Foreign Aid Fraud and The American Red Cross
Taxpayers spend billions of dollars each year to help people in need throughout the world. While most emergency relief and poverty reduction programs are centered on those folks living within the United States, last year we spent $23 billion on foreign aid. Unfortunately, because of corruption and limited resources, much of that money is lost to fraud.
Foreign aid fraud is a huge problem. I spoke with one embassy official in Afghanistan who claims that embassy personnel are simply stretched too thin to accurately monitor every foreign aid project in the region.
Sometimes the money goes directly to foreign governments and sometimes it goes to contractors and vendors who agree to build schools, hospitals, and housing or provide emergency relief. When that money is misspent, everyone loses. The local population in extreme needs loses as well as U.S. taxpayers. Our reputation as a country also suffers… the people waiting for medical care or food have no way of knowing that some corrupt corporation embezzled funds. They simply see empty promises.
Luckily, President Abraham Lincoln and Congress authorized ordinary individuals to take matters into their own hands. Yes, President Lincoln. During the Civil War, Congress enacted the federal False Claims Act, a law that authorizes whistleblowers to file a lawsuit in the name of the United States government and keep a percentage of any recovery.
Last year over 700 False Claims Act cases were filed and the government paid whistleblowers $635,000,000.00. The law and the awards are quite real. Better yet, in cases of foreign aid fraud one does not even have to be a U.S. citizen to file a whistleblower suit and obtain an award.
We have reported a few foreign aid fraud cases in this blog. Most do not garner much media attention, however. A recent probe of the American Red Cross’ relief efforts provides an analogous story that sheds light on the problems we have in delivering aid outside the United States.
The American Red Cross is a private, nonprofit agency. Although chartered by Congress, they are not a public entity. Only if they misspend federal dollars could they be subject to the False Claims Act. The purpose of this story isn’t to solicit claims against the Red Cross. As noted above, our goal is to educate everyone on the problems of delivering relief services outside the U.S. and the potential for massive foreign aid fraud.
According to an investigation by ProPublica, the American Red Cross raised over $500,000,000.00 for disaster relief in Haiti yet built just 6 houses.
According to ProPublica, the American Red Cross promised to rebuild entire neighborhoods after the earthquake. Instead, “confidential memos, emails from worried top officers, and accounts of a dozen frustrated and disappointed insiders show the charity has broken promises, squandered donations, and made dubious claims of success.”
Although we believe the Red Cross did a poor job in providing relief in Haiti (and at home in response to Hurricane Katrina and Superstorm Sandy), we don’t accuse the agency of fraud. Instead, we believe the problems are much more complex.
Like the U.S. government, the Red Cross isn’t equipped to construct houses, hospitals, etc. Instead, it must contract out those services. And that is where the real foreign aid fraud begins.
Red Cross documents claim the agency was going to build 700 homes, many in the devastated Campeche neighborhood. The homes would have running water, toilets and finished floors. They were to be completed by January 2013.
When a ProPublica journalist visited the neighborhood, folks were still living in cardboard and rusty sheet metal shacks. No drinkable water. No electricity. Residents are rightfully angry with the Red Cross.
Worse, ProPublica says just six houses were built. Millions of dollars, years of delays and the final product? Six houses!
While many of the problems may be attributable to corrupt contractors, the Red Cross doesn’t get off scot free. Other aid groups were able to build 9000 homes.
The report also claims that instead of making true infrastructure improvements, the Red Cross did things such as an educational hand-washing campaign. Unfortunately, the people who were targeted by the campaign have no running water, much less soap.
We are frustrated by these stories. Millions of Americans donate money for relief campaign thinking that their money is doing real good in the world. Our government is spending tens of billions of dollars on worldwide relief efforts too. Yet much of that money is lost to foreign aid fraud.
As one of the leading whistleblower law firms, we are seeking people who wish to rise up and really make a difference. Whistleblowers are heroes. True heroes. Their efforts save taxpayers billions of dollars per year and make a real difference in fighting corruption and fraud.
If you have original source (inside) information about foreign aid fraud anywhere in the world give us a call. If the project involves federal tax dollars, you may be eligible for a sizeable award. In the last year we have helped our clients collect over $100,000,000.00 in rewards.
All inquiries are protected by the attorney – client privilege and kept strictly confidential.
For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct).
MahanyLaw – America’s Whistleblower Lawyers