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A federal watchdog revealed that tens of billions of dollars in COVID-19 aid over the years might have been stolen via two large, Congress-passed relief programs.
The federal U.S. Small Business Administration inspector general, in figures released Tuesday (pdf), show fraud that was much greater than previously forecast. It found that the most significant amounts of cash were stolen via the Paycheck Protection and COVID-19 Economic Injury Disaster Loan programs.
The inspector general’s report stated that “at least 17 percent of all COVID-EIDL and PPP funds were disbursed to potentially fraudulent actors,” referring to the programs. The fraud estimate for the COVID-19 Economic Injury Disaster Loan program is more than $136 billion, which represents 33 percent of the total money spent on that program, according to the report. The Paycheck Protection fraud estimate is $64 billion, the inspector general said.
Those loans were handed out during widespread lockdowns, stay-at-home orders, and other measures that significantly impacted the U.S. economy. Some of that money was intended to be provided to small businesses and other individuals who needed to pay their employees, although critics say that the United States should have never locked things down. At the same time loans were being handed out, the Internal Revenue Service (IRS) sent out what was described as stimulus checks to people in a bid to provide economic relief.
During the implementation of those programs, a number of controls were weakened to provide cash during the onset of the pandemic, said the inspector general’s report. Those controls, it said, would have prevented more criminals and purveyors of fraud from gaining access.
But as a result, fraudsters were able to take “advantage of the economic crisis and [transferred] funding intended for deserving, eligible American small business owners,” the report said.
“Using investigative casework, prior OIG reporting, and advanced data analytics, we identified multiple schemes used by fraudsters to steal from the American taxpayer and exploit programs meant to help those in need,” the report said. “We believe loans identified as potentially fraudulent as part of our review warrant investigation by OIG and its investigative partners.”
As of May 2023, more than 1,000 indictments, 800 arrests, and 500 convictions related to Payment Protection and Economic Injury Disaster fraud have been carried out. About $30 billion in fraudulently obtained cash was returned, although that’s a tiny fraction of what has been stolen.
The SBA inspector general, Hannibal “Mike” Ware, said in a statement on Tuesday that the report “utilizes investigative casework, prior (inspector general) reporting, and cutting-edge data analysis to identify multiple fraud schemes used to potentially steal over $200 billion from American taxpayers and exploit programs meant to help those in need.”
Ware, in an interview with The Associated Press earlier this month, said that these latest fraud figures won’t be the last ones issued by his office. “We will continue to assess fraud until we’re finished with the investigations on these things,” Ware said. That could be a long while. Ware’s office has a backlog of more than 90,000 actionable leads into pandemic relief fraud, which amounts to nearly a century’s worth of work.
In a 2021 interview, Ware forecast that the amount of fraud from pandemic-related relief programs would be “larger than any government” program in U.S. history. “Fraudsters are going to do what fraudsters are going to do,” Ware said at the time. “But the upfront controls mitigate exposure to fraud, and doing so would have saved taxpayers a whole lot of heartache on the back end. Unfortunately, the heartache was not avoided because of the way these programs were implemented up front.”
“A decision was made at the outset of the pandemic: speed was the key,” Michael Horowitz, the chairman of the Pandemic Response Accountability Committee, told ABC News. “It was a bad choice. It was the wrong choice. It never should have happened.”
In one instance, a NASA executive, Andrew Tezna, pleaded guilty to submitting fraudulent loan applications to PPP and EIDL and sought some $350,000 before spending that cash on personal expenses. Other individuals who acquired pandemic funds through fraudulent means purchased luxury vehicles, homes, and other items.
The U.S. Attorney in the Southern District of Florida, Juan Gonzalez, said that lenders had to stop making PPP loans when the money ran out, saying that people who needed the money via the program were bilked out of taxpayer-funded relief.
“This is billions of taxpayer dollars that has been stripped from them,” he told NBC News in an interview last year. “And more angry should be the people who did lose their jobs, who worked for businesses that couldn’t apply for this money because it was gone. Those are really the ones who should be the angriest of all.”
Never has so much in federal funds been stolen so quickly, he noted. “I have a hard time imagining when so much money has gone so quickly into the hands of people who don’t deserve it,” he added.
The Associated Press contributed to this report.