Government largely gives up on recovering hundreds of billions of dollars in fraudulent COVID relief payments

Government largely gives up on recovering hundreds of billions of dollars in fraudulent COVID relief payments
Labor Secretary Julie Su

The government has largely given up on trying to recover the several hundred billion dollars in fraudulent pandemic relief payments it made in 2021 and 2020, and a federal agency isn’t even trying to recover amounts of less than $100,000, reports Reason Magazine:

A couple claiming to run a farm that employed dozens of people used fake employee records to get more than $1 million in COVID-19 relief payments when they actually employed no one on a farm that did not exist.

A social media influencer created fake documents to score more than $400,000 in COVID-19 funds meant to help small businesses, then used the money to buy cryptocurrency and gifts for his girlfriend.

A state employee whose job was to stop unemployment benefits fraud helped other fraudsters navigate around fraud prevention systems so they could steal more than $1 million, including federal tax dollars made available to states during the pandemic.

Only now, nearly four years after the federal government approved an unprecedented amount of emergency spending in response to the COVID-19 pandemic, are investigators getting a full picture of all the ways that schemers and thieves raided programs. Congress approved about $4.6 trillion in COVID-19 emergency spending, and so much of it was stolen that auditors now say we’ll likely never have a full accounting of it all.

“When the federal government provides emergency assistance, the risk of payment errors—including those attributable to fraud—may increase because the need to provide this assistance quickly can lead agencies to relax or forego effective safeguards,” the Government Accountability Office (GAO) explained in a new report summing up efforts to recoup stolen funds. “Because not all fraud will be identified, investigated, and adjudicated through judicial or other systems, the full extent of fraud associated with the COVID-19 relief funds will never be known with certainty.”

Over $320 billion was stolen from just two of the federal government’s pandemic relief programs:

As Reason has previously reported, auditors believe that about $200 billion was fraudulently disbursed from two programs run by the Small Business Administration (SBA) during the pandemic. That’s about one-sixth of all spending run through the SBA’s Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program. Additionally, the GAO believes that between $100 billion and $135 billion in federal unemployment funds—provided to states on a temporary basis during the pandemic—were lost to fraud.

One former U.S. attorney has called it “the biggest fraud in a generation.”

But only a tiny number of people have been prosecuted for the fraud — less than “1,400 individuals…have been found guilty of fraud connected to COVID-19 relief efforts, out of millions of people who likely committed fraud. There have only been 1,051 sentences handed down in those cases, often requiring restitution of fraudulent payments, and leading to jail time in hundreds of cases, including 33 who received sentences of 10 years or more:

But recovering all the lost funds is impossible. In some cases, officials aren’t even trying: The SBA decided earlier this year not to pursue collections actions against individuals who haven’t repaid EIDL loans of $100,000 or less. The SBA says trying to collect those loans would be more costly than whatever might be recouped—and since many of the loans were probably given out fraudulently, tracking down who got what will be extra difficult.

Even when fraudsters can be identified, they usually repay only about an eighth of what they owe: “the GAO reported in May that states had identified about $55.8 billion in fraudulent and nonfraudulent unemployment overpayments that occurred between March 2020 and March 2023. Of that, about $6.8 billion had been recovered.”

Foreign criminals received countless billions of dollars from America’s pandemic unemployment funds. Such handouts were paid for with government borrowing that has increased America’s national debt to a point where it is now much bigger than our economy.

The New York Post believes that half of America’s pandemic unemployment money may have been stolen, with foreign scammers collecting most of the stolen money.

At the state level, California had the largest dollar amount of fraudulent pandemic unemployment payments. Biden rewarded this incompetence by appointing as his Deputy Secretary of Labor — and acting Secretary of Labor — Julie Su, the secretary for the California Labor and Workforce Development Agency, which made the fraudulent payments. She was barely confirmed by the U.S. Senate, on a party-line vote by the Senate. As Tom Manzo noted in The Hill,

Countless Californians, ranging from business owners to those struggling on unemployment, have suffered because of Su’s incompetence. While Su was at the helm…the “most significant fraud on taxpayer funds in California history” took place at the Employment Development Department (EDD). Here’s how it went down. Prior to the pandemic, the EDD failed to update its outdated system, even though California had set aside $30 million for a modernization effort more than four years earlier. Under Su’s leadership, this crucial update never made it out of the “planning stages.”

When the pandemic hit, millions of Californians tried to apply for desperately needed unemployment insurance benefits. In response, the EDD’s system crumbled, and Californians seeking help were abandoned. Fewer than one percent of calls were answered by the agency helpline. As many as 1.8 million Californians suffered without their payments. The outrage was so great that state leaders demanded an auditor look into the problems plaguing the EDD. While investigating the website debacle, the audit also uncovered massive fraud that was taking place during the same time period.

Not all criminals get COVID relief payments due to fraud or scams. Some legally qualified for pandemic relief payments, because the coronavirus relief legislation was deliberately written by Democrats to include prisoners in the U.S., including those who already had money.

Prison inmates got $1,400 stimulus payments under the COVID relief law that President Biden signed in March 2021. Sen. Bill Cassidy (R-LA) objected to that, saying prisoners have “their living and medical expenses paid for by the taxpayer,” “don’t pay taxes,” and “can’t be unemployed. Inmates are not economically impacted by COVID.” Senator Tom Cotton noted that “Dylann Roof murdered nine people,” yet “he’ll be getting a $1,400 stimulus check as part of the Democrats’ ‘COVID relief’ bill.”

LU Staff

LU Staff

Promoting and defending liberty, as defined by the nation’s founders, requires both facts and philosophical thought, transcending all elements of our culture, from partisan politics to social issues, the workings of government, and entertainment and off-duty interests. Liberty Unyielding is committed to bringing together voices that will fuel the flame of liberty, with a dialogue that is lively and informative.


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