FEMA To Katrina Victims: It's Payback Time

Hurricane Katrina stole just about everything Sheila Moore had in this world.

"How bad does it get for you?" asks CBS News chief investigative correspondent Armen Keteyian.

"It can't get any badder. How can it get worse?" Moore says.

So when FEMA told her she qualified for thousands of dollars in emergency assistance, she took it. Then, seven months later, in July 2006, Moore received a letter from FEMA demanding its money back; $14,749.51 to be paid in full in 30 days.

"I don't have money to pay this back. I can't pay it back," she says. "What am I supposed to do?"

The emergency funds were spent on food, clothing, and a used car to get to her full-time job. The car even ended up becoming her home for a while.

"Yes, it is. And it did. And it maybe, before all is said and done, may have to be my permanent home," she says.

In the wake of Katrina, FEMA released emergency funds to more than 700,000 households. Auditors later said the agency had overpaid by nearly a half-billion dollars, providing assistance to people who, they claim, didn't deserve it.

So FEMA sent out about 150,000 letters demanding its money back. Letters often filled with confusing accusations like "app has not proved occupancy" and cryptic coding like "awhm." Any questions? Call the FEMA helpline.

"And they call this helpline and get very little information, and very little detail in terms of why they are in this position now," says attorney Ranie Thompson.

Thompson says her clients are among the thousands of people lost in a process she calls broken, one that's built on the presumption of guilt.

"They don't have transportation. They're struggling with health care issues," she says. "And you want them to pay you $20,000. You've go to be kidding me."

A CBS News investigation has found that FEMA call center workers were under extraordinary pressure to move as many cases as possible. Clark Browne was a case worker at a FEMA call center in Hyattsville, Md.

"They had quotas," Browne says.

"They had quotas? In the call center? What kind of quotas are we talking about here?" Keteyian asks.

"Twenty cases a day. Some of those cases got messed up because people were rushing," says Browne.

"Aren't you there to help people?" asks Keteyian. "What did the people calling in get?"

"Exactly," Browne says. "It was like a dog chasing their tail, going around in circles."

Other current FEMA case workers, who asked not to be identified, told CBS News that managers encourage the idea that "victims are just a number," while workers who try to spend more time on complex cases are told, "we are not supposed to put out that effort."

As in the past, FEMA refused to speak with Keteyian on camera and didn't even issue a statement, citing ongoing litigation - litigation that has forced FEMA to temporarily halt its efforts to extract money from Katrina survivors.

Sheila Moore and her attorney spent a year and a-half fighting FEMA before the agency admitted she no longer owed $14,000. The reason? Someone had simply misspelled her name on her application for aid.