Fraudsters stole $1bn of Hurricane Katrina relief

Guardian Unlimited | Special reports | Fraudsters stole $1bn of Hurricane Katrina relief cash, Congress told

· Agency's failings allowed 'assault on taxpayer'
· Money spent on jewellery, champagne and porn

Fema also paid rental assistance to people who were already enjoying luxurious hotel accommodation - footing an $8,000 hotel bill in Hawaii for someone who simultaneously received $2,358 in rental assistance.

Fema debit cards also turned out to be an easy mark for those bent on fraud. Among some of the charges the GAO found unnecessary to satisfy legitimate disaster needs were $3,700 on a diamond watch, earrings and ring, a one-week all inclusive holiday in the Dominican Republic, $200 of Dom Perignon champagne, fireworks, $1,000 for a Houston divorce lawyer, and a considerable amount for adult erotica.

Fema recovered some of the mis-spent funds. However, the agency remains unable to account for 381 debit cards worth about $760,000.

Backstory

Hurricane Katrina was the first major test of the new disaster response plan set up by the Bush administration, and Fema, the US government agency with primary responsibility for disaster recovery, failed miserably.

Congressional inquiries since have exposed a dysfunctional and divided bureaucracy that became overwhelmed by the enormous numbers of those who were trapped in their homes amid rising waters or stranded in squalid shelters. Former Fema director Michael Brown became a symbol of the divide between a slow-moving and incompetent bureaucracy and the tragedy unfolding on the ground.