Feds fall short on recovering pandemic fraud; less than 1% has been clawed back - Insurance News | InsuranceNewsNet

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April 10, 2024 Newswires
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Feds fall short on recovering pandemic fraud; less than 1% has been clawed back

Washington Times, The (DC)

The Justice Department’s pandemic fraud task force has recovered just $1.4 billion in money seized or forfeited from people who stole the government’s coronavirus cash, just a fraction of 1% of the total lost to theft.

The department announced the data Tuesday, marking nearly three years since Attorney General Merrick Garland created the COVID-19 Fraud Enforcement Task Force and roughly four years since Uncle Sam opened its wallet and shoveled cash out the door to help the country cope with shuttered businesses and mass layoffs.

Authorities say they’ve brought federal criminal charges against more than 3,500 people, accounting for about $2 billion in total losses. They have reached more than 400 civil settlements and judgments and recovered $1.4 billion.

Other agencies, such as the Secret Service, have also recovered several billion dollars, but that’s still a small fraction of what was stolen.

“During the pandemic around $1 trillion was lost to criminal groups. With that, the vast majority of the money went overseas supporting international criminal groups,” said Haywood Talcove, CEO of LexisNexis Risk Solutions’ government group.

Acknowledging the hefty work still to do, top Biden officials announced their backing Tuesday for new legislation that would expand the capacity for investigations and prosecutions, raise the cap on civil recovery and double the statute of limitations for prosecuting unemployment fraud to 10 years, giving authorities more time to bring cases.

“The Justice Department’s work to identity and prosecute those who stole pandemic relief funds is far from over,” Mr. Garland said in backing the new proposal.

The pandemic represented an unparalleled opportunity for scammers, with Congress ordering agencies to pump money into the economy through payments to businesses, the unemployed and states and localities. Speed was the goal, and agencies — prodded by Congress — erased fraud protections to get the money out into communities.

The result was a tsunami of fraud, with the enhanced unemployment benefits, the Paycheck Protection Program and Economic Injury Disaster Loans serving as the juiciest targets.

The government is still working to come up with a total fraud estimate, but outside experts put the figure at anywhere from a few hundred billion up to Mr. Talcove’s estimate of $1 trillion.

“Bad actors got their hands on money that was meant to help our communities get through what was an incredibly difficult time. Quite frankly, they just took advantage of the disaster for their own financial gain,” said Sen. Gary Peters, Michigan Democrat and one of the sponsors of the legislation.

Biden officials pinned the blame for “historic levels of fraud” on the Trump team for ignoring some basic safeguards in the urgency to pay out. That includes not abiding by the Treasury Department’s “Do Not Pay” list or Social Security’s “Death Master File.”

Gene Sperling, President Biden’s pandemic spending coordinator, said following those practices could have saved billions of dollars.

Whatever the blame, the massive fraud exposed an ongoing problem for the government: Once it pays out money, it’s almost impossible to get it back.

“Pay and chase doesn’t work,” said Mr. Talcove, who said the government could have headed off almost all of the fraud by spending a fraction of the $1.4 billion on detection and prevention ahead of the spending.

Thomas A. Schatz, president of Citizens Against Government Waste, said the Small Business Administration, which oversees PPP and EIDL, got enough fraud leads for 100 years of casework.

“Since the money was not accounted for before it was sent, there is no way to calculate how much was stolen. But whatever it is, the unprecedented lack of accountability demonstrates the critical importance of continuing the oversight and recovery of pandemic programs,” Mr. Schatz said.

Another factor is the government’s leniency.

Adam Andrzejewski, founder of OpenTheBooks.com, a spending watchdog, said the administration has already forgiven $1.4 billion in bogus PPP loans.

“From inefficiency to widespread fraud and unintended consequences, it’s clear that Congress rushed to flood the economy with cash without enough forethought,” he said. “States with budget surpluses received billions. Small business loans went to tens of thousands of recipients on Treasury’s ‘Do Not Pay’ list. Rushed processes left all manner of programs open to criminals looking to game the system.”

Democrats said they’re trying to fix some of those problems ahead of a future spending splurge.

The new bill includes millions of dollars for new identity verification systems that can help large federal agencies gain more confidence that they’re paying real people.

The legislation would also make permanent the data operation that’s at the center of the current pandemic fraud effort. The government’s comptroller general says if the feds hadn’t disbanded a similar data center after the recovery from the 2008 Wall Street collapse, some of the pandemic fraud could have been blocked at the start.

All told, White House officials said, Mr. Biden is asking for about $1.4 billion in new resources.

Pandemic fraudsters ran the gamut from small-time opportunists — one South Dakota man was just sentenced to 18 months for stealing $20,833 — to career fraudsters, street gangs and Nigerian and Romanian fraud rings.

At the height of the pandemic, people were posting how-to tutorials on social media to share methods for stealing the government’s money.

Among the more than 3,500 federal pandemic fraud defendants is the sentencing last week of Takiyah Gordon Austin, who had been an employee at Social Security during the pandemic and used her position to steal Social Security numbers of Americans and file bogus unemployment claims in their name, directing the payments to her own accounts.

Austin, a Pennsylvania resident, stole names of prisoners, the homeless, disabled and dead people, walked away with $288,590. She was given three years in federal prison. 

In Ohio, a judge last month slapped a sentence of nearly eight years on Terrence L. Pounds, who filed $9.5 million in bogus loan applications and collected $4.2 million. He poured some of that money into vehicles — a 2021 Chevrolet Tahoe, a 2021 Kia Telluride, a 2020 Hyundai Elantra and a 2020 BMX X4 — which have all been seized.

In Oregon, Justin David Goulet got more than two years in prison last week for stealing $163,100. Prosecutors said he spent his money on cars and illegal drugs.

Kelly Bree Mosley, who pleaded guilty to pandemic fraud in North Carolina on March 29, spent some of her $125,317 on liposuction.

The cases announced to date are almost exclusively domestic frauds, even though experts say a massive amount of the cash was stolen by criminal syndicates operating from abroad, oftentimes with links to foreign adversary governments.

The Biden officials said Tuesday that going after those sorts of sophisticated fraudsters will require new and persistent investment, including Congress being willing to pony up multiyear funding for some of the investigative operations.

“Without that, we may lose people. You could have layoffs instead of people persisting on getting the most serious syndicates that stole the most funds,” Mr. Sperling said.

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