La. Judge: Fed. Prosecutors Should Get Involved in Whistle-Blower Case

The judge in New Orleans who unsealed a federal whistle-blower case accusing insurance companies of overbilling the National Flood Insurance Program says the U.S. Department of Justice should get involved or explain why not.

The case was brought by former insurance adjusters who say they have evidence that insurance companies overbilled the federal flood program while underpaying claims for Hurricane Katrina wind damage.

U.S. District Judge Peter Beer filed a one-sentence motion this week: “The Court, on its own motion, respectfully requests the United States Department of Justice enter this case by July 9, 2007, or show cause on July 11, 2007, at 9:30 a.m., why they are not intervening in this civil action.”

The U.S. Attorney’s Office in Baton Rouge, which fielded the complaint with the Department of Justice in Washington even though it was filed in New Orleans, referred a call for comment to Washington. The department has no comment, spokesman Charles Miller said.

Beer said he was surprised to learn that the U.S. attorney’s office in Baton Rouge planned only to monitor the case, which now is being prosecuted for the U.S. government by a private attorney who represents the whistle-blowers.

“What about the good old general public? Who better to look after the interests of the public than the U.S. attorneys?” Beer said. “This is a case the government should be involved with. The United States should be right in there, and not just monitoring it, given as far-reaching and serious as this case is.”

The whistle-blowers say that they’ve analyzed insurance appraisals of damage and readjusted claims at 150 properties in the New Orleans area. They say all of the flood claims were overpaid – by an average of 66 percent – while the wind claims were underpaid.

The average means the overcharges could total billions out of the $14 billion paid after Hurricanes Katrina and Rita in Louisiana.

Because private insurance carriers administer federal flood insurance policies and adjust both flood and wind claims, the theory is that companies may be dumping the bills for wind damage onto the taxpayer-financed flood program to save themselves money.

Insurance companies have said they stand by their claims-handling practices.

Beer’s motion was copied to U.S. Attorney General Alberto Gonzales or his deputy; Jim Letten, the U.S. attorney in New Orleans; and David Dugas, the U.S. attorney in Baton Rouge.

Information from: The Times-Picayune, www.timespicayune.com.