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NICK CAMERADA, Homeowner: We looked around and tried to find the perfect spot between Brooklyn, where I grew up, and she grew up from Jersey, so Staten Island was the median. So we said “This is the place we want to live.”
DIANE CAMERADA, Homeowner: He loves fishing. It’s right off the water. And it just fit into our life. There was a lot of joy and happiness that this ocean brought to us.
NICK CAMERADA: The ocean can be joyful, and the ocean could also swallow you up at any given time. You know, it’s unpredictable.
NEWSCASTER: Clear and present danger, Sandy swirls along the East Coast.
OFFICIAL: The time for evacuation is over.
OFFICIAL: Go on, get back behind the building!
NICK CAMERADA: Fishing Staten Island for 20 years, you pretty much know what the tides are. The tide was the highest tide I’d ever seen on Staten Island. I ran up the whole entire block and I said, “This is the storm. We have to leave, or there’s a good chance you’re going to die.”
NEWSCASTER: Seven subway tunnels under the East River are flooded. The entire system is shut down.
NEWSCASTER: There was a explosion at a transformer.
NEWSCASTER: We are essentially in a blackout.
NEWSCASTER: The island of Manhattan all but shut off.
DIANE CAMERADA: I just couldn’t understand when I saw water coming out from my son’s bedroom underneath the door, and I’m, like, “What the heck is that?”
NICK CAMERADA: We went to the window, and the car was being washed down the block already. There’s no escape now. Now the thing is we’re stuck in this house.
DIANE CAMERADA: We’re all upstairs and we’re watching the water level rise. As it’s coming closer to the top step, I’m wondering, “Where are we all going to go?”
NEWSCASTER: As the sun rises on the devastation, Staten Island badly affected by flooding.
NEWSCASTER: The real tragedy from Sandy is the number of people who have died. And that number grows, it seems, by the hour.
JAMES ODDO, Pres., Staten Island Borough: The morning after the storm, I traveled down Father Capodanno Boulevard, which is the main thoroughfare right on the shoreline. I saw boats and cars up on people’s property. I saw holes in homes. And when it’s your home community, you are instantly numb. I was beginning to understand the ferocity of Mother Nature, but really had no idea just how difficult recovery would be.
NEWSCASTER: They were hit as hard as anyone. President Obama will see for himself the damage inflicted on the folks and homes of Staten Island.
JAMES ODDO: So to have the president come was a big moment for us.
Pres. BARACK OBAMA: Well, we are going to do everything we can to help, all right?
JAMES ODDO: I think a lot of Staten Islanders, whether they like President Obama or not, thought, “All right, we’ll get the help that we need.”
Pres. BARACK OBAMA: Good to see you guys. You doing OK?
NICK CAMERADA: And I never expected the president to just walk into the crowd and put his arms around my wife and I.
DIANE CAMERADA: I was, like, Wow!
Pres. BARACK OBAMA: So some of this is going to be tough. But here’s—my commitment to you is I’m going to stay on it.
NICK CAMERADA: He promised that he would cut all the red tape.
DIANE CAMERADA: He was going to make it right.
NICK CAMERADA: He was going to make it right.
DIANE CAMERADA: Not to worry.
Don’t forget about us.
Pres. BARACK OBAMA: That’s my point. That’s why I came here.
SANDY VICTIM: God bless you!
Pres. BARACK OBAMA: It’s always good when a politician comes after the election. [laughter]
SANDY VICTIMS: God bless you. God bless you. God bless you.
NEWSCASTER: Economic damage from Hurricane Sandy could go—
NEWSCASTER: Superstorm Sandy could cost $20 billion—
STATE OFFICIAL: Our requests are about $78 billion.
Pres. BARACK OBAMA: My instructions to the federal agency has been, “I want you to cut through red tape, bureaucracy, make sure that we are getting the resources where they’re needed as quickly as possible.”
Three years later
ORGANIZER: All the Sandy survivors, could everyone get over here? We’re going to be shoulder to shoulder. Are we standing together until we’re all home?
ORGANIZER: Are we standing shoulder to shoulder until we’re all home?
ORGANIZER: All right.
LAURA SULLIVAN, Correspondent: [voice-over] As a reporter for NPR, I’ve covered quite a few disasters and the slow process of recovery. From Katrina to Haiti, I’ve investigated problems with disaster aid and looked closely at efforts to rebuild.
For the past year, I’ve been hearing stories about Superstorm Sandy victims. A group of them gathered last fall, here at the state capitol in Trenton.
1st SPEAKER: I’d like to bring up one of the families that really can use help. [applause]
1st HOMEOWNER: Morning. My name is Nancy Wertz. Me and my daughter, Samantha, are still three years later without a home, facing foreclosure, and we still need help. Thank you.
LAURA SULLIVAN: I was surprised to learn just how many homeowners were still struggling.
DOUG QUINN, Homeowner: Because it’s important that the people across the street understand that thousands of us are still not home yet.
2nd SPEAKER: We have billions of dollars from the federal government, and those billions still haven’t reached the people who need help.
2nd HOMEOWNER: This is where our house was.
LAURA SULLIVAN: As I talked to Sandy survivors, they told me about problems with insurance.
2nd HOMEOWNER: So the insurance company said, “Oh, no, no. That was preexisting. Everything that’s wrong there, it was there before the storm.”
LAURA SULLIVAN: And nightmares of government bureaucracy.
3rd HOMEOWNER: If I sent them an email, I’d probably get a response within, you know, like, about month later or two months later.
LAURA SULLIVAN: And there was one story i heard over and over from so many homeowners, like Doug Quinn.
DOUG QUINN: You know, I was optimistic. It’s going to be OK. Everything’s going to be OK. I’ve been in worse spots than this. I’m sure I’ll work it out.
LAURA SULLIVAN: [on camera] Is that what happened?
DOUG QUINN: It’s three years, and I’m still not anywhere close. I should be at home in my house and a part of my community, and instead, I’m here doing this.
LAURA SULLIVAN: [voice-over] As a country, we spend billions of dollars every year to help people like Doug Quinn, money that’s supposed to get them back on their feet and protect them from the next storm.
Over the past year, we’ve been investigating where those billions are actually going, and why, more than three years after Sandy, storm survivors are still not home.
That question took me to a dirt lot in Toms River, New Jersey, where I met up again with Doug Quinn.
[on camera] Wow! Hey, Doug. How are you?
DOUG QUINN: Hey. How are you?
[voice-over] Quinn moved to this waterfront neighborhood in 2011.
DOUG QUINN: Nice to see you again.
LAURA SULLIVAN: [voice-over] He’d always dreamed of living on the water.
DOUG QUINN: Yeah, this is it. This is what’s left of it, at least. My house was over this way. My front door would have been right over here. It was nothing fancy. It was a comfortable, cozy, middle class home. Soon as I came here, I just was—it definitely spoke to my heart that this was home.
LAURA SULLIVAN: What remained from that home was still on his lot.
[on camera] So this is the stuff that stayed dry?
DOUG QUINN: Yeah.
LAURA SULLIVAN: And it all fits into a box, huh? This is everything. This is all you’ve got.
DOUG QUINN: You get weird with stuff after the storm because everything within my house was destroyed. So the process of just pushing all of my possessions out of the front door into a big pile on the lawn was really difficult.
LAURA SULLIVAN: [voice-over] He had no idea that the really difficult part was still ahead.
DOUG QUINN: I just assumed there’s going to be a small period where life will be a little topsy-turvy, and then we’ll work our way back to normal. I did buy flood insurance as a contingency, and that’s what it’s for.
LAURA SULLIVAN: He’s right. His situation is what flood insurance was designed for. But most flood insurance is different from other homeowners’ insurance. It’s run by a government program created after a series of massive floods in the 1950s and ‘60s.
NEWSREEL: Along 400 miles of the Kansas and Missouri Rivers, the worst floods in U.S. history inundate thousands of square miles of land.
ROBERT HARTWIG, Insurance Industry Rep.: The U.S. was growing rapidly at that time, and increasingly, homes were being built in vulnerable areas. So time after time, the federal government was being called upon to provide disaster aid, and people had very few options even to purchase insurance at that point in time.
LAURA SULLIVAN: The insurance industry had said floods were too risky to cover, so Congress set up the National Flood Insurance Program in 1968. The program paid private insurance companies a fee to sell policies and settle claims, especially in flood-prone areas. The premiums from those policies would be used to cover all losses, unless the disaster got too costly. Then taxpayers would make up the difference.
ROBERT HUNTER, Fmr. Head, Natl. Flood Ins. Program: The insurance companies don’t have any risk in the program. The risk is all the taxpayers’.
LAURA SULLIVAN: Bob Hunter ran the flood program in the 1970s, and he says he had problems with the insurance companies from the beginning.
ROBERT HUNTER: We developed information that showed that they were charging us too much and the taxpayers were paying them too much money. At the same time, they were also refusing to pay what we thought were some legitimate claims. And ultimately, we kicked them out of the program.
LAURA SULLIVAN: [on camera] How’d they take that?
ROBERT HUNTER: They didn’t like it. [laughs] They went to Congress and tried to fight it, but Congress stood with us and they left.
LAURA SULLIVAN: [voice-over] But they weren’t out of the program for long. The 1980s brought a new president and renewed faith in the private sector.
NATIONAL FLOOD INSURANCE PROGRAM COMMERCIAL: A flood is coming. You try to keep it from destroying everything—
LAURA SULLIVAN: The insurance industry was brought back into the flood program to sell and service policies and expand its reach.
NATIONAL FLOOD INSURANCE PROGRAM COMMERCIAL: Ask your insurance agent about National Flood Insurance now.
LAURA SULLIVAN: By the early 2000s, FEMA was overseeing the program, and 4.5 million homeowners had government-backed flood insurance.
BOB HARTWIG, Pres., Insurance Info. Institute: Now, that number goes up and down, depending on the frequency of floods that exist. Nothing sells flood insurance like a flood.
LAURA SULLIVAN: And the floods kept coming.
NEWSCASTER: Incredible pictures show the ferocity of Hurricane Wilma—
LAURA SULLIVAN: In 2005, a series of devastating hurricanes put the national flood program deeply in debt.
NEWSCASTER: We see neighborhoods that have been flooded. We see the front of churches just ripped off!
LAURA SULLIVAN: None more than Katrina.
NEWSCASTER: The city absolutely devastated by Katrina—
BOB HARTWIG: For all intents and purposes, it immediately bankrupted the National Flood Insurance Program, which had to resort on borrowing from the U.S. Treasury.
LAURA SULLIVAN: By the time Sandy came around, the flood program was nearly $18 billion in debt, and that debt was going to have a big impact on thousands of homeowners like Doug Quinn.
[on camera] So this is it.
DOUG QUINN: This is it. This is the rental that I’ve been in since the month after Sandy. I pay for this. Plus, in my Sandy-damaged property, I pay for the mortgage. And particularly insulting, I pay the flood insurance on a house that is a dirt lot.
LAURA SULLIVAN: You have to pay flood insurance on a house that doesn’t exist?
DOUG QUINN: Yeah.
LAURA SULLIVAN: How are you affording this?
DOUG QUINN: I’m not. I’m going broke.
LAURA SULLIVAN: [voice-over] But he had an even bigger problem.
[on camera] So how much insurance did you have on this house?
DOUG QUINN: I had a $250,000 flood insurance policy. I bought the maximum amount that I was legally allowed to buy.
LAURA SULLIVAN: What did you get?
DOUG QUINN: $90,000.
LAURA SULLIVAN: Can you build your home again for $90,000?
DOUG QUINN: Not even close.
LAURA SULLIVAN: [voice-over] He was convinced he’d been underpaid. He hired his own experts, who said it would cost $252,000 to rebuild his home. So he filed an appeal with FEMA. And then he waited—for nearly five months.
DOUG QUINN: So finally, I get this letter from FEMA. “FEMA concurs with Selective’s final decision, and no further administrative review can be provided through this appeal process.” They sided with the insurance company.
LAURA SULLIVAN: [on camera] What did you do?
DOUG QUINN: I hired an attorney. There was nothing to do. Like I say, I’m 51 years old. I’ve never sued anyone in my life, and my back was against the wall because I knew something was wrong here.
LAURA SULLIVAN: [voice-over] To understand Quinn’s fight with the insurance company, I had to journey deep into the complex world of flood coverage. The search took me to New Orleans and a high-stakes legal battle.
[on camera] Hi. Are you John?
JOHN HOUGHTALING, Sandy Plaintiff’s Attorney: Hello.
LAURA SULLIVAN: Laura Sullivan. Nice to meet you.
JOHN HOUGHTALING: Very nice to meet you as, well.
LAURA SULLIVAN: [voice-over] John Houghtaling is a bit of a New Orleans legend, a plaintiff’s attorney with a taste for French antiques.
JOHN HOUGHTALING: So it’s restored, just like at the time.
LAURA SULLIVAN: He made millions for his clients, and for himself, taking on the insurance companies after Katrina.
JOHN HOUGHTALING: Insurance policies, even for a lawyer that’s been doing this for a long time—they’re very complicated. I mean, they’re thick. If you’ve ever tried to read an insurance policy, it’s very difficult to read. It’s not written in plan language. There’s lots of loopholes in it, lots of exclusions.
So everybody here is working on Sandy. And these are the clients we represent.
LAURA SULLIVAN: After Sandy, Houghtaling focused his law firm’s attention on problems developing with flood claims in New York and New Jersey.
JOHN HOUGHTALING: I looked at some of the cases, and I had never seen anything worse in my entire career.
LAURA SULLIVAN: He eventually signed on to represent about 600 Sandy victims in lawsuits against 20 insurance companies. And he says the companies used a variety of ways to systematically underpay homeowners.
JOHN HOUGHTALING: If you look at this, all of these neighborhoods were all underpaid uniformly. They used the same process to underpay everybody.
LAURA SULLIVAN: As the lawyers dug into the Sandy cases, they made a shocking discovery.
NEWSCASTER: The FEMA-run National Flood Insurance Program appears riddled with widespread cheating and—
NEWSCASTER: Thousands say they have become victims again.
LAURA SULLIVAN: Evidence that several engineering firms the insurance companies were using may have committed fraud. A big-time Texas attorney, Steve Mostyn, had joined Houghtaling in the fight.
STEVE MOSTYN, Sandy Plaintiffs’ Attorney: These are notebooks that were used in some of the hearings that we had. And this one here—
LAURA SULLIVAN: The lawyers found engineers who said their managers changed their reports without them knowing about it.
STEVE MOSTYN: This is the original first report.
LAURA SULLIVAN: [on camera] This is the original report.
STEVE MOSTYN: This is what the engineer tells him out at the house. “The physical evidence observed at the property indicated that the subject building was structurally damaged by hydrodynamic forces associated with the flood.”
And then we go over here and it says, “The physical evidence observed at the property indicated that the subject building was not structurally damaged by hydrodynamic forces.”
LAURA SULLIVAN: Not flood.
STEVE MOSTYN: Not.
LAURA SULLIVAN: Same report.
STEVE MOSTYN: Same report, same engineer, supposedly.
I’m talking about a process where a person who never went to the house, never saw the house, never discussed with the original engineer changed it.
LAURA SULLIVAN: [voice-over] The engineering companies accused of fraud wouldn’t talk to us, and neither would insurance companies involved in the lawsuit.
STEVE MOSTYN: This here, it says—
LAURA SULLIVAN: But both argued in court that the reports had been changed through a standard peer review process.
BOB HARTWIG, Pres., Insurance Info. Institute: I can’t comment on any individual engineering report or whether or not there have been changes or what the reason for them, for those changes, were. But what I will say is that in a peer review process, can two engineers potentially disagree as to the cause and to the amount of damage that occurred? That can happen.
LAURA SULLIVAN: But as the lawyers dug deeper, they uncovered another a suspicious pattern.
STEVE MOSTYN: This is the conclusion, but the observations, right, is as if—
LAURA SULLIVAN: [on camera] Observations are what they see at the house?
STEVE MOSTYN: Are identical, OK, in report after report after report. And every one of them says, “long-term differential movement,” “not structurally damaged,” “long-term differential movement,” “not structurally damaged.”
LAURA SULLIVAN: [voice-over] The lawsuits focused attention on what would become the most controversial exclusion in flood insurance.
STEVE MOSTYN: “Long-term differential movement,” “not structurally damaged.”
DOUG QUINN: —“of long-term differential movement of”—
LAURA SULLIVAN: It was the same exclusion Quinn’s insurance used to deny coverage for his foundation.
DOUG QUINN: —“foundation that was caused by long-term differential movement of”—
LAURA SULLIVAN: It’s known a earth movement, and it’s considered a preexisting condition.
DOUG QUINN: They said that it was long-term earth movement, it was damaged, those big cracks in my foundation—that was all there before the storm...
LAURA SULLIVAN: [on camera] And they said the earth had moved, long-term earth movement.
DOUG QUINN: Long-term earth movement shifting, which mysteriously is not covered by flood insurance.
LAURA SULLIVAN: Is it possible that the earth movement exclusion might not be in the best interests of homeowners, but it is, in fact, in their policies and it’s written there and that’s what they’re paying for?
JOHN HOUGHTALING: We have no dispute that there’s an earth movement exclusion. Our dispute is, did the flood trauma break the foundations of the homes, or was it like that before? They’re making up fake facts to put it into the exclusion. That’s the problem.
LAURA SULLIVAN: [voice-over] In February 2015, the fraud allegations—
NEWSCASTER: State authorities raided a Uniondale engineering company today—
LAURA SULLIVAN: —prompted investigations by state attorneys general in New York and New Jersey that are still under way.
NEWSCASTER: Armed with a search warrant, investigators removed dozens of boxes from the building—
LAURA SULLIVAN: And in Washington, criticism over FEMA’s management of the program was growing. The administrator of FEMA, Craig Fugate, declined to be interviewed. But amid the controversy, he replaced the leadership of the program and promised a wide-ranging overhaul.
The new head of the flood program is Roy Wright.
[on camera] What do you think was happening with these examples of forged signatures, and not just changed conclusions but changed observations?
ROY WRIGHT, Dir., Natl. Flood Ins. Program: Of all issues in front of me, I find these engineering reports to be the most maddening. Many of them were done right. But I’ve seen reports where they took pictures of damage, they described the damage, and when you get to the conclusion on page 32, they said there was no damage. That’s shoddy, sloppy work.
LAURA SULLIVAN: Is it sloppy work, or is it fraud?
ROY WRIGHT: You know, so the questions of fraud I need to leave to the legal investigators’ side to play out. I look forward to what the states’ attorney generals can bring to me.
LAURA SULLIVAN: This was happening across multiple engineering companies, represented by multiple insurance companies. How was this happening across so many different platforms if it was just shoddy work?
ROY WRIGHT: So—and this is a piece that I’m here to fix. There is no incentive in this program to do anything other than pay for everything covered under the policy.
LAURA SULLIVAN: [voice-over] On the face of it, the companies don’t seem to have an incentive to underpay homeowners. They don’t pay claims with their own money, it’s the government’s money.
But as we continued to investigate, we heard stories from industry insiders about the pressures to keep payments down. One veteran of the flood business told me what he’d seen happen over the last decade.
DAVID CHARLES, Flood Insurance Adjuster: Hurricane Andrew, Katrina, Hugo, the Northridge quake, the World Trade Center disaster—
Anything disaster-related—that’s all I’ve ever done, is disaster relief work.
LAURA SULLIVAN: [on camera] OK. Oh!
[voice-over] David Charles took me inside a Sandy-damaged home.
DAVID CHARLES: Boy!
LAURA SULLIVAN: Yeah, this is a mess.
He now helps homeowners fight insurance companies, but for nearly 30 years, those companies hired him as an adjuster .
[on camera] It also feels like this house is leaning.
DAVID CHARLES: It is. You can feel it as you walk.
LAURA SULLIVAN: [voice-over] His job was to figure out how much the national flood program should pay homeowners.
DAVID CHARLES: This is a classic dispute, where they gave her just a little bit of money and the house needs to come down.
LAURA SULLIVAN: He says the program changed after Katrina amid mounting debt and concerns about overpayments on flood claims
DAVID CHARLES: There was so much money spent on Katrina, the insurance companies paid out so much that there was a noticeable sea change in the attitude of the insurance companies going forward.
LAURA SULLIVAN: [on camera] How do you know that?
DAVID CHARLES: Well, I worked the claims, and I felt that coming down from middle management, telling me how to operate.
LAURA SULLIVAN: You were told to be stingy.
DAVID CHARLES: No, not told to be stingy, but things that I used to pay for were being rejected. Every single change that they made reduced the cost. There was never anybody telling you to increase it.
LAURA SULLIVAN: Why do you think they were doing this?
DAVID CHARLES: To save money. They were getting tremendous pressure from Congress to tighten up everywhere that they could, and one of these was to make sure that there’s no overpayments on claims.
LAURA SULLIVAN: [voice-over] The pressure to tighten up intensified after Sandy, according to several other adjusters who agreed to speak to us. One of them was Jeff Coolidge, a manager who oversaw Sandy claims.
[on camera] What happened when you started adjusting claims in Sandy?
JEFF COOLIDGE: Guidance was coming back from the carriers saying, “Remove these items.” So I would send those back to the adjuster, saying “Remove”—fine example, “Remove the fireplace.” Fireplace? Well, they need to have an expert come in. We’ll put it on the insured or the policy holder to prove additional monies are owed. So it was a systematic way of low-balling these insurers to say 80 percent of these people will never come back and ask for more money.
LAURA SULLIVAN: You’re saying that your supervisors or your insurance—an insurance company that you worked for—were telling you to pay homeowners less.
JEFF COOLIDGE: Yes. And that was done on a wide spectrum.
LAURA SULLIVAN: [voice-over] To help control spending after Katrina, FEMA increased its auditing of flood claims. Some of the most expensive claims originate here, in the basement.
[on camera] Oh, wow. Yeah. There’s ocean grass.
DAVID CHARLES: The worst thing I’ve ever seen in 37 years is the earth movement exclusion. The foundation is obviously the most important element of any building. That’s the most expensive thing to fix.
These are cracks that—that’s fresh. If there’s any one place that they shouldn’t be cutting coverage and making things more difficult for the homeowner, that’s the place.
LAURA SULLIVAN: [voice-over] Despite homeowner complaints, a Senate committee last year said it couldn’t find any widespread problem of underpayments
BOB HARTWIG, Insurance Industry Rep.: There’s no evidence of any systematic issues with respect to how the claims were adjusted or how the claims were paid. An event like Sandy, would you expect some disputes to arise after an unprecedented event of that magnitude? Yes, you would expect some to arise. But they were very small in number.
LAURA SULLIVAN: [on camera] Why do you think so many people alleged and felt that they had been underpaid?
STEVE MOSTYN: I think that the National Flood Insurance Program has been under attack since Katrina. And I think that they thought that if they didn’t protect this pot that they had, if they went deeply into debt again, there would be a push to end the National Flood Insurance Program. And for some of these companies and some of these lawyers and some of these engineers, that’s how they make their living.
LAURA SULLIVAN: [voice-over] That raised a question we wanted to get to the bottom of. How much money do insurance companies make off the flood program?
It’s not easy to find out. We looked at what’s called “the arrangement.” That’s the contract between FEMA and the insurance companies. Every year, the companies take about a third of the premiums they collect as fees for running the program. The rest goes to settling claims.
Those fees come to about $1 billion a year, sometimes more, depending on the number of claims and policies. So how much of that is profit?
Seven years ago, Congress’s investigative arm, the GAO, told FEMA to figure that out.
[on camera] Do you think you’re paying the insurance companies too much?
ROY WRIGHT, Dir., Natl. Flood Ins. Program: You know, there’s a cost to running a business, and we are a private-public partnership that is there. But the costs are one of those things that I’m examining.
LAURA SULLIVAN: What kind of a profit do you think they’re making?
ROY WRIGHT: I’ve never looked at the book of business to understand their profits.
LAURA SULLIVAN: That’s a big statement for somebody that is giving insurance companies—
ROY WRIGHT: So in every instance—
LAURA SULLIVAN: —more than in excess of a billion dollars a year, to not know what their profit structure would be on that.
ROY WRIGHT: Yeah, so flood is one of the perils that these companies run. So you’d need to go specifically to the companies to understand those numbers.
LAURA SULLIVAN: [voice-over] Since the insurance companies wouldn’t agree to be interviewed, I asked their representative about the profit margins.
[on camera] Do you know for a fact how much it actually costs the insurance companies to run the expenses every year?
BOB HARTWIG: The—the insurers will—will price their services to cover their costs and what they consider a—a reasonable profit margin. Other than that—
LAURA SULLIVAN: Do you know what that profit margin is?
BOB HARTWIG: I don’t off the top of my head, no. But if they didn’t think it was reasonable, then they would not participate in the program.
LAURA SULLIVAN: Why is it so hard to understand how much the insurance companies are making, how much they’re paying, what their expenses are and what their profit is?
ROBERT HUNTER, Fmr. Head, Natl. Flood Ins. Program: Because obfuscation is helpful to them in this situation. And we’ve never seen the numbers. FEMA should get them and publish them.
LAURA SULLIVAN: [on the phone] Hey, Jim. It’s Laura Sullivan from NPR.
[voice-over] We started trying to find those numbers, the data that would help us figure out what kind of profits the insurance companies are making.
[on camera] Take care. Thanks so much again.
[voice-over] And that would take some time.
But our investigation into the business of disaster also took us to another stream of federal money, beyond flood insurance.
NEWSCASTER: New York City got its plan for $1.8 billion in aid—
LAURA SULLIVAN: Insurance only goes so far, and many don’t have it at all. So when big disasters strike, Congress sends billions of dollars to state and local governments to help homeowners rebuild.
To see where that money is going, I headed to Staten Island. At a local non-profit in Midland Beach, I met up with Tommy Cunsolo.
TOMMY CUNSOLO: This is before the water came.
LAURA SULLIVAN: He helps homeowners apply for the extra housing aid.
TOMMY CUNSOLO: This is where all the water went. Fifteen feet is what we got.
LAURA SULLIVAN: [on camera] This is 15 feet of water? Is the damage really bad throughout these neighborhoods?
TOMMY CUNSOLO: Every single one of them.
LAURA SULLIVAN: Can we go see it?
TOMMY CUNSOLO: Let’s go.
LAURA SULLIVAN: [voice-over] Sandy devastated communities along the eastern shore of Staten Island.
[on camera] This was like a giant ocean that we’re driving through right now.
TOMMY CUNSOLO: Yes, the ocean was here. It was over the signs. It was over these signs.
LAURA SULLIVAN: Oh, my gosh!
[voice-over] Many homes have been abandoned.
TOMMY CUNSOLO: Anyone that’s got the boards on them, they’re already bought out and they’re gone.
LAURA SULLIVAN: And for some that stayed, building back means taking extreme steps to stay above the next flood.
TOMMY CUNSOLO: See how high it’s going to be?
LAURA SULLIVAN: [on camera] Whoa!
TOMMY CUNSOLO: That’s the height.
LAURA SULLIVAN: You got to walk up to a front door up there?
TOMMY CUNSOLO: Yes.
LAURA SULLIVAN: No!
TOMMY CUNSOLO: Yes. That’s the height. That’s where you’ve got to be at to survive.
LAURA SULLIVAN: [voice-over] I could see there was still a lot of work to do.
[on camera] Did you think it was going to take three years to get to this point?
TOMMY CUNSOLO: Not at all. I once told somebody, I says, “You know what? We built the Empire State building in one year. How can we not rebuild single family homes?”
LAURA SULLIVAN: [voice-over] The job of rebuilding these homes in New York City is the responsibility of a special housing program called Build It Back.
BUILD IT BACK COMMERCIAL: We’ve created a powerful program.
LAURA SULLIVAN: The program got $1.7 billion from Washington.
BUILD IT BACK COMMERCIAL: And we’ve secured federal aid money. The name of the program is NYC Build it Back, and it’s here to make your home safer, our community stronger and—
LAURA SULLIVAN: One family that was told they’d be among the first to be helped by Build It Back was Diane and Nick Camerada, the couple the president had comforted.
DIANE CAMERADA: Just don’t forget about us.
Pres. BARACK OBAMA: That’s my point. That’s why I came here.
LAURA SULLIVAN: [on camera] Hi.
[voice-over] But three years later, they were still living with a fish tank filled with Sandy stormwater.
DIANE CAMERADA: This is our fish tank.
LAURA SULLIVAN: [on camera] Is this the water from the tidal surge?
DIANE CAMERADA: Yes.
LAURA SULLIVAN: This is tidal surge water.
DIANE CAMERADA: Yes, tidal surge plus the fish tank water. I mean, everything must have mixed up because the water actually went up to the top step before my second floor.
LAURA SULLIVAN: The water came all the way up here. This whole floor was under water?
DIANE CAMERADA: Under water.
LAURA SULLIVAN: This used to be your entryway?
DIANE CAMERADA: This was our entryway.
LAURA SULLIVAN: [voice-over] The Cameradas were still waiting to get their first floor fixed up and their house elevated.
DIANE CAMERADA: —our television, our couch, our living area—
LAURA SULLIVAN: Like many homeowners, they gambled and didn’t have flood insurance. they were now counting on help from Build It Back.
DIANE CAMERADA: Do you know I had to itemize every single thing that I lost?
LAURA SULLIVAN: Diane showed me what that process has been like.
DIANE CAMERADA: I know I filled this same application out three times.
LAURA SULLIVAN: [on camera] No. This same application—
DIANE CAMERADA: The same application.
LAURA SULLIVAN: —this pile?
DIANE CAMERADA: Yes.
LAURA SULLIVAN: How do you keep all of this straight?
DIANE CAMERADA: I have no choice but to keep it straight. I have to know where everything is so when somebody says, “Oh, you didn’t fill this out,” or “You didn’t fill that out”—here it is. I filled it out. I filled it out three, four times.
LAURA SULLIVAN: [voice-over] It wasn’t just lost paperwork, it was also hard to get a straight answer.
DIANE CAMERADA: You would talk to one person, and then if you would talk to another person, you would get a totally different story. So who do you believe, you know? So you’re going on good faith. You’re trusting what this person says. You’re doing everything he says. Then when you go back and that person’s no longer there, and this person takes over and you’re getting a totally different story—all that time goes by and nothing’s been accomplished.
LAURA SULLIVAN: [voice-over] The Cameradas’ frustrations with Build It Back were far from unique. The New York City comptroller audited the program’s first year.
SCOTT STRINGER, Comptroller New York City: People came in expecting to file paperwork and then go through a process. And what really happened was people would come in, deliver their documentation, and it would vanish.
LAURA SULLIVAN: [on camera] Is it—well, is this incompetence?
SCOTT STRINGER: Well, it’s gross—gross incompetence.
LAURA SULLIVAN: [voice-over] The city had hired outside consulting firms to run the Build It Back program at a cost of $50 million.
SCOTT STRINGER: This is the whole contract.
LAURA SULLIVAN: The auditors discovered why so many homeowners were frustrated.
[on camera] The people that were on the front lines helping victims—were they qualified to do this work?
SCOTT STRINGER: Many were not.
LAURA SULLIVAN: How did—what did you find? What do you—how do you know?
SCOTT STRINGER: We just found that the resumes did not match the job.
LAURA SULLIVAN: Let’s see.
[voice-over] Case workers were supposed to have a degree in social work.
[on camera] This is—
SCOTT STRINGER: Yeah.
LAURA SULLIVAN: [voice-over] Or experience in the field. But a review of the resumes showed that most had no social service experience at all. Some were cashiers at Walmart, Staples and RiteAid.
SCOTT STRINGER: Think about how outrageous it is that we were paying these huge consulting companies hundreds of thousands of dollars a month for creating a system using unqualified people, with no oversight by the city.
LAURA SULLIVAN: [on camera] How bad was the damage here?
BRAD GAIR, Fmr. Disaster Recovery Mgr., NYC: We had a lot of damage.
LAURA SULLIVAN: [voice-over] Brad Gair was the top official overseeing Sandy housing recovery for New York City.
BRAD GAIR: The water came up from the East River, which is right there, and covered this whole area and—
LAURA SULLIVAN: [voice-over] He’s a 20-year veteran of disaster recovery, and we wanted his explanation for the problems with Build It Back.
BRAD GAIR: I saw that we, as New York City, with all the best intentions, created a big, hard-to-understand bureaucratic slow, inefficient process for getting people funds or to get them back in their homes.
LAURA SULLIVAN: [on camera] Why did that happen?
BRAD GAIR: The system makes that happen. You can’t expect any government large or small to create a $2 billion corporation and expect them to roll that out in any short period of time and not have a chaotic mess. You can’t build this thing on the fly and expect it to work. The contractors came and give their best estimate of what they thought they could do to make a profit. It’s not a charity.
LAURA SULLIVAN: Right.
BRAD GAIR: Were they making excessive profits? I don’t know.
LAURA SULLIVAN: [voice-over] That was a question we had. So we got records of Build It Back payments to the consultants during the first year. And this is what we found. The consultants were getting paid to provide caseworkers based on rates of $40 to $100 an hour. But in fact, the firm paid less than $18 an hour to a temp agency for some of those caseworkers.
SCOTT STRINGER, Comptroller New York City: The one thing that stood out in this audit, the consultants always got paid. And that became what this was about.
JAMES ODDO, Pres., Staten Island Borough: We’re not making widgets. This is not like we screwed up a conveyor belt. These are people whose homes are still gone and life has been upside down for three years. Think about it. Like, they don’t know where it’s going. And I won’t even get into the sort of—unless you want to—get into the “Let’s take a home that’s worth $80,000 and let’s pour $600,000 into it to elevate it and rehab it.”
LAURA SULLIVAN: [on camera] Is that what’s going on?
JAMES ODDO: That’s one case that happened, and we—it was a—it’s—oh, my God. Where do you start?
LAURA SULLIVAN: [voice-over] That $600,000 house? We found it here on Topping Street.
NICOLE CHATI, Homeowner: This house should have been a total knockdown. The city came in, did their survey and said, No, we can lift it. And they did. They raised the house up in the air, and then they came in and they looked up and—my hand to God, they looked up and they went, “Uh-oh.”
LAURA SULLIVAN: [on camera] Why? What was up?
NICOLE CHATI: Because they realized how everything was just—everything was shifted.
LAURA SULLIVAN: [voice-over] The house fell apart and had to be entirely rebuilt, in the air.
NICOLE CHATI: My neighbors and I, we joke about it sometimes, what it actually cost to put these houses up, the ones that were miscalculated, because I could have gotten myself home and my neighbor next door who’s still waiting after three years. And that’s hard on me.
LAURA SULLIVAN: [on camera] Yeah. Why?
NICOLE CHATI: Because I’m home and they’re not.
LAURA SULLIVAN: Yeah.
LAURA SULLIVAN: [voice-over] The head of Build It Back is Amy Peterson.
[on camera] One of the homes that we saw is a home not too far away from here where Build It Back spent $600,000 to raise a house. Does that make a lot of sense to you?
AMY PETERSON, Director, NYC Build It Back: So that’s a good example because I know the home you’re talking about. That’s a good example of kind of learning as we go along. Sometimes when you start to elevate a home and you start to take kind of the skin away from the home, you realize there’s a lot of structural work that has to happen.
And so we have faced those situations. The work that we’re doing moving forward, we’re making changes. But it costs money to build elevated homes within kind of these tight communities.
LAURA SULLIVAN: Does it cost $600,000?
AMY PETERSON: We’re looking at all of the costs across all of our programs and trying to figure out the best way to do this.
LAURA SULLIVAN: [voice-over] Out on the streets of Staten Island, I could see the challenges with rebuilding in these increasingly risky areas. Some homeowners had had enough.
[on camera] You live here? This is your house?
1st HOMEOWNER: I used to.
LAURA SULLIVAN: This used to be your house.
1st HOMEOWNER: Yes.
LAURA SULLIVAN: After Sandy, did you end up leaving?
1st HOMEOWNER: Yeah.
LAURA SULLIVAN: Do you think you’re coming back?
1st HOMEOWNER: No.
LAURA SULLIVAN: You’re done.
1st HOMEOWNER: I’m done. I want to pay off the mortgage. I don’t know if Build it Back is going to buy it or if I’m selling it to a private person.
LAURA SULLIVAN: [voice-over] Some homeowners were content keeping things the way they are.
2nd HOMEOWNER: They want give us money to knock these down, to build two separate ones higher up off the ground. It’s not really worth it for us. Why knock things down now that we’re making rents on? It makes no sense.
LAURA SULLIVAN: Others were worried about the choice they faced.
3rd HOMEOWNER: I’m fearful that these bungalows should not be elevated. You know, I mean, I’m not an engineer. You know, maybe engineers can say differently. But I mean, these are 90-year-old homes that I just don’t think were built to withstand these elevations.
LAURA SULLIVAN: [on camera] It’s OK?
[voice-over] Everyone seemed to have their own concerns.
4th HOMEOWNER: I just want to show you something. Here’s our front door. They said they can’t put a stairway here to get up. They want to put an elevator, you know, a lift, in the back yard. You got to walk 72 feet around the house to get to the elevator in the back yard.
LAURA SULLIVAN: The more time I spent here and the more people i talked to, the more complicated it all seemed. It was hard to see where all this was headed.
[on camera] What’s the plan here?
AMY PETERSON: After the storm, there was a lot of thoughts about what individual communities wanted. But in the end, it’s about what individual homeowners want. And so some homeowners are committed to elevate their home. Some homeowners have decided to sell their homes.
LAURA SULLIVAN: You say it’s up to the homeowners, depending on what they want. You could end up with neighborhoods where half a block is empty, half a block is still below sea level. Some of the houses are raised. Is this something that makes sense for our communities?
AMY PETERSON: Well, I think that helping these communities get to be more resilient is—is important.
LAURA SULLIVAN: Is that more resilient?
AMY PETERSON: I think every single home that gets raised is more resilient,
LAURA SULLIVAN: Is it possible that in some of these areas, we shouldn’t be rebuilding at all?
AMY PETERSON: You know, a city that has as much coastline as we have, that has, you know, generations and generations of families that have lived here, that if there’s ways to make these homes and neighborhoods more resilient, it’s important to keep these as part of the fabric of New York City.
LAURA SULLIVAN: Does it make sense to have different people doing different things on the same block, different communities doing different things right next to each other in terms of resiliency?
BRAD GAIR, Fmr. Disaster Recovery Mgr., NYC: Does it make sense? No. Anything that is happening in a non-systematic way inherently isn’t going to make a lot of sense. Does it do exactly what the programs, as they’re currently designed, do? Yes. It gives individuals the choice, and it doesn’t tell them that you have to participate in a solution that’s better for your block or your neighborhood or your community or your state. There’s no larger strategy where we say, “What do we want to have this community look like before the next one hits?”
LAURA SULLIVAN: [voice-over] New York City has taken greater control over Build It Back and has renegotiated its contracts to try to speed up the process and save money. The program plans to spend $1.7 billion to help about 9,000 Sandy homeowners. About 20 percent of the homes are expected to be elevated. So far, 64 of those have been completed.
One family still waiting to have their house elevated was the Cameradas. And before I left Staten Island, I wanted to see if they were any closer to getting it done.
[on camera] Hi. It’s so good to see you.
DIANE CAMERADA: Hi, stranger.
LAURA SULLIVAN: [voice-over] There were signs of progress.
[on camera] No fish tank.
DIANE CAMERADA: No fish tank.
LAURA SULLIVAN: [voice-over] But it turned out, their plans were still mired in red tape.
[on camera] It looks fantastic!
DIANE CAMERADA: It does. They did a wonderful job.
LAURA SULLIVAN: The furniture is coming? When are you getting settled?
NICK CAMERADA: No, not quite. It’s going to get ripped out.
LAURA SULLIVAN: [voice-over] They’re going to tear out all the renovations when they lift the house.
[on camera] They’re going to rip all of this out?
NICK CAMERADA: Every bit of it.
LAURA SULLIVAN: [voice-over] Before Build It Back will elevate their home, the Cameradas needed old building permits closed out, and that meant they had to fix up their first floor.
NICK CAMERADA: So basically, they’re going to come halfway up the walls. And then they are going to push the house up in the air. And everything that was just done in the house was just to close the permits.
DIANE CAMERADA: It’s crazy!
JAMES ODDO, Pres., Staten Island Borough: When you see what the storm did to these people and then you see what government has been doing to them, yeah, this is the most infuriating, frustrating experience of—of—probably of my life, not just my career. People made some mistakes, and we need to make sure that others learn from them, benefit from them and don’t repeat them.
LAURA SULLIVAN: The federal agency that oversees housing programs is HUD. I asked the agency’s head of disaster recovery about the delays and problems with Build It Back.
[on camera] At some point, isn’t this an oversight issue for HUD?
MARION McFADDEN, Dep. Asst. Secretary, Disaster, HUD So absolutely, we’re overseeing them. We’re working very closely with them to ensure that where there are these problems that they’re getting solved.
LAURA SULLIVAN: Do you feel like you could have maybe brought a little bit more of a hammer down to make some of these problems go away?
MARION McFADDEN: Ultimately, there aren’t a lot of hammers here. The way that the Congress provides the money, they want us to let the local governments make those decisions.
LAURA SULLIVAN: And this is what our communities are now going to look like, this sort of ad hoc streets and neighborhoods?
MARION McFADDEN: I think that’s up to the affected communities to decide. They get to make the choices about what to do with the dollars that we provide to them. But is there a better way of doing this? I hope that there is, or that we can all work together to do it this way even better because that’s what people are counting on the federal government for.
LAURA SULLIVAN: [voice-over] In the aftermath of all the Sandy troubles, FEMA, too, has been promising changes.
ROY WRIGHT, Dir.. Natl. Flood Ins. Program: So this is the Sandy Claims Review Center that we have here, where all of the work comes in for the folks that we are looking at their claims again.
LAURA SULLIVAN: A year ago, it gave 144,000 Sandy homeowners who had filed claims a chance at a new review. 19,000 homeowners came forward, and so far, nearly 80 percent are getting some additional money.
1st ADJUSTER: Tell you what. Do me a favor. Take a look at the photos on that file.
LAURA SULLIVAN: But some homeowners say FEMA is still underpaying those claims, and the review process alone has cost more than $100 million.
2nd ADJUSTER: —Sandy review task force—
LAURA SULLIVAN: Since last year, the agency has also been settling those lawsuits against the insurance companies, now nearly 1,700 in all.
DOUG QUINN: There was a deadline for me to accept. I did accept.
LAURA SULLIVAN: One of those settlements was Toms River resident Doug Quinn. He got an additional $130,000, but it won’t all go to rebuilding his home.
DOUG QUINN: I won’t get all that money. A third of it is going to the attorneys. They will not cover me for legal fees.
LAURA SULLIVAN: [on camera] They won’t do legal fees.
DOUG QUINN: Oh, no, they’ll do legal fees. They’ll pay the legal fees for the insurance company that tried to cheat me. But they won’t pay for the storm victims’ legal fees. So I had to pay over $40,000 to a law firm because my government would not honor their obligations that they made when they accepted my premium money. And that money’s gone. That’s not going to be used to rebuild my house.
LAURA SULLIVAN: Why does FEMA pay the legal bills of the insurance companies?
ROY WRIGHT: So these are some of the contract stipulations that I inherited. And we’re making some specific changes because at the end of the day, I want dollars to go to policy holders, not to lawyers.
LAURA SULLIVAN: [voice-over] Figuring out where all those dollars do go was exactly what we’d been working on, trying to determine the profits the insurance companies were making off the flood program. FEMA wasn’t keeping track, but we finally got ahold of some key data, the expenses the companies report to state insurance regulators. And from FEMA, we got the fees it pays to the insurance companies.
Using these numbers, we calculated the profits before taxes. Companies have varying ways of accounting for their expenses and revenue, but without access to their internal books, this was the best possible look at the scale of profits.
[on camera] Here’s all the FEMA data. This is all the money that FEMA has paid the insurance companies.
[voice-over] We took our findings to the former head of the flood program, Bob Hunter, who’s also an actuary.
ROBERT HUNTER, Fmr. Head, Natl. Flood Ins. Program: So you deduct those expenses from what they received and you’ve got their—
LAURA SULLIVAN: Our analysis showed that between 2011 and 2014, total profits for all the companies in the program averaged about $325 million a year.
[on camera] Is that too much money?
ROBERT HUNTER: Oh, definitely because, look, we’re talking about somewhere near 30 percent profit margin compared to what they receive as payments, and they have no risk.
LAURA SULLIVAN: So what do you make of this, then?
ROBERT HUNTER: Well, it’s obviously a sweetheart deal.
LAURA SULLIVAN: [voice-over] There was one number that really jumped out. With all the claims in the wake of Sandy, the profits were more than $400 million.
ROBERT HUNTER: Because they’re handling a lot of claims that year, and they get—make a lot of money when they handle claims.
LAURA SULLIVAN: [on camera] When a big storm hits, then, they make more money?
ROBERT HUNTER: Yeah, at the very time you need them to make less money, if anything, because the burden is going to be borne by the taxpayers, they make a killing.
LAURA SULLIVAN: [voice-over] We explained our methodology and results to the insurance industry representatives. They disputed our 30 percent estimate and said profits are really 10 to 15 percent after taxes, but provided no additional data. They also said several companies have left the program because the profits don’t justify participating.
The GAO is now examining how the insurance companies are paid and how much they make. FEMA says it’s also looking into these questions.
[on camera] It’s hard to look at profit numbers after Sandy, when tens of thousands of people believed that they were underpaid by the insurance companies, and see that the insurance companies walked away with $400 million dollars in profit. How can you explain that?
ROY RIGHT, Dir., Natl. Flood Ins. Program: So what I can tell you is that I am focused on those policy holders and ensuring that they get the resources and they get the payouts that they are entitled to. As we manage this program going forward, we will provide the appropriate level of oversight because as I go back and look, while we were providing oversight, it was not enough.
DOUG QUINN: They can’t begin to fathom the amount of heartache that they’ve created, the amount of financial wreckage they’ve created for average people. We’re average, middle class people, and we’re in ruins here. It makes me really angry. It makes me angry to watch the way that people are profiting unfairly on other peoples’ misery.
LAURA SULLIVAN: Is our country in a good place in terms of the next disaster?
BRAD GAIR, Fmr. Disaster Recovery Mgr., NYC: No, we’re not in a good place. You can look at any of these big disasters and ask yourself the most basic question. Did we put a bunch of money out? Yes. Is everybody mad? Yes. Did people get what they needed to get back into a home? No. Is there a grand strategy, a national resilience strategy that says this is how we’re going to deal with these big disasters when they happen? No. It’s not there.
DIANE CAMERADA: I don’t think enough people know the different areas that can be affected by storms like this. And something has to be set up because I don’t think we could bounce back if it happened again.