SDNY Civil Settlements

New York City will pay $5.3 million to the United States for fraudulently obtaining FEMA funds related to Superstorm Sandy in a False Claims Act settlement with the Southern District of New York. The City admitted improperly seeking reimbursement from FEMA for vehicles that were not damaged by Superstorm Sandy.

Superstorm Sandy swept through New York in October 2012 and left extraordinary damage in its wake. The New York City Department of Transportation (NYC DOT) sought reimbursement from the Federal Emergency Management Agency (FEMA) for 132 vehicles it certified had been directly damages by Sandy. Many of these vehicles, however, had been non-operational prior to the storm.

In February, the SDNY filed a civil complaint asserting False Claims Act and common law claims. In a settlement stipulation filed the same day, the City admitted to fraudulent conduct, including:

  • NYC DOT failed to sufficiently review whether the vehicles were operational or in use prior to Sandy, and whether the amounts in the request for reimbursement accurately represented losses incurred due to Sandy;
  • The City official signing the certification did not have personal knowledge and failed to direct a proper investigation before signing the certification;
  • Shortly after the certification, a NYC DOT employee sent an e-mail to the certifying official that certain vehicles were “junk for years;”
  • The City did not take steps to notify FEMA that it was not entitled to certain of the requested funds until after it became aware of the SDNY investigation.

The City agreed to a total settlement of $5.3 million, including a repayment of over $4 million and a de-obligation of over $1 million that FEMA had authorized but not yet paid.  The City agreed to cooperate with the investigation of individuals, and the release language of the settlement agreement specifically provided that “[f]or avoidance of doubt, this Stipulation does not release any current or former officer, director, employee, or agent of the City from liability of any kind.”

This settlement, and the possible continuing investigation, highlight the significant responsibilities held by those who certify information in requests for federal funds.