The Great Grift: How billions in COVID-19 relief aid was stolen or wasted

By RICHARD LARDNER, JENNIFER McDERMOTT and AARON KESSLER of The AP. Excerpts:

"Much of the theft was brazen, even simple.

Fraudsters used the Social Security numbers of dead people and federal prisoners to get unemployment checks. Cheaters collected those benefits in multiple states. And federal loan applicants weren’t cross-checked against a Treasury Department database that would have raised red flags about sketchy borrowers.

Criminals and gangs grabbed the money. But so did 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.

All of it led to the greatest grift in U.S. history, with thieves plundering billions of dollars in federal COVID-19 relief aid intended to combat the worst pandemic in a century and to stabilize an economy in free fall.

An Associated Press analysis found that fraudsters potentially stole more than $280 billion in COVID-19 relief funding; another $123 billion was wasted or misspent. Combined, the loss represents 10% of the $4.2 trillion the U.S. government has so far disbursed in COVID relief aid.

That number is certain to grow as investigators dig deeper into thousands of potential schemes.

How could so much be stolen? Investigators and outside experts say the government, in seeking to quickly spend trillions in relief aid, conducted too little oversight during the pandemic’s early stages and instituted too few restrictions on applicants. In short, they say, the grift was just way too easy.

Here was this sort of endless pot of money that anyone could access,” said Dan Fruchter, chief of the fraud and white-collar crime unit at the U.S. Attorney’s office in the Eastern District of Washington. “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.

Most of the looted money was swiped from three large pandemic-relief initiatives launched during the Trump administration and inherited by President Joe Biden. Those programs were designed to help small businesses and unemployed workers survive the economic upheaval caused by the pandemic.

The pilfering was wide but not always as deep as the eye-catching headlines about cases involving many millions of dollars. But all of the theft, big and small, illustrates an epidemic of scams and swindles at a time America was grappling with overrun hospitals, school closures and shuttered businesses. Since the pandemic began in early 2020, more than 1.13 million people in the U.S. have died from COVID-19, according to the Centers for Disease Control and Prevention.

Michael Horowitz, the U.S. Justice Department inspector general who chairs the federal Pandemic Response Accountability Committee, told Congress the fraud is “clearly in the tens of billions of dollars” and may eventually exceed $100 billion."

"When the pandemic struck, the agency was assigned to manage two massive relief efforts — the COVID-19 Economic Injury Disaster Loan and Paycheck Protection programs, which would swell to more than a trillion dollars. SBA’s workforce had to get money out the door, fast, to help struggling businesses and their employees. COVID-19 pushed SBA’s pace from a walk to an Olympic sprint. Between March 2020 and the end of July 2020, the agency granted 3.2 million COVID-19 economic injury disaster loans totaling $169 billion, according to an SBA inspector general’s report, while at the same time implementing the huge new Paycheck Protection Program.

In the haste, guardrails to protect federal money were dropped. Prospective borrowers were allowed to “self-certify” that their loan applications were true. The CARES Act also barred SBA from looking at tax return transcripts that could have weeded out shady or undeserving applicants, a decision eventually reversed at the end of 2020."

"A 2022 study from the University of Texas at Austin found almost five times as many suspicious Paycheck Protection loans as the $20 billion SBA’s inspector general has reported so far. The research, led by finance professor John Griffin, found as much as $117 billion in questionable and possibly fraudulent loans, citing indicators such as non-registered businesses and multiple loans to the same address.

Horowitz, the pandemic watchdog chairman, criticized the government’s failure early on to use the “Do Not Pay” Treasury Department database, designed to keep government money from going to debarred contractors, fugitives, felons or people convicted of tax fraud. Those reviews, he said, could have been done quickly."

"the federal government has not developed an accepted system for assessing fraud in government programs."

"Fraud in pandemic unemployment assistance programs stands at $76 billion, according to congressional testimony from Labor Department Inspector General Larry Turner. That’s a conservative estimate. Another $115 billion mistakenly went to people who should not have received the benefits, according to his testimony."