Whitaker hes talking about this minimotors fixed inside the bicycle, a hightech stealth form of cheating that many people we spoke with believe have been used in the Tour De France. So if someone came to you and said directly, i want to use your invention to cheat, ill pay you a lot of money for it, would you sell it to them . If the money is big, why not . Whitaker we took a test ride to see how well these motors work. Hello. What do you want . There are not many shows on television that deserve to be called true american institutions. But one of them surely is sesame street. Now theres a new kid on the street whos making news. Hi, julia julia, a muppet with autism. Not an easy addition. Its tricky, because autism is not one thing. Because it is different for every Single Person who has autism. We really like julia. Shes really special to us, miss lesley. Im steve kroft. Im lesley stahl. Im anderson cooper. Im bill whitaker. Im sharyn alfonsi. Im scott pelley. 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Assessing the property loss and repairing or replacing homes and businesses will take years, and it will cost tens of billions of dollars in insurance settlements. The victims are relying on it. But, as we first reported some two and a half years after Hurricane Sandy devastated parts of the east coast, sandys victims were hit by another disaster we called it the storm after the storm. Many people said they were cheated out of their insurance claims. Thousands of claims remained unresolved for years, and there was evidence that many homeowners were victims of apparent widescale fraud, where original damage reports were later changed to make it look like the damage wasnt as bad. Hurricane sandy damaged or destroyed hundreds of thousands of homes and rearranged neighborhoods. Long beach, new york, was one of them. This was bob kaibles house the next day. The yellow one, with a sand dune blocking his front door. Kaible the beaches decided that they didnt want to be there any more, and they came to pay a visit. And thats what happened. And we got back to the house and we were devastated. Alfonsi what was that like, to walk into your house for the first time . Kaible everything that you worked so hard in your life to get is now gone. Alfonsi but you had Flood Insurance. Kaible uhhuh. Alfonsi youd pay for every month. Kaible absolutely. Alfonsi did you think you were okay . Kaible sure. I mean, thats what you pay insurance for. Alfonsi the city condemned kaibles home, saying it was damaged beyond repair. The house had been knocked off its foundation. His Insurance Company, wright flood, sent an engineer to inspect the damage. Three weeks later, the kaibles couldnt have been more surprised. Kaible i get the engineering report, that theres no structural damage to the house. So im going like, what do you mean theres no structural damage . The house is not what it was before. Alfonsi the Insurance Company agreed to send someone back out to the house. Surprisingly, it was the same engineer, george hernemar, who worked for a Company Called u. S. Forensic. Kaible i said, george, how could you write a report like that . He goes, its not my report. I said, what . What do you mean, its not your report . He says, wait here. He goes to the trunk of his car, goes. Picks up the report and brings it into the house. He says, this is the report i wrote. Alfonsi bob kaible got out his phone and took a picture of georges original report. It plainly said there was structural damage to the house. But this is the report the Insurance Company sent to kaible when they denied his claim, not structurally damaged. They said the damage was long term, meaning it existed before Hurricane Sandy. The kaibles Insurance Company, wright flood, the largest provider of Flood Insurance in the country, paid him just 79,000 of his 250,000 policy. Kaible we had a mortgage on the house. Ive had estimates of 300,000 to 350,000 to rebuild the house. What am i going to do . Alfonsi bob kaibles house was torn down after he sold it for a loss, and he believes it was because of a falsified engineering report. The photo kaible took was solid proof for many other sandy victims who were struggling with similar situations. How many houses do you see that are empty . Kaible on this block . Probably half of them. Alfonsi the kaibles pleaded to a Vice President at their Insurance Company and passed on their evidence. But the company denied full payment, arguing subsequent reports supported them. With frustration as high as the water marks in their home, the kaibles filed a lawsuit. That suit drew the attention of a texas trial lawyer who had never been to long beach, but got on his plane in a hurry. Steve mostyn has won billions fighting Insurance Companies, and when he heard about bob kaibles case, he says he had a gut feeling the kaible family wasnt alone. Sure enough, he says, his Houston Office is now flooded with paperwork from victims of the superstorm. Mostyn theres been a systematic fraud on the policy holders whove filed flood claims from sandy. Alfonsi whats the fraud . Mostyn the fraud is taking engineers reports and changing them from saying there was structural damage to saying theres no structural damage, or giving the engineers a form to fill out that already has the conclusion of no structural damage. Alfonsi why would anyone do that . Mostyn save money. The biggest ticket item inside a claim, for a flood claim, is the structural damage. And so, when they dont pay for structural damage, they save hundreds of thousands of dollars on each claim. Alfonsi of the thousands of cases lawyer steve mostyn says hes found, electrician john mero and his wife gails is the most revealing. Their house is in east rockaway, new york. What was this street like in the days. The day after sandy . Gail mero sixfoothigh water in the street. John mero well, the day after, it was like armageddon. Alfonsi the meros house had to be torn down after the storm. Their Insurance Company paid them just 80,000. And now, theyre buried in debt after rebuilding their home. John mero i was like, how can you tell me that youre not going to cover this, that im not going to get the full amount of my insurance . I says. You got my payments every month. Said its time for you to pay and heres what youre going to tell me. Alfonsi it was two years later that the meros felt a second wave hit them, when the engineer who assessed their home after the storm called them out of the blue. John mero the engineer sent his report in to the Insurance Company saying that the house was damaged due to flood. The structural damage is caused by the flood. And from what i understand, the Insurance Company changed it, changed his words, without him knowing. Alfonsi this is andrew braum, the engineer who could no longer stay silent. Braum told us, not only were changes made to his engineering reports, but he was asked to cover it up. He showed us the original report hed written about the damage to john and gail meros house. Andrew braum we assess in the conclusions hydrodynamic forces, hydrostatic forces, due to the flood, caused a cracking and shifting throughout the foundation. Alfonsi so youre saying the flood caused this damage . Braum correct. And then, in the revised or the altered report, it says, settlement due to consolidation of soil caused the Foundation Wall to crack. Thats not what i wrote; its completely altered. Alfonsi braum inspected more than 180 homes after sandy, working for a Company Called hi rise engineering. After he discovered the changes made to the report he wrote about the meros home, he went back to check all the copies of his original reports against the final copies that the homeowners received. How many of those reports were doctored . Braum at least 175 of them, or approximately 96 , is the number that i calculated. Alfonsi 175 of your reports were doctored . Braum correct. They were altered. Alfonsi and the ones that werent changed . Braum the ones that werent changed, interestingly, were ones where i recommended that no repairs are required. Alfonsi braum says hirise engineering pressured him to sign an affidavit saying he agreed with their final reports. He says he ignored the request and never did it. Do you think they were trying to cover up something . Braum now knowing what i know, yes. Alfonsi what do you think was going on . Braum they figured out that they altered all those reports. And they wanted to hurry up and have they called me braum; braum, get braum to sign off on this quick. So if braum wasnt thinking or if braum didnt care, he would just sign his name 200something times, and they were off the hook. And that wasnt happening with me. Alfonsi Insurance Companies have argued the reason the engineering reports were changed was to allow for a peer review process, a Standard Practice in the insurance industry. Braum peer review, to me, would be amongst my peers of an equal licensing or education level, and review a report and discuss it. But not peer review when i send my final report and its changed without my knowledge. Thats not peer review. Alfonsi in february, 2015, the offices of hirise engineering were raided by the new York Attorney generals office, which was conducting a criminal investigation into hirise, as well as the Insurance Companies that hired them. Hirise pleaded guilty to criminal charges. Wright flood and u. S. Forensic declined our requests for an interview. They have denied allegations of criminal activity, and all three said they cooperated with the investigation. More than 2,000 sandy victims have filed lawsuits in federal courts. Mostyn you know, we thought originally it might be one engineer, right . And then we find multiple engineers inside the same company. And as we dug into it, its other engineering companies. Well, then you got to start looking for a different common denominator. Alfonsi and in this case, all of those companies are overseen by fema, the federal Emergency Management agency. More than five million homeowners living in designated flood zones all around the country are required to buy Flood Insurance policies backed by fema and taxpayer money. Brad kieserman was the new head of femas flood program, when we first spoke to him. Hed been on the job just three weeks, and hed already had to answer to allegations of fraud and criminal activity at the expense of some of sandys hardesthit families. Brad kieserman im not going to sit here and conceal the fact that it happened. Because in the last three weeks, ive seen evidence of it. Alfonsi you say youve seen evidence of these fraudulent reports. Kieserman yes. Alfonsi youve seen evidence of what could be criminal activity by using unlicensed engineers . Kieserman yes, which is why i referred it to the inspector general. Alfonsi when did fema learn that there may be a problem here, that fraudulent reports may be used to deny claims . Kieserman i think that there were signals. Based on what ive seen, if you will, signals in late 2013, early 2014 that there were problems that our survivors were experiencing with engineering, with the claims process, with appeals. But those were signals. And i think those signals got louder, if you will. Alfonsi it was more than signals. This is. This is a letter to fema in the summer of 2013 that clearly says that the person conducting, doing the inspections here wasnt a licensed engineer. This is to fema. Kieserman so. Alfonsi . Inin the summer of 2013. Kieserman so. Youre right. This is dated august 19, 2013. And, you know, ive seen this. Alfonsi the document, sent to fema, was an appeal from another family who felt badly cheated by their Insurance Company. In it they provide proof that the engineer who inspected their home, working for the firm u. S. Forensic, was not licensed to work in new york. Kieserman this upset me very much. Because this piece of information, had it been elevated in the agency, would have been very helpful in helping us help people earlier. Alfonsi why wasnt it elevated in the agency . I mean, this to me is the type of thing you run to the boss with. Kieserman this would be the type of thing that i would run to the boss with. And i need to find out why that didnt happen. Alfonsi but as far as you know, no one at fema ever said to the Insurance Companies, ever said to the engineering companies, keep the claims down . Kieserman as far as i know, no one at fema has ever done that. Alfonsi but lawyers paid for by fema have gone after sandy survivors in court, accusing them of fraud. Bob kaible, who took the photo of his altered engineering report, was accused in court of stealing the report done on his own home, which he denies. We have homeowners who went through the appeals process, and the attorneys, who are being paid for by fema, called them thieves, said they were trying to conduct fraud. Those are your dogs at the end of the leash. Do you take any responsibility for that . Kieserman yes, i take responsibility for the fact that when fema funds activities, the people who are getting paid by those funds need to behave in a professional, ethical manner. Alfonsi so, are you going to make it right . Kieserman i am. As you know, im doing everything i can in the midst of negotiations to try to make that right. Lets face it, i dont have unlimited authority. I cant wave a magic wand and make all of this right for everyone. Alfonsi since we first reported this story, fema created a review process and has settled many of the sandy flood cases. 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He told us motors have been used in the Tour De France. As we first reported in january, our story is not about the latest drugs the riders are using to cheat, its all about enhancing the bike. Where, where is the motor in here . Stefano varjas here, the motor is here. Whitaker its in here. In a bike shop in budapest, hungary, we met istvan varjas. Stefano, as hes known, is a former cyclist, a businessman, and a