Federal agencies are barred from contracting with a Uniondale engineering and consulting firm, after the company was indicted on forgery charges in connection with falsified flood insurance damage reports filed after superstorm Sandy.
The Department of Homeland Security on Monday suspended HiRise Engineering and former employee Matthew Pappalardo after the Aug.1 indictment, making them ineligible for future contracts, grants, fellowships, loans, subsidies or other government benefit programs.
This is the first time an engineering firm, private insurer or adjuster has been suspended or debarred related to Sandy engineering irregularities, Federal Emergency Management Administration spokesman Rafael Lemaitre said Wednesday.
“We continue to take all allegations of fraud or underpayment very seriously,” Lemaitre said. Policy holders “should never have concerns about the credibility of the companies that we partner with.”
The suspension is temporary pending legal proceedings and cannot last longer than 18 months. Officials at Homeland Security, which did not return calls for comment, can end the suspension at any time. Debarment, which typically lasts three years, comes after a conviction in court.
Manhattan attorney Kenneth C. Murphy, who represents HiRise, said the company had not been told of the federal suspension. “At the moment, we are not in any federal contracts,” he said.
FEMA requested that Homeland Security suspend HiRise from future contracts after state Attorney General Eric T. Schneiderman brought forgery charges against HiRise and Pappalardo. Pappalardo also was charged with practicing engineering without a license.
Both the company and Pappalardo have pleaded not guilty in Nassau County Court.
The attorney general’s office declined to comment.
Long Beach attorney Denis G. Kelly has represented homeowners in settlements and civil suits involving FEMA and HiRise. He said the suspension should have come sooner given evidence already presented in court. In some cases under review, Kelly said FEMA is standing by insurance claim reports with Pappalardo’s name on them.
“I’m not thrilled,” he said. “Why didn’t it happen a year ago.”
He said his clients have suffered financially and psychologically.
“This is slow mental torture and it’s awful,” Kelly said. “It’s an awful system and it comes after a natural disaster.”
FEMA underwrites flood insurance but hires private companies to execute policies and adjust claims. More than 144,000 insurance claims were filed after Sandy.
Within a year of the October 2012 storm, policy holders began complaining about altered damage reports that reduced payments. Nearly 1,700 filed lawsuits and settled with FEMA in early 2015 for more than $163 million.
After that round of litigation, FEMA started a Sandy claims review program. More than 19,000 files were opened to re-examine cases, and the agency so far has agreed to pay out an estimated $140 million.
In 2014, FEMA and New York opened investigations. In the summer of that year, Sen. Charles Schumer (D-N.Y.) pressed the Senate Banking Committee to hold hearings and for FEMA to move aggressively to address underpayments and to reform the flood insurance program.
Schumer said Wednesday he hopes flood insurance reforms will be instituted swiftly.
“The message today is that if you abuse the system, cheat those impacted by disasters and think you can get away with it — you’re wrong,” Schumer said in a statement. “It’s clear, HiRise was a bad actor and deserves to be disbarred from the flood program.”
Over the past two years, FEMA replaced top leadership, made it easier to change policy and added oversight to examine engineering reports and fees, Lemaitre said after the state’s indictment.
With Maura McDermott