FEMA says it is investigating allegations of falsified Sandy engineering reports

An attorney for the Federal Emergency Management Agency Tuesday said the organization was investigating allegations that engineering reports were secretly rewritten after superstorm Sandy to deny claims on government-funded flood insurance policies.

FEMA associate general counsel Jordan Fried told a panel of federal judges in Brooklyn that the agency was troubled by reports that private insurance and engineering companies had conspired to falsify documents to partially reject a settlement for homeowners in Long Beach.

"We are investigating it and we will look at everyone involved," Fried said before three magistrates overseeing all Sandy lawsuits filed in the Eastern District of New York, which includes Long Island.

After the hearing, Fried said FEMA hadn't determined yet whether it would undertake the probe itself -- or refer the matter to the U.S. Department of Homeland Security Office of Inspector General. He declined to comment further.

Fried's comments come nearly three weeks after one of the three magistrates -- Judge Gary Brown -- issued a ruling saying it appeared engineering reports may have been routinely doctored to avoid paying claims. Brown's ruling orders all insurers being sued over Sandy claims to release copies of their draft engineering and adjusting reports. FEMA has appealed that mandate.

His ruling has led to a federal class-action lawsuit. All four U.S. senators from New York and New Jersey have called on FEMA to investigate.

Flood insurance claims are paid by the government. But lawyers for homeowners contend that the private companies hired to process the settlements are under tremendous pressure from FEMA to keep payments to a minimum.

During the hearing, Magistrate Judge Cheryl L. Pollak said it was crucial for FEMA to determine whether claims were fraudulently rejected. "I cannot imagine the reaction of the public," she said, "if it turns out that FEMA was denying reimbursements to homeowners based on phony reports."