Trump FEMA nominee withdraws after NBC questions on falsified records

WASHINGTON — President Donald Trump's nominee for the No. 2 spot at the Federal Emergency Management Agency withdrew from consideration on Wednesday after NBC News raised questions about a federal investigation that found he had falsified government travel and timekeeping records when he served in the Bush administration in 2005.

"Given the distraction, this will cause the Agency in a time when they cannot afford to lose focus, I have withdrawn from my nomination," the former nominee, Daniel A. Craig, said in an email to NBC News.

The investigation, jointly conducted by the FBI and the Department of Homeland Security’s Office of Inspector General, concluded there was insufficient evidence that Craig had violated conflict-of-interest laws in the awarding of huge FEMA contracts in the aftermath of Hurricane Katrina, according to the 2011 report that has never been made public but which was reviewed by NBC News.

But the investigation revealed conduct by Craig that could have been an impediment to his confirmation by the Senate had he not withdrawn.

RELATED: Hurricane Irma's destruction in Florida

27 PHOTOS
Hurricane Irma spreads destruction across Florida
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Hurricane Irma spreads destruction across Florida
A man died when his pickup truck crashed into a tree in the Florida Keys during Hurricane Irma in Florida, U.S. in this handout photo obtained by Reuters September 10, 2017. Monroe County Sheriff� Department/Handout via REUTERS REUTERS ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY.??
The crumbled canopy of a gas station damaged by Hurricane Irma is seen in Bonita Springs, Florida, U.S., September 10, 2017. REUTERS/Bryan Woolston
Flood water from Hurricane Irma surround a damaged mobile home in Bonita Springs, Florida, U.S., September 10, 2017. REUTERS/Bryan Woolston
The crumbled canopy of a gas station damaged by Hurricane Irma is seen in Bonita Springs, Florida, U.S., September 10, 2017. REUTERS/Bryan Woolston
A collapsed construction crane is seen in Downtown Miami as Hurricane Irma arrives at south Florida, September 10, 2017. REUTERS/Carlos Barria TPX IMAGES OF THE DAY
A local resident walks across a flooded street in downtown Miami as Hurricane Irma arrives at south Florida, U.S. September 10, 2017. REUTERS/Carlos Barria TPX IMAGES OF THE DAY
A boat rack storage facility lays destroyed after Hurricane Irma blew though Hollywood, Florida, U.S., September 10, 2017. REUTERS/Carlo Allegri
A smoke shop lays destroyed after Hurricane Irma blew though Fort Lauderdale, Florida, U.S., September 10, 2017. REUTERS/Carlo Allegri
Thomas Sanz clears a fallen branch as Hurricane Irma passes Miami, Florida, U.S. September 10, 2017. REUTERS/Stephen Yang
Mailboxes down caused by Hurricane Irma's strong winds and rain in The Vineyards in Monarch Lakes in West Miramar Sunday afternoon, Sept. 10, 2017. As the hurricane moved north up the Gulf coast, it brought violent weather to South Florida. (Taimy Alvarez/Sun Sentinel/TNS via Getty Images)
Palm Bay officer Dustin Terkoski walks over debris from a two-story home at Palm Point Subdivision in Brevard County after a tornado touched down on Sunday, Sept. 10, 2017. (Red Huber, Orlando Sentinel/TNS via Getty Images)
Brickell Avenue in Miami, Fla. was flooded after Hurricane Irma on Sunday, Sept. 10, 2017. (Mike Stocker/Sun Sentinel/TNS via Getty Images)
The Vineyards in Monarch Lake resident Syed Ali takes pictures of down tree limbs in his neighbor's front yard after Hurricane Irma left the Miramar community, sparing it from major damage other than down trees, branches and mailboxes on Sunday, Sept. 10, 2017. 'Thank God it didn't fall on either of our houses,' said Ali. (Taimy Alvarez/Sun Sentinel/TNS via Getty Images)
Brickell Avenue in Miami, Fla. was flooded after Hurricane Irma on Sunday, Sept. 10, 2017. (Mike Stocker/Sun Sentinel/TNS via Getty Images)
Flooding in the Brickell neighborhood as Hurricane Irma passes Miami, Florida, U.S. September 10, 2017. REUTERS/Stephen Yang
Flooding in the Brickell neighborhood as Hurricane Irma passes Miami, Florida, U.S. September 10, 2017. REUTERS/Stephen Yang
Flooding near the Hard Rock Stadium as Hurricane Irma passes Miami, Florida, U.S. September 10, 2017. REUTERS/Stephen Yang
Flooding in the Brickell neighborhood as Hurricane Irma passes Miami, Florida, U.S. September 10, 2017. REUTERS/Stephen Yang
Flooding in the Brickell neighborhood as Hurricane Irma passes Miami, Florida, U.S. September 10, 2017. REUTERS/Stephen Yang
Fallen trees and flooded streets from Hurricane Irma are pictured in Marco Island, Florida, U.S. in this handout photo obtained by Reuters September 10, 2017. Marco Island Police Department/Handout via REUTERS ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY.??
Flooding in the Brickell neighborhood as Hurricane Irma passes Miami, Florida, U.S. September 10, 2017. REUTERS/Stephen Yang
Boats are seen at a marina in Coconut Grove as Hurricane Irma arrives at south Florida, in Miami, Florida, U.S., September 10, 2017. REUTERS/Carlos Barria
Boats are seen at a marina in Coconut Grove as Hurricane Irma arrives at south Florida, in Miami, Florida, U.S., September 10, 2017. REUTERS/Carlos Barria
A partially submerged car is seen at a flooded area in Coconut Grove as Hurricane Irma arrives at south Florida, in Miami, Florida, U.S., September 10, 2017. REUTERS/Carlos Barria
Boats are seen at a marina in Coconut Grove as Hurricane Irma arrives at south Florida, in Miami, Florida, U.S., September 10, 2017. REUTERS/Carlos Barria
Palm trees blow in the winds of hurricane Irma in Bonita Springs, Florida, northeast of Naples, on September 10, 2017. Hurricane Irma regained strength to a Category 4 storm early as it began pummeling Florida and threatening landfall within hours. / AFP PHOTO / NICHOLAS KAMM (Photo credit should read NICHOLAS KAMM/AFP/Getty Images)
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Craig said he was withdrawing his nomination after NBC News contacted him about the report. He also said there was information in the report that was incorrect and the result of "poor" investigating and added that the IG had failed to follow up on information investigators were given at the time.

Craig was never charged with a crime for his actions and maintains he did nothing wrong. He said he properly accounted for all of the hours he worked.

In July, Trump nominated Craig to serve as FEMA’s deputy administrator. His nomination had been referred to the Senate Committee on Homeland Security and Governmental Affairs; the committee had yet to move forward on the nomination.

Craig’s falsification of records, substantiated in the report, could have become a major stumbling block.

In his email to NBC News, Craig said he never tried to hide the investigation from the White House or the Senate, and said it was mentioned in the answers to the official questionnaire he had to fill out.

With FEMA back in the news because of the recent hurricanes, and still smarting from its inadequate response to Katrina, senators would have had to decide whether he should be the person they want running its day-to-day operations.

Craig came under scrutiny by the Inspector General for allegedly exploiting his position as FEMA’s director of recovery for personal gain. At the time, the agency was giving $100 million contracts to private firms for temporary housing of Katrina victims, and the report said that Craig was seeking employment with those firms.

NBC News reviewed 18 pages of the 21-page summary of the report issued by DHS’s Office of the Inspector General in March 2011, which has not been made public. It was provided by a source familiar with the investigation. NBC has not seen a copy of the full report.

RELATED: Houston Texas post-Hurricane Harvey

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Houston, Texas post Hurricane Harvey
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Houston, Texas post Hurricane Harvey
Ginger Benfield works to save family photos in the aftermath of tropical storm Harvey in west Houston, Texas, U.S. September 11, 2017. "Memories are the hardest thing, but at least they are in your heart," said Benfield. Benfield's home flooded after controlled releases from Addicks Reservoir and neighboring Barker reservoir. REUTERS/Chris Aluka Berry
Mechanic Sebastian Ramirez pours new oil into a truck that was flooded by tropical storm Harvey in Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. Ramirez has worked on more than 100 flooded vehicles since the storm, but always tells the automobile owners that he can't guarantee how long the vehicle will run if he's able to fix the immediate problem. REUTERS/Chris Aluka Berry
James Giles pauses for a moment as Do'nie Murphy gets a breath of fresh air as they clean out a Mexican restaurant that was completely immersed in water in the aftermath of tropical storm Harvey in Kingwood, Houston, Texas, U.S. September 9, 2017. "We never thought it would come to this point," said Giles. REUTERS/Chris Aluka Berry
From left, Kameron Smith, 4, Darius Smith, 9, and Deandre Green, 10, play with toys that they found in the piles of destroyed property at Crofton Place Apartments in the aftermath of Hurricane Harvey in Houston, Texas, U.S. September 8, 2017. The children's apartment was destroyed by the flood waters. Picture taken September 8, 2017. REUTERS/Chris Aluka Berry
Carlos Crane, 54, of Crane's Service Center, cleans a padlock so he can lock up tools after the shop was completely immersed in water in the aftermath of tropical storm Harvey in Kingwood, Houston, Texas, U.S. September 9, 2017. "Just cleaning and keep going, we take it one day at a time," he said. REUTERS/Chris Aluka Berry
Vainer Fredrick, 26, cleans out a convenience store that was completely immersed in water in the aftermath of tropical storm Harvey in Kingwood, Houston, Texas, U.S. September 9, 2017. "I'm glad I'm working and making good money," said Fredrick. REUTERS/Chris Aluka Berry
Janice Young, 63, waits for FEMA outside of her Crofton Place Apartment, north Houston, in the aftermath of Hurricane Harvey, Texas, U.S. September 8, 2017. "I lost everything I got, I thank God I didn't loose my life," she said. Picture taken September 8, 2017. REUTERS/Chris Aluka Berry
Kalacedtra Smith, eight months pregnant, is joined by her son Kameron Smith, 9, as she rests for a moment after inspecting the water damage in her Crofton Place Apartment in north Houston during the aftermath of Hurricane Harvey, Texas, U.S. September 8, 2017. Picture taken September 8, 2017. REUTERS/Chris Aluka Berry
Jacob Chaisson, 9, and his brother Joseph Chaisson, 10, play with items that they found in the piles of destroyed property at Crofton Place Apartments in the aftermath of Hurricane Harvey in Houston, Texas, U.S. September 8, 2017. Picture taken September 8, 2017. REUTERS/Chris Aluka Berry
A pile of destroyed property surrounds a pillow with the word "Hope" inscribed on it in the aftermath of tropical storm Harvey in west Houston, Texas, U.S. September 11, 2017. This neighborhood flooded after controlled releases from Addicks Reservoir and neighboring Barker reservoir. REUTERS/Chris Aluka Berry
Isom Horace, 61, sits on the from porch of his north Houston apartment in the aftermath of Hurricane Harvey in Houston, Texas, U.S. September 8, 2017. Although he still has to pay rent, Horace doesn't know where he will stay the night. He can't stay in his apartment because it is so badly damaged and lined with mold and mildew. "It was like a river was running through the apartment...home sweet home," he said. REUTERS/Chris Aluka Berry
Vera Hsiung cleans off her husband, Elliot Wu's, neck and face as they clean out their home which was flooded with water for twelve days in the aftermath of tropical storm Harvey in west Houston, Texas, U.S. September 11, 2017. "We're really worried about contacting disease from exposure to mold," said Hsiung. Their home flooded after controlled releases from Addicks Reservoir and neighboring Barker reservoir. REUTERS/Chris Aluka Berry
Pamela Shaffer photographs a portrait from her 1984 wedding in the aftermath of tropical storm Harvey in west Houston, Texas, U.S. September 11, 2017. "It's hard to let go of these things, just pack stuff up and hope for the best," said Pamela. Shaffer's home flooded after controlled releases from Addicks Reservoir and neighboring Barker reservoir. REUTERS/Chris Aluka Berry
Savannah Shaffer (L) hugs her mother Pamela Shaffer after finding a pair of boots that weren't damaged by the flooding in the aftermath of tropical storm Harvey in west Houston, Texas, U.S. September 11, 2017. "We celebrate every victory," said Pamela. The Shaffer's home flooded after controlled releases from Addicks Reservoir and neighboring Barker reservoir. REUTERS/Chris Aluka Berry
Jon Shaffer salvages what he can from his home, which was flooded for twelve days, in the aftermath of tropical storm Harvey in west Houston, Texas, U.S. September 11, 2017. Shaffer's home flooded after controlled releases from Addicks Reservoir and neighboring Barker reservoir. REUTERS/Chris Aluka Berry
Francile Lovings, 52, sits on her front porch to avoid the odour of mould and mildew in her home during the aftermath of tropical storm Harvey in Acres Homes, Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. Lovings, who is waiting for assistance from FEMA, is still sleeping in the home although it doesn't have electricity and the mould gets worst everyday. "Im just praying and hoping I can survive until I get out of this situation," said Lovings. REUTERS/Chris Aluka Berry
Cynthia Cochran plays with her granddaughter Elizabeth Thomas, 2, as her husband Edward Stanton sits by the window in their FEMA provided hotel room in the aftermath of tropical storm Harvey in Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. Cochran, who lost all of her belongings in the flood said, "This is just another stumbling block. I don't know how I'm going to step over it, but I'm going to step." REUTERS/Chris Aluka Berry
Joderrica Cornealius, 18, reads to her cousin, Elizabeth Thomas, 2, in a FEMA provided hotel room in the aftermath of tropical storm Harvey in Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. Cornealius' home didn't flood, but she came to the hotel to show support to her family members who lost everything in the flood. REUTERS/Chris Aluka Berry
Dameon Horton, (L) and his father Paul Horton grill ribs outside their FEMA provided hotel room in the aftermath of tropical storm Harvey in Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. Talking about the the flooding, Paul said, "I didn't know what to do, but I couldn't crack under pressure, I got kids, I had to go into survival mode. Texas is strong, for real, we gonna get ourselves together and get back to work." REUTERS/Chris Aluka Berry
Elizabeth Thomas, 2, watches videos on her mother's phone outside their FEMA provided hotel room in the aftermath of tropical storm Harvey in Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. Thomas' family lost all of their belongings in the flood and are living in a hotel room temporarily. REUTERS/Chris Aluka Berry
Quincy Smith, 59, and his wife Francile Lovings, 52, sit outside their home to avoid the odour of mould and mildew in their home during the aftermath of tropical storm Harvey in Acres Homes, Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. The couple is waiting for assistance from FEMA. They are still sleeping in the home although it doesn't have electricity and the mould gets worst everyday. "Im just praying and hoping I can survive until I get out of this situation," said Lovings. REUTERS/Chris Aluka Berry
Mike Taylor, 59, drains water from the gas line in his car in the aftermath of tropical storm Harvey in Acres Homes, Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. "I got it bad, I'm so hot and tired," said Taylor. REUTERS/Chris Aluka Berry
Coby Cochran, plays peek-a-boo with her daughter, Melanie Thomas, 7, outside their FEMA provided hotel room in the aftermath of tropical storm Harvey in Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. "I'm a single mom and it's hard losing everything, but God is going to take care of us no matter what. Just live and love," said Cochran. "Momma I'm happy as long as we're together," said Melanie Thomas. REUTERS/Chris Aluka Berry
Coby Cochran, (L) and her daughter Elizabeth Thomas, 2, receive a visit in their FEMA provided hotel room from family member, Joderrica Cornealius, in the aftermath of tropical storm Harvey in Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. "I'm a single mom and it's hard losing everything, but God is going to take care of us no matter what. Just live and love," said Cochran. REUTERS/Chris Aluka Berry
Quincy Smith, 59, is seen inside his bathroom during the aftermath of tropical storm Harvey in Acres Homes, Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. Smith and his wife are still sleeping in the home although it doesn't have electricity and the mould gets worse everyday. "It's rough trying to live day by day, especially when you don't have any money, we're just trying to make it through until FEMA comes," said Smith. REUTERS/Chris Aluka Berry
Coby Cochran, (L) and her daughters Elizabeth Thomas, 2, and Melanie Thomas, 7, receive a visit in their FEMA provided hotel room from family members in the aftermath of tropical storm Harvey in Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. "I'm a single mom and it's hard losing everything, but God is going to take care of us no matter what. Just live and love," said Cochran. "Momma I'm happy as long as we're together," said Melanie Thomas. REUTERS/Chris Aluka Berry
Evelyn Teague, 88, heads home after Sunday service at True Vine Missionary Baptist Church in the aftermath of tropical storm Harvey in Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. Although no water came into Teague's home parts of her ceiling caved in. "God's taking care of me," said Teague. REUTERS/Chris Aluka Berry
Damaged property is piled up on the streets as mechanic, Sebastian Ramirez, prepares to put new oil into a truck that was flooded by tropical storm Harvey in Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. Ramirez has worked on more than 100 flooded vehicles since the storm, but always tells the automobile owners that he can't guarantee how long the vehicle will run if he's able to fix the immediate problem. REUTERS/Chris Aluka Berry
Paris Thomas, 3, sings along during the Sunday service at True Vine Missionary Baptist Church in the aftermath of tropical storm Harvey in Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. Thomas' family lost all of their belongings in the flood and are living at a hotel with the assistance of FEMA. REUTERS/Chris Aluka Berry
Coby Cochran, tries to figure out how to get her daughter, Melanie Thomas, 7, to school in the morning as they spend time outside their FEMA provided hotel room in the aftermath of tropical storm Harvey in Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. "I'm a single mom and it's hard losing everything, but God is going to take care of us no matter what. Just live and love," said Cochran. "Momma I'm happy as long as we're together," said Melanie Thomas. REUTERS/Chris Aluka Berry TPX IMAGES OF THE DAY
Melanie Thomas, 7, wears a donated dress and shoes at the Sunday service at True Vine Missionary Baptist Church in the aftermath of tropical storm Harvey in Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. Her family lost all of their belongings in the flood and are living at a hotel with the assistance of FEMA. "Momma I'm happy as long as we're together," said Thomas. REUTERS/Chris Aluka Berry
Paris Thomas, 3, thumbs through the Bible as she attends Sunday service at True Vine Missionary Baptist Church with her sister Elizabeth Thomas, 2, and mother, Coby Cochran, in the aftermath of tropical storm Harvey in Houston, Texas, U.S. September 10, 2017. Picture taken September 10, 2017. The family lost all of their belongings in the flood and are living at a hotel with the assistance of FEMA. "I'm a single mom and it's hard losing everything, but God is going to take care of us no matter what. Just live and love," said Cochran. REUTERS/Chris Aluka Berry
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The White House did not respond to a request for comment.

When the White House nominated Craig in July, it said in a news release that he had managed the recovery services and funds given to victims of more than 120 disasters, fires and emergencies, including the 9/11 terrorist attacks and the Space Shuttle Columbia explosion in 2003.

A former Republican operative and U.S. Chamber of Commerce official, Craig served from 2003 to 2005 as FEMA’s director of recovery, a senior position that oversees disaster recovery efforts. He most recently worked as a senior vice president at Adjusters International, a disaster preparedness and recovery firm.

The IG report six years ago highlighted potential ethics concerns surrounding Craig after he left FEMA and became a lobbyist for a Miami-based law firm, Akerman Senterfitt, working on behalf of a client that secured more than $1 billion in FEMA contracts as part of the Katrina relief effort.

As a former federal employee in a senior position, Craig was subject to a one-year prohibition on lobbying FEMA officials.

But before a full year had passed since he left the agency, he had dinner with two FEMA employees and submitted the bill to his firm as business expenses, according to Akerman account statements cited in the report.

One of them was the FEMA administrator at the time, David Paulison, the agency’s top-ranking official, who told NBC News he secretly recorded Craig at the FBI's request after federal investigators informed him of the potential conflict-of-interest violation, the report said. In the recorded conversation, Craig told Paulison he had done nothing wrong and denied that their dinner had violated the one-year lobbying ban, according to the report.

Paulison told NBC News that the report’s description of his conversations with investigators was accurate regarding his 2006 dinner with Craig, but said that he could not comment on the investigation’s other findings since he had not seen the report.

"Dan was a great employee when he worked for me, very bright, a hard worker," Paulison said in an interview before Craig withdrew. "I hope he gets through his nomination — I think he would be a good asset to FEMA."

RELATED: Ninth Ward damage from Hurricane Katrine 2005

35 PHOTOS
Katrina 10 year: Ninth Ward damage
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Katrina 10 year: Ninth Ward damage
NEW ORLEANS - AUGUST 29: A man holds himself on his porch in Lower Ninth Ward in New Orleans, Louisiana on August 29, 2005 after hurricane Katrina slammed Louisiana as a category 4 storm. Much of New Orleans was flooded after levies broke and water rushed into the city. (Photo by Marko Georgiev/Getty Images)
UNITED STATES - CIRCA 2002: Partially-submerged cars and houses make for a surreal sight in the flooded Ninth Ward neighborhood of New Orleans, La. Parts of the low-lying district were swallowed up by 20 feet of water when Hurricane Katrina slammed the city last week. Large swaths of New Orleans still remain under several feet of filthy water, and federal officials say it could take months to drain it. (Photo by Corey Sipkin/NY Daily News Archive via Getty Images)
UNITED STATES - CIRCA 2002: Lonzo Cutler, 34, who doesn't want to leave his pit bull behind, cradles the dog in front of his flooded home in the Ninth Ward neighborhood of New Orleans, La., as the rest of his family (in background) waits for rescuers to help them escape the barely-habitable area. As the Big Easy evacuates, already traumatized victims of Hurricane Katrina are making a choice: Head for safety or stay behind with a beloved pet. (Photo by Corey Sipkin/NY Daily News Archive via Getty Images)
NEW ORLEANS - AUGUST 29: Swat police officer Cris Mandry navigates a rescue boat through a flooded alley looking for survivors in the Lower Ninth Ward in New Orleans, Louisiana on August 29, 2005. Hurricane Katrina slammed Louisiana as a category 4 storm, forcing levies to brake and flooding much of New Orleans. (Photo by Marko Georgiev/Getty Images)
NEW ORLEANS - AUGUST 29: An unidentified woman makes her way through a hole in the roof of a flooded house in the Lower Ninth Ward in New Orleans, Louisiana on August 29, 2005. Hurricane Katrina slammed Louisiana as a category 4 storm, forcing levies to brake and flooding much of New Orleans. (Photo by Marko Georgiev/Getty Images)
NEW ORLEANS - AUGUST 29: Swat police officers rescue a unidentified person from the flooded Lower Ninth Ward in New Orleans, Louisiana on August 29, 2005. Hurricane Katrina slammed Louisiana as a category 4 storm, forcing levies to brake and flooding much of New Orleans. (Photo by Marko Georgiev/Getty Images)
NEW ORLEANS - AUGUST 29: Unidentified people just rescued from the Lower Ninth Ward recuperate on the St. Cloud bridge in New Orleans, Louisiana on August 29, 2005. Hurricane Katrina slammed Louisiana as a category 4 storm, breaking levies and flooding much of New Orleans. (Photo by Marko Georgiev/Getty Images)
UNITED STATES - CIRCA 2002: The front porch is all that remains of a lower Ninth Ward house in the aftermath of Hurricane Katrina. (Photo by Linda Rosier/NY Daily News Archive via Getty Images)
NEW ORLEANS - SEPTEMBER 04: A man walks through brackish water as he makes his way through the poor Ninth Ward neighborhood September 4, 2005 in New Orleans, Louisiana. Hurricane Katrina dealt New Orleans a devastating blow when it came ashore August 29, flooding the city and causing a death toll that officials fear will be in the thousands. (Photo by Chris Hondros/Getty Images)
NEW ORLEANS - SEPTEMBER 08: Holdout Howard Gillett is reflected in a mirror on his front porch in the heavily damaged ninth ward in the aftermath of Hurricane Katrina September 8, 2005 in New Orleans, Louisiana. Gillett and his family intend to stay at their home despite orders to evacuate. Authorities have said they are planning forcible evacuations of residents who refuse to leave. (Photo by Mario Tama/Getty Images)
The streets of New Orleans Ninth Ward are still fllooded more than a week after Hurricane Katrina caused numerous levee breaks, Friday, September 9, 2005. (Photo by Robert Gauthier/Los Angeles Times via Getty Images)
NEW ORLEANS - SEPTEMBER 12: US Army National Guard soldiers from Oregon gather on a street corner while conducting search operations September 11, 2005 in the Ninth Ward neighborhood of New Orleans, Louisiana. Rescue efforts and clean up continue in the areas hit by Hurricane Katrina two weeks after the deadly storm hit. (Photo by Mario Tama/Getty Images)
UNITED STATES - SEPTEMBER 12: A military helicopter flies September 12, 2005 over Harold Irvin, Sr., who is staying with his son Glen after his house in New Orleans' 9th Ward was covered by floodwaters in the aftermath of Hurricane Katrina. Both Irvin and his son refuse to leave their home, despite pressure from police. (Photo by Timothy Fadek/Bloomberg via Getty Images)
NEW ORLEANS - SEPTEMBER 5: Paul Garrett, 56, and his neighbor's dog, Rusty, whom he rescued during Hurricane Katrina, walk the streets of the 9th ward on their way home. 'Everybody left,' said Garrett, a former longshoreman. 'I stayed.' Garrett said he stayed to help the neighborhood's elderly and sick. 'Everybody can't leave,' he said. 'I'm lookin' [sic] out for people who can't help themselves. Especially the older people. See, I'm just a 'junior citizen.' They're 'senior citizens',' he continued. 'You got a lot of people in this city who don't care for each other. I feel like we should pull together now instead of apart. It's gotten worse. It's not right,' he said. (Photo by Dina Rudick/The Boston Globe via Getty Images)
A tattered US flag waves on a pole in the devastated Ninth ward of New Orleans, Louisiana 21 September 2005, most of the neighborhood was flooded and destroyed by the water following Hurricane Katrina. Authorities have finished removing bodies from New Orleans flood waters, but the search for the dead goes on inside homes, Mayor Ray Nagin said Wednesday. The death toll from Hurricane Katrina rose above 1,000 Wednesday as 63 more bodies have been recovered in Louisiana, authorities said. AFP PHOTO/Menahem KAHANA (Photo credit should read MENAHEM KAHANA/AFP/Getty Images)
UNITED STATES - SEPTEMBER 16: A film crew documents the levee breech along the industrial canal near Arabi, Louisiana, following Hurricane Katrina's landing in New Orleans. This breech caused massive flooding and destruction of homes in the lower 9th Ward. Much of this flooding had drained by Friday, September 16, 2005. (Photo by Scott Saltzman/Bloomberg via Getty Images)
NEW ORLEANS - SEPTEMBER 11: A Drug Enforcement Agent (DEA) marks a building with spray paint after searching for survivors September 11, 2005 in the Ninth Ward district of New Orleans, Louisiana. Rescue efforts and clean up continue in the areas hit by Hurricane Katrina fourteen days after the deadly storm hit. (Photo by Justin Sullivan/Getty Images)
NEW ORLEANS - SEPTEMBER 11: Two dogs run past a house marked with a note, 'Dead Body Inside' September 11, 2005 in the Ninth Ward district of New Orleans, Louisiana. Rescue efforts and clean up continue in the areas hit by Hurricane Katrina fourteen days after the deadly storm hit. (Photo by Justin Sullivan/Getty Images)
NEW ORLEANS - SEPTEMBER 16: A mix of oil and water and sewerage still lingers in areas of the Ninth Ward on September 16, 2005 in New Orleans, Louisiana. The hurricane swept though the area 19 days ago and left much of the city under water and without power. (Photo by Chris Graythen/Getty Images)
NEW ORLEANS - SEPTEMBER 16: A car is covered in mud, debris and sewerage left by Hurricane Katrina in the Ninth Ward on September 16, 2005 in New Orleans, Louisiana. The hurricane swept though the area 19 days ago and left much of the city under water and without power. (Photo by Chris Graythen/Getty Images)
New Orleans, UNITED STATES: A thick layer of mud covers the streets of the Ninth Ward of New Orleans after the water receded 18 September 2005, The area was one of the most severely damaged when hurricane Katrina hit the city three weeks ago. AFP PHOTO/Omar TORRES (Photo credit should read OMAR TORRES/AFP/Getty Images)
New Orleans, UNITED STATES: A boat reamins in front of a house in the Ninth Ward of New Orleans 18 September 2005, The area was one of the most severely damaged when Hurricane Katrina hit the city three weeks ago. AFP PHOTO/Omar TORRES (Photo credit should read OMAR TORRES/AFP/Getty Images)
NEW ORLEANS - SEPTEMBER 23: Water flows through a breach in the repaired Inner Harbor Canal towards the Ninth Ward District September 23, 2005 in New Orleans, Louisiana. Rain and wind has started to hit New Orleans as Hurricane Rita passes through the Gulf of Mexico just over three weeks after Hurricane Katrina ravaged the region. (Photo by Justin Sullivan/Getty Images)
NEW ORLEANS - SEPTEMBER 23: A toilet sits in water coming from a breach in the repaired Inner Harbor Canal as water flows towards houses in the Ninth Ward District September 23, 2005 in New Orleans, Louisiana. Rain and wind has started to hit New Orleans as Hurricane Rita passes through the Gulf of Mexico just over three weeks after Hurricane Katrina ravaged the region. (Photo by Justin Sullivan/Getty Images)
Areas of the Ninth Ward in New Orleans are still flooded after Hurricanes Katrina and Rita, 26 September 2005. New Orleans Mayor Ray Nagin is allowing business owners back into the Central Business District (CBD) starting 26 September 2005. The CBD was not flooded by either hurricane. AFP PHOTO / Robyn Beck (Photo credit should read ROBYN BECK/AFP/Getty Images)
NEW ORLEANS, UNITED STATES: Local artist Jeffery Holmes looks out from the balcony of his home (center in background) of a part of his 'toxic art' exhibition on the median of the roadway in front of his home in the Ninth Ward of New Orleans, 27 September 2005. The 'toxic art' consists of artworks from his home by himself and his wife, as well as everyday items from their home, all of which were ruined by the floodwaters from Hurricane Katrina. AFP PHOTO / Robyn Beck (Photo credit should read ROBYN BECK/AFP/Getty Images)
NEW ORLEANS, UNITED STATES: Palazzolo Simmons, 49, looks out over his home neighborhood for the first time since Hurricane Katrina in the mostly poor and black Lower Ninth Ward section of New Orleans, 02 October 2005. Simmons, who said his home was destroyed and would never come back, was riding with his neighbors from the Ninth Ward on a customized monster truck brought to the city by a private citizen from Florida to let the local population get a look in the area still unpassable to regular cars. While New Orleanians in more upscale neighborhoods are being urged to return home, their counterparts from the poorest areas hardest hit by Hurricane Katrina are forced to sneak past police checkpoints to see for the first time the renmants of their life. AFP PHOTO / Robyn Beck (Photo credit should read ROBYN BECK/AFP/Getty Images)
NEW ORLEANS, LOUISIANA - NOVEMBER 11: Lorriane Macell on her porch in the lower ninth ward of New Orleans, Louisiana on November 11, 2005, after Hurricane Katrina devastated the city.(Photo by Benjamin Lowy/Getty Images)
NEW ORLEANS - NOVEMBER 21: Zadie Smith rests while cleaning her home in the heavily damaged Ninth Ward November 21, 2005 in New Orleans, Louisiana. Smith is attempting clean up her home because she says she cannot afford to pay workers to clean it. (Photo by Mario Tama/Getty Images)
NEW ORLEANS - DECEMBER 24: A car adorned with a toy reindeer, Christmas lights and a spray-painted 'Merry Christmas' message is seen in the heavily damaged Lower Ninth Ward December 24, 2005 in New Orleans, Louisiana. Nearly four months after Hurricane Katrina devastated the area, the worst-hit parts of New Orleans and surrounding areas are still uninhabitable. (Photo by Ethan Miller/Getty Images)
NEW ORLEANS - DECEMBER 24: A destroyed house is seen in the heavily damaged Lower Ninth Ward December 24, 2005 in New Orleans, Louisiana. Nearly four months after Hurricane Katrina devastated the area, the worst-hit parts of New Orleans and surrounding areas are still uninhabitable. (Photo by Ethan Miller/Getty Images)
NEW ORLEANS - JANUARY 7: A home destroyed by Hurricane Katrina is seen on January 7, 2006 in New Orleans, Louisiana. The New Orleans City council has agreed to wait two more weeks before starting to tear down damaged homes as a federal judge decides if he will hear a challenge from local community activists. (Photo by Chris Graythen/Getty Images)
NEW ORLEANS - JANUARY 10: Keith Jackson takes a picture of the rubble surrounding the remains of his aunt's home in the Lower Ninth Ward of New Orleans, Louisiana on January 10, 2006. The home was destroyed when the Industrial Canal levee was breeched and floodwaters inundated the neighborhood, during Hurricane Katrina, in August 2005. (Photo by Andy Nelson/The Christian Science Monitor via Getty Images)
NEW ORLEANS - FEBRUARY 20: Flood damaged homes are lit by car headlights after dark in the Lower Ninth Ward February 20, 2006 in New Orleans, Louisiana. The hurricane-ravaged Ninth Ward mostly still does not have power, and majority of the homes are uninhabitable as the city begins celebrating Mardi Gras. (Photo by Justin Sullivan/Getty Images)
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The U.S. Attorney’s Office for the Middle District of Louisiana had conducted its own investigation into whether Craig had violated federal conflict-of-interest laws by seeking employment at firms that won big FEMA contracts, the Inspector General report noted. The Justice Department had similarly concluded that there was not enough evidence to prove that he had violated the law, and closed its file on Craig in 2010, the report said.

DHS’s Office of Inspector General has never made its own findings public. Unlike audits or inspections, which are usually publicly available, Inspector General investigations into alleged criminal, civil, and administrative misconduct are seldom released.

A Trip to Baton Rouge and Falsified Expenses

The IG report alleges that Craig committed travel-voucher fraud for a trip he took to Baton Rouge, Louisiana, in August 2005, claiming his travel expenses were for official government business when in fact he was interviewing for a job with the Shaw Group, an engineering and construction firm that received a big post-Katrina contract.

In an interview with investigators, the FEMA official responsible for signing travel vouchers said that his signature had been forged on Craig’s voucher. Craig’s Louisiana trip cost taxpayers $482.43, the report said, but the report did not specify whether he had paid back the money.

Craig also falsified his time and attendance records at FEMA, interviewing for potential new jobs during times he claimed to be at work, the report alleged.

During the summer of 2005, Craig had met to discuss employment with Shaw and the Fluor Corporation — another engineering firm with a big post-Katrina contract — during times that he reported to be at work, investigators concluded. The report cited an affidavit that Craig submitted to DHS’s Office of Inspector General in September 2005, which described his job-hunting meetings with Shaw and Fluor. (The summary of the investigation that NBC News reviewed did not cite any interviews with Craig or any responses by him to the report’s findings.)

Shaw ultimately offered Craig a job, which he accepted but then later turned down, according to company executives cited in the report. On Sept. 8, 2005, Shaw announced that FEMA had awarded the firm a $100 million contract to provide temporary housing for victims of Katrina, which hit the Gulf Coast on August 29, 2005. Fluor and two other federal contractors landed similarly large deals with FEMA.

Under federal law, executive-branch employees are prohibited from participating in government matters in which they have a financial interest. In a Sept. 21, 2005 letter to Paulison, then FEMA’s acting director, Craig made an effort to recuse himself, but the letter was dated after the report said he had begun interviewing with Shaw, and after FEMA had already awarded the contract to the firm. A FEMA official also told investigators that Craig had not properly recused himself before interviewing with Shaw, according to the report.

Craig told Paulison that he was potentially pursuing a job with Shaw, among other firms, and could no longer participate in matters that affected the financial interests of those companies, according to the letter, which was obtained by the Project on Government Oversight, a non-partisan watchdog group.

Craig also informed DHS’s Office of Inspector General that he had landed a job with a FEMA contractor but did not take it, according to the report. That was what prompted the IG’s office to open its initial investigation into Craig’s potential conflict-of-interest violation, the report said. Craig left his post at FEMA on Sept. 30, 2005, the report continued, and went to work for Akerman instead.

FEMA’s deal with Shaw was one of four controversial, no-bid contracts for FEMA trailers that the agency doled out in Katrina’s aftermath. Each contract originally had a $100 million ceiling, but their value quickly swelled. By July 2006, the government had committed to paying Shaw more than $900 million for its FEMA trailer contract, the agency said.

FEMA quickly came under heavy criticism for the no-bid contracts, which the agency claimed were necessary given the overwhelming demands of the Katrina recovery. The controversy intensified scrutiny into how the contracts were awarded in the first place.

Matt Jadacki, special inspector general for Gulf Coast Hurricane Recovery, testified that FEMA had not adequately documented why it chose to award the four contracts to certain firms over others. "The lack of source-selection documentation created the appearance of bias or favoritism," he told a Senate subcommittee in 2006.

In the summer of 2007, the U.S. Attorney’s Office for the Eastern District of Louisiana asked the FBI to investigate whether Craig had violated federal law during his job search with firms that received the no-bid contracts from FEMA, the report said. At the request of the U.S. Attorney, DHS re-opened its own investigation into the matter. The joint FBI-DHS inquiry built upon an earlier DHS investigation that concluded there was not enough evidence to prove that Craig had a substantial role in FEMA’s decision to award a contract to Shaw, in violation of federal law, according to the report.

Through interviews with his former colleagues, the report said, federal investigators confirmed that Craig was involved in the internal discussions at FEMA about the temporary housing contracts.

One colleague asked Craig to recommend names of individual contractors in late July or early August — around the time that investigators said Craig was interviewing with Shaw — and Craig had suggested Shaw without going into further detail, according to the report. But the colleague, like others at FEMA, told federal investigators that he wasn’t aware of any effort on Craig’s part to influence the selection of contractors.

The housing contracts would ultimately become exemplars of government waste and mismanagement during the Katrina recovery.

Describing the four contracts as "the largest written by FEMA during the response to Hurricane Katrina," DHS’s Inspector General concluded in a 2008 audit that government waste and questionable costs were responsible for $46 million out of the $3.2 billion that it had committed to spending on FEMA trailers. The audit faulted the government for awarding the four contracts without properly vetting the firms, negotiating prices, or defining critical terms and conditions for them. (The audit did not cite Craig by name or allege any wrongdoing on his part.)

The Shaw Group Severs Ties

Shaw, for its part, was eager to have Craig help the firm apply for its next FEMA contract by bringing him on board as a consultant, according to Shaw executives cited in the IG report. Though Craig decided not to join the firm’s staff, Shaw still managed to employ his services and hired Akerman Senterfitt, where Craig worked as a consultant and lobbyist from October 2005 through May 2008, according to his LinkedIn profile.

In an interview with federal investigators cited in the report, a Shaw executive said that Craig acted as a consultant to help the firm land a second contract with FEMA, which the executive estimated to be worth about $600 million. (FEMA awarded new housing contracts to Shaw and five other firms in August 2006.) But soon after the second contract was awarded, according to an email cited in the report, Shaw terminated its business relationship with Akerman after a lobbying disclosure appeared to show that Craig had potentially run afoul of a second federal ethics law.

Under that federal law, which was enacted for executive branch employees in 1978, senior federal employees are subject to a one-year "cooling off" period after leaving the government, during which they’re prohibited from lobbying their former departments or agencies. But less than a year after leaving the administration, Craig lobbied FEMA on disaster relief and housing issues on behalf of Shaw, according to a federal lobbying disclosure cited in the IG report from Akerman Senterfitt — which has since changed its name to Akerman — dated July 5, 2006.

A few months later, Craig told the Shaw Group that Akerman staff had filed the July lobbying disclosure in error, as the one-year ban prohibited him from lobbying FEMA, according to documents cited in the IG report. Akerman also filed an amended version of the lobbying report that removed Craig’s name. Troubled by the revelation, Shaw immediately ended its business relationship with Akerman, according to the report, adding that Shaw said it had never asked or intended for Craig to lobby FEMA on the firm’s behalf.

During his one-year cooling-off period, Craig had dinners with Paulison, the head of the agency, and Jadacki, FEMA’s head of Katrina oversight, that he charged to Akerman as business expenses, according to account statements described in the report. Under federal law, Craig would have been prohibited from communicating with FEMA officials with the intent to influence them.

Speaking to federal investigators, Jadacki explained that he was friends with Craig, but said that they had never discussed Shaw or FEMA housing contracts, according to the report.

Similarly, Paulison told investigators that Craig had not lobbied him and did not recall him bringing up the FEMA contracts; he described their dinner in August 2006 as a social occasion and said he was angry with Craig for listing it as a business expense, according to the report. After speaking with investigators, the report continued, Paulison agreed to meet with Craig again, secretly record their conversation, and debrief federal agents afterwards.

During that meeting, which took place in December 2008, Craig told Paulison that he hadn’t done anything wrong, the report said. He denied writing off the 2006 dinner as a business expense and said he had not violated the one-year ban on lobbying, according to the report. Paulison showed him a subpoena from the U.S. Attorney’s office requiring all documentation of his business meetings with Craig, the report continued. Craig said that he had broken no laws and told Paulison to tell the truth.

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