Seventeen call center reps are accused of stealing from Hurricane Katrina relief efforts.
Posted Dec 28, 2005
Forty-nine people associated with the American Red Cross are under indictment for an alleged scam that swindled the organization out of hundreds of thousands of dollars specifically marked for Hurricane Katrina victims. Published reports indicate that 17 of the alleged participants were contracted employees working at a Red Cross call center in Bakersfield, CA, which fielded calls from Katrina victims and commissioned cash payments to them. The remaining suspects are friends and family members of the agents. Six have pleaded guilty to federal wire fraud charges first filed in October, according to published reports.
About $300,000 has been stolen, says Devorah Goldburg, spokeswoman for the American Red Cross, but that number could rise as the investigation continues. The organization maintains that instances of fraud represent a small percentage of the overall contributions made to the Red Cross. "If you look at the fact that we've distributed more than $1.3 billion in aid [for Katrina victims], that's a very, very, very small amount."
The alleged scam was discovered when the emergency response organization grew increasingly suspicious after noticing that while only a small number of former Gulf-state residents evacuated to the region, a substantial amount of people in the Bakersfield area were receiving money from Western Union locations in the region. Following its own investigation, the Red Cross contacted the FBI. "There were contract employees...that were in the call center giving out code numbers [to their friends and family] to go to their local Western Union to pick up money. [These people] were really not Katrina victims," Goldburg says.
Goldburg estimates that the call center employed more than 1,000 people, but none of the accused was a direct employee of the Red Cross. Instead, they were employees of Spherion, which operates the call center and did not have adequate time to conduct background checks, according to published reports.
"The Red Cross takes financial stewardship very seriously and has a robust system of checks and balances in place to uncover fraud as we did at the Bakersfield call center," the organization said in a statement issued Tuesday. "In partnership with the Department of Justice Hurricane Katrina Fraud Task Force, the Red Cross works closely with the Department of Justice, FBI, Secret Service, State Attorneys General, and the Federal Trade Commission to investigate and prosecute fraud to the fullest extent under the law, which includes court-ordered restitution to reclaim donor dollars."
According to Joe Outlaw, principal analyst for contact center solutions at Current Analysis, the alleged scam is more of a public relations matter than a contact center matter. "It looks like the Red Cross is doing what it can at this point to be sure the bad agents are identified, removed, and prosecuted."
The Red Cross has suffered PR black eyes over the past several years, says Maggie Klenke, founding partner at The Call Center School. "There were issues of badly used donations in terms of luxurious employee benefits. Now, donations are being stolen. Bad management issues have been in the press somewhat continuously, so the Red Cross is really in a lot of PR trouble."
To lessen concern surrounding its call centers, Klenke suggests that the organization's outsourced agents be bonded and insured. "If they're not, then the Red Cross is at risk," she says. "If somebody steals a donation, then the Red Cross and the donation maker are out of money, as opposed to some insurance company. [The Red Cross must] let the public know that they don't let calls be taken by anybody who isn't bonded."
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