Charity Or Fraud? Fla. Man Charged

(CBS/AP)  The nation's first Internet charity fraud case involving Hurricane Katrina has surfaced in Miami.

FBI agents arrested a Sunny Isles Beach man today in the country's first Internet charity fraud case involving the alleged exploitation of Hurricane Katrina victims for personal profit.

Gary S. Kraser, 50, is charged in a federal indictment with creating a computer website — www.airkatrina.com — to prey upon dozens of unsuspecting donors who contributed thousands of dollars to aid storm victims in the Gulf Coast. His site provided a direct link to PayPal and asked for donations to be made online to purportedly support humanitarian air-lift operations to get victims out of Louisiana.

The Aug. 29 hurricane claimed the lives of more than 1,000 people in Louisiana, Mississippi and Alabama.

Kraser, taken into custody at his high-rise apartment this morning, made his first appearance in Miami federal court this afternoon to determine if he could afford an attorney. The grand jury returned the wire-fraud indictment — based on an initial complaint to the FBI — under seal last Thursday.

The indictment, obtained by CBS News, lists the materially false statements found on Kraser's Web site:

"That any donations received through the website would be used solely to pay for jet fuel costs associated with hurricane relief flights to Louisiana..."

"That Kraser was making medical supply and rescue flights to the areas of Louisiana affected by Hurricane Katrina..."

That, on one of the flights returning from Louisiana, Kraser evacuated a seventeen-month-old infant in need of critical medical care..."

After the storm's devastation, U.S. Attorney Alberto Gonzales set up the Hurricane Katrina Fraud Task Force to target fraudulent charities, identity theft, insurance fraud and false applications for government damage benefits. In Miami Beach last week, Gonzales stressed the dangers of cybercrimes — especially hurricane relief efforts — at the International Association of Chiefs of Police's 112th annual conference.

"In the wake of Hurricane Katrina, a devious few sought to take advantage of the outpouring of charitable support for victims by committing charities fraud and insurance fraud," Gonzales told hundreds of police officials gathered at the Jackie Gleason Theatre Sept. 26. "Within a week of the flooding from Hurricane Katrina, there were over 2,000 websites dedicated to relief efforts — there are more than 4,000 now — and a fraction of these turned out to be criminal fronts designed to prey on generous contributors."

Earlier, two people accused of posing as American Red Cross volunteers and taking in as much as $2,000 have been charged in the first federal case involving an alleged Hurricane Katrina relief scam, prosecutors said.

Federal law bars anyone from impersonating a Red Cross worker. A conviction can lead to five years in prison.

Tino Lee, 44, of Burbank and Gina Liz Nicholas, 19, of Glendale were charged Friday, the U.S. attorney's office in Los Angeles said in a statement. Both were in custody pending a Monday hearing. It wasn't immediately clear if they had attorneys who could comment.

Authorities said the two set up a table with a collection box outside a Best Buy store in Burbank and displayed fliers that read: "Help Now. American Red Cross Relief For Hurricane Katrina."

They had collected as much as $2,000 in cash, as well as a check for $200, before their arrest Thursday night, authorities said. Police took them into custody after determining they lacked the paperwork to prove they represented the relief group. A 14-year-old girl also received a citation to appear in Juvenile Court.

The Hurricane Katrina Fraud Task Force consists of the FBI, Federal Trade Commission, the Postal Inspector's Office and Executive Office of U.S. Attorneys. Collectively, they are tracking complaints, investigations and cases involving fraudulent schemes for illegal gain.

South Florida is well acquainted with hurricane-relief fraud.

Last March, for example, the U.S. Attorney's Office charged 14 Miami-Dade residents for filing false damage claims in the wake of Hurricane Frances in September 2004. The system generated only tropical-storm force winds in the county and made landfall 100 miles north.

The total alleged fraud: More than $150,000 in bogus claims were filed with the Federal Emergency Management Agency. FEMA doled out $31 million in Frances-related damage payouts to Miami-Dade residents.

Of the 14 county fraud suspects, all but one pleaded guilty. The last was acquitted at trial in June.

Later this summer, two additional Frances-related suspects were charged with filing phony FEMA damage claims.