Watch for scams, Gulf Coast homeowners told
Officials along the Gulf Coast are warning homeowners that they will likely face a wave of contractor scams in the coming months as they begin collecting billions of dollars in government grants to rebuild what Hurricane Katrina destroyed. Mississippi has hired six investigators to target schemes aimed at recipients. Louisiana will send out vans to warn consumers about scams and take complaints. Both states are filling the airwaves with warnings about common schemes, and regularly warn aid recipients to research contractors and put work agreements in writing.

Mississippi has hired six investigators to target schemes aimed at recipients. Louisiana will send out vans to warn consumers about scams and take complaints. Both states are filling the airwaves with warnings about common schemes, and regularly warn aid recipients to research contractors and put work agreements in writing.

The grant programs in both states will distribute as much as $10.5 billion in aid to homeowners and could trigger thousands of building projects in areas already struggling with a shortage of qualified contractors.

"What used to be an occasional complaint about phony contractors or an occasional fraud has turned into — well, the best way I can describe it is blood in the water," says Charles Marceaux, executive director of Louisiana's contractor licensing board. The board now reviews the conduct of about 100 contractors each month, based on complaints from homeowners, Marceaux says. The complaints range from concerns about unqualified local workers to information about rip-off artists from as far away as Mexico, he says.

The temptation of such scams will only intensify as more homeowners start collecting grants, he says. So far, Louisiana's grant program has given money to 104 of the almost 92,000 people who applied, and Mississippi has paid 8,200 of its roughly 17,500 applicants"The biggest risk for fraud is once we put the money into the hands of a homeowner," says Donna Sanford, who runs Mississippi's program.

It's the latest venue for fraud in the federal government's $80 billion hurricane recovery effort, already faulted repeatedly by federal auditors for waste and abuse. The U.S. Government Accountability Office,the investigative arm of Congress, estimated this year that that Federal Emergency Management Agency has made $1 billion worth of fraudulent or unjustified aid payments.

Officials expect contracting schemes will make up the next wave of fraud, in part because taking money from homeowners is already proving far less complicated than scamming the government-run grants, Mississippi State Auditor Phil Bryant says. Both states required that applicants be interviewed in person and prove they own damaged homes; Louisiana also photographed and thumbprinted applicants.

"This is federal taxpayer money, and we're going to have zero tolerance for any fraud, abuse or corruption," Louisiana Attorney General Charles C. Foti, Jr. says. He says his office now gets 125 contractor fraud complaints a week, and the number is increasing.