By Adam Klasfeld, Courthouse News Service

MANHATTAN (CN) — A Long Island engineering firm and its employees are facing a hail of 50 criminal charges for doctoring the reports of homeowners beset by Hurricane Sandy, New York's attorney general said Monday.

Sandy destroyed roughly 305,000 housing units in New York and 346,000 in New Jersey when it ripped through the Eastern Seaboard nearly four years ago.

As thousands of federal lawsuits trickled into court demanding flood insurance, lawyers for the homeowners alleged a pattern of engineering reports that had been forged to attribute hurricane damage to other causes.

On Monday, New York Attorney General Eric Schneiderman unveiled his first criminal indictment related to these claims, involving the Uniondale-based firm HiRise Engineering and its project manager Matthew Pappalardo.

"Fraudulently altering engineering reports undermines the integrity of the entire FEMA [Federal Emergency Management Agency] claims process, which homeowners and families rely upon in a time of crisis," Schneiderman said in a statement. "Today's charges reveal a flagrant disregard for the well-being and safety of New Yorkers, and my office will not tolerate it."

HiRise was one of the companies contracted to perform structural engineering assessments for properties covered under the National Flood Insurance Program.

Though HiRise retained licensed engineers for the initial inspections, Pappalardo instructed the firm's other employees to alter the original findings, prosecutors say.

"Pappalardo and the other HiRise employees who made the alterations to the original reports did not personally inspect the damaged buildings and were not licensed to practice engineering in New York State," Schneiderman's office said.

At his Nassau County Supreme Court arraignment this morning, Pappalardo posted bail of $20,000 cash over a $40,000 bond. The 38-year-old faces up to seven years in prison if convicted on all charges.

HiRise faces up to a $10,000 fine on each of its 25 felony counts.

The company's spokeswoman said she was "disappointed" that the attorney general filed charges.

"Nevertheless, as we have from the beginning, we steadfastly maintain that there was never any intent by HiRise or its principals to defraud any homeowner with respect to the preparation of these reports and we look forward now to an opportunity to defend these allegations," she said in an email.

Schneiderman supplemented his charges this morning with a 24-page report titled "Murky Waters," which identifies "several fundamental flaws" hobbling the National Flood Insurance Program, which is approaching its 50th anniversary.

"When the next major storm hits, it's crucial that families know exactly what kind of damage is covered by insurance, and that their claims are being handled professionally and reliably," the attorney general noted.

Flood insurance generally did not exist before the program's enactment in 1968, and there is still little clarity or transparency over how it works, Schneiderman found.

"Unfortunately, our investigation has uncovered that many property owners fail to understand that the term 'flood' as it applies to the NFIP is exceedingly specific and narrow as it applies to their coverage," the report states.

The Government Accountability Office has found that the Federal Emergency Management Agency, the program's administrator, owed $23 billion to the Department of Treasury as of Sept. 30, 2015.

Part of the reason for that ballooning price tag stems from inadequate training, lack of certification standards, and poor supervision of the claims process, Schneiderman said.

"Our investigation revealed systematic inefficiencies as well as inadequate transparency and oversight in the flood claim process, resulting in delays for consumers and higher costs for taxpayers," the report states.

Meanwhile, the report reveals that Schneiderman's office "uncovered evidence of other crimes" involving Sandy-related fraud — outside of New York State's jurisdiction.

"We have referred our findings to the United States Department of Justice, and we look forward to working with the appropriate federal law enforcement agencies in conjunction with this ongoing investigation," Schneiderman wrote in the report.

The Justice Department would neither confirm nor deny whether such a probe is pending.

To Learn More:

FEMA to Reopen 141,800 Hurricane Sandy Homeowner Damage Claims (by Noel Brinkerhoff and Danny Biederman, AllGov)

Inspector General Finds Bush-Era FEMA Paid for Hurricane Damage Covered by Private Insurer (by Danny Biederman and Noel Brinkerhoff, AllGov)