Katrina victims may have to repay money

Contractor says it rushed to deliver aid; agency to collect overpayments

Bill Haber / AP

New Orleans City Council members, Shelley Midura, Stacey Head Arnie Fielkow, from left, and Louisiana Gov. Kathleen Blanco listen to Cynthia Hedge-Morrell, right, before the opening the Road Home office in New Orleans in this Aug. 22, 2006, photo. The private contractor is under investigation for the compensation it received to run the Road Home grant program for Katrina victims.

NEW ORLEANS - Imagine that your home was reduced to mold-covered wood framing by Hurricane Katrina. Desperate for money to rebuild, you engage in a frustrating bureaucratic process, and after months of living in a government provided-trailer that gives off formaldehyde fumes you finally win a federal grant.

Then a collector announces that you have to pay back thousands of dollars.

For thousands of Katrina victims, this may be a reality.

A private contractor under investigation for the compensation it received to run the Road Home grant program for Katrina victims says that in the rush to deliver aid to homeowners in need some people got too much. Now it wants to hire a separate company to collect millions in grant overpayments.

The contractor, ICF International of Fairfax, Va., revealed the extent of the overpayments when it issued a March 11 request for bids from companies willing to handle "approximately 1,000 to 5,000 cases that will necessitate collection effort."

The bid invitation said: "The average amount to be collected is estimated to be approximately $35,000, but in some cases may be as high as $100,000 to $150,000."

The biggest grant amount allowed by the Road Home program is $150,000, so ICF believes it paid some recipients the maximum when they should not have received a penny. If ICF's highest estimate of 5,000 collection cases — overpaid by an average of $35,000 — proves to be true, that means applicants will have to pay back a total of $175 million.

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