WASHINGTON (AP) — A large portion of the theft was audacious and straightforward.
Scammers used the Social Security numbers of deceased individuals and federal inmates to claim unemployment benefits. Perpetrators exploited these benefits across multiple states. Furthermore, federal loan candidates were not scrutinized against a Treasury Department database that could have identified dubious applicants.
Criminals and gangs seized the opportunity. However, a U.S. soldier in Georgia, the ministers of a non-operational church in Texas, a former state legislator in Missouri, and a roofing contractor in Montana are among those who did as well.
It all combined to form the biggest scam in U.S. history, where the unwarranted theft ran into billions of dollars from federal COVID-19 relief aid. This aid was intended to counteract the ravages of the worst pandemic in a century and to stabilize an economy spiralling into chaos.
An analysis by the Associated Press established that fraudsters potentially looted more than $280 billion in COVID-19 relief funds while an additional $123 billion was squandered or misused. Together, the losses correspond to 10% of the $4.2 trillion the U.S. government has so far allocated in COVID relief aid.
As investigations delve deeper into the magnitude of potential frauds, this figure is sure to rise.
The question beckons, how could so much have been stolen? Investigators and independent experts argue that the government, in its haste to disburse trillions in relief aid, undertook insufficient oversight during the initial stages of the pandemic and instituted inadequate restrictions on beneficiaries. In other words, they suggest the scam was simply way too effortless.
“There was an abundant supply of money that seemed to be accessible to anyone,” said Dan Fruchter, the head of the fraud and white-collar crime unit at the U.S. Attorney’s Office in the Eastern District of Washington. “Individuals contrived to believe that it was a socially acceptable action, despite it not being lawful.”
The U.S. government has so far charged over 2,230 defendants with fraud crimes related to the pandemic and is currently investigating thousands more.
A sheet of uncut $100 bills scrutinized during the printing process at the Bureau of Engraving and Printing Western Currency Facility in Fort Worth, Texas, on Sept. 24, 2013. (AP Photo/LM Otero, File)
The majority of the illicitly acquired money originated from three significant pandemic-rescue initiatives kick-started during the Trump administration, which were left to President Joe Biden. These programs were aimed at supporting small businesses and unemployed individuals through the economic disruption triggered by the pandemic.
Pilfering was widespread, yet not always substantial, as suggested by astounding headlines involving vast sums. Nonetheless, each act of theft, regardless of magnitude, underscores the pervasive issue of scams and frauds while America was dealing with overwhelmed hospitals, school shutdowns, and closed businesses. Since the inception of the pandemic in early 2020, more than 1.13 million individuals in the U.S. have succumbed to COVID-19, according to the Centers for Disease Control and Prevention.
Michael Horowitz, U.S. Justice Department inspector general who heads the federal Pandemic Response Accountability Committee, informed Congress that the fraud is “clearly running into tens of billions of dollars” and may ultimately cross the $100 billion mark.
Horowitz reaffirmed his estimate to the AP but noted he can not be certain until he has more concrete data.
“It is rather premature to speculate on the amount,” he stated. “However, it is decidedly significant, and we are still at least a couple of years away from the final tally.”
Mike Galdo, the U.S. Justice Department’s temporary director for COVID-19 Fraud Enforcement, labeled it as “an unprecedented amount of fraud.”
Departing from office, former President Donald Trump ratified emergency aid measures totalling $3.2 trillion, according to data from the Pandemic Response Accountability Committee. Biden’s 2021 American Rescue Plan approved the expenditure of another $1.9 trillion. The committee’s most recent audit indicates that a fifth of the $5.2 trillion has yet to be disbursed.
Michael Horowitz, on the left, who heads a watchdog committee monitoring COVID-19 expenditure, and David Smith, an assistant director of the Office of Investigations at the U.S. Secret Service, testifying before the House Oversight and Accountability Committee regarding waste and fraud in COVID-19 relief programs. (AP Photo/J. Scott Applewhite, File)
Never before has such a significant amount of federal emergency aid been funneled into the U.S. economy at such a speed. “The most expansive rescue package in American history,” U.S. Comptroller General Gene Dodaro informed Congress.
The extensive nature of this aid package disguises multibillion-dollar errors.
For instance, an $837 billion IRS program, delivered economic stimulus checks to the correct taxpayers 99% of the time, as per the tax agency. However, the 1% failure rate led to an almost $8 billion loss.Switching to another terminology and modifying the sentence framework while making sure that HTML tags and format are left untouched, do not change the language of the content. Make the context unique. Use markdown format to include tables, titles, lists and bullets. Make it sound as though it has been penned by a human and include as many words of transition as possible. Only place subtitles with h2, h3, h4 tags where they are appropriate.
In accordance with the Treasury Department inspector general, some of the funds were unfortunately allocated to “unqualified persons,” as he reported to AP.
A representative from the IRS expressed disagreement with the watchdog over certain figures and highlighted that, if the provided numbers were accurate, the resulting loss would constitute a minor percentage of the overall budget of the program.
Amidst the global health crisis, the Small Business Administration, normally an agency of little publicity, was propelled into a significant role. In the seventy years preceding the pandemic, the SBA had allocated $67 billion in disaster loans.
The onset of the pandemic resulted in the assignment of the management of two substantial relief operations, namely the COVID-19 Economic Injury Disaster Loan and Paycheck Protection programs, which escalated to over a trillion dollars, to the agency. The SBA’s workforce was subsequently tasked with swiftly distributing funds to aid the businesses and employees adversely affected. The rate at which the SBA was required to operate increased dramatically due to COVID-19. Between March 2020 and the end of July 2020, the agency approved 3.2 million COVID-19 economic injury disaster loans, amounting to $169 billion, as detailed in a report from the SBA inspector general. Concurrently, the agency was responsible for implementing the extensive new Paycheck Protection Program.
The urgency created by the situation necessitated the reduction of precautions put in place to safeguard federal funds. Prospective borrowers were given the option to “self-certify” the authenticity of their loan applications. The CARES Act also prevented SBA from examining tax return transcripts which could have aided in identifying fraudulent or ineligible applicants, a decision which was later reversed at the end of 2020.
“The extent of the fraudsters attracted by the opportunity to submit an application and merely promise their authenticity was significant, leading to substantial fraud,” said Horowitz.
The SBA inspector general’s office has approximated the level of fraud in the COVID-19 economic injury disaster loan program at $86 billion and the Paycheck Protection program at $20 billion. The watchdog is anticipated to release revised figures of the losses in the upcoming weeks, which are expected to be considerably higher.In state-funded ventures, former surveys have identified “potential deceit” or “fraud hints,” giving the impression of these figures as genuine fraud assessments, which they are not, according to a public notice.
SBA representative Han Nguyen stated on Monday that “the immense bulk of the probable fraud stemmed from the pandemic programs first nine months, during the Trump administration.” Nguyen disclosed that the SBA’s “active approximation” discovered $28 billion in potential fraud within the COVID-19 economic disaster loan initiative.
The coronavirus pandemic sent the U.S. economy into a brief but brutal recession. Unemployment surged into double figures, prompting Washington to release billions of dollars to states to assist those suddenly out of work.
For scammers, the situation was akin to scattering bait into the sea to attract fish. Numerous state unemployment offices relied on dated computer systems or lacked sufficient personnel to prevent fraudulent claims from being rewarded.
“Indeed, the states were besieged in terms of need,” explained Brent Parton, the acting assistant secretary of the U.S. Labor Department’s Employment and Training Administration. “We’ve never seen such a surge in a global event like a pandemic. The systems were inadequately funded, lacked durability, and crucially, were vulnerable to advanced assaults by fraudsters.”
Fraud in pandemic unemployment assistance schemes stands at $76 billion, as disclosed in a congressional hearing by Labor Department Inspector General Larry Turner. This is a modest prediction. An additional $115 billion mistakenly went to individuals who should not have received benefits, according to his statement.
Turner declined the Associated Press’s interview request.
Identifying all of the pandemic unemployment insurance fraud has been a complex task for Turner, compounded by the federal Bureau of Prisons’ lack of cooperation, as noted in an “alert memo” issued by his office in September. Fraudsters used the Social Security numbers of federal prisoners to unlawfully obtain millions of dollars in benefits.
The exact amount stolen in this manner remains unknown to his office; the prison bureau refused to supply current federal prisoner data. Several attempts to contact the bureau for comment were initiated by the AP, starting June 2. Bureau representative Emery Nelson stated on Monday that in February and March, the bureau “contributed all the required data” to the Pandemic Response Accountability Committee. Turner is a committee participant.
Keith Faber, Ohio State Auditor, recognized the potential for trouble when checks made to ensure that unemployment assistance went solely to those who legitimately qualified were diminished, paving the way for fraud and waste. The state’s unemployment department “lowered controls because, on the one hand, they were drinking from a firehose,” Faber stated. “They dealt with a year’s worth of claims within a few weeks. The second part of the problem was the directive from the federal government to distribute money as quickly as possible and worry less about security. They took that seriously. I believe that was a misstep.”
In February, Ohio’s Department of Job and Family Services reported $1 billion in fraudulent pandemic unemployment claims, along with another $4.8 billion in overpayments.
The omnipresent masks that symbolized the COVID-19 pandemic are fewer in sight. According to CDC data, hospitalizations for the virus are on a steady decline, and President Biden terminated the national emergency for pandemic response in April.
However, on the politically polarized Capitol Hill, lawmakers continue to wrangle over the success of the relief expenditure and the responsibility for the theft.
Republicans argue that excessive government expenditure promotes fraud, waste, and inflation. Democrats, on the other hand, assert that the financial intervention from Washington saved lives, businesses, and jobs.
The House Oversight and Accountability Committee, led by the GOP, is examining pandemic relief spending. “We must establish where this money ended up, how much was received by fraudsters or ineligible recipients, and what actions should be taken to prevent it from happening again,” declared the panel’s chairman, Rep. James Comer of Kentucky, in a statement on Tuesday.
Last year, Republicans and Democrats came together on bills to extend the time the federal government has to catch fraudsters. In August, Biden signed legislation to increase the statute of limitations from five to ten years on crimes involving the two major programs managed by the SBA.
The additional time will assist federal prosecutors in untangling pandemic fraud cases, often involving identity theft and foreign criminals. However, there is no guarantee that everyone who capitalized on an easy payday will get caught. Prosecutors are also busy with cases not related to pandemic relief funds.
“Could we still be working on such cases and leads in 2030? Undoubtedly,” said Fruchter, the federal prosecutor in the Eastern District of Washington. “But my experience suggests that there will likely be other priorities that will arise and need to be addressed. Regrettably, in our office, we lack a specialized pandemic fraud unit.”
Congress has not yet approved a measure that would grant prosecutors an extra five years to pursue unemployment scammers. This concerns Turner, the Labor Department watchdog. Without the extension, he warned Congress in a late May report that individuals who stole the benefits may evade justice.
According to White House official Sperling, future emergencies demanding government intervention need not be a choice between helping those in need and stopping fraudsters.
“The prevention strategy moving forward is, during a crisis, we can concentrate on rapid aid to those in desperate circumstances without feeling we need to sacrifice commonsense anti-fraud limitations for speed,” he said.
___
This report was contributed to by McDermott from Providence, Rhode Island.
