The U.S. government spent a massive amount of money on COVID-19 relief, issuing more than $4 trillion in payments to Americans through three major initiatives. Roughly 10% of that money — some $400 billion — has either been stolen or wasted in “the greatest grift in U.S. history,” according to a new analysis from the Associated Press.
In a report published Monday, the AP said thieves “[plundered] billions of dollars in federal COVID-19 relief aid.” The analysis found that fraudsters potentially stole more than $280 billion in COVID-19 relief funding. Another $123 billion was either wasted or misspent. The combined loss represents one-tenth of the $4.2 trillion the U.S. government has so far disbursed in COVID relief aid.
That figure “is certain to grow” as investigators dig deeper into thousands of potential schemes, the AP reported. COVID relief scams came in different forms, though many involved fraudsters using the Social Security numbers of deceased people and federal prisoners to get unemployment checks. A separate report from USA Today late last year also found that COVID-19 fraudsters filed for unemployment in multiple states and with suspicious email accounts.
The government wasn’t the only victim, either. Many Americans had to wait to get their relief money because scammers “choked the system” with false claims, according to Amanda D’Amico, vice president of Risk and Fraud Strategy & Operations at Thomson Reuters. Hundreds or even thousands of Americans had their identities stolen and had to take time off work to fix the problem.
Meanwhile, the roster of scammers went beyond just seasoned criminals. As the AP noted, other scammers included a U.S. soldier in Georgia, the pastors of a defunct church in Texas, a former state lawmaker in Missouri and a roofing contractor in Montana.
One reason they succeeded is because federal loan applicants “weren’t cross-checked” against a U.S. Treasury Department database that would have raised red flags. Investigators and security experts told the AP that the government’s hurry to get aid to Americans led to too little oversight and too few restrictions, making it easy for scammers to defraud the government — and taxpayers.
“Here was this sort of endless pot of money that anyone could access,” Dan Fruchter, chief of the fraud and white-collar crime unit at the U.S. Attorney’s office in the Eastern District of Washington, told the AP. “Folks kind of fooled themselves into thinking that it was a socially acceptable thing to do, even though it wasn’t legal.”
The U.S. government has charged more than 2,230 defendants with pandemic-related fraud crimes and is conducting thousands of investigations into other schemes, the AP reported.
COVID-19 relief funds weren’t only lost through fraud. Government waste and errors also drained federal coffers of tens of billions of dollars. For example, about $8 billion worth of stimulus checks were sent by the IRS to “ineligible” taxpayers, a Treasury Department inspector general told AP. An IRS spokesman questioned some of the figures and pointed out that the agency had a 99% success rate in distributing the payments.
Another problem involved the Small Business Administration, which was assigned to manage two “massive relief efforts” — the COVID-19 Economic Injury Disaster Loan and Paycheck Protection programs. In its haste to “get money out the door” quickly to small businesses, the SBA skipped the normal guardrails that would have more thoroughly vetted applicants. As a result, some of the money was sent to undeserving applicants.
“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,” said Michael Horowitz, the U.S. Justice Department inspector general and chair of the federal Pandemic Response Accountability Committee.
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