Since the U.S. government first marshaled its historic economic response to the coronavirus pandemic, the Justice Department has uncovered a vast array of alleged fraud, resulting in charges and investigations involving more than $8 billion in federal aid.
The figures, revealed by the agency on Thursday, prompted the DOJ to redouble its enforcement efforts — chiefly through the appointment of a new director now tasked to carry out President Biden’s mission to pursue “the criminals who stole billions in relief money.”
The extent of the fraud alleged and uncovered by the Justice Department is vast, touching nearly every major facet of the roughly $6 trillion that Congress adopted over a two-year period to support families, workers and businesses.
In some of the cases, suspects wrongfully obtained federal loans to bolster companies that did not actually exist. In others, large, transnational crime syndicates stole workers’ identities to receive generous unemployment benefits under someone else’s name. And in a series of additional allegations that struck at the very heart of Americans’ pandemic anxieties, federal officials charged a litany of actors who promised tests, which proved faulty, or cures that turned out to be fake — then at times submitted fake Medicare claims to the government for reimbursement.
Yet the shady schemes and other crimes reported by the Justice Department also reflected a potentially significant undercount. Federal officials on Thursday could tally only the cases and charges already brought or closed — not the tens of billions of dollars still under review. The looming threat of further criminal activity prompted Attorney General Merrick Garland to stress in a statement Thursday the government would use “every available federal tool” to pursue such fraud.
“We will continue to hold accountable those who seek to exploit the pandemic for personal gain, to protect vulnerable populations, and to safeguard the integrity of taxpayer-funded programs,” he said.
To that end, top DOJ officials on Thursday introduced Kevin Chambers, currently an associate deputy attorney general, as the agency’s new director for covid-19 fraud enforcement. The announcement arrived just over a week after Biden promised to create such a position during his first State of the Union address. The White House coupled its calls for the position with a pledge that it would lead a broader campaign to ferret out fraud, including a push on Capitol Hill to toughen penalties against those who stole large sums from the government.
Chambers is set to augment existing work at the DOJ, which last year created a special task force to investigate misuse in coronavirus funds. His effort aims to focus on larger-scale criminal activity, including the widespread use of identity theft and the attempts to steal federal money that originated from abroad. The DOJ said his first priority is to establish special “strike teams,” which the White House previously explained would rely on “state-of-the-art data analytics” to mine for potential wrongdoing across the country’s full spectrum of stimulus spending.
The heightened enforcement reflects a dawning realization in Washington that its massive burst in spending over the past two years saved the economy yet came at a cost: It rescued the country from the worst crisis since the Great Depression, even as it forced the lumbering government to move at such uncharacteristic speed that it may have distributed money erroneously.
The promise and peril are laid bare in a series of stories by The Washington Post, which found agencies including the Small Business Administration for years failed to put in place key checks to keep watch over its aid programs. The SBA’s own inspector general at times has warned about as much as $80 billion in fraud affecting the agency alone, warning in public reports and congressional testimony recently that it could take years to find and recover the funds.
Many of the government watchdogs overseeing the money also face significant resource constraints. Major federal oversight agencies essentially received about $1 in new money for about every $12,000 in coronavirus stimulus spending, a Post analysis of the data showed. Meanwhile, federal systems to keep track of how much has been spent, and who has received it, have suffered from significant, persistent data gaps two years into the pandemic — troubling lawmakers from both parties on Capitol Hill.
Those concerns about transparency and oversight loomed large as Congress considered another burst of spending this week in response to the pandemic. As the Biden administration this month sought new aid to prepare for a potentially worsening pandemic, three dozen Senate Republicans demanded a fuller accounting of the roughly $6 trillion that Congress already had approved. They cited The Post’s reporting, demanding more transparency as negotiators on Capitol Hill cobbled together a broader spending package to fund the government.
Lawmakers settled on $15 billion in aid to boost testing, therapeutics and vaccines, an amount tied to Republican-sought provisions that sourced the money from other past pandemic programs. But an 11th-hour fight over the financing soured the debate and forced Democrats to jettison the money entirely from their $1.5 trillion deal — allowing it to pass the House late Wednesday albeit without a tranche of money the White House has described as critical.
In the meantime, the Justice Department on Thursday detailed the full scope of its labors to keep watch over the money Congress already approved. It said it brought criminal charges against more than 1,000 defendants, with alleged losses in pandemic relief exceeding $1.1 billion. It also opened 240 civil investigations into more than 1,800 individuals and entities specifically involving pandemic loans, with alleged misconduct totaling more than $6 billion.
The largest bucket includes initiatives known as the Paycheck Protection Program and the Economic Injury Disaster Loan, two SBA-led efforts that provided billions of dollars in potentially forgivable assistance to smaller firms. The DOJ and other federal authorities said they seized an additional $1 billion in EIDL loan proceeds, some of which stemmed from suspects who applied for the funds on behalf of shell companies or firms that did not actually exist.
In one such case last March, a judge sentenced a 55-year-old man in Coppell, Tex., for seeking $24.8 million in PPP loans to assist businesses that actually did not have any employees. He falsified tax documents, federal officials said at the time, and created bank statements showing wages that were never paid to workers. The suspect then used the proceeds to “buy a fleet of luxury cars,” including a Bentley convertible, a Corvette Stingray and a Porsche Macan.
In a more recent example, a judge sentenced a 31-year-old man in Georgia for trying to defraud the government to obtain small-business aid from the SBA, which he then used in part to buy a Pokémon trading card for more than $57,000. The suspect had to forfeit the Charizard card, the DOJ said.
The U.S. government also grappled with unprecedented identity theft involving the nation’s unemployment insurance program, which had been boosted to provide historically large sums and expanded to cover new categories of workers, including those who work in the gig economy. The DOJ said Thursday that federal officials had charged more than 430 defendants in these and other unemployment fraud-related cases.
The agency did not provide a dollar amount, but other outside estimates recently have warned the number is expansive — and growing. One report from the Government Accountability Office identified at least $2.3 billion in unemployment fraud as of last fall, but it warned the number is likely outdated and understated, since it did not include ongoing investigations that “may take a long time” to complete.
The widespread trouble stemmed in part from high-profile data breaches that left Americans’ information vulnerable on the “dark web.” The growing concern prompted the White House last week to announce a forthcoming executive order, aiming to “prevent and detect identity theft involving public benefits” broadly.