Biden administration struggles to recover billions in stolen pandemic aid

The Justice Department charged 48 people this week with operating a massive fraud ring in Minnesota that drained $240 million from a pandemic hunger program intended to feed children.

Dozens of people allegedly made up names and ages for children they claimed to have fed, then pocketed the money for those fake meals.

While the scale of the scheme was unusual, the approach was not.

So much money flowed to programs with so little oversight that people all over the world managed to siphon off piles of cash that the government is unlikely ever to recover.

“Congress failed to implement any tracking, accountability, [or] oversight into any of the programs, any of the funding that they issued over the last three years,” Deborah Collier, vice president for policy and government affairs at Citizens Against Government Waste, told the Washington Examiner. “It’s just nonexistent.”

WATCHDOG IDENTIFIES $45 BILLION PAID IN FRAUDULENT COVID-19 UNEMPLOYMENT CLAIMS

The Labor Department’s inspector general estimated that the improper payment rate for pandemic unemployment programs exceeded 19%.

In California, for example, officials estimated that fraud could account for as much as 27% of the pandemic jobless benefits it paid in 2020.

In Maryland, officials detected a stunning 508,000 fraudulent claims over just one six-week window last summer.

The enormous amount of money available and the speed at which the government pushed it out the door created abundant opportunities for fraud.

“Obviously, any time you have a disaster, and this was a rather unprecedented disaster … there’s an urgency to getting the money out, and it’s expected that some level of oversight and some of the checks and balances may be reduced in order to speed up getting that money out,” Sean Moulton, senior policy analyst at the Project on Government Oversight, told the Washington Examiner. “It’s a different balancing point that agencies try and strike in recognition of that urgent need.”

“Unfortunately, I think we didn’t even try to strike a new balance,” he added. “We just got rid of the idea of oversight and accountability.”

Some people applied for pandemic unemployment benefits in multiple states. One fraudster managed to rake in $222,000 in payments from 29 states using a single Social Security number.

Others used the Social Security numbers of dead people or anonymous email accounts to snap up extra payments.

And some of the fraud played out far from home.

More sophisticated pandemic unemployment schemes involved conspirators who hired low-wage workers in China, Brazil, Bolivia, Mexico, and several West African countries to file jobless benefits claims in the United States on a massive scale, according to ProPublica.

Pandemic unemployment benefits went to prison, too, despite the program barring incarcerated people from collecting payments. The Department of Labor estimated that at least $98 million in pandemic jobless aid went to federal prisoners.

Two inmates in a California prison faced criminal charges after they allegedly used the birth dates and Social Security numbers of fellow inmates to file a flurry of unemployment claims. The two men collected $1.4 million, according to court documents.

In all, pandemic unemployment programs may have lost as much as $163 billion to improper payments and fraud, with the Labor Department inspector general theorizing that the actual amount was “likely higher.”

On Thursday, the Labor Department inspector general issued a memo saying her team had identified $45.6 billion in pandemic unemployment insurance fraud. That figure had increased significantly from the last time the watchdog gave an update on its fraud findings.

The Paycheck Protection Program also sent billions of dollars to people who inflated — or, in many cases, invented — their small businesses. Lawmakers designed PPP to help businesses keep workers on the payroll during the height of lockdowns, and the program aimed to get money into company accounts as quickly as possible.

More than a year after the program expired, prosecutors are still chasing down the stolen funds.

A man in Washington, D.C., was sentenced on Tuesday to 10 years in prison for creating fake company documents to apply for more than two dozen PPP loans. He successfully stole more than $2.3 million and used the proceeds to purchase a Tesla, according to the Justice Department.

Justice Department officials seized four luxury cars and jewelry after investigating a PPP scheme in Georgia that allegedly netted one man $11.1 million from 14 fraudulent PPP loans that went to fake businesses.

A woman in California apparently created a fake company to apply for nine PPP loans and, according to prosecutors, “spent the bulk of the loan money on personal indulgences, including private jet travel, hotel stays, boat rentals, expensive automobiles, luxury goods purchased from Louis Vuitton and Neiman Marcus, and specialty items purchased from the Sunglass Hut and the San Francisco Giants Dugout Store.”

Some people invented fake farms to collect pandemic aid.

In South Dakota, one woman learned her home address had been listed as a potato farm only when a local news reporter contacted her for a story about fake farm schemes.

A fraudster had pocketed $42,700 for the nonexistent potato farm. When the woman called the Small Business Administration to report the fraud that the news station had alerted her to, she then learned her house had also been listed as a tomato farm for a second loan.

In Ohio, a single family allegedly created 72 fake farms, claiming to be growing everything from organic berries to garlic, to take out more than $7 million in pandemic loans.

The three addresses used by the family members on their loan applications were apparently ordinary homes, not farms.

But federal authorities did not uncover the scheme. In fact, reporters at Bloomberg News were the ones to discover it while reporting on how little the government enforced even the most basic requirements associated with the loan program, such as a ban on giving loans to companies that did not exist before Congress created PPP.

Ineligible — but, unlike much of the PPP fraud, at least existent — businesses raked in pandemic loans as well.

Two women in Massachusetts faced criminal charges after the Justice Department said they collected pandemic aid for their prostitution rings, for example.

Researchers estimated last year that PPP fraud could have risen higher than $100 billion, according to an analysis in the Journal of Finance.

That would be a significant chunk of the program, which ultimately doled out $793 billion in loans.

The Biden administration has stepped up efforts to crack down on the fraud, which began during the Trump administration but continued apace under President Joe Biden.

Last week, the Justice Department unveiled three Strike Force teams focused on going after pandemic program fraud.

Attorney General Merrick Garland said federal officials had recovered $1.2 billion in stolen pandemic aid — just a fraction of the known fraud.

Last month, Biden signed a bill that extended the statute of limitations for some kinds of PPP fraud from five years to 10, giving investigators more time to dig through the millions of loan applications filed during the pandemic.

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Republican Sens. Mike Crapo and Rob Portman introduced a bill in July that would help claw back money lost to fraud in pandemic unemployment programs.

“The fraud associated with pandemic unemployment programs reached staggering levels,” Portman said in a statement at the time. “Billions of hard-working Americans’ taxpayer dollars that were meant to help out-of-work Americans instead went to criminals and cheats.”

But Collier said tracking down and recovering stolen pandemic funds is an incredibly difficult task.

“A lot of it is that you’ve got the agencies now having to investigate where the money went, and it’s really hard, especially with a lot of these fraud cases — they have to build cases surrounding the fraud,” she said. “And if the money’s already spent on gosh knows what … The money is gone, all they can do is prosecute the folks that abused the programs.”