Five Facts on COVID Relief Fraud
The Big Insight: Washington’s COVID relief funding was rife with fraud, and antiquated government technology was a big part of the problem.
As the COVID-19 pandemic struck the U.S. in early 2020, Congress quickly rushed through massive relief expenditures to keep businesses and workers afloat. In all, more than $5 trillion in COVID relief would be approved, and much of it provided a critical lifeline to American families and businesses. Unfortunately, the rush to get funds out, without proper controls and relying on antiquated technology to have enabled the largest government fraud in American history.
1. As much as $600 billion in federal COVID relief funding may have been lost to fraud.
Unemployment fraud alone could eventually reach $400 billion, much of which went to foreign criminals according to law enforcement. One individual collected benefits from 29 different states, and in 2020, Maryland alone detected more than 1.3 million fraudulent unemployment claims — equal to one-fifth of the state’s population. When the pandemic started, at least 12 states including California were using the 1960s programming language COBOL to process unemployment claims, and had a hard time finding programmers who knew the decades-old language.
2. In 2020, 75,180 emergency loans went to recipients on the Treasury Department’s “Do Not Pay” list.
The Economic Injury Disaster Loans in question totaled more than $3.1 billion. Beyond these loans, the Small Business Administration reported approving $14.3 billion “to accounts that differed from the original bank accounts listed on the loan applications” and $62.7 billion to applicants using the same address for multiple applications. SBA admitted that it “‘lowered the guardrails’ or relaxed internal controls” during the pandemic.
3. One online lending platform sent 378 pandemic loans worth $7 million to fake companies.
Kabbage approved $20,833 each to fake farms named “Deely Nuts” and “Ritter Wheat Club.” Kabbage also approved a loan for a fake cattle ranch called “Beefy King” that listed a New Jersey beachfront community as its address.
4. A Nigerian fraud ring collected as much as $4.7 million in relief funds from just one state.
The scammers, dubbed “Scattered Canary” by cybersecurity researchers, filed at least 174 fraudulent claims in Washington State in the first two months of pandemic aid availability.
5. Approximately 1,500 people have so far been charged with pandemic aid fraud, with more than 450 convicted.
There are about 500 federal investigators focused on pandemic fraud. The Labor Department alone has more than 39,000 investigations underway — while the Small Business Administration estimates it may probe as many as two million loan applications. President Biden recently signed legislation that would extend the statute of limitations for certain kinds of COVID relief fraud from five to 10 years.
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