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FEMA's "Toxic Bureaucracy"

FEMA's been under fire from critics who claim the Gulf Coast recovery is moving too slowly. Now FEMA officials said they're investigating allegations of serious misconduct at the New Orleans office. CBS News has learned workers there accuse their bosses of intentionally holding up Katrina aid.

The day Hurricane Katrina hit Slidell, La., in 2005, more than six feet of tidal surge flooded the city's downtown. Today Slidell mayor Ben Morris is still running city hall - out of a trailer.

"When the train goes by, it shakes," Morris said.

All because of endless delays, caused by FEMA, he says, which just last month delayed money for rebuilding yet again, CBS News chief investigative correspondent Armen Keteyian reports exclusively.

"It's been an indescribable nightmare that most people would not believe," Morris explained.

Today, nearly $4 billion intended to rebuild the Gulf Coast remain unspent. That's 68 percent of the $6 billion promised by FEMA.

This is leaving hundreds of projects, like a police station in New Orleans, and the Charity Hospital, waiting.

Now, a CBS News investigation has uncovered what more than a dozen current and former employees say is one key reason help isn't getting to those in need.

They point to a FEMA office in downtown New Orleans, which is responsible for distributing the money. They say the way the office is managed is itself a disaster.

Three senior level staff people - who still work for FEMA - fear they will lose their jobs for speaking out. CBS News agreed to protect their identities.

Keteyian asked one employee to describe the atmosphere in the office.

Keteyian: Cronyism?

FEMA employee: Yes.

Keteyian: Sexual harassment?

FEMA employee: Yes.

Keteyian: Racial discrimination?

FEMA employee: Yes.

Keteyian: Intimidation?

FEMA employee: Yes.

Keteyian: Retaliation?

FEMA employee: Yes.

CBS News has learned that since January 1, nearly 80 employment-related complaints have been filed by staff at the office.

And in the last year, more than 30 complaints have been filed against one man - chief of staff Doug Whitmer - including charges of sexual harassment.

"The harassment, the equal rights - violations that are currently taking place over there, this office is slowing down the recovery in this region." said one former FEMA employee.

And slowing down the recovery - these former employees charge - is exactly what some senior managers at the New Orleans FEMA office want.

Keteyian: But what's in it for them? To slow this process ...

Former FEMA employee: They're making ... over $100,000 plus a pension in some cases.

Keteyian: So they've taken a natural disaster and turned it into a huge boondoggle for themselves?

Former FEMA employee: In my opinion, yes.

"Shame on FEMA," said Rep. Joseph Cao, R-La.

Cao said the New Orleans FEMA office needs to be investigated.

"They're more worried about their own positions in FEMA, their own salaries," Cao said. "Than the recovery process down here."

CBS News wanted to speak with Doug Whitmer or Jim Stark, his boss. Stark opened up this morning in Washington. He denied there was any intentional slow down of the recovery process.

"I find that pretty offensive, Armen," said Stark. "I live in New Orleans, I've lived there for six years. I joined FEMA to help my community to recover."

"Does that trouble you in any way that one man has 30 complaints in the last year against him, employment-related?" Keteyian asked.

"I am concerned for the people that may have been abused," Stark responded. "We'll have to see."

"The word that has been used with us is 'toxic.' That the atmosphere in your office right now is toxic," Keteyian said.

"Then we'll take steps to fix it," Stark said.

Gulf Coast resident shouldn't expect FEMA's recovery work to end here anytime soon.

Employees say they've been told to expect it to go on for as long as 15 years.

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