The Katrina Konspiracy
By ROYAL PAs a loan officer for a federal agency that was supposed to help homeowners and businesses get back on their feet, he had high expectations he could make a difference. But he recalls how he was forced to turn away many qualified applicants because of what he says was pressure from his supervisors to close files quickly.
Karen Bazile remembers having high hopes, too, when she applied for a loan from the same agency, the Small Business Administration, to rebuild her home in the New Orleans suburb of Chalmette. While she ultimately got the money, she quickly lost faith as she struggled with different loan officers who misplaced her paperwork and told her she had only 48 hours to find and fax critical documents or her application would be canceled.
Some 160 miles to the east, in Alabama, Erik Schmitz, former commodore of the Fairhope Yacht Club, takes in a breathtaking view of Mobile Bay from a posh new clubhouse rebuilt in part with a $1.5 million disaster loan, the maximum from the SBA. For Schmitz, the entire loan process was smooth sailing.
While stories of the Federal Emergency Management Agency's contaminated trailers and the Army Corps of Engineers' inability to shore up the levees captured the headlines in the aftermath of the deadly storms of 2005, the bungling of the SBA, the lead federal agency helping people rebuild their homes and businesses, has largely been untold.
The sagas of Schmitz, Bazile and the SBA's Young, who worked out of the agency's massive loan processing center in Fort Worth, Texas, collectively reveal how the SBA failed in so many ways, an ominous experience as the agency prepares to play a similar role in the aftermath of the massive BP PLC oil spill.
Mismanaged bureaucracy
These are stories of a mismanaged bureaucracy that still hurt
half a decade later: tales of applications for low-interest
disaster loans that should have been approved but were not, of
applications deleted from the SBA computer system for no valid
reason, of impossible-to-meet deadlines manufactured to clear
backlogs, and of a process so chaotic and painful that thousands
simply gave up.
An Associated Press investigation based on more than 200 interviews, thousands of pages of public documents obtained under the federal Freedom of Information Act and a first-ever detailed computer analysis of SBA data from hurricanes Katrina and Rita found that:
- Despite the obvious need, 55 percent of homeowners and businesses that applied for help after the hurricanes were turned away. According to data provided by SBA, of 318,953 applications processed, 175,463 were rejected and 143,490 were approved.
- Only 60 percent of the loan money approved by SBA ultimately reached applicants. Over the years, SBA officials have told congressional committees that the agency had approved more than $10 billion in loans, touting it as an example of how SBA had helped those on the Gulf Coast. However, according to the data, only $6.1 billion of the approved loan money has been dispensed. SBA officials say many applicants never accepted the loans because they found other ways to rebuild, including using insurance money. But many former applicants said in interviews that they just walked away because the entire process took too long and was too complicated.
- Of the money SBA did distribute, $357 million — nearly 6 percent — has never been repaid. More than a dozen people whose loans were charged off told the AP that the agency hasn't contacted them about repayment.
- Country clubs, yacht clubs, exclusive private schools and megachurches received millions in loans from the agency founded in 1953 with a mission to "aid, counsel, assist and protect the interests of small business concerns." Some of the more substantial operations rebuilt bigger and better, often contradicting SBA rules that say damaged buildings should be repaired only to their original state.
- Homeowners and businesses in higher-income areas were more likely to get a loan than those in lower-income areas, according to AP's analysis of SBA data by ZIP code. "The truth is that only the wealthy moved through the system easily," said Gale Martin, another former SBA loan officer. "If you were of a certain income, we funded you first, which is not the way the system is supposed to work." Martin contended that contrary to the SBA mission to especially help people who didn't always have the means to rebuild, applicants with higher credit scores and bigger incomes were cherry-picked for processing first because those files could be closed quicker.
- A disparity also existed along racial lines. For example, the predominantly white, wealthier Lakeview section of New Orleans had the city's highest ratio of approvals to rejections, while the lowest approval rates were in poorer, mostly black areas like the Lower 9th Ward. But a racial disparity was clear even among economically similar areas. SBA approved nearly 66 percent of loan applications in a predominantly white part of suburban St. Bernard Parish but approved only 42.1 percent in a predominantly black, adjacent section of eastern New Orleans with comparable median household income. SBA officials said they don't collect information about race on loan applications, but try to reach out to applicants in poor neighborhoods. Civil rights leaders say the agency hasn't done enough to help.
SBA officials insist the agency today is better prepared to handle a major disaster.
"We're not proud of what happened during the 2005 Gulf Coast hurricanes," said James Rivera, deputy associate administrator of SBA's office of disaster assistance. "Our response was slow, but we've learned from our mistakes. We've had five years to reflect on this."
During that period, agency officials say, they have added staff, improved technology and simplified the loan process to push money out quickly to disaster victims.
But recent reports by government watchdog groups and some critics have slammed SBA for being too slow to implement measures that could improve an agency with a troubled past.
Congressional investigators and SBA whistleblowers question whether the agency is any better equipped for a major disaster today, as the region grapples with the oil-spill related assault on three pillars of its economy — seafood, tourism and offshore drilling.
'This is going to happen again'
The SBA
is once again setting up disaster recovery centers along the
Gulf Coast, although the oil spill effort will likely be
overshadowed by the hurricanes' economic toll. While BP is
responsible for the financial impact caused by the spill, the
SBA is helping people while they wait for the corporate
assistance.
"This is going to happen again — tomorrow — if there's another Katrina," Martin said. "They didn't fix enough for it not to happen."
Images of New Orleanians trapped inside the Superdome without food and water, or desperately waiting on rooftops for help, haunted Americans in September 2005. Police officers walked off the job, looters ransacked downtown shops, and critics scolded the Bush administration for being too slow to respond.
Meanwhile, a different kind of chaos was unfolding inside the SBA.
A new computer system that was supposed to speed and simplify the loan process crashed time and again, resulting in massive delays. But that wasn't the only problem.
"There were lots of people sitting around not doing anything with thousands of applications pouring in everyday," said Brad Durtschi, a former SBA loan officer who now works for FEMA.
In the years leading up to the storms, the agency's staff had been cut. When Katrina hit, followed by Rita about three weeks later, SBA had only 880 employees to process hundreds of thousands of loan applications, including 190 loan officers working at the Fort Worth center.
SBA scrambled to hire several thousand additional staffers, many to work in Texas, where loan applications filed in dozens of makeshift disaster recovery centers along the Gulf Coast were sent for processing. The new loan officers — many from the private sector, with no loan processing experience — were rushed into service and expected to navigate a complex set of rules and regulations.
It was bedlam, Durtschi said.
The loan applications piled up, and the phones rang and rang. People wanted to know if their application had been approved, and when they would receive money to help reopen their business or rebuild their home. At one point, officers were told by supervisors not to answer phones because the questions were taking up too much time, former loan officers and supervisors told the AP.
'Crying and begging'
By December 2005, the system was gridlocked. Hundreds of
thousands of applications were sitting in computer queues
awaiting processing. And the phone calls turned from
inquisitive to frustrated to angry.
"People called in everyday crying and begging," Martin said. "We were forced to do things that were wrong."
With congressional pressure mounting to turn loans around more quickly, the agency began using new methods to clear the backlog that had little to do with helping people get loans, former loan officers and supervisors said.
Supervisors would reject applications if a single sheet of paper or signature was out of place. In the first four months following Katrina and Rita, the agency rejected more loans than it approved, according to an AP analysis. Loan officers were required to process up to twice as many applications per day. When one landed on their desk, a loan officer had to try three times within 24 hours to reach the potential borrower by telephone. If they didn't, the loan was either declined or indefinitely shelved.
If shelved, the loan application was effectively canceled and a letter was generated saying the applicant had 60 days to reapply. But many times, the loan officers, under pressure to reach quotas, would call only once or not at all, then withdraw or decline the application, the former loan workers said.
Overwhelmed employees
They and their
supervisors described computer queues clogged with tens of
thousands of loan applications, and of overwhelmed employees
being told to put efficiency above all else and callously
dismiss the pleas of desperate people.
"People were homeless, living in their cars," said Young, now a bank loan officer. "People were running out of rental assistance. They didn't have a place to go. They had worn out their favors with their families. And they needed to move on. And they would call and ask: 'Could you please do anything you can to help us?'"
"I couldn't sleep," he said. "I knew it wasn't right."
Said Durtschi: "We had no compassion for these people. To our supervisors, it was all about production and we hurt a lot of people along the way."
A 2007 report from the SBA's Office of the Inspector General, which performs independent reviews and audits of the agency, criticized SBA for canceling pending approved loans without warning.
During one period in 2006, the report said, the agency's Buffalo, N.Y., call center terminated 7,752 pending loans without notifying borrowers in advance. In many cases, the investigators found, no call had ever been made to the applicant to begin final processing.
If a loan officer did manage to reach a borrower, the applicant was given 48 hours to fax documents to bring the loan to the closing phase. Often, the borrower didn't have all the paperwork readily available.
"Maybe you need a deed and it's at the courthouse, but the courthouse is under water. The documentation is destroyed," said Young, the former SBA loan officer. "Or maybe you need payroll stubs, and that information is gone. Now you're told you have 48 hours to get it. That's even if we reach you by phone. We have your old phone number. Sometimes we call, sometimes we don't."
When borrowers requested additional time, the agency was unyielding, Young said.
"We never budged," he said. "It was a manufactured deadline that put undue stress on people."
"At the end of the 48 hours, you're wiped out from our queue," he said. "You didn't exist."
'We weren't there to help'
When a borrower did find the critical documents and fax them to
Fort Worth, the paperwork would often get lost. The office had
only a few fax machines to handle the crush. Receipt of the
documentation was assured only if a loan officer waited by the
machine to snag the papers.
Bazile remembers faxing 50- to 70-page packets two or three
times before someone at the processing center would acknowledge
receipt.
"How could something like that get lost?" she wondered. "It was
a constant frustration." Plus, the documents contained personal
information, such as Social Security and bank account numbers.
Martin recalled once arguing unsuccessfully with her supervisor in favor of approving a loan for a small business owner and being told: "Don't think about it. Move on."
"They were ruthless, absolutely ruthless," Martin said of her bosses. "We weren't there to help the public."
Cash prizes
Those same supervisors often
conducted contests with cash prizes to reward loan officers who
cleared the most applications, usually by rejecting as many as
possible. One supervisor told the AP she won $100 for exceeding
production quotas.
"I would hear loan officers laughing about the loans they turned down," Young said. "The same people kept winning."
In recent weeks, the AP found more than two dozen of the same supervisors still working in the Fort Worth office. But all of the current supervisors reached by the AP declined to comment, saying the agency prohibited them from talking.
Others recall that productivity was the mantra at staff meetings. At one, a supervisor explained to loan officers how to get people off the phone. Use an egg timer, he said. When it goes off, hang up.
"Your performance was measured on the number of files you closed," said Bill Russell, a former loan officer and certified public accountant. "It wasn't long until people discovered that to meet the quota, the easiest thing to do was just to deny the loan."
One supervisor who spoke to the AP on condition of anonymity out of fear she would lose her job said that on weekends fellow supervisors and other managers would order pizza and just empty the queue of applications.
The extra sessions were called "Signoff Sunday," she said. "It was all about getting these loans out of the system to make it appear like we were clearing up the backlog and helping people. But we weren't helping people. What we were doing was saving our own jobs."
SBA's Rivera questioned whether supervisors pushed loans through without review.
"Obviously when you have 4,250 employees, you're going to have some disgruntled employees," he said.
Scarface Talks About The "Dirty South"
By ROYAL PI was nominated [to be honored at the "Dirty South" VH1 Hip Hop Honors] but I declined to accept because I don't wanna be classified as just “Dirty South.” I'm Hip Hop, man. I’m not going because I feel slighted. Even though it was a nice gesture, I feel like it’s just a pacifier. They’re like, “Let’s give these n***as down there a pacifier so they can stop feeling left out. We’ll make Luke and all these n***as down here look funny,” you know? “Let’s put a plate of fried chicken and some watermelon and let’s just do some n***a-ass s**t.” (laughs) Quote, end quote. "Some n***a-ass s**t." Fried chicken and watermelon. "s**t, the faster we get this over with, the better."
Honoring [Uncle] Luke and James [Prince] and [Master] P and Timbaland and JD and Dungeon Family is a good thing. I don't wanna f**k their Honors up. They helped lay the foundation. More power to 'em. I respect what they do and I respect what they've done for Hip Hop, but to put us in a category is disrespectful. Why would you categorize us as "Dirty South"? Why can't you just honor some muthaf**kers from down here and leave it like that? You ain't gotta make us look extra country. We know where we're from and we know where you're from. We know where Hip Hop came from, man. We're cool with that. I'm proud to be from Houston but don't make a mockery of my accomplishments. We're not "dirty" down here in the South anyway. This s**t down here probably cleaner than the rest of the country, cause we got grandmas down here. Our grandmas don't play that s**t.
I was a part of the Slick Rick and De La Soul and Too $hort and Public Enemy [Hip Hop Honors]. I felt good about being a part of that. I went [to Hip Hop Honors] when they honored Def Jam because I wanted to be a part of that. I felt honored that they would even call me to do it. But this year, I totally disagree with how they're trying to categorize us. You know how they make us look on TV? Like we live on the front porch with flies and s**t flying around us, with our stomachs all big eating watermelon rinds? That ain't us, man. Don't f**kin' make a mockery of us because we come from down here and you have no f**kin' idea what it looks like. They're gonna try to put us with some cows and just make us look f**ked up, man, like we don't know what the f**k we doin' down here. We're smart, man. Our life is slowed down so we don't miss nothing. When s**t gets moving too fast you miss everything. s**t's slowed down here so we see it all.
I come from the era when New York and L.A. had the only Hip Hop, and they weren’t f**kin’ with us, at all. If you think I'm lyin', check the history of Hip Hop. Try to pull up some footage from the 1989/1990 New Music Seminar. That's what I base my whole f**kin' life on: the New Music Seminar 1989/1990. They was NOT f**kin' with us. We sold records all over the f**kin' country and New York made a mockery of it. They f**kin' booed the Geto Boys in New York. They sure did.
Back when Luke had Skywalker Records and J had Rap-A-Lot Records, they weren’t tryin’ to do no South s**t. “It didn’t come from New York, son, so f**k that.” That was their attitude. Just because a TV was made in Japan, is it a Japanese TV? Or is it just a f**king TV? If a lightbulb was made in China is it a Chinese lightbulb?
It was hard breaking through. It was hard getting respect from the East Coast. We didn't get no f**kin' love from nobody. Fab Five Freddy came down here early in our career to see what we were really about, and I respected and appreciated that. But we been having money down here. We been rollin' f**kin' Bentleys and Ferraris down here since the 80s. Muthaf**kers ain't just started rockin' gold and platinum chains. We had that s**t in high school. s**t, we just now started running out of money. (laughs) That's how long we been had money down here.
Eventually New York came around and started f**kin' with us. But for an East Coast-based show to call themselves showing some f**kin' love by making a Southern watered-down version of what the show is supposed to be or what Hip Hop really is, man, I feel f**ked up about that s**t. Because we fought harder than a muthaf**ker. When [Ice] Cube was on Hip Hop Honors, it wasn't the "Hip Hop West Coast Honors." Every part of the ghetto is the same mu'f**kin' story. Hip Hop is one machine, regardless if you come from New York or Bareback, Africa. It's f**kin' Hip Hop.
But that's just [my opinion], and f**k me. I don't mean nothing. I'm just a n***a who fought harder than a muthaf**ker to get our records played in New York and on the East Coast period. And now all a n***a needs to do is fart on a record and it gets played. So it's fine by me. I'm cool with that. I'm not mad about it, I just feel disrespected. Whoever goes [to Hip Hop Honors], it's fine and dandy by me. But if you wanted to do a Southern-based show you shoulda got a n***a DOWN SOUTH to do it in the South.
From: (www.ozonemag.com)
UnderCover "FRIENDS" (WATCH OUT!!!)
By ROYAL PU.S. law enforcement agents are following the rest of the Internet world into popular social-networking services, going undercover with false online profiles to communicate with suspects and gather private information, according to an internal Justice Department document that offers a tantalizing glimpse of issues related to privacy and crime-fighting.
Think you know who's behind that "friend" request? Think again. Your new "friend" just might be the FBI.
The document, obtained in a Freedom of Information Act lawsuit, makes clear that U.S. agents are already logging on surreptitiously to exchange messages with suspects, identify a target's friends or relatives and browse private information such as postings, personal photographs and video clips.
Among other purposes: Investigators can check suspects' alibis by comparing stories told to police with tweets sent at the same time about their whereabouts. Online photos from a suspicious spending spree — people posing with jewelry, guns or fancy cars — can link suspects or their friends to robberies or burglaries.
The Electronic Frontier Foundation, a San Francisco-based civil liberties group, obtained the Justice Department document when it sued the agency and five others in federal court. The 33-page document underscores the importance of social networking sites to U.S. authorities. The foundation said it would publish the document on its Web site on Tuesday.
With agents going undercover, state and local police coordinate their online activities with the Secret Service, FBI and other federal agencies in a strategy known as "deconfliction" to keep out of each other's way.
"You could really mess up someone's investigation because you're investigating the same person and maybe doing things that are counterproductive to what another agency is doing," said Detective Frank Dannahey of the Rocky Hill, Conn., Police Department, a veteran of dozens of undercover cases.
A decade ago, agents kept watch over AOL and MSN chat rooms to nab sexual predators. But those text-only chat services are old-school compared with today's social media, which contain mountains of personal data, photographs, videos and audio clips — a potential treasure trove of evidence for cases of violent crime, financial fraud and much more.
The Justice Department document, part of a presentation given in August by top cybercrime officials, describes the value of Facebook, Twitter, MySpace, LinkedIn and other services to government investigators. It does not describe in detail the boundaries for using them.
"It doesn't really discuss any mechanisms for accountability or ensuring that government agents use those tools responsibly," said Marcia Hoffman, a senior attorney with the Electronic Frontier Foundation.
The group sued in Washington to force the government to disclose its policies for using social networking sites in investigations, data collection and surveillance.
The foundation also obtained an Internal Revenue Service document that instructs employees on how to use to use Internet tools — including social networking sites — to investigate taxpayers. The document states that IRS employees are barred from using deception or creating fake accounts to get information, a directive the group says is commendable.
Covert investigations on social-networking services are legal and governed by internal rules, according to Justice Department officials. But they would not say what those rules are.
The Justice Department document raises a legal question about a social-media bullying case in which U.S. prosecutors charged a Missouri woman with computer fraud for creating a fake MySpace account — effectively the same activity that undercover agents are doing, although for different purposes.
The woman, Lori Drew, helped create an account for a fictitious teen boy on MySpace and sent flirtatious messages to a 13-year-old neighborhood girl in his name. The girl hanged herself in October 2006, in a St. Louis suburb, after she received a message saying the world would be better without her.
A jury in California, where MySpace has its servers, convicted Drew of three misdemeanor counts of accessing computers without authorization because she was accused of violating MySpace's rules against creating fake accounts. But last year a judge overturned the verdicts, citing the vagueness of the law.
"If agents violate terms of service, is that 'otherwise illegal activity'?" the document asks. It doesn't provide an answer.
Facebook's rules, for example, specify that users "will not provide any false personal information on Facebook, or create an account for anyone other than yourself without permission." Twitter's rules prohibit its users from sending deceptive or false information. MySpace requires that information for accounts be "truthful and accurate."
A former U.S. cybersecurity prosecutor, Marc Zwillinger, said investigators should be able to go undercover in the online world the same way they do in the real world, even if such conduct is barred by a company's rules. But there have to be limits, he said.
In the face-to-face world, agents can't impersonate a suspect's spouse, child, parent or best friend. But online, behind the guise of a social-networking account, they can.
"This new situation presents a need for careful oversight so that law enforcement does not use social networking to intrude on some of our most personal relationships," said Zwillinger, whose firm does legal work for Yahoo and MySpace.
Undercover operations aren't necessary if the suspect is reckless. Federal authorities nabbed a man wanted on bank fraud charges after he started posting Facebook updates about the fun he was having in Mexico.
Maxi Sopo, a native of Cameroon living in the Seattle area, apparently slipped across the border into Mexico in a rented car last year after learning that federal agents were investigating the alleged scheme. The agents initially could find no trace of him on social media sites, and they were unable to pin down his exact location in Mexico. But they kept checking and eventually found Sopo on Facebook.
While Sopo's online profile was private, his list of friends was not. Assistant U.S. Attorney Michael Scoville began going through the list and was able to learn where Sopo was living. Mexican authorities arrested Sopo in September. He is awaiting extradition to the U.S.
The Justice document describes how Facebook, MySpace and Twitter have interacted with federal investigators: Facebook is "often cooperative with emergency requests," the government said. MySpace preserves information about its users indefinitely and even stores data from deleted accounts for one year. But Twitter's lawyers tell prosecutors they need a warrant or subpoena before the company turns over customer information, the document says.
"Will not preserve data without legal process," the document says under the heading, "Getting Info From Twitter ... the bad news."
Twitter did not respond to a request for comment for this story.
The chief security officer for MySpace, Hemanshu Nigam, said MySpace doesn't want to be the company that stands in the way of an investigation. "That said, we also want to make sure that our users' privacy is protected and any data that's disclosed is done under proper legal process," Nigam said.
MySpace requires a search warrant for private messages less than six months old, according to the company.
Facebook spokesman Andrew Noyes said the company has put together a handbook to help law enforcement officials understand "the proper ways to request information from Facebook to aid investigations."
The Justice document includes sections about its own lawyers. For government attorneys taking cases to trial, social networks are a "valuable source of info on defense witnesses," they said. "Knowledge is power. ... Research all witnesses on social networking sites."
But the government warned prosecutors to advise their own witnesses not to discuss cases on social media sites and to "think carefully about what they post."
It also cautioned federal law enforcement officials to think prudently before adding judges or defense counsel as "friends" on these services.
"Social networking and the courtroom can be a dangerous combination," the government said.
___
On the Net:
Link to Justice Department document: http://tinyurl.com/yjc6mql
By RICHARD LARDNER, AP
2010
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