The Scheme

The best place to hide a needle is in a haystack of needles.

From the time my children were old enough to doubt there really was a Santa Claus until the older two were grown, I can only recall one year that none of the three found where I was hiding their Christmas presents – the year I wrapped their gifts and set them under the tree.

Frankly, I was surprised they didn’t figure out my scheme; but nowhere near as surprised as I was the OIG couldn’t find the scheme to shift cost to the NFIP – much less as shocked as I was to learn investigators from MID couldn’t find it either.

Maybe both investigations were looking for a needle in a haystack when every element of the scheme was in plain view, a needle hidden in a haystack of needles. Pick them out one by one, put the elements together and you’ll see what the Rigsby sisters saw – the scheme.

My kids made looking for their gifts an insiders game with a legitimate reason ready to cover if they were caught. One searched the car, I can’t find my math book; another the closets, I’m looking for my sweatshirt; the little one they sent under the beds, I’ve lost my tennis shoes.

Wind versus water is an insiders game, too. It can be played as a word game or a mind game, a blame game, a power game; even a monopoly game with players swapping property cards purchased with printed paper that passes for money.

In the early morning hours on the 29^th of August, 2005, they all became one big game, the scheme – not hidden in NFIP claims but in clear view in the NFIP claims handling systems and the qui tam claim filed by the Rigsby sisters as restated in their Response to the first set of dispositive motions.

…the Rigsbys provided to the government examples of specific claims as well as detailed, previously undisclosed allegations regarding the mechanisms and artifices used by State Farm to defraud the government, including, but not limited to:

• Causing Haag to write a report that was contrary to science and all normative models of hurricanes in order to lend credibility to adjusters who were assigning wind claims to water damage;

• Seeking compliant and poorly-trained adjusters from Renfroe to assist in State Farm’s handling of flood-related losses;

• Instructing adjusters to overstate the amount of damage when using the XACT Total program in order to “hit the limits” of the flood policies;

• Canceling engineering reports that did not reflect flood damage as the cause of loss;

• Terminating engineering companies who refused to change their reports to reflect flood damage as the cause of loss.

Now do you see it? Take a closer look. Start with what could be seen on the 29^th of August 2005.

At 6:10am CST, the hurricane made a second landfall south of Buras, Louisiana. Hurricane force winds extend outward up to 125 miles from the centers…and tropical storm force winds extend outward up to 230 miles.

The eye crossed the coastline again at 10:00am …downgraded to a Category 3…the most dangerous part of the storm, the eastern eyewall, hitting the Mississippi coast at the Mississippi – Louisiana border with 125 mph wind…35 miles northeast of the New Orleans.

Hurricane force winds continued 150 miles inland and didn’t weaken to a tropical depression until the next day when the storm passed over the Tennessee Valley.

In Mississippi alone, State Farm had over 80,000 windstorm claims with 39,044 in the three coastal counties of the State, including 6269 flood claims. In other words over 93% were wind damage claims with no flood coverage.

However, while Katrina’s powerful winds were moving through the State, the City of New Orleans was flooding.

It was time to play the word game.

(To be continued)