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U.S. government faces "immense" fraud concerns as it tries to tighten scrutiny of $6 trillion in emergency coronavirus spending
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And in St. Petersburg, Fla., a federal judge sentenced to prison a 63-year-old man who obtained $800,000 on behalf of businesses that did not exist.
The cases and charges, each announced over the past month, count among hundreds involving a slew of programs enacted by Congress in the darkest days of the coronavirus pandemic — money dispatched with such an urgency at the time that it is now putting Washington’s watchdogs to the test.
Roughly two years after lawmakers approved their first tranche of rescue funds, the U.S. government is grappling with an unprecedented challenge: how to oversee its own historic stimulus effort. Totaling nearly $6 trillion, the loans, grants, direct checks and other emergency assistance summed to more than the entire federal budget in the fiscal year before the coronavirus arrived, creating a unique and long-term strain on the nation’s policymakers to ensure the funds have been put to good use.
Policymakers and economists widely agree that the investments helped rescue the U.S. economy from the worst crisis since the Great Depression, aiding out-of-work Americans and saving businesses from shuttering for good. But the money remains hard to track. There are lingering questions as to whether it benefited those who needed it the most. And the aid continues to be a ripe target for criminals nationwide, the full extent of which is only beginning to come to light.
“There is no question that the immense fraud that took place at the crush of the pandemic in 2020, particularly in small business loans and unemployment insurance, is the largest oversight challenge the Biden administration inherited,” said Gene Sperling, the president’s chief coordinator for stimulus spending, stressing that the administration is taking “significant steps to strengthen anti-fraud controls.”
Nowhere was the promise and peril more evident than at the Small Business Administration. The normally lumbering SBA moved at lightning speed to disburse roughly $1 trillion to cash-strapped firms, hoping to stanch the bleeding at a time when many companies were laying off workers in droves. But the agency’s approach, particularly during the Trump administration, also carried a steep cost, as the SBA did not put in place a wide array of policies that might have prevented significant waste, fraud and abuse.
The troubles are laid bare in stinging federal oversight reports issued over the past year. Across the agency’s two key emergency initiatives, investigators have questioned nearly every aspect of SBA’s spending, flagging billions of dollars in suspect loans and grants, overpayments to those who should not have received them and in some cases outright fraud. One effort meant to help businesses in economic distress may even be rife with identity theft: Watchdogs said they had received more than 845,000 applications for aid that are now suspected of having come from individuals using stolen identities — some of which were funded anyway.
Meanwhile, the calls to the SBA’s tip line for criminal activity spiked by more than 37,000 percent over an 18-month period earlier in the outbreak. The agency’s top watchdog issued numerous warnings about its management of more recent stimulus programs adopted under President Biden, including multibillion-dollar funding for restaurants and performance spaces. And only last month, the SBA received another blow: A panel of pandemic watchdogs highlighted more than five dozen criminal cases that might have been prevented if only the SBA had been more diligent earlier in the pandemic.
The troubles may represent just the tip of the iceberg, according to federal officials and outside experts, who together warn the U.S. government could face years of expensive and intricate sleuthing work. The agency’s own inspector general, Hannibal “Mike” Ware, long has cautioned that the SBA is staring down a daunting future, telling Congress in January it is still “realizing the true scope of fraud” that occurred under its watch.
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