Sandy peace talks
People walk along the boardwalk in Long Beach, New York, next to a pool flooded with sand from Hurricane Sandy, Oct. 31, 2012. FEMA is in settlement talks with storm victims who are still in court over flood insurance claims, pushing off a hearing on allegations of altered engineering reports. Getty Images/ Andrew Burton

The flood insurance policyholders in New York and New Jersey who were victimized by altered damage reports may number as many as 10,000, according to a lead attorney for the plaintiffs.

“We have strong evidence that indicates there’s 10,000 reports” that were altered, or followed a template of pre-determined outcomes, attorney Steve Mostyn tells International Business Times. Mostyn’s firm has reviewed about 1 million pages of documents that insurance companies were forced to disclose. The Texas-based lawyer has filed three class-action lawsuits against insurers that handle claims for the Federal Emergency Management Agency, alleging that they and other contractors schemed to alter damage reports and minimize payouts.

Mostyn is leading the negotiations in new settlement talks between plaintiffs and the federal government.

On Wednesday, Mostyn's client Deborah Ramey, a sixth-grade teacher from Long Beach, New York, took the stand in federal court to describe life after Hurricane Sandy: During the months she’d fled her home to live with relatives, she also was trying to figure out how an engineering report on a property she owned — right behind her house — said there was no flood damage.

“My husband and I read it, and we were shocked by it,” said Ramey. She’s one of 1,500 Sandy victims fighting in court for insurance payments against private insurers that help administer FEMA’s National Flood Insurance Program.

Her case became a magnet for attention from lawmakers, and her name — misspelled as "Raimey" in the original lawsuit -- is now synonymous with court orders forcing insurance companies to turn over draft engineering reports. But Wednesday marked the first time Ramey testified about the case.

In a courtroom of rapt listeners, one person in the second row stood out: Brad Kieserman, FEMA’s newly appointed dealmaker, now leading the agency’s efforts to forge settlements with homeowners more than a year into contentious litigation in New York and New Jersey.

The negotiations staved off a major hearing scheduled for Thursday on allegations of altered reports in other cases. The talks come, too, as a criminal inquiry by the New York attorney general intensifies, and as evidence mounts well beyond the cases in litigation.

“We’ve been talking since the weekend and we have not stopped talking,” Kieserman, deputy assistant administrator for federal insurance, said during a break in Ramey’s testimony on Wednesday. That very morning, the New York attorney general executed a search warrant at the Uniondale, Long Island, office of HiRise Engineering, one of the firms that homeowners have accused of falsifying reports.

Judges had asked attorneys to present evidence Thursday on two cases involving HiRise reports, and three cases involving U.S. Forensic, but have now postponed that hearing indefinitely, pending the settlement talks.

“Everything,” Kieserman added, “is on the table in settlement negotiations.”

That includes monetary settlements and reforms at the National Flood Insurance Program, says Mostyn. The program is deeply indebted to the U.S. Treasury, and serves 5.3 million policyholders. “They’re seen as the enemy, often,” Mostyn says.

“The culture has to change,” he says.

In his review of documents, Mostyn, who represents Ramey and her husband Robert Kaible, studied a spreadsheet referencing 2,800 reports carried out by HiRise Engineering, as well as a sample of 250 reports produced by U.S. Forensic. Out of that U.S. Forensic sample, “248 are identical,” Mostyn says. In total, he says, “We know they wrote about 7,000 reports.”

Running parallel to individual insurance lawsuits, Mostyn has filed three class-action racketeering suits alleging that companies used fraudulent engineering reports to deny or lowball insurance payments to homeowners. Ramey and Kaible are the lead plaintiffs in a lawsuit against Wright National Flood Insurance and U.S. Forensic. Two other suits, both involving reports by HiRise Engineering, name Travelers Insurance and Hartford Insurance Company of the Midwest as defendants.

The New York Attorney General’s Office is “interested to know the information the civil litigation has produced that may be indicative of criminal conduct,” Mostyn says. “I’ve been cooperative.”

A spokesperson for the New York AG’s office confirmed that authorities executed a search warrant at HiRise, and that “we have an ongoing criminal investigation.” The spokesperson declined to comment further.

HiRise Engineering president and CEO Joe Celentano said in a statement that the company is “cooperating to the fullest extent possible with all parties in an effort to address and resolve the issues that have been raised.”

A spokesperson for Travelers declined to comment, citing pending litigation.

A Hartford spokesman reiterated a statement that the company arranged for a new report for a policyholder when notified that "an engineering report from a vendor may have been improperly altered."

"We have suspended all further use of the engineering firm," Thomas Hambrick said.

U.S. Forensic has previously denied wrongdoing, but did not respond to a request for comment on this story.

A spokesperson for Wright Flood, the largest flood insurance carrier in the U.S., declined to comment.

Wright Flood’s conduct in Ramey and Kaible’s insurance claim was the subject of Wednesday’s hearing in U.S. District Court for the Eastern District of New York. Jeffrey Moore, a Wright executive called to testify, took the Fifth Amendment and declined to answer any of the questions that Mostyn posed.

While the proceedings clearly frustrated Mostyn, he said his recent dealings with FEMA’s Kieserman – appointed to his job 11 days ago – have been “refreshingly candid and direct.”

“I think they’re committed to doing the right thing,” Mostyn said.

In a letter last week to New York federal judges overseeing around 1,000 Sandy cases, Kieserman said the agency leadership “is deeply troubled” by allegations that FEMA and private insurers “may have relied on questionable and subpar engineering reports when adjusting claims.” He added that he is “initiating a thorough and multi-disciplinary assessment” of the flood insurance program.

After Ramey’s testimony Wednesday, Kieserman introduced himself and shook her hand. “He was very sincere,” Ramey told IBTimes later. “It was to the effect of, ‘I’m sorry for all you’re going through.’”

Ramey and Kaible returned to their home by the ocean eight months after Sandy, but were forced to sell their other house when they couldn't afford to repair it. “I’m hoping that other people are going to be helped,” she said, “And that people who aren’t home, can come home.”