Fraudsters Potentially Stole More Than $280 Billion in COVID-19 Relief Funding

Fraudsters used the Social Security numbers of dead people and federal prisoners to get unemployment checks, a report has shown.

Cheaters collected those benefits in multiple states and federal loan applicants weren’t cross-checked against a Treasury Department database that would have raised red flags about sketchy borrowers.

All of it led to the greatest grift in U.S. history, with thieves plundering billions of dollars in federal COVID-19 relief aid intended to combat the worst pandemic in a century and to stabilize an economy in free fall.

An Associated Press analysis found that fraudsters potentially stole more than $280 billion in COVID-19 relief funding; another $123 billion was wasted or misspent. Combined, the loss represents 10% of the $4.2 trillion the U.S. government has so far disbursed in COVID relief aid.

That number was certain to grow as investigators dig deeper into thousands of potential schemes.

How could so much be stolen? Investigators and outside experts say the government, in seeking to quickly spend trillions in relief aid, conducted too little oversight during the pandemic’s early stages and instituted too few restrictions on applicants. In short, they say, the grift was just way too easy.

“Here was this sort of endless pot of money that anyone could access,” chief of the fraud and white-collar crime unit at the U.S. Attorney’s office in the Eastern District of Washington, Dan Fruchter said.

 “Folks kind of fooled themselves into thinking that it was a socially acceptable thing to do, even though it wasn’t legal.”

The US government has charged more than 2,230 defendants with pandemic-related fraud crimes and is conducting thousands of investigations.

Most of the looted money was swiped from three large pandemic-relief initiatives launched during the Trump administration and inherited by President Joe Biden. Those programs were designed to help small businesses and unemployed workers survive the economic upheaval caused by the pandemic.

The pilfering was wide but not always as deep as the eye-catching headlines about cases involving many millions of dollars. But all of the theft, big and small, illustrates an epidemic of scams and swindles at a time America was grappling with overrun hospitals, school closures and shuttered businesses. Since the pandemic began in early 2020, more than 1.13 million people in the U.S. have died from COVID-19, according to the Centers for Disease Control and Prevention.

U.S. Justice Department inspector general, Michael Horowitz, who chairs the federal Pandemic Response Accountability Committee, told Congress the fraud is “clearly in the tens of billions of dollars” and may eventually exceed $100 billion.

Horowitz told the AP he was sticking with that estimate, but won’t be certain about the number until he gets more solid data.

“I’m hesitant to get too far out on how much it is,” he said. “But clearly it’s substantial and the final accounting is still at least a couple of years away.”

Mike Galdo, the U.S. Justice Department’s acting director for COVID-19 Fraud Enforcement, said, “It is an unprecedented amount of fraud.”

Before leaving office, former President Donald Trump approved emergency aid measures totaling $3.2 trillion, according to figures from the Pandemic Response Accountability Committee. Biden’s 2021 American Rescue Plan authorized the spending of another $1.9 trillion. About a fifth of the $5.2 trillion has yet to be paid out, according to the committee’s most recent accounting.

Never has so much federal emergency aid been injected into the U.S. economy so quickly. “The largest rescue package in American history,” U.S. Comptroller General Gene Dodaro told Congress.

The enormous scale of that package has obscured multibillion-dollar mistakes.

An $837 billion IRS program, for example, succeeded 99% of the time in getting economic stimulus checks to the proper taxpayers, according to the tax agency. Nevertheless, that 1% failure rate translated into nearly $8 billion going to “ineligible individuals,” a Treasury Department inspector general told AP.

An IRS spokesman said the agency does not agree with all the figures cited by the watchdog and noted that, even if correct, the loss represented a tiny fraction of the program’s budget.

The health crisis thrust the Small Business Administration, an agency that typically gets little attention, into an unprecedented role. In the seven decades before the pandemic struck, for example, the SBA had doled out $67 billion in disaster loans.

When the pandemic struck, the agency was assigned to manage two massive relief efforts — the COVID-19 Economic Injury Disaster Loan and Paycheck Protection programs, which would swell to more than a trillion dollars. SBA’s workforce had to get money out the door, fast, to help struggling businesses and their employees. COVID-19 pushed SBA’s pace from a walk to an Olympic sprint. Between March 2020 and the end of July 2020, the agency granted 3.2 million COVID-19 economic injury disaster loans totaling $169 billion, according to an SBA inspector general’s report, while at the same time implementing the huge new Paycheck Protection Program.