Prosecutors Struggle to Catch Up to a Tidal Wave of Pandemic Fraud
Investigators say there was so much fraud in federal Covid-relief programs that — even after two years of work and hundreds of pandemic fraud prosecutions — they’re still just getting started.
In the midst of the pandemic, the government gave unemployment benefits to the incarcerated, the imaginary and the dead. It sent money to “farms” that turned out to be front yards. It paid people who were on the government’s “Do Not Pay List.” It gave loans to 342 people who said their name was “N/A.”
As the coronavirus shuttered businesses and forced people out of work, the federal government sent a flood of relief money into programs aimed at helping the newly unemployed and bolstering the economy. That included $3.1 trillion that former President Donald J. Trump approved in 2020, followed by a $1.9 trillion package signed into law in 2021 by President Biden.
But those dollars came with few strings and minimal oversight. The result: one of the largest frauds in American history, with billions of dollars stolen by thousands of people, including at least one amateur who boasted of his criminal activity on YouTube.
‘I Don’t Want To Be Absolutely Robbed Blind’: Bill Maher Blasts COVID Relief – Pandemic Fraud
Comedian Bill Maher lashed out at both Democrats and Republicans on Friday saying the nation was “robbed blind” by coronavirus relief fraud, and neither party took a stand.
Maher noted that President Joe Biden would be extending the statute of limitations for investigating COVID-19 fraud. The government relied on the honor system during the pandemic to give out Paycheck Protection Program loans, which resulted in as much as $100 billion in fraud, The New York Times reported. The programs were largely abused by individuals who used fake names, listed fake businesses and provided false information in order to obtain the grants.
Maher criticized the government, saying he was upset with how much money was stolen and that both Democrats and Republicans apparently did nothing.
“It doesn’t really make me a conservative, does it, that I don’t want to be absolutely robbed blind? Is there some number at which I go, ‘you are just taking my money and wasting it and letting people steal it.’”
Maher then questioned why Democrats, who are supposed to be the “good government party” didn’t step up and fix government operations to prevent mass fraud and why Republicans, who always act as “fiscal watchdogs” didn’t do more.
“Nobody does any of their part!” Maher exclaimed.
“It makes me a little less excited about the money they’re planning to spend,” Maher said, likely in reference to the so-called Inflation Reduction Act which has a $740 billion price tag that includes $370 billion for green energy initiatives, a 15% tax on corporations with a reported annual income greater than $1 billion, as well as nearly $80 billion in funding for the Internal Revenue Service.
Tens of Billions in Pandemic Fraud
These programs are now over. There is no official estimate for the amount of money that was stolen from them — or from pandemic-relief programs in general. The Justice Department has charged people with about $1 billion in fraud so far, and is investigating other cases involving $6 billion more, investigators said.
But other reports have suggested the real number could be much higher. One official said the total of “improper” unemployment payments could be more than $163 billion, as first reported by The Washington Post. In the Economic Injury Disaster Loan program, a watchdog found that $58 billion had been paid to companies that shared the same addresses, phone numbers, bank accounts or other data as other applicants — a sign of potential fraud.
“It’s clear there’s tens of billions in fraud,” said Michael Horowitz, the chairman of the Pandemic Response Accountability Committee, which includes 21 agency inspectors general working on fraud cases. “Would it surprise me if it exceeded $100 billion? No.”
Biden is dazed about the massive pandemic-fraud cases
Now, prosecutors are trying to catch up.
There are currently 500 people working on pandemic-fraud cases across the offices of 21 inspectors general, plus investigators from the F.B.I., the Secret Service, the Postal Inspection Service and the Internal Revenue Service.
The federal government has already charged 1,500 people with defrauding pandemic-aid programs, and more than 450 people have been convicted so far. But those figures are dwarfed by the mountain of tips and leads that investigators still have to chase.
Agents in the inspector general’s office at the Labor Department have 39,000 investigations going. About 50 agents in a Small Business Administration office are sorting through two million potentially fraudulent loan applications.
Officials already concede that the sheer number of cases means that some small-dollar thefts may never be prosecuted. This month, Mr. Biden signed bills extending the statute of limitations for some pandemic-related fraud to 10 years from five, a move aimed at giving the government more time to pursue cases. “My message to those cheats out there is this: You can’t hide. We’re going to find you,” Mr. Biden said during the signing at the White House.
Investigators say they hope the extra time will allow them to ensure that those who defrauded the government are ultimately punished, restoring a deterrent that had vanished in a flood of lies and money.
“There are years and years and years of work ahead of us,” said Kevin Chambers, the Justice Department’s chief pandemic prosecutor. “I’m confident that we’ll be using every last day of those 10 years.”
The federal government provided about $5 trillion in relief money in three separate legislative packages — an enormous sum that is credited with reducing poverty and saving the country from a prolonged, painful recession.
But investigators say that Congress, in its haste to get money out the door, devised all three packages with the same flaw: relying on the honor system.
For example, an expanded unemployment benefit gave workers an extra $600 per week in federal jobless funds on top of what they received from their state. The program was funded by the federal government but administered by states, which often had loose rules around qualifying. Applicants did not need to provide proof they had lost income because of Covid-19; they simply had to swear it was true.
Loan programs run by the Small Business Administration
A similar we’ll-take-your-word-for-it approach was used in two loan programs run by the Small Business Administration.
They were the Paycheck Protection Program, in which the government guaranteed loans made by private lenders, and the Economic Injury Disaster Loan program, in which the government itself gave out loans and smaller advance grants that did not have to be repaid. In both, the government trusted businesses to self-certify that they met key requirements.
Both the Labor Department and the Small Business Administration said that they had tried to screen those claims — and that they did reject billions of dollars’ worth of applications that did not make sense. But that was not enough.
In some cases, the programs missed schemes that were comically easy to spot. In one instance, 29 states paid unemployment benefits to the same person. In another, a Postal Service employee got an $82,900 loan for a business called “U.S. Postal Services.” Another individual got 10 loans for 10 nonexistent bathroom-renovation businesses, using the email address of a burrito shop.
In the Paycheck Protection Program, private banks were supposed to help with the screening, since in theory they were dealing with customers they already knew. But that left out many small businesses, and the government allowed online lenders to enter the program. This year, University of Texas researchers found that some of those “fintech” lenders appeared less diligent about catching fraud.
In another case, a mother and daughter in Westchester County, N.Y., stand accused of turning fraud into a franchise — helping other people cook up fake businesses in order to get loans from the Economic Injury Disaster program.
Andrea Ayers advised one client to tell the government she ran a baking business from home, although she was not a baker, prosecutors said.
“You bake,” Ms. Ayers texted to the client, adding four laugh-crying emojis, according to charging documents.
“Lol,” the client wrote back.
The scheme, prosecutors said, was intended to take advantage of the Small Business Administration’s advance grant program, which provided applicants up to $10,000 up front while the agency decided whether to award a larger loan. Even if the loan was rejected, in many cases the applicant could still keep the grant.
Prosecutors said Ms. Ayers’s daughter, Alicia Ayers, texted another client that the small size of the grants meant they were unlikely to be punished: “10k is not enough for jail time lol.”
The government charged both Ayerses with wire fraud. They have pleaded not guilty. Their lawyers did not respond to requests for comment.
In some corners of the internet, schemes to defraud were discussed in chat rooms and YouTube videos, where scammers offered to help for a cut of the proceeds. Some used the money on necessities, like mortgage bills or car payments. But many seemed to act out of opportunism and greed, splurging on a yacht, a mansion, a $38,000 Rolex or a $57,000 Pokémon trading card.
Vinath Oudomsine bought the Pokémon card in January 2021, after receiving a loan from the Small Business Administration for a nonexistent business. He pleaded guilty in October to defrauding the loan program, leaving the U.S. government responsible for selling the card.
Pandemic fraud became such an open secret that it ceased to be much of a secret at all. In September 2020, a California rapper named Fontrell Antonio Baines, who performs as Nuke Bizzle, posted a music video on YouTube, bragging in detail about how he had gotten rich by submitting false unemployment claims. His song was called “EDD,” after California’s Employment Development Department, which paid the benefits.
“I just seen 30 cards land in one day. Got straight on the phone and activate,” Mr. Baines rapped in the song, flashing cash and envelopes with preloaded debit cards from the state.
“Unemployment so sweet,” he said.