I had heard this in the news not long ago and now it's made Snopes. Some people who were issued the government debit cards - I think it's around $2000 - have been going to stores and buying designer handbags, clothes, etc. http://www.snopes.com/katrina/charity/debitcard.asp Article pasted here: Through its disaster management agency FEMA, the federal government issued more than 10,000 debit cards to Hurricane Katrina refugees in Houston, Dallas, and San Antonio. Each card carried a monetary value of $2,000. While the only overtly stated restrictions on their use prohibited the purchase of alcohol, tobacco or firearms, recipients were required to sign an agreement promising to use the cards only for disaster recovery purposes; that is, expenses related to the process of rebuilding their lives. On 11 September 2005, just three days after its start, the debit card program was discontinued after refugees expressed frustration with the process. FEMA has since reverted to its traditional mode of directly depositing cash into the bank accounts of those being assisted. While the intent of the novel program was to quickly thrust money into the hands of those left homeless by Hurricane Katrina and in need of ready cash with which to meet living expenses, not everyone who received debit cards kept their purchases in line with the spirit of the program's purpose. At least some of the cards were used to buy luxury or entertainment items. One of the first news outlets to report on abuse of these financial instruments was the New York Daily News, who broke the story that two of the cards had been used in Atlanta to buy $800 Louis Vuitton handbags. (That claim has been substantiated by MSNBC's Abrams Report; the store confirmed to them that it happened.) Others have been spotted in adult entertainment venues according to a report by KPRC Channel 2 in Houston, the wife of a strip club manager in that city said her husband has seen patrons from Louisiana offering FEMA and Red Cross debit cards. A manager at Caligula XXI Gentlemen's Club told KPRC that he has seen at least one card used at his club. "Abby," a bartender at Baby Dolls, another strip club in Houston, said customers are paying for drinks with what may be FEMA or Red Cross debit cards. Syndicated radio talk show host Neal Boortz says FEMA debit cards were also used to pay for breast implants. (That assertion stands as unconfirmed at the moment.) We have ourselves received numerous e-mails from folks who claim they or someone they know saw the cards used to purchase expensive suits, diamond earrings, $300 handbags, and large plasma screen televisions. While we can't confirm any of those specifically, we do know the Houston Police Department formed a task force to investigate abuse of the FEMA-issued debit cards. How many of the cards have been misused is unknown at this point, but Lt. Craig Williams of the Houston Police Department Fraud Task Force says a majority of people are using the money the way it was intended. While the FEMA-issued card program has been brought to an end, the American Red Cross continues to give out debit cards, called Client Assistance Cards. Like FEMA's program, each disaster victim must agree to use the cards for emergency needs, such as food, housing, and clothing. Those too have been abused; for example, Red Cross records show one was used for entertainment items at a Best Buy (a computers, stereos, TVs, and other electronics store) in Kentucky for more than $1,000. We can't answer the larger question in the back of everyone's minds have most evacuees used the cash and resources handed them wisely and well, with the abuse limited to a mere handful of refugees, or has the exploitation of people's goodwill been widespread, with the "wisely and well" crowd in the distinct minority? It's a troubling question to have to go unanswered, because Americans are not going to open their wallets to the Red Cross nearly as readily or be as supportive of FEMA if they've strong reason to suspect the money they drained from their households to assist victims of disasters (either as direct donations or through their taxes) is going for big-ticket items they themselves can't afford for their own families or is being tucked into someone's G-string.