Eric Schneiderman for Attorney General

Guilty Pleas to Falsifying Reports on Hurricane Sandy Damage

January 11, 2017

As published by the NY Times on January 10, 2017.

A Long Island engineering company and one of its former executives pleaded guilty on Tuesday to charges that they had deliberately falsified engineering reports of homes battered by Hurricane Sandy in 2012.

HiRise Engineering of Uniondale, N.Y., and Matthew Pappalardo, a former director, were accused of falsifying engineering reports that were used to determine the structural damage to homes caused by the storm. Those reports were evaluated by flood insurance adjusters and federal officials, and homeowners were reimbursed based on them. As a consequence, numerous flood claims may have been undervalued or denied under the National Flood Insurance Program, a part of the Federal Emergency Management Agency.

The issue came to the fore in 2015, after investigations by The New York Times and the CBS News program “60 Minutes.” Eric T. Schneiderman, the New York attorney general, secured the indictment of the company and Mr. Pappalardo last summer and referred evidence of crimes outside New York to the federal Justice Department.

On Tuesday, the New York case concluded when Mr. Pappalardo pleaded guilty to one count of unauthorized practice of engineering, a Class E felony, while the company admitted to a criminal-solicitation violation.

In a hearing before Justice Jerald S. Carter in State Supreme Court in Nassau County, the company agreed to be permanently barred from receiving contracts and providing services under the federal flood insurance plan, and to pay $225,000 in costs. Mr. Pappalardo, who left HiRise in November 2015 and has changed careers, agreed to three years’ probation and a fine of $10,000.

Prosecutors did not go so far as to accuse engineers, adjusters and out-of-state insurers of colluding to minimize insurance payments.

But court documents indicated that HiRise, at Mr. Pappalardo’s urging, backdated documents and cajoled reluctant parties to go along with the fraud. The engineers who originally surveyed the damage were not aware that their reports had been altered.

In a statement, Mr. Schneiderman said that “fraudulently altering engineering reports undermines the integrity of the entire N.F.I.P. claims process, which homeowners and families rely upon in a time of crisis.”

But Avraham C. Moskowitz, a lawyer for Mr. Pappalardo, said that his client “was a sacrificial lamb” because he was the supervisor of a department that was “under enormous pressure to complete these reports quickly and in a format that insurance companies would accept.”

Any “edits were done in good faith,” Mr. Moskowitz said, and ultimately, “no homeowners got defrauded.”

Kenneth C. Murphy, a lawyer for HiRise, said that the company had “implemented quality assurance controls to be certain that this doesn’t ever happen again.” He also credited the attorney general for releasing a report highlighting the flaws of the flood insurance program.

“It’s nothing but fraught with peril,” Mr. Murphy said.