New York Engineering Firm Charged With Forging Sandy Reports

  • Homeowners argue their insurance claims were wrongfully denied
  • Engineering reports were altered to deny claims, A.G. says

New York authorities charged a Long Island engineering firm and one of its former executives with forging damage reports for homes swamped by Hurricane Sandy, altering the documents in such a way that owners’ flood insurance claims were eventually denied.

Matthew Pappalardo and his former employer GEB HiRise Engineering PC were named in a 50-count indictment accusing Pappalardo of directing his staff to remove descriptions of flood damage from least 25 reports that had been prepared by subcontractors who visited the properties.

It’s the first indictment over what some lawyers say was a widespread practice intended to benefit the Federal Emergency Management Agency’s flood insurance program and the private insurers that administered its policies following a storm that caused more than $75 billion in damage.

“Today’s charges reveal a flagrant disregard for the well-being and safety of New Yorkers and my office will not tolerate it,” New York Attorney General Eric Schneiderman said Monday in a statement.

Pappalardo, 38, and Uniondale, New York-based HiRise were arraigned on Monday in state court in Nassau County, according to the statement. Pappalardo’s lawyer, Avraham Moskowitz, said his client pleaded not guilty to the charges.

Pappalardo "adamantly denies all of the charges against him," Moskowitz said in an e-mail. "He has done nothing wrong and looks forward to being vindicated at trial."

Widespread Litigation

Disputes over insurance claims stemming from the 2012 hurricane spawned widespread litigation. Insurers who were sued in a related case paid millions of dollars to homeowners in settlements over allegedly manipulated reports, with some companies accused of conspiring with engineers and lawyers to deny claims. Lawmakers including U.S. Senators Kirsten Gillibrand and Charles Schumer of New York and Robert Menendez and Cory Booker of New Jersey pushed FEMA to address potential manipulation in the handling of flood-insurance claims.

"As we have from the beginning, we steadfastly maintain that there was never any intent by HiRise or its principals to defraud any homeowner with respect to the preparation of these reports," the company said in an e-mail.

Moskowitz said Pappalardo’s departure from HiRise was "amicable" and declined to give any more details. The attorney said Schneiderman’s failure to give any possible motivation for the former executive to alter the reports was one of the "many weaknesses" in the case.

FEMA Pressure

But Steve Mostyn, a Houston-based plaintiffs’ lawyer who represents several storm victims, has said engineering firms hired by insurers altered damage reports to them. And insurers want payouts to be lower because FEMA, $24 billion in debt after 2005’s Hurricane Katrina and other storms, pressured them to hold the line on Sandy payments, he said. A message left with FEMA’s press office on Monday seeking comment on Mostyn’s allegations wasn’t immediately returned.

Schneiderman also released a report identifying what his office called fundamental flaws in the National Flood Insurance Program, created by Congress in the 1960s to drive down the financial impact of disasters. The report recommends an increase in transparency and accountability for the program, including improving communication with buyers about what is and isn’t covered by the insurance and providing homeowners with all documents related to the claims process.

"When the next major storm hits, it’s crucial that families know exactly what kind of damage is covered by insurance, and that their claims are being handled professionally and reliably," Schneiderman said.

The case is The People of the State of New York v. Pappalardo, 1171N-16, New York Supreme Court, Nassau County (Mineola).

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