The Great Scam: More than $200 billion in COVID-19 aid may have been stolen


WASHINGTON (AP) — More than $200 billion may have been stolen from two major COVID-19 relief efforts, according to new estimates by a federal regulator investigating state-funded programs that helped small businesses survive the crisis worst public health crisis in more than a hundred years.

The figures were released on Tuesday The numbers, compiled by the U.S. Small Business Administration’s Inspector General of Small Business Administration, significantly exceed the agency’s earlier forecasts and underscore how vulnerable the Paycheck Protection and COVID-19 Economic Injury Disaster Loan programs were to fraudsters, particularly in the early stages of the coronavirus pandemic.

The Inspector General’s report states, “At least 17 percent of all COVID EIDL and PPP funds were disbursed to potentially fraudulent actors.” According to the report, the fraud estimate for the COVID-19 Economic Injury Disaster Loan program is more than 136 billion US dollars, representing 33 percent of the total funds spent on this program. The estimate of the Paycheck Protection scam is $64 billion, the inspector general said.

In comments accompanying the report, a senior SBA official disputed the new numbers. Bailey DeVries, Acting Deputy Administrator for Access to Capital at the SBA, said that the Inspector General’s “approach has serious flaws that grossly overestimate fraud and unwittingly mislead the public into believing that the work we are doing together has no appreciable impact on protection.” against cheating.”

The SBA inspector general had previously estimated the fraud at $86 billion under the COVID-19 disaster loan program and $20 billion under the Paycheck Protection program.

The Associated Press reported June 13 that scammers and scammers may have stolen around $280 billion in COVID-19 emergency relief; Another $123 billion was wasted or misspent. Most of the potential losses stem from the two SBA programs and another to provide unemployment benefits to workers who have been suddenly out of work due to the economic turmoil caused by the pandemic. The three initiatives were launched during the Trump administration and adopted by President Joe Biden. Taken together, the AP-estimated loss represents 10% of the $4.2 trillion the U.S. government has paid out in COVID relief efforts to date.

The federal government, meanwhile, has reported a potential $276 billion in fraud, a figure consistent with the AP’s analysis.

Gene Sperling, a senior White House official overseeing pandemic relief spending, said in an interview Tuesday that 86% of the fraud or potential fraud in the emergency-borrowing programs occurred during the first nine months of the pandemic, when President Donald Trump was was in office.

“$200 billion is a very large number, but again, this should be remembered as a potential scam,” Sperling said. “We believe the magnitude of probable or actual fraud is significantly lower, well below $100 billion, perhaps around $40 billion.”

But he added, “Whatever it is, it’s unacceptably high.”

SBA Inspector General Hannibal “Mike” Ware said in a statement Tuesday that the report “utilizes investigative casework, previous (Inspector General’s) reports and state-of-the-art data analysis to identify multiple fraud schemes that potentially cost more than $200 billion in Dollars are stolen.” American taxpayers and exploitation programs are designed to help those in need.”

Ware said in an interview with The Associated Press earlier this month that these latest fraud numbers will not be the last his office has released.

“We will continue to investigate fraud until we have completed the investigation into these things,” Ware said. That can take a long time. His office has a backlog of more than 90,000 actionable leads on pandemic fraud, the equivalent of nearly a century of work.

The SBA released its own report on Tuesday detailing the anti-fraud measures it is taking. The agency’s administrator, Isabella Casillas Guzman, said in an emailed statement that the report “sets out the effective measures that have been added to fight fraud and hold bad actors accountable.”

SBA previously told The Associated Press that the federal government has not developed a recognized system for evaluating fraud in federal programs. Previous analysis, the agency said, had pointed to “potential fraud” or “fraud indicators” in a way that presented these numbers as genuine fraud estimates when they weren’t. For the COVID-19 Economic Injury Disaster Loan program, the agency said its “working estimate” revealed a likely $28 billion in fraud.

According to a testimony before Congress by Labor Department Inspector General Larry Turner, fraud in pandemic jobless assistance programs totals $76 billion. That’s a conservative estimate. According to him, another $115 billion wrongly went to people who shouldn’t have received the benefits.

The Biden administration has introduced stricter rules to curb pandemic fraud, including using a “Do Not Pay” database. Biden also recently proposed a $1.6 billion plan to increase law enforcement efforts in chasing down pandemic aid scammers.

Bob Westbrooks, former executive director of the Pandemic Response Accountability Committee, said in an interview that the $200 billion figure was “unacceptable, unprecedented and unimaginable.” Westbrooks released a book last week titled “Left Holding the Bag: A Watchdog’s Account of How Washington Fumbled his COVID Test.”

“Fast distribution of funds and program integrity are not mutually exclusive,” Westbrooks said Tuesday. “The government can go for a walk and chew gum at the same time. They should have put in place basic fraud controls to verify people’s identities and ensure targeted help gets into the right hands.”

The fraudulent payouts have consequences, said John Griffin, a finance professor at the University of Texas McCombs School of Business at Austin.

Griffin and colleagues said i New paper This pandemic aid scam has sent real estate prices skyrocketing.

The study found that people who had fraudulently obtained wage protection loans were more likely to buy a home than those who had legitimate loans, and that home prices in fraud-prone ZIP codes rose an average of 5.7 percentage points during the pandemic , even after accounting for these factors, other factors affecting property prices such as B. the supply of land, previous real estate price increases and the possibility of teleworking. For a $400,000 home, that would be $22,800.

The study also found an increase in consumer spending in ZIP codes, where people received large amounts of fraudulent funds, which may have fueled inflation more broadly, Griffin said Tuesday.

“If you overpaid for your home because scammers drove up property prices in your zip code and then your home price goes down, you could be the victim of an unintended succession of fraud,” he said in an interview. “That’s another reason why we should be concerned about fraud.”

McDermott reported from Providence, Rhode Island.

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