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On the heels of a report earlier this week that Atlanta area Katrina victims were using $2,000 debit cards to purchase luxury items like Louis Vuitton handbags, Houston police yesterday discovered the cards, provided by FEMA and the Red Cross, being used at local strip clubs.

The Houston Police Department just formed a task force to investigate the abuse of the cards, which were distributed to thousands of Katrina hurricane victims to provide for necessities, such as food, clothing and toiletries. On the first day, the police found the cards being used to buy beer while ogling exotic dancers.

According to a report by KPRC, Channel 2, in Houston, a manager at Caligula XXI Gentlemen’s Club said he has seen at least one debit card used at his club. A bartender at Baby Dolls, identified only as “Abby,” said she has seen many of the cards used at her establishment.

“A lot of customers have been coming in from Louisiana and they’ve been real happy about the $1.75 beers and they’re really nice,” she said.

She couldn’t say for sure whether the cards she has seen were from the Red Cross or from the Federal Emergency Management Agency, but she found no fault in using federal dollars to guzzle beer at a strip club.

“You lost your whole house, then, why not?” she said “You might want some beer in a strip club. There are a lot of guys out there that like to do that.”

The wife of the manager of another strip club told KPRC that her husband has seen patrons from Louisiana offering Red Cross and FEMA debit cards, but she declined to reveal the club’s name.

The FEMA and Red Cross cards have few restrictions, but some evacuees have gotten into trouble when they tried to get additional cards.

Meanwhile, Houston police are going undercover as evacuees to keep their eyes on those who get in line more than once.

“There may be some individuals who use some false identifications or providing false information on the forms, so we’re targeting those persons also,” said Lt. Robert Manzo.

Officers handed out a warning that falsifying government documents could result in a 20-year prison sentence.

Earlier this week, the New York Daily News reported that “profiteering ghouls” were using the debit cards in luxury-goods stores as far away as Atlanta.

“We’ve seen three of the cards,” said a senior employee of the Louis Vuitton store at the Lenox Square Mall in affluent Buckhead. “Two I’m certain have purchased; one actually asked if she could use it in the store. This has been since Saturday.”

Restrictions on the cards say they can’t be used to purchase alcohol, tobacco or firearms.

The clerk at the Louis Vuitton store said: “There’s nothing legally that prevents us from taking it, unfortunately – other than morally, it’s wrong.” The unnamed employee told the Daily News two women who had made purchases with the card each bought a signature monogrammed Louis Vuitton handbag in the $800 range.

Meanwhile, in Memphis, Tenn., residents told News Channel 3 they saw Hurricane Katrina survivors purchase designer jeans, high heels and purses with their $2,000 emergency debit cards. According to the report, one Katrina victim was spotted at a Cordova clothier buying stacks of $65 designer jeans. Another viewer reported spotting a survivor buying “over $700 in high heel shoes and purses” at a Memphis department store “while (her) younger children, most of them looked under the age of 3, looked like they haven’t showered in weeks.”

“If they make an inappropriate decision as to what to purchase, the whole issue of victims’ rights comes into play,” said Bill Hildebrandt, chief executive officer of the Mid-South chapter of the Red Cross. “They have a right, I guess, to be inappropriate.”

Hildebrandt conceded that the purchases could be traced, but he said if the receipts just said “shirt” or “jeans” or “clothes,” there would be nothing the Red Cross could do. He said the Mid-South chapter stopped using the cards because the process became too cumbersome.

FEMA reportedly issued about 10,500 cards in the pilot program, with a total value of $20.6 million. Hildebrandt said some Red Cross chapters are still using the cards.

The cards have been a major source of confusion – and resentment – throughout the country.

On Sept. 7, after criticism about the federal government’s slow response to helping the Katrina victims, the Bush administration announced that displaced families of the hurricane would receive the debit cards to spend on clothing and other immediate needs.

Two days later, FEMA scrapped the program after distributing the cards at shelters in Dallas, Houston and San Antonio, where many of the evacuees were moved. FEMA said then that no cards will be issued to victims in other states.

FEMA Director Mike Brown resigned a few days later after being sent back to Washington, D.C., and relieved of his duty as head of the federal government’s hurricane efforts.

Since then, FEMA has stopped handing out the cash cards, but is now requiring evacuees in other states outside Texas to apply for cash assistance.

FEMA is still distributing $2,000 per household to victims of the hurricane, but the process has been slow. After a brief experiment with the debit cards, the agency is now directly depositing the money in bank accounts.

Hurricane victims have to register with the agency by calling an 800 number that is almost always busy. The same goes for a Red Cross fund, which has distributed $140 million thus far, determining the amount per family based on need.

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