DOJ has seized $1.4B in Covid relief fraud. How was so much money stolen?

The Justice Department announced it charged 371 defendants, including members of gangs and transnational criminal organizations, with crimes related to $836 million in Covid relief fraud. The charges are part of a coordinated law enforcement sweep that took place from May to July. 

That brings the total to 3,000 defendants and $1.4 billion seized since the department launched the COVID-19 Fraud Enforcement Task Force in May 2021.

119 defendants in the latest sweep have already been convicted or pleaded guilty. The sheer size of the fraud can be attributed in part to the ease of obtaining the money. This fraud has been the subject of Congressional hearings. 

“Our focus on recovering stolen funds won’t be thwarted by fraudsters who try to hide or spend those funds before being prosecuted,” Deputy Attorney General Lisa Monaco said when announcing the enforcement action. “We will seek judicial orders requiring convicted defendants to pay back every stolen dollar – and we have 20 years to realize those recoveries.” 

“Small Business Administration’s first round of PPP loans resulted in 14 years-worth of lending in 14 days,” SBA Deputy Inspector General Sheldon Shoemaker told the House Oversight Committee in March. “As the program swelled to more than one trillion dollars, so did the risk to taxpayers. A simple system control that disallowed payments over one thousand dollars for each employee or validation with tax identification records could have prevented these improper payments. We also found in PPP, the Department of Treasury’s do-not-pay list was not included within the initial internal control environment, allowing billions of dollars of likely improper payments.”

Most of the cases stem from the Paycheck Protection Program, pandemic unemployment insurance benefits or economic injury disaster loans.

Receiving Paycheck Protection Program loans was as simple as filling out a two-page application and going to an approved lender like a bank or credit union. From start to finish, getting the money took an average of two weeks. 

“The unprecedented infusion of federal funds gave fraudsters a high value target to exploit,” Department of Labor Inspector General Larry Turner told the Oversight Committee. “That, combined with ease of identity theft and system weaknesses previously identified by the OIG, allowed criminals to defraud the programs.”

First time loan applicants could receive 2.5 times their business’s average monthly payroll costs, up to $10 million. The loans were forgiven as long as the money was used for approved expenses like payroll and operations. 

In the latest sweep, the Justice Department targeted violent criminals and transnational organizations, including 30 gang members in Wisconsin who used unemployment money to solicit murder for hire and buy weapons and drugs. 

“To those who committed fraud and have not yet been prosecuted, know that we have an extended statute of limitations for many of these offenses. Our law enforcement team is using sophisticated techniques to generate new investigative leads every day,” Deputy AG Monaco said. 

The fraud investigations will continue and expand. The Justice Department announced it’s launching two more strike forces in Colorado and New Jersey.