“It is an unprecedented amount of fraud,” said Justice Department acting director for COVID-19 Fraud Enforcement Mike Galdo.
QUICK FACTS:
- At least $280 billion in COVID-19 relief aid was stolen and another $123 billion was wasted for a combined 10% of total aid, an Associated Press analysis revealed.
- The amount of stolen or misspent aid is expected to grow as officials continue investigations into fraud schemes from three pandemic aid programs created under the Trump Administration and later passed onto Biden.
- So far, more than 2,230 individuals have been charged with pandemic aid fraud.
- In an effort to provide aid to businesses during the COVID pandemic, traditional money protections fell by the wayside.
- “Self-certifications” were used to prove individuals’ identity, a system Inspector General of the U.S. Department of Justice (DOJ) Michael Horowitz explained.
- “If you open up the bank window and say, give me your application and just promise me you really are who you say you are, you attract a lot of fraudsters and that’s what happened here,” he said.
- The Small Business Administration (SBA), the agency managing two of the COVID-19 aid programs, currently gauges fraud to be $86 billion in the economic injury disaster loan program and $20 billion in the Paycheck Protection Program.
- A study from the University of Texas at Austin found roughly $117 billion in potentially fraudulent loans from the Paycheck Protection Program, a far cry from the SBA’s estimated $20 billion.
OFFICIALS’ RESPONSE TO FRAUD:
- Chief of the Fraud & White-Collar Crime Unit at the U.S. Attorney’s office in the Eastern District of Washington Dan Fruchter described the aid as an “endless pot of money that anyone could access,” opening the door to fraud.
- DOJ’s Horowitz told Congress that fraud is “clearly in the tens of billions of dollars.”
- “It wouldn’t surprise me if it exceeds ultimately more than $100 billion, but we have so much work to do,” he told lawmakers. “So we’re going to be counting and figuring this out for years to come. We’re going to go after every penny we can.”
- In an interview, White House American Rescue Plan Gene Sperling said, “I think the bottom line is regardless of what the number is, it emanates overwhelmingly from three programs that were designed and originated in 2020 with too many large holes that opened the door to criminal fraud.”
- The Associated Press added that Ohio’s State Auditor, Keith Faber, took note of suspicious activity when safeguards securing unemployment aid to qualifying individuals were lowered, providing the opportunity for waste and fraud schemes.
- “They had a year’s worth of claims in a couple of weeks,” Faber said. “The second part of the problem was the (federal government) directed them to get the money out the door as quickly as possible and worry less about security. They took that to heart. I think that was a mistake.”
BACKGROUND:
- According to a DOJ press release, five Internal Revenue Service (IRS) employees allegedly fraudulently obtained $400,000 of COVID-19 aid designed for small businesses.
- The funds were then spent on clothing, jewelry, a Mercedes-Benz, and a trip to Las Vegas.
- “These individuals—acting out of pure greed—abused their positions by taking government funds meant for citizens and businesses who desperately needed it,” said U.S. Attorney Kevin G. Ritz for the Western District of Tennessee.
- “I thank our law enforcement partners for rooting out this fraud. Our office will not hesitate to pursue and charge individuals who steal from our nation’s taxpayers,” he continued.
