Combating Fraud Slows Oil Spill Payments

"You're all covered!" said Ken Feinberg. "You're all eligible!"

Ken Feinberg's willing to spend $20 billion to make people whole after the oil spill, but not one penny on scammers. Feinberg oversees BP's new compensation fund.

To combat fraud, Feinberg says, "I've got the complete cooperation of the Department of Justice, and that criminal fraud division is the best there is."

And in Baton Rouge is the division's national center for disaster fraud, created after widespread fraud following hurricane Katrina.

Special Section: Disaster in the Gulf

Eighty billion dollars was earmarked for reconstruction but an estimated $4 billion to $6 billion was linked to insurance fraud, reports CBS News correspondent Mark Strassmann. Among the criminal convictions: a Mississippi mayor; a Louisiana minister; and a parish councilman.

The national center's mission now is to protect BP's money for legitimate victims. "It is harder to get away with it," says assistant attorney general Lanny Breuer. "That's not going to say people won't try."

Just this month, three Louisiana fishermen were arrested for felony fraud. Each received thousands in BP compensation checks after allegedly filing phony claims.

"I cannot get claims without documentation," says Feinberg.

But weeding out scammers will also slow payments for spill victims like Emma Chighizola, who has a struggling souvenir shop. She's received only one BP check for $5,000. That was in May.

"I mean, how long does it take to look at paperwork?" says Chighizola.

Fraud investigators worry frustration can lead to desperation. And worse.

"Anger at BP or any other corporate entity out there will not just justify a fraudulent attempt to obtain money that they're not entitled to," says U.S. attorney James Letten.

The fraud potential goes well beyond BP's fund from scamming contractors to bogus charity drives, but investigators say one of Katrina's many costly but very valuable lessons is that they are better now at spotting the scammers.

  • Mark Strassmann

    Mark Strassmann has been a CBS News correspondent since January 2001 and is based in the Atlanta bureau.