Kicking off their new oversight role, House Republicans will take aim at the hundreds of billions of taxpayer dollars lost to fraud among the $5 trillion in Covid relief funds distributed by both the Trump and Biden administrations.
The new chairman of the House Oversight and Accountability Committee, Rep. James Comer, R-Ky., labeled pandemic fraud “the biggest fleecing of America in American history.”
“I think that some of these pandemic programs could go down in history as the largest transfer of wealth from the government to the rich in American history,” Comer told NBC News, noting that cyber criminals — many of whom are overseas — fared well from the fraud. “And every American should be outraged, and they should demand that Congress do something about it.”
Though the committee’s investigations have just begun, Comer said he believes no meaningful changes have been made at the federal or state levels in the three years since the pandemic relief programs were initiated. “Right now, I have no confidence in the federal government’s ability to prevent fraud.”
Comer said he is hopeful that the committee’s pandemic fraud investigations will be a bipartisan effort, although he said previous House Democratic leadership should “feel ashamed” for their lack of hearings on pandemic fraud, which he argued could have stopped the flood of criminal activity earlier, as well as prevented inflation that he linked to pandemic relief spending.
“So it is safe to say there’s a new sheriff in town,” he said.
His focus, he said, is on ensuring accountability both for criminals and for officials responsible for the lack of safeguards, recovering as much in taxpayer funds as possible and exploring legislative options to prevent future fraud. “We need to learn from this and not repeat the mistakes of the past,” he said.
In a statement, a White House spokesperson said the Republicans on the Oversight Committee were engaging in “political stunts.”
“When President Biden took office, he implemented strict pandemic fraud controls that the previous administration had failed to put in place despite repeated warnings from Democrats and nonpartisan watchdogs,” said Ian Sams. “Many Republicans on the Oversight Committee defended the prior administration’s handling of these programs and opposed efforts to fund fraud prevention, yet are now using this issue to try to score political points.”
While the full scope of Covid relief fraud is not known, some experts estimate it could be more than a quarter of a trillion dollars. So far, at least $2 billion has been recovered, according to figures assembled by the Government Accountability Office.
Since March 2020, 1,044 people have pleaded guilty or been convicted of defrauding federal Covid relief programs, according to the GAO. An additional 609 have been charged. More than 500 investigations are ongoing involving Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP) loans. It is estimated that at least $80 billion of the more than $800 billion in PPP loans were fraudulent.
The effort to track and oversee the $5 trillion in Covid relief spending has been hampered by the sheer volume of the grant awards that went out the door. Data reported by the state and local governments to the federal government is sometimes incomplete, according to the Pandemic Response Accountability Committee (PRAC), the government watchdog that oversees the funding.
In just one example, PRAC staff members identified 15,400 awards to state and local governments worth $33 billion that have what PRAC describes as “meaningless descriptions.” For 276 Child Care and Development Block Grants adding up to more than $9 billion from Health and Human Services, PRAC data scientists found grant descriptions that listed nothing more than “CCC5-2021.”
The Secret Service has been a leader among law enforcement and investigative agencies dealing with the fallout from pandemic fraud. According to prepared testimony from David Smith, the assistant director of the agency’s Office of Investigations, the Secret Service has initiated more than 5,000 investigations into fraud in unemployment insurance and Small Business Administration programs. The agency has seized for forfeiture over $1.43 billion in fraudulently obtained funds and has returned about $3 billion to unemployment insurance benefit programs.
But he warned that pandemic-related fraud “has absorbed a substantial portion of our investigative attention and resources” and emphasized the need for additional options to improve law enforcement’s ability to detect illicit activity online and block criminals from obtaining funds.
“I expect that our investigative efforts to recover stolen assets and hold criminals accountable for pandemic fraud will continue for years to come.”
Questionable ‘Social Security’ numbers
In an earlier fraud alert this week, PRAC reported that the federal government awarded more than $5.4 billion in Covid loans to businesses with “questionable” Social Security numbers.
The alert was first reported by The Washington Post.
The potentially fraudulent Social Security numbers were used to secure approval of loans under EIDL and PPP, which together provided almost $1.2 trillion in loans to small businesses from 2020 to 2022.
As NBC News reported last year, the government estimated that 10% of the more than $800 billion in PPP loans was obtained fraudulently, while private experts think Covid unemployment benefit fraud may have accounted for as much as $400 billion of the $900 billion that was disbursed. The GAO issued a report last month that estimated unemployment fraud at more than $60 billion, which it said was a low estimate.
According to the alert, PRAC analyzed 33 million loan applications for potentially fraudulent Social Security numbers. It then sent the results to the Social Security Administration for verification. The SSA told PRAC that 221,427 of the Social Security numbers used in the applications “were either not issued by SSA or … did not match the name and/or date of birth information provided … suggesting potential identity fraud.”
Despite the problems with the numbers, just under a third, 69,323, were used successfully to secure EIDL or PPP loans totaling $5.4 billion.
The alert noted that when the SBA launched PPP in April 2020, there were “limited controls in place to ensure program integrity.”
“Although SBA subsequently added certain fraud prevention controls in 2021, the initial implementation of PPP prioritized the speed of disbursing funds rather than scrutiny of applicant eligibility, a trade-off that contributed to widespread fraud.”
In a statement, an SBA spokesperson said: “The issue of identity theft in PPP and COVID-EIDL programs highlighted by the PRAC report is a prime example of why it was a mistake to not implement additional anti-fraud measures during the Trump administration.”
Gene Sperling, the coordinator for the White House’s American Rescue Plan, said PRAC’s alert “documents both the significant fraud and identity theft that occurred under the prior administration due to the lack of basic anti-fraud controls, as well as how consequential were the Biden administration quick actions to reinstate strong anti-abuse measures.”
Many officials across the government believe that ultimately only a tiny percentage of the estimated hundreds of billions lost to fraud will be recovered and that the true scale of this fraud may never be fully known. Comer said he is confident that his oversight efforts will make a difference.
“I think this oversight will be worth it. At the end of the day, if for no other reason, the American people would demand more from Congress in the future.”