSPARENCY AND ACCOUNTABILITY By Scott M.

Stringer On October 29, 2012, Hurricane Sandy dealt a devastating blow to New York City, leaving behind a tally of destruction unlike any storm we have ever seen – 43 residents killed, millions forced to suffer without heat or electricity, a submerged subway system, and billions in additional damages. Nine months later, the winds have subsided but a new challenge now confronts our city – the process of rebuilding, and making sure that every tax dollar devoted to strengthening our infrastructure and returning families to their homes is spent wisely and efficiently. New York City is expected to receive at least $15 billion in Sandy recovery funds in the coming years from the federal government – the first $1.8 billion was just approved for release in May 2013 – while the Metropolitan Transportation Authority (MTA) will receive an additional $5 billion. This money will have a profound effect, not only on the lives of homeowners and business people whose lives were turned upside down by Sandy, but also on how the City prepares itself for the storms of the coming century. However, as with any great disaster that involves a large influx of government dollars, the potential for waste and fraud is high. As Comptroller, Scott M. Stringer will establish a dedicated unit within the Audit Bureau to track the flow of Sandy dollars in New York City, to ensure that businesses and families hurt by the hurricane get the aid they deserve, and to monitor the scores of planned public works projects designed to harden the city’s infrastructure and protect our shoreline communities. This unit will work in conjunction with the Comptroller’s Budget Bureau and its Bureau of Contract Administration to ensure comprehensive analysis of all projects and expenditures.

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An essential component of the effort will be a dedicated online resource, The Sandy Tracker, that will allow New Yorkers to follow how the City is spending its storm-related dollars, much as City Hall developed the NYC Stimulus Tracker to track federal dollars after the passage of the American Recovery and Reinvestment Act of 2009.1 To date, the city’s Stimulus Tracker has provided details on some $9 billion in spending by city agencies. Stringer will also establish a dedicated, 24-hour hotline for taxpayers to report instances of Sandy-related fraud or abuse, in collaboration with the city’s Department of Investigation. History’s Lessons: 9/11, Katrina and Beyond The Comptroller of the City of New York is the City’s chief financial watchdog, empowered to audit every city agency, register every contract and sign every check. As such, the office is uniquely suited to track Sandy-related spending and to put in place proper protocols to ensure that every dollar is spent efficiently and transparently. Unfortunately, we don’t have to look far for examples of waste, fraud, and abuse in the wake of major disasters, especially once federal dollars begin to flow. In the wake of the 9/11 attacks, the City put in place a monitoring system to oversee the recovery, cleanup, and reconstruction of Ground Zero – an effort that many believe saved New York City tens of millions of dollars. 2 The lessons learned from that experience remain relevant today to understand the scope and scale of an effective oversight mechanism, especially in relation to large construction projects. To oversee work at Ground Zero, the city initially divided the 16-acre World Trade Center site into four quadrants. A construction manager was retained for each of the four quadrants and an Integrity Monitor appointed by DOI to oversee the work of each of the four construction management companies. The integrity monitors had the authority to review and audit all of the books and records of the contractors working at the site and to maintain a physical presence at the site.

http://www.nyc.gov/html/ops/nycstim/html/home/home.shtml. http://www.gpo.gov/fdsys/pkg/CPRT-109HPRT20452/html/CPRT-109HPRT20452.htm; Hearn told Congress “In total, we have estimated that based on their extensive work and forensic analysis, the integrity monitors recommended in excess of $47 million in cost savings and that their very presence on the Ground Zero site and their frequent audits produced additional significant savings that cannot be quantified.”
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In addition, DOI required the monitors to establish a hotline number where anyone could call with concerns or information and reported directly to DOI on all contractor activities. As a result, DOI Commissioner Rose Gill Hearn stated, “the integrity monitors scrutinized the contractors' activities in real time and functioned as the city's eyes and ears.”3 Monitoring Sandy expenditures is, in many ways, a more complicated task. While the World Trade Center site was and remains enormously complex, it is a single, 16-acre site where much of the work was in the hands of a handful of large contractors. The destruction wrought by Sandy was much more sprawling. Sandy submerged over 16% of NYC’s landmass, flooding over 75,000 buildings across on all five boroughs. As a result, it will require a different approach— marshalling the kind of broad, multiple-agency oversight that only the Comptroller can offer. Still, the lessons of Ground Zero remain instructive. Indeed, despite rigorous protocols, fraudsters and con-artists were still able to exploit the situation in the years after the attacks. Some of the scams uncovered included: • • • • A man collected nearly $300,000 in Federal loans after claiming his two telecommunications companies, which moved out of the World Trade Center in July 2001, sustained physical damage in the attacks Two employees of the New York City Medical Examiner's Office were accused of embezzling Federal funds intended to help identify victims’ remains FEMA paid for free air conditioners and other clean-air devices for tens of thousands of New Yorkers who lived nowhere near Ground Zero or the toxic plume from the World Trade Center4 Millions of dollars in small business grants went to at least 28 Fortune 500 companies and several hundred other multibillion-dollar firms Furthermore, a 2006 report by the U.S. Small Business Administration (SBA) (which was responsible for providing loans to businesses affected by the attacks) found that in a whopping 85 percent of cases, auditors were unable to determine whether the borrowers were adversely affected by the 9/11attacks and their aftermath, based on lenders’ loan files and discussion with borrowers.5 While this does not mean that 85 percent of loans were, in fact, fraudulent, the failure to prepare adequate justifications and obtain supporting documentation to determine eligibility left the door open to criminals who would seek to profit off of the tragedy of 9/11.
Id. http://www.nydailynews.com/archives/news/story-forced-congress-act-article-1.605275. 5 http://www.sba.gov/content/eric-m-thorson-inspector-general-us-small-businessadministration-before-committee-homeland-security-subcommitee-managem.
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Ultimately, the Subcommittee on Management, Integration, and Oversight charged with reporting to Congress on 9/11 recovery funds outlined a series of systemic problems, including: (1) (2) (3) (4) (5) Lack of information sharing and cooperation Inadequate verification prior to disbursing funds Duplicative payments Relaxed or ineffective controls, and Weak oversight of procurement

New York is far from alone in experiencing these kinds of challenges. In addition to 9/11, the FBI’s White Collar Crime Center reported many notorious scams associated with the Deepwater Horizon Oil Spill, and Hurricanes Katrina and Rita.6 The GAO estimated that 16 percent of individual assistance payments related to Hurricanes Katrina and Rita were fraudulent—a total of roughly $1 billion.7 Tens of thousands of payments were distributed through FEMA’s expedited assistance program based on phony registration data, including, an individual who received numerous rental assistance checks while residing in a hotel room already paid for by FEMA, and inmates receiving assistance checks while being incarcerated. All told, through September 30, 2011, a total of 1,439 people have been federally charged with fraud related to Katrina and Rita across 47 federal districts in all regions of the United States. In addition, state and local prosecutors’ offices have continued to bring criminal cases involving disaster-related fraud.8 Current State of Affairs At the state level, Gov. Cuomo has already buttressed oversight of Sandy dollars by engaging PricewaterhouseCoopers (PWC) to perform comprehensive integrity monitoring on all programs. PWC staff has been
http://www.nw3c.org/docs/whitepapers/disaster_fraud_(1009)8E9CBCE7F9B9C780C1A8C392.pdf?sfvrsn=3. 7 http://www.gao.gov/new.items/d06844t.pdf; The U.S. became so concerned about Katrina fraud that it created the U.S. Department of Justice’s Hurricane Katrina Fraud Task Force in 2005 (today, that group lives on as the Disaster Fraud Task Force—see: http://blogs.justice.gov/main/files/2012/08/ReportDFTF2011FinalRev.pdf). In 2008, in the wake Katrina/Rita, Congress passed and President Bush signed the Emergency and Disaster Assistance Fraud Penalty Enhancement Act into law, increasing sentencing and penalties for any fraudulent activity related to national disasters. 8 http://blogs.justice.gov/main/files/2012/08/ReportDFTF2011FinalRev.pdf.
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involved in every decision regarding procedures and protocols to ensure proper documentation and fraud-detection systems are in place. Finally, PWC will be conducting ongoing spot audits in each of the major programs, with additional oversight from HUD’s internal integrity monitoring staff will be provided to ensure best practices. At the City level, Mayor Bloomberg was joined by Secretary of Housing and Urban Development Shaun Donovan and Senator Schumer to announce the first round of federal aid for New York City, totaling nearly $1.8 billion. 9 The basic breakdown is as follows: • $720 million to rebuild and renovate storm-damaged housing ($350 million of this sum would go out as grants to owners of one- and twofamily homes, $250 million to repair storm-damaged multi-family dwellings, and $120 million for repairs to the public housing) $185 million to assist businesses and help businesses become more storm-resilient ($80 million worth of business recovery loans and grants, $100 million in storm-resiliency grants, and a $5 million grant competition to encourage development of technologies that could help businesses when big storms hit again) A $100 million contest to come up with the best ideas for reviving the commercial areas most devastated by Hurricane Sandy A $40 million competition to help utility companies find new ways to deal with major storms in the future

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Conclusion—Building a Resilient City Through Transparency and Accountability Hurricane Sandy was a once-in-a-generation storm that resulted in untold suffering throughout the five boroughs—lives lost, homes destroyed, businesses shuttered, infrastructure rendered inoperable for days, weeks, and even months. As is often the case, the scope of the tragedy is equaled only by the opportunity it presents to rebuild our city to be better prepared for the next great storm—to truly serve as a model for urban development in a world set to be challenged like never before by the effects of climate change. Putting proper fiscal controls in place as this massive rebuilding effort begins will protect taxpayers and guard against waste and abuse.

http://www.nyc.gov/portal/site/nycgov/menuitem.c0935b9a57bb4ef3daf2f1c701c789a0/ind ex.jsp?pageID=mayor_press_release&catID=1194&doc_name=http%3A%2F %2Fwww.nyc.gov%2Fhtml%2Fom%2Fhtml%2F2013a%2Fpr15913.html&cc=unused1978&rc=1194&ndi=1.
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