Fraudsters angle for piece of BP oil spill fund

A woman pumps fuel into her vehicle at a BP service station in Alexandria, Virginia July 19, 2010.

BOOTHVILLE, Louisiana (Reuters) - Swindlers, scammers and even a few strippers are flocking to the Gulf Coast in search of a piece of the $20 billion BP Plc has set aside to compensate residents for spill-related losses.

Adjusters passing out emergency funds in Louisiana and other Gulf Coast states are on high alert for fraud even as they pay out legitimate claims following the April 20 oil rig explosion and spill that killed 11 workers and devastated the livelihoods of many fishermen, tourism workers and others.

The promise of a handout has attracted the unscrupulous, who have flocked to the Gulf in a bid to cash in.

Scott Ward, assistant manager of the BP claims office in Boothville, Louisiana, recalls staring at the long, manicured fingernails of the purported deckhand who sat across his desk one day asking for compensation.

The woman, who was "all gussied up," bore little resemblance to the hardened workers he knew made their living on the water, Ward said.

"How can you separate shrimp with those nails?" he recalls thinking. "She had the proper documentation so we paid her, but you have to wonder."

Another applicant was overheard telling fellow claimants in the waiting room she was a stripper on New Orleans' famed Bourbon Street, said Burnell Alessi, the office's manager.

"Every time we think we've seen it all, there's a new one that comes in," Alessi said.

BP has so far paid $201 million out of its $20 billion fund to residents and businesses in Gulf Coast states. Fishermen and shrimpers have received $50 million of that pie. But of the 114,000 claims submitted, nearly 54 percent, or more than 61,000, lack key documentation, according to BP.

Although many fishermen, shrimpers, oystermen and others have complained of red tape, BP says it is working diligently to quickly process and pay claims.

The process has been flexible to allow for unforeseen issues, like claimants without their paperwork in perfect order, but that may have opened the door to fraud.

"We are trying to have a process that is workable that addresses genuine need," said BP's government and public affairs director, Ron Rybarczyk.

"It was not a perfect system. We erred on the side of ... putting it in motion before we examined every angle."

There are 36 claims offices throughout the Gulf states.

In early August, the claims process will transfer from BP to Kenneth Feinberg, a high-powered attorney tasked by President Obama to oversee the damage claims process.

Speaking recently at a town hall meeting in Houma, Louisiana, Feinberg stressed his willingness to pay legitimate claimants who might not have perfect documentation.

"Tell the captain of your boat or your priest or your sheriff or your mayor, come on in and vouch for you," he said.

"I have to get something to avoid fraud, to verify your claim, but I'm not looking to get fancy here," Feinberg said. "I'm looking to get the money out to people who need it. I'm working for you. Let's get creative on corroboration. I will then bend over backwards."

HAT IN HAND

But that willingness to pay has opened the door to trouble, locals say.

"You see people who haven't been down here in 20 years showing up at that claims office," said shrimper Marvin Davis, who reported one out-of-towner trying to game the system.

In one scam making the circuit, boat captains vouch for purported out-of-work deckhands who then share with the captains a cut of their BP payment. Adjusters are now wise to the scheme, using a boat registration number that can show whether a boat with a capacity for four workers, for example, has a phantom crew of double that number -- all seeking funds.

Applications for Louisiana commercial fishing licenses also reveal potential schemes in motion. The department of wildlife and fisheries processed applications for 85 such licenses on April 9th, about a week before the spill. A month later, that number rose 44 percent to 122 applications, following the news that BP would pay claims to fishermen with active licenses.

"Why would you need a commercial fishing license when you know the fishing is closed?" asked Ward.

BP has hired private investigators to follow up on questionable claims, said Mike Thompson, director of investigations at the Louisiana Attorney General's office. Some will likely be passed along to local district attorneys.

Fraud is not only directed at BP -- local residents are also potential victims. The Federal Trade Commission recently warned that scammers were likely to go door to door, or use email or websites, to solicit funds for fraudulent environmental causes or pretend to be authorized adjusters who need upfront fees to expedite claims.

Locals say the word is out, and even the undeserving are scrambling to get a piece of the pie.

"If doesn't take long in a community like ours -- we call it the Cajun grapevine -- to find out exactly what you need to get a check," said Alessi. "I'm certain quite a few people have gotten payments they shouldn't have."

(Editing by Todd Eastham)