Quake Fraud Investigators Face Huge Task : Disaster aid: Thousands turn to cheating for piece of $20 billion in federal funds and insurance money. Officials say catching most culprits is impossible, but some are so audacious they stand out.

Authorities say thousands of people have turned to cheating or outright fraud to snatch some of the $20 billion in federal disaster aid and insurance money distributed to victims of the Northridge earthquake.

Small armies of investigators have been scouring the Southland to catch these would-be thieves. But investigators are so outnumbered that their task has been a bit like trying to keep the ground dry in a storm by catching raindrops in a bucket.

The federal Small Business Administration, for example, has approved $4.7 billion in low-interest loans for quake victims. Officials figure that 1% of the 250,000 disaster loan applications received by the SBA probably contain some fraud. But 18 months after the quake, just 11 people have been caught and convicted, according to the U.S. attorney’s office.

Similarly, the Federal Emergency Management Agency has allocated $9.7 billion for emergency grants to quake victims. A few high-profile prosecutions helped prompt the voluntary return of about $16 million. But even though the agency has received 681,694 applications, just 33 people have been convicted of submitting false claims.

Numerous state agencies, including the Department of Insurance and Contractors State License Board, along with private insurance companies, have been similarly overwhelmed. Even the Internal Revenue Service has yet to complete a preliminary review of what could be a torrent of phony tax deductions from quake damage claims.

Officials admit that catching even a majority of quake-related fraud is an impossible task, but they say it’s the effort that counts. “With every type of crime, there will always be people who evade detection,” said Nathan Hochman, the assistant U.S. attorney in charge of disaster-fraud prosecutions. “But they will always be looking over their shoulders, wondering if they’re next in line to go to jail.”

Or in some cases at least wondering whether they’ll get a $1,500 citation. That’s the most common penalty faced by the hundreds of unlicensed contractors who have flooded the region to take advantage of the quake repair construction boom.

At a Contractors State License Board office in Van Nuys, Supervising Deputy Steve Skogebo presides over eight investigators handling quake-related complaints, mostly about contractors who perform shoddy work or disappear after taking hefty cash deposits.

Since January, the office has received 776 complaints. Trouble is, 150 new complaints arrive each month, and the office is so backlogged that it can be months before complaints get to investigators.

Agents and investigators say they are increasingly disillusioned with the public, citing widespread belief that stealing from the government is not only forgivable, but a justified blow against bureaucracy.

Insurance companies feel a similar hostility. Take the claim that the Northridge quake ruined . . . baseball cards.

The claim, one of 114,000 that State Farm Insurance received after the quake, said 22,000 cards, valued at $1.9 million, had been ruined by water damage. The quake, explained the man who filed the claim, had sloshed three feet of water out of his swimming pool. This miniature tsunami then rolled under his home and into his garage, where the cards were stored on the floor.

“The claims representative just about choked,” said Gerri Brown, claims superintendent at State Farm in Westlake Village.

The man, who said he had thrown the cards away, withdrew the claim when State Farm officials pressed him for receipts. But Brown said the card caper was just one example of the lengths people have gone to since the quake to soak their insurance companies.

“I have cases open right now that are even more ridiculous,” she said.

About 10% of all insurance claims filed each year contain some fraud, insurance industry experts say. For the quake, that would translate into about 43,000 fraudulent claims.

Insurance companies are required to refer all suspicious claims to the state Insurance Department for criminal investigation. But the department has investigated fewer than 100 Northridge quake claims so far, and only one conviction has been recorded, said Gil Rosas, supervisor of the department’s fraud division in Los Angeles. Rosas supervises four investigators. “I’d like to have at least 20,” he said. “There would be enough work.”

When government investigators do take a case, sometimes one clue is all they need.

Elsa Aguirre Gomez applied for a $200,000 SBA disaster loan last year, claiming her restaurant near Downtown had burned in a fire caused by the quake, officials said. For some reason, however, the Fire Department report she submitted indicated that the fire had started at 2:12 a.m. on Jan. 17, 1994, more than two hours before the quake hit.

When SBA loan officials asked her about this, she said it was a mistake. She then provided a new report that listed a time of 4:42 a.m., eleven minutes after the quake. But then officials wondered why the time was printed in different type than the rest of the report.

Last August, Gomez, 45, confessed after SBA investigators confronted her with a copy of the real Fire Department report--which showed that the fire caused $20,000 in damage and happened two weeks after the quake. She has since pleaded guilty to filing a false claim with the government, officials said, and awaits sentencing.

But Gomez is among only a handful who have been nabbed by SBA investigators for quake-related schemes. Even though SBA officials estimate that 1% of the 250,000 quake applications they have received contain fraud, just 65 applications have been investigated so far, said Debbie Jones, supervisor of a Glendale-based team of SBA special agents.

“We’re not equipped to conduct that number of investigations,” said Jones, whose five agents are swamped with cases stemming from disasters going back to the riots of 1992. “I have to use my resources on what I consider the most egregious fraud.”

In fact, Elsa Gomez probably wouldn’t have attracted so much attention if her ruse hadn’t been so inept. As it was, the SBA went after Gomez largely because her scheme was deemed “insulting to the SBA’s intelligence,” Jones said.