59–010 

110TH CONGRESS REPORT " ! SENATE 1st Session 110–69 

EMERGENCY AND DISASTER ASSISTANCE FRAUD 

PENALTY ENHANCEMENT ACT OF 2007 

MAY 22, 2007.—Ordered to be printed 

Mr. LEAHY, from the Committee on the Judiciary, 

submitted the following 

R E P O R T 

together with 

ADDITIONAL VIEWS 

[To accompany S. 863] 

The Committee on the Judiciary, to which was referred the bill 

(S. 863) to amend title 18, United States Code, with respect to 

fraud in connection with major disaster or emergency funds, having 

considered the same, reports favorably thereon and recommends 

that the bill do pass. 

CONTENTS 

Page 

I. Purpose and Summary .................................................................................. 1 

II. Background and Need for the Legislation ................................................... 2 

III. Discussion ....................................................................................................... 4 

IV. Legislative History ......................................................................................... 5 

V. Vote of the Committee ................................................................................... 6 

VI. Section-by-Section Analysis and Discussion ................................................ 6 

VII. Cost Estimate ................................................................................................. 7 

VIII. Regulatory Impact Statement ....................................................................... 8 

IX. Additional Views of Senator Sessions .......................................................... 8 

X. Changes in Existing Law .............................................................................. 12 

I. PURPOSE AND SUMMARY

In response to concerns that the current provisions of title 18, 

United States Code, do not adequately address or deter fraud in 

connection with emergency and disaster assistance, Senator Sessions introduced S. 863, the ‘‘Emergency and Disaster Assistance 

Fraud Penalty Enhancement Act of 2005,’’ on March 13, 2007, with 

Senators Landrieu, Cornyn, Vitter, and Grassley as cosponsors. 


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The bill makes it a specific crime to engage in fraud in connection 

with major disaster or emergency benefits, increases criminal penalties for engaging in mail or wire fraud during and in relation to 

a major disaster or emergency, and directs the United States Sentencing Commission to promulgate guidelines to provide for increased penalties for persons convicted of disaster or emergency 

benefit fraud. 

II. BACKGROUND AND NEED FOR THE LEGISLATION

Congress has appropriated approximately $62.3 billion in disaster assistance in the wake of Hurricanes Katrina, Rita and 

Wilma. As of March 8, 2006, the Federal Emergency Management 

Agency’s (FEMA) allocations for Katrina and Rita-related relief 

from the Disaster Assistance Fund totaled approximately $29.8 billion. Of this amount, $13.45 billion has been allocated to human 

services including: unemployment assistance; crisis counseling; 

housing assistance; and various other needs of the victims. The remainder, approximately $16.4 billion, has been allocated for infrastructure, mitigation, general operations and the administration of 

field operations. These costs include expenditures for relief worker 

salaries, travel and transportation, as well as contracts for facilities, equipment, utilities, and other required services. 

Almost immediately after FEMA began making disaster assistance available to victims of the hurricanes, reports of fraud, misuse 

and abuse began to surface. These reports included allegations that 

recipients of disaster assistance had misused funds to purchase 

luxury goods, that non-eligible persons had applied for and received 

benefits, and that criminals had established phony Katrina-related 

websites to exploit those who wished to contribute to legitimate disaster assistance efforts. 

In June of 2006 the Government Accountability Office released 

a report to Congress detailing fraud and abuse of disaster recovery 

funds following Hurricane Katrina. The report found a host of 

fraudulent payments in connection with Katrina and Rita disaster 

relief, such as claims for properties that did not exist and the use 

of invalid Social Security Numbers to obtain fraudulent payments. 

The GAO estimated that $1 billion (16% of total) in improper or 

fraudulent payments had been made by FEMA at that time. The 

total price tag for the fraud committed after Hurricanes Katrina 

and Rita is not yet known; but GAO investigators have testified 

that it will, at the very least, be in the billions of dollars. 

Senator Sessions observed: 

Billions of dollars in fraudulent payments is an insult to 

the victims of these natural disasters and an insult to the 

ultimate victim in this fraud, the American taxpayer. Natural disasters and emergency situations often create an opportunity for unscrupulous individuals to take advantage 

of both the immediate victims of the disaster or emergency, as well as those who offer financial and other assistance to the victims. The American people are extremely 

generous in responding to disasters, but they should not be 

expected to tolerate the fraud of those who deceitfully exploit their generosity. 


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1 By contrast, the cases for fraud in connection with the efforts in Iraq and Afghanistan in 

which hundreds of billions have been devoted over the last four years amount to only 25 individuals in eight cases in four judicial districts. 

In response to increased instances of fraud following the hurricanes, the Attorney General announced the formation of the Hurricane Katrina Fraud Task Force on September 8, 2005. The Task 

Force is comprised of representatives from the Departments of Justice, Homeland Security, and Treasury, the Federal Bureau of Investigation, Federal Trade Commission, Securities and Exchange 

Commission, other federal partners, as well as representatives of 

State and local law enforcement. As of January 3, 2007, the Hurricane Katrina Fraud Task Force had charged 525 individuals in 445 

indictments brought in 35 judicial districts around the country 

with various hurricane fraud-related crimes, including fraud, identity theft, theft of federal funds and public corruption.1

Although many of the cases prosecuted by the Hurricane Katrina 

Task Force involved false or fraudulent claims for a few thousand 

dollars in FEMA benefits, other more elaborate and costly schemes 

have surfaced. For instance, the United States Attorney for the 

Northern District of Texas charged a Red Cross volunteer and his 

sister with theft of over 100 Red Cross debit cards used to obtain 

over $230,000 in benefits from the charity intended for Katrina 

Victims. The defendants used proceeds from these debit cards to 

purchase vehicles, jewelry and clothing for themselves, family 

members and friends. 

In another case, a grand jury in the Southern District of Texas 

returned a 39-count indictment against the owner of a Galveston, 

Texas hotel charging him with filing fraudulent claims with FEMA 

for over $232,000 in Short-Term Lodging reimbursements. According to the indictment, the fraudulent conduct included filing claims 

for payment for rooms in the name of hurricane evacuees who had 

never stayed at the hotel, rooms in the name of supposed evacuees 

when the rooms were occupied by paying guests with different 

names, and multiple rooms in the name of a single guest when the 

guest occupied fewer rooms than billed. 

Despite efforts by federal, State and local law enforcement to 

prosecute emergency and disaster benefits schemes wherever and 

whenever they occur, it persists. In February 2006 alone, the Department of Justice announced 15 indictments, three guilty pleas, 

and two convictions for Hurricane Katrina or Rita-related disaster 

fraud. In March 2006, the Department charged or indicted another 

14 individuals for Katrina-related fraud and obtained four guilty 

pleas. By January 2007 the number of individuals charged with 

hurricane fraud-related crimes had grown to 525, and this number 

continues to grow. 

The bill will send a strong message that disaster relief crime is 

a serious crime. The Department of Justice has written that the 

bill would ‘‘provide important prosecutorial tools in the government’s efforts to combat fraud associated with natural disasters 

and other emergencies.’’ Last June, the Department wrote: 

[These provisions] will help the Department address natural disasters and will send a strong signal that exploiting 

the kindness of Americans in times of crisis is a serious 

crime that will be treated with appropriate severity. The 


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new criminal fraud statute that will be created by the Act, 

as well as the enhanced penalties for disaster fraud, will 

help ensure that the victims of these terrible disasters, 

and members of the American public who generously reach 

out to help those victims, are not preyed upon by criminals 

attempting to profit from these disasters and emergencies. 

The bill is an effort to prevent and prosecute disaster relief fraud 

in the aftermath of emergencies and disasters. 

In March 2007, tornadoes killed at least 20 people in the Southeast and Midwest and damaged or destroyed hundreds of homes 

from Minnesota to the Gulf Coast. The loss of eight Alabama children at Enterprise High School was especially heartbreaking. The 

President declared Enterprise, Alabama, a federal disaster area 

and the Federal Emergency Management Agency (FEMA) declared 

several other damaged counties in Alabama eligible for Individual 

Disaster Assistance. This means the storm victims the affected Alabama counties will potentially be eligible to receive thousands of 

dollars in federal aid. 

We want to help ensure that federal money goes to the right people and does not get stolen by criminals posing as victims. Congress wants to provide appropriate recovery and relief resources to 

affected States, and also ensure that these resources are protected 

and distributed only to the real victims—not to individuals seeking 

to take advantage of the disaster. 

III. DISCUSSION

The goal of the bill is to protect the real victims of disasters like 

Hurricane Katrina by specifically making it a crime under the existing fraud chapter of title 18 (18 U.S.C. §§ 1001–1039) to fraudulently obtain emergency disaster funds. The bill creates a new federal crime specifically related to emergency and disaster relief 

fraud by amending title 18. In addition to creating a new federal 

crime that specifically prohibits fraud in connection with any emergency or disaster benefit (including federal assistance or private 

charitable contributions), the bill also increases criminal penalties 

for engaging in mail or wire fraud following a major disaster or 

emergency by updating the current mail and wire fraud statutes 

found in chapter 63 of title 18. (18 U.S.C. §§ 1341 and 1343). The 

bill changes the federal mail and wire fraud statutes by applying 

the 30–year maximum penalties that are currently reserved for 

cases involving fraud against financial institutions to cases involving emergency or disaster relief fraud. 

Senator Sessions has observed: 

The fact is, some people think in a disaster they can run 

in and make any kind of bogus claim they desire—that 

money will be given to them and people will be too busy 

to check. And if they do, nothing is ever going to happen 

to them. We need to completely reverse that mentality. We 

need to create a mindset on the part of everybody that 

these disaster relief funds are sacred; that they are for the 

benefit of people who have suffered loss, and only people 

who have suffered loss should gain benefit of it. We need 

to make it clear that those who steal that money are going 

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2On June 21, 2006, Senator Jeff Sessions introduced S. 3547, the Emergency and Disaster 

Assistance Fraud Penalty Enhancement Act of 2005, which was an earlier version of the bill. 

That legislation was cosponsored by Senator Mary Landrieu (D–LA), Senator John Cornyn (R– TX), Senator Charles Grassley (R–IA), Senator David Vitter (R–LA), and Senator Mike DeWine 

(R–OH). That bill was referred to the Committee on the Judiciary. The Committee took no action on the bill in the 109th Congress. The Department of Justice sent a letter to the Chairman 

of the Committee on June 30, 2006 supporting the legislation. 

verely than somebody who commits some other kind of 

crime because I think it is worse to steal from the generosity of the American people who intended to help those 

in need. 

Senator Landrieu has noted: 

People who commit fraud in a disaster situation should 

be prosecuted to the fullest extent of the law. . . . It is 

equivalent to taking money directly from the hurricane 

victims who lost their homes, businesses, schools and communities. It inhibits our recovery. This legislation puts the 

remedies and penalties in place without creating obstacles 

for those rightly seeking federal assistance following a disaster. 

Senator Cornyn has noted: 

We must send a message that the actions of those who 

may defraud the government or otherwise illegally obtain 

a portion of these funds will not be tolerated. The Emergency and Disaster Assistance Fraud Penalty Enhancement Act will say to those who may be thinking about illegally cutting corners or outright stealing disaster funds 

whether by fraud, theft or embezzlement that they will be 

caught, prosecuted and imprisoned. 

IV. LEGISLATIVE HISTORY

On March 13, 2007, Senators Sessions, Landrieu and others introduced S. 863, the Emergency and Disaster Assistance Fraud 

Penalty Enhancement Act of 2007.2

In connection with the bill introduction, Senator Sessions said: 

After an emergency or disaster, such as the recent tornadoes that devastated the city of Enterprise in my home 

State, we should do everything we can to make sure 100 

percent of the relief funds gets into the hands of real victims. Taxpayers should not sustain a financial loss at the 

hands of scam artists, and these wrongdoers should not 

profit from exploiting the victims of horrific events. Common sense requires that those who deceive the government 

and obtain emergency disaster funds by fraud be subject 

to criminal punishment. As a former federal prosecutor, 

I’ve been there in the aftermath of hurricanes and tornadoes and I’ve seen such fraud and abuse first hand. Our 

resources are not unlimited, and it’s critical that we ensure that every relief dollar goes to legitimate storm victims. It’s important that we give prosecutors the tools they 

need to protect these victims as well as the American taxpayer. 

Senator Vitter stated: 


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It sickens me that some people abused the tragedy of 

many good people of the Gulf Coast who desperately needed relief funds and the kindness of the American taxpayer. 

This bill creates federal crimes for fraudulent abuse of 

emergency funds and increases the penalties on these violations to reduce the likelihood of these relief programs 

being undermined. 

After Senators Sessions, Landrieu and others introduced S. 863, 

the Emergency and Disaster Assistance Fraud Penalty Enhancement Act of 2007, in the 110th Congress, on March 13, the bill was 

referred to the Committee on the Judiciary, and Chairman Leahy 

placed the bill on the Executive Business Meeting agenda for 

March 15, 2007. 

V. VOTE OF THE COMMITTEE

On March 15, 2007, the Committee on the Judiciary, with a 

quorum present, met and considered S. 863, the Emergency and 

Disaster Assistance Fraud Penalty Enhancement Act of 2007. The 

Committee approved the bill, without amendment, by voice vote, 

with no objection noted, and ordered the bill to be reported favorably to the full Senate. 

VI. SECTION-BY-SECTION ANALYSIS AND DISCUSSION

Section 1. Short title 

The ‘‘Emergency and Disaster Assistance Fraud Penalty Enhancement Act of 2007.’’

Sec. 2. Fraud in connection with major disaster or emergency benefits 

Section 2 creates a new 18 U.S.C. § 1040 to provide a new crime 

of fraud in connection with major disaster or emergency benefits. 

Section 1040 would prohibit fraud ‘‘in any matter involving any 

benefit authorized, transported, transmitted, transferred, disbursed 

or paid in connection with a major disaster or emergency declaration,’’ or in connection with any Federal Government contract related to such declarations, as long as the benefit was authorized or 

paid in interstate commerce, transported in the mail, or is a record, 

payment, money or other thing of value of the United States. Violations of this section would be punishable by fines up to $250,000 

for an individual or $500,000 for an organization, imprisonment of 

up to 30 years, or both. 

Sec. 3. Increased criminal penalties for engaging in wire, radio, and 

television fraud during and relation to a presidentially declared 

major disaster or emergency 

Section 3 increases the penalties available for wire fraud (18 

U.S.C. § 1343) that occur in connection with major disaster or 

emergency declarations. Current law provides that violations of the 

wire fraud statute (18 U.S.C. § 1343) are punishable by fines up to 

$250,000 for an individual or $500,000 for an organization, or up 

to 20 years in prison. If the violation involves a financial institution, the maximum penalty is increased to 30 years in prison. This 

section adds fraud occurring ‘‘in relation to, or involving any benVerDate Aug 31 2005 05:24 May 26, 2007 Jkt 059010 PO 00000 Frm 00006 Fmt 6659 Sfmt 6602 E:\HR\OC\SR069.XXX SR069

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efit authorized, transported, transmitted, transferred, disbursed or 

paid in connection with a major disaster or emergency’’ to the 30- 

year maximum now applicable only to financial institution fraud. 

Sec. 4. Increased criminal penalties for engaging in mail fraud during and relation to a presidentially declared major disaster or 

emergency 

Section 4 increases the penalties available for mail fraud (18 

U.S.C. § 1341) that occur in connection with major disaster or 

emergency declarations. Current law (18 U.S.C. § 1341) provides 

that violations of the mail fraud statute are punishable by fines up 

to $250,000 for an individual or $500,000 for an organization, or up 

to 20 years in prison. If the violation involves a financial institution, the maximum penalty is increased to 30 years in prison. This 

section adds fraud occurring ‘‘in relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or 

paid in connection with a presidentially declared major disaster or 

emergency’’ to the 30-year maximum now applicable only to financial institution fraud. 

Sec. 5. Directive to Sentencing Commission 

Section 5 directs the United States Sentencing Commission to 

promulgate sentencing guidelines, or amend the existing guidelines 

to provide for increased penalties for fraud or theft offenses committed in connection with a major disaster or emergency declaration. Section 5 also directs the Commission to submit to the Committees on the Judiciary any guidelines changes accompanied by an 

explanation and any additional policy recommendations for combating emergency or disaster fraud. 

This section identifies several requirements for the Sentencing 

Commission, including assuring reasonable consistency with other 

relevant directives and guidelines, accounting for any circumstances that might justify exceptions, and making any necessary conforming changes to the sentencing guidelines. Section 5 

also provides emergency authority for the Sentencing Commission 

to promulgate the guidelines or amendments and a deadline of not 

later than 30 days after the enactment of S. 863. 

VII. COST ESTIMATE

MARCH 21, 2007. 

Hon. PATRICK J. LEAHY, Chairman, Committee on the Judiciary, 

U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 863, the Emergency and 

Disaster Assistance Fraud Penalty Enhancement Act of 2007. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Mark Grabowicz. 

Sincerely, 

PETER R. ORSZAG. 

Enclosure. 


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S. 863—Emergency and Disaster Assistance Fraud Penalty Enhancement Act of 2007 

CBO estimates that implementing S. 863 would have no significant cost to the federal government. Enacting the bill could affect 

direct spending and revenues, but CBO estimates that any such effects would not be significant. 

S. 863 contains no intergovernmental or private-sector mandates 

as defined in the unfunded Mandates Reform Act and would impose no costs on state, local, or tribal governments. 

S. 863 would establish a new federal crime for the commission 

of certain fraudulent acts relating to benefits distributed after 

major disasters or emergencies. Because the bill would establish a 

new offense, the government would be able to pursue cases that it 

otherwise would not be able to prosecute. We expect that S. 863 

would apply to a relatively small number of offenders, however, so 

any increase in costs for law enforcement, court proceedings, or 

prison operations would not be significant. Any such costs would be 

subject to the availability of appropriated funds. 

Because those prosecuted and convicted under S. 863 could be 

subject to criminal fines, the federal government might collect additional fines if the legislation is enacted. Criminal fines are recorded 

as revenues, then deposited in the Crime Victims Fund and later 

spent. CBO expects that any additional revenues and direct spending would not be significant because of the small number of cases 

likely to be affected. 

The CBO staff contact for this estimate is Mark Grabowicz. This 

estimate was approved by Peter H. Fontaine, Deputy Assistant Director for Budget Analysis. 

VIII. REGULATORY IMPACT STATEMENT

In compliance with paragraph 11(b)(1), rule XXVI of the Standing Rules of the Senate, the Committee, after due consideration, 

concludes that S. 863 will not have a significant regulatory impact. 

IX. ADDITIONAL VIEWS OF SENATOR SESSIONS

It is clear that current criminal penalties are insufficient to deter 

disaster fraud. The increasing number of indictments from the direct aftermath of Hurricanes Katrina and Rita through today illustrates this problem. The Justice Department is aggressively prosecuting these criminals, but they have asked Congress for additional tools so that the federal statutes adequately address and 

deter fraud in connection with emergency and disaster assistance. 

The bill will send a strong message that disaster relief fraud is 

a serious crime. Importantly, the increased penalties will help to 

deter this kind of fraud. Exploiting the kindness of the American 

people in times of crisis is a serious crime that will be treated with 

appropriate severity. We will not tolerate criminals stealing from 

the pockets of disaster victims. We must ensure that victims and 

the generous members of the American public are not preyed upon 

by criminals attempting to profit from these disasters and emergencies. 

The Department of Justice announced its strong support for this 

legislation by letter to the Chairman of the Committee on April 25, 

2007. The Justice Department’s Views Letter raises a number of 


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important points, and I include the letter as an attachment to this 

statement. 

JEFF SESSIONS. 


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X. CHANGES IN EXISTING LAW

In compliance with paragraph 12 of rule XXVI of the Standing 

Rules of the Senate, changes in existing law made by S. 863, as reported, are shown as follows (new matter is printed in italic, and 

existing law in which no change is proposed is shown in roman): 

TITLE 18, UNITED STATES CODE 

* * * * * * * 

PART I—CRIMES 

* * * * * * * 

CHAPTER 47—FRAUD AND FALSE STATEMENTS 

Sec. 

1001. Statements or entries generally. 

* * * * * * * 

1040. Fraud in connection with major disaster or emergency benefits. 

* * * * * * * 

§ 1040. Fraud in connection with major disaster or emergency 

benefits 

(a) Whoever, in a circumstance described in subsection (b) of this 

section, knowingly—

(1) falsifies, conceals, or covers up by any trick, scheme, or device any material fact; or 

(2) makes any materially false, fictitious, or fraudulent statement or representation, or makes or uses any false writing or 

document knowing the same to contain any materially false, fictitious, or fraudulent statement or representation, 

in any matter involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection with a major 

disaster declaration under section 401 of the Disaster Relief Act of 

1974, or an emergency declaration under section 501 of the Disaster 

Relief Act of 1974, or in connection with any procurement of property or services related to any emergency or disaster declaration as 

a prime contractor with the United States or as a subcontractor or 

supplier on a contract in which there is a prime contract with the 

United States, shall be fined under this title, imprisoned for not 

more than 30 years, or both. 

(b) The circumstance to which subsection (a) of this section refers 

is that—

(1) the authorization, transportation, transmission, transfer, 

disbursement, or payment of the benefit is in or affects interstate or foreign commerce; 

(2) the benefit is transported in the mail at any point in the 

authorization, transportation, transmission, transfer, disbursement, or payment of that benefit; or 

(3) the benefit is a record, voucher, payment, money, or thing 

of value of the United States, or of any department or agency 

thereof. 

(c) In this section, the term ‘‘benefit’’ means any record, voucher, 

payment, money or thing of value, good, service, right, or privilege 


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provided by the United States, State or local government, or other 

entity. 

* * * * * * * 

CHAPTER 63—MAIL FRAUD 

* * * * * * * 

§ 1341. Frauds and swindles 

Whoever, having devised or intending to devise any scheme or 

artifice to defraud, or for obtaining money or property by means of 

false or fraudulent pretenses, representations, or promises, or to 

sell, dispose of, loan, exchange, alter, give away, distribute, supply, 

or furnish or procure for unlawful use any counterfeit or spurious 

coin, obligation, security, or other article, or anything represented 

to be or intimated or held out to be such counterfeit or spurious 

article, for the purpose of executing such scheme or artifice or attempting so to do, places in any post office or authorized depository 

for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or deposits or causes to be deposited 

any matter or thing whatever to be sent or delivered by any private 

or commercial interstate carrier, or takes or receives therefrom, 

any such matter or thing, or knowingly causes to be delivered by 

mail or such carrier according to the direction thereon, or at the 

place at which it is directed to be delivered by the person to whom 

it is addressed, any such matter or thing, shall be fined under this 

title or imprisoned not more than 20 years, or both. If the violation 

occurs in relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection 

with, a presidentially declared major disaster or emergency, or affects a financial institution, such person shall be fined not more 

than $1,000,000 or imprisoned not more than 30 years, or both. 

* * * * * * * 

§ 1343. Fraud by wire, radio, or television 

Whoever, having devised or intending to devise any scheme or 

artifice to defraud, or for obtaining money or property by means of 

false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any 

writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation occurs in 

relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection with, a presidentially declared major disaster or emergency, or affects a financial institution, such person shall be fined not more than 

$1,000,000 or imprisoned not more than 30 years, or both. 

* * * * * * * 

Æ 


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