New Bill Seeks to Recover COVID Funds Taken by Fraudsters

What could he do if President Biden were to get serious about recovering pandemic relief stolen by fraudsters?

The question has to be asked because of Julie Su’s recent nomination to become the U.S. Labor Secretary. While serving as California’s Labor Secretary, Su famously did very little to combat pandemic unemployment insurance fraud other than leave it to her successors in office. Between April 2020 and July 2021, she burned through 15 months in which she could have taken action to recover stolen funds but did not.

This prolonged inaction can be considered a gift for the pandemic aid fraudsters. That’s because the federal statute of limitations for their crimes is ticking down. The longer they can go without facing criminal charges, the more likely they can get away with it. A repeat leadership performance by Su as U.S. Labor Secretary would make for a most generous gift for the fraudsters.

New legislation being considered in Congress could extend the statute of limitations on COVID unemployment fraud before time runs out. A bill to extend that time and give more tools to state and local prosecutors just cleared its first hurdle toward becoming law:

House Ways and Means Committee members approved legislation on Feb. 28 that provides states new incentives to go after an estimated $400 billion in COVID-19 unemployment insurance (UI) fraud and extends the federal statute of limitations on prosecution of such crimes.

The “Protecting Taxpayers and Victims of Unemployment Fraud Act” was introduced in the House by Rep. Jason Smith (R-Mo.), who’s chairman of the powerful Ways and Means Committee. There are 26 co-sponsors of the proposal, all of them Republicans. The bill is expected to be moved to the floor of the House of Representatives for debate and voting on final passage in the spring.

The proposal is needed, according to Smith, because the Department of Labor inspector general (IG) and Pandemic Response Accountability Committee (PRAC), headed by Department of Justice IG Michael Horowitz, and other law enforcement officials have estimated that as much as $400 billion has been lost to fraudulent claims for federal assistance approved during the COVID-19 pandemic in 2020 and 2021.

$400 billion is equivalent to 29% of the U.S. government’s FY2022 budget deficit.

As currently drafted, the bill would:

  • Extend the federal statute of limitations from five years under current law to ten years.
  • Let states keep 25% of any recovered fraudulent overpayments of federal funds.
  • Allow states to use recovered money to pay for improving their unemployment benefit systems to prevent future fraud.

The U.S. government has a $400 billion reason to make a more serious fraud recovery effort. The magnitude of pandemic unemployment fraud demands changes in the nation’s laws to address this problem.

Craig Eyermann is a Research Fellow at the Independent Institute.
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