Over $100 Billion in COVID Aid Lost to 'Staggering' Levels of Fraud, Report Shows
'This is a breakdown of catastrophic proportions that has failed the American taxpayer'
Coronavirus aid, which is meant to help struggling Americans and businesses, has been lost to a massive scale of fraud in the unemployment program created by the CARES Act, NBC News reported.
The report discusses a fraud scheme which “cost taxpayers an estimated $11 million,” Orange County prosecutors revealed.
Nguyen Social Services have reportedly been charging “up to $700 a pop to file false unemployment claims for people who did not qualify to receive Covid-19 relief money.”
“This isn’t just an Orange County problem. It isn’t just a California problem,” said Orange County District Attorney Todd Spitzer.
“This is a breakdown of catastrophic proportions that has failed the American taxpayer.”
The NBC News report suggests the Labor Department estimated “at least $63 billion of the $630 billion in disbursements has been misspent,” with the “full scope of the loss in taxpayer funds" expected to be over $100 billion, experts and officials say.
“A rush to release the funds put enormous strain on state workforce agencies, creating a bonanza for individual scam artists and international cybercrime rings,” the report added.
“It’s a little bit of a high wire act,” said Bill McCamley, Cabinet secretary of the New Mexico Department of Workforce Solutions, as reported by CNBC last month.
“Because there’s so much pressure to get money out.”
The Labor’s Office of the Inspector General estimated “that at least $36 billion worth of unemployment payments expended as of Nov. 7 may have been invalid." Fox News reported.
One element of the CARES Act is the Pandemic Unemployment Assistance program “aimed at helping gig workers, caregivers and people who are self-employed, all of whom are not typically eligible for unemployment insurance.”
With “no former employer to verify this category of claims, states were forced to rely on self-reported work histories."
Also, “many states also relaxed internal controls" to enhance the approval rate of incoming claims.
Meanwhile, California “said they have tallied $11 billion stolen from taxpayers so far, but the total figure could be as high as $30 billion, or 27 percent," NBC News reported.
Matters were worse in Nebraska, finding statewide payments saw “roughly 66 percent of unemployment money was misspent.”
“In California, this is unquestionably the largest fraud against public agencies in our history,” said the president of the California District Attorneys Association, Vern Pierson.
“Increasingly, we are learning there could be fraud of historic proportions nationwide. While we don’t know the exact price tag, we know the amount of the loss of taxpayers is staggering.”
Another such case of fraud was that of a Texas engineer who defrauded bank loan applications seeking more than $10 million dollars in forgivable loans guaranteed under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Shashank Rai, 30, of Beaumont, pleaded guilty to one count of making false statements to a bank.
He was charged on May 13, 2020, with violations of wire fraud, bank fraud, false statements to a financial institution, and false statements to the SBA.
As part of his guilty plea, Rai admitted that he sought millions of dollars in forgivable loans guaranteed by the SBA from two different banks by claiming to have 250 employees earning wages when, in fact, no employees worked for his purported business.
Rai made two fraudulent claims to two different lenders for loans guaranteed by the SBA for COVID-19 relief through the Paycheck Protection Program (PPP).
In the application submitted to the first lender, Rai sought $10 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of $4 million.
In the second application, Rai sought approximately $3 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of approximately $1.2 million.