“The Biggest Fraud in a Generation”
When the federal government wants to spend money in a hurry, it does it badly. Very, very badly.
That’s the top lesson to take away from 2020’s Paycheck Protection Program (PPP) and the Pandemic Unemployment Assistance Program (PUA). Together, these programs are described as “the biggest fraud in a generation.” Here is NBC News‘ coverage of the ongoing crime story:
Even if the highest estimates are inflated, the total fraud in all Covid relief funds amounts to a mind-boggling sum of taxpayer money that could rival the $579 billion in federal funds included in President Joe Biden’s massive 10-year infrastructure spending plan, according to prosecutors, government watchdogs and private experts who are trying to plug the leaks.
“Nothing like this has ever happened before,” said Matthew Schneider, a former U.S. attorney from Michigan who is now with Honigman LLP. “It is the biggest fraud in a generation.”
Most of the losses are considered unrecoverable, but there is still a chance to stanch the bleeding, because federal officials say $600 billion is still waiting to go out the door. The Biden administration imposed new verification rules last year that administration officials say appear to have made a difference in curbing fraud. But they acknowledge that programs in 2020 sacrificed security for speed, needlessly.
It’s no accident NBC News compares the size of the fraud to the December 2021 bipartisan infrastructure law. Some of the money funding the infrastructure spending comes from the federal government’s Unemployment Insurance Integrity program. This program recovers money lost to fraudsters who filed phony unemployment assistance claims. Estimates of PUA fraud top $400 billion. Most of that money will never be recovered, but the Biden administration will spend what is.
More Pandemic Fraud
Adding in the PPP increases the total fraud level by up to another $100 million. But no one really knows how much of it went to fraudsters. That’s because the bureaucrats who executed the programs didn’t track where the money was going. Plus, they made it super easy for fraudsters to get the money:
No one is sure exactly how much was stolen. An academic paper released last year estimated at least $76 billion in potential fraud, and the authors said that was conservative.
The SBA’s inspector general has identified $78.1 billion in potentially fraudulent Economic Injury Disaster Loans, another Covid relief program for businesses. The Secret Service has its own estimate: $100 billion.
The basic scheme, Talcove said, was “really simple.” People went on state websites and took the names of existing businesses or registered new, fake ones.
“There’s absolutely no security on there. There’s no validation of any information,” Talcove said. “And voila, you have company ABC with 40 employees and a payroll of $10 million. And you go and apply for a PPP loan. It was a piece of cake.”
Perhaps the most disturbing part of the story is all the bureaucrats who knew what they were doing was wrong. They did it anyway. Needlessly.