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VA flood fraud uncovered

Once in the maelstrom of a flood, the tiny town of Hurley, Va., is now in the maelstrom of indictments involving flood relief funds.

BY SUSAN KIM | HURLEY, Va. | June 26, 2004

"Now, we learn that the very individuals who were elected to serve and protect the people were, in fact, stealing from them."

—U.S. Attorney John L. Brownlee

Once in the maelstrom of a flood, the tiny town of Hurley, Va., is now in the maelstrom of indictments involving flood relief funds.

This week federal authorities charged 16 individuals and six companies in Buchanan County - including the top county official - with accepting bribes ranging from hunting dogs to NASCAR tickets for directing disaster relief money to contractors.

In 2002, Hurley - nestled near the West Virginia-Kentucky border - was submerged by floodwaters that killed two people and caused some $30 million in damages.

The investigation resulted in charges of racketeering, conspiracy, program fraud, mail fraud, false statements, bribery, money laundering, witness tampering, perjury and social security fraud.

The individuals and companies were indicted for accepting some $545,000 in bribes and for awarding some $7.6 million in flood relief contracts.

At least some residents said they had a notion of what was going on before the 43-count indictment was unsealed Wednesday.

"Oh, yes, people were saying, 'they are dividing the Hurley flood money up between them,' " said one resident. "We've known what was going on for months."

If people suspect fraud, where can they turn, especially when their family members might be on the list of indictments?

As one resident said, "We keep waiting to see who's next. Nobody from my family is on the list. I mean, not so far anyway."

No matter where you live - even if you live in a town where everybody knows everybody else - the Federal Emergency Management Agency (FEMA) makes available a toll-free number to report suspected fraud, explained a FEMA official in the region. "You can report anonymously," she said.

In an area where people already tend to mistrust government entities, news of fraud tends to confirm existing suspicions.

At a news conference, U.S. Attorney John L. Brownlee said the indicted officials allegedly stole from flood-ravaged families "in their time of great need. Now, we learn that the very individuals who were elected to serve and protect the people were, in fact, stealing from them," Brownlee said. "This type of public corruption will never be tolerated."

"Initially, rebuilding responsibilities were awarded to a company based in New Orleans," Brownlee said. "However, after public outcry over the outsourcing, the Federal Emergency Management Agency turned the operations over to Buchanan County officials."

The county board of supervisors was in charge of awarding contracts for bridge repair, demolition and other operations related to flood cleanup. Prosecutors alleged officials started working secretly with their associates to fix contracts at high prices.

Stuart Ray Blankenship, who was chairman of the Buchanan County Board of Supervisors before James Ralph "Pete" Stiltner took over in January 2003, began accepting trained hunting dogs as bribes in exchange for the overpriced contracts, Brownlee said.

Both Blankenship and Stiltner were among those indicted.

A FEMA disaster assistance contract employee was also indicted.

The bribes, according to the U.S. Attorney's Office, were roughly divided as follows: $350,000 in cash; $40,000 in hunting dogs; $15,000 in all-terrain vehicles; $40,000 in trucks; $60,000 in fraudulent land deals; and, $50,000 in assorted items, including construction of a dog kennel; payments for hunting trips; firearms; a truck motor; a wide screen television with surround sound; men's and women's clothing; an air conditioner; a pressure washer; Washington Wizard tickets; University of Tennessee football tickets; NASCAR tickets; tires; building materials; and, personal services that include feeding hunting dogs, cleaning out the excrement from dog kennels, and mowing lawns.

Fraud charges might make people in small mountain communities more hesitant to call FEMA and register, said the regional FEMA official. Areas in both Virginia and West Virginia sustained extensive flood damage last month.

She urged people not only to register with FEMA - but also to call back if something doesn't sound right. "People aren't really assertive about calling back. We hire a lot of people off the street during a disaster. We give them three hours of training and turn them loose on the phones."

The system works well, she said, because it helps get aid out quickly to those most in need. But the phone operators are human, too, she said, and they make mistakes. "If something doesn't sound right, you have the right to ask."

People also shouldn't depend on their neighbor for information about their own flood damage, she added. "Every case is individual. You're comparing apples to oranges if you listen to your neighbor. Check the facts."

If you turn down FEMA aid even though you're eligible, you're not necessarily being a "good citizen," she said. "The more people who call and register, every person who calls, means another dollar spent on mitigation for that community."

In an attempt to encourage more people to register with FEMA, government officials have set up tables at Lowe's, Home Depot, and 84 Lumber stores in flood-affected areas.

This effort debuted Saturday, when more than 250 people approached FEMA officials and spoke to a mitigation counselor, said the FEMA official. The tables will be in place for at least five weeks, she said. "We hope to help folks who are intimidated about approaching FEMA - for whatever reason," she said.

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