Estimates ranging from $100 billion to over $400 billion have been stolen from Covid-19 unemployment and other pandemic relief programs. The United States Labor Department reported that nearly $90 billion in unemployment benefits alone could have been paid improperly due to fraudulent activities, according to PBS NewsHour.
The U.S. Secret Service released data on Tuesday on its efforts to investigate acts of fraud that exploit Covid-19 relief funds. Investigations have resulted in the seizure of millions of dollars and have assisted in the return of approximately $2 billion.
The Secret Service says it has over 900 ongoing active criminal investigations into pandemic-related fraud cases. In addition to protecting the president, the Secret Service has responsibilities in protecting America’s financial and payment systems from criminal exploitation.
The stolen funds were diverted by fraudsters from the Small Business Administration’s Paycheck Protection Program, the Economic Injury Disaster Loan program and other federal government programs that were intended to help Americans going through tumultuous financial circumstances.
“Today’s announcement is just the latest example of the critical role the Secret Service plays in rooting out financial fraud to protect our financial infrastructure and economic security,” said Secretary Alejandro Mayorkas. “I am incredibly proud of the Secret Service and their continued dedication to protecting our communities from exploitation.”
U.S. Secret Service director James M. Murray said, “Throughout the Covid-19 pandemic, millions of Americans have been depending on the men and women of the Secret Service to safeguard the integrity of essential financial relief.” Murray added, “For more than 150 years, the Secret Service has been identifying and investigating individuals and organizations engaged in fraud and determined to undermine the nation’s financial stability—a mission we continue to uphold today.”
Larry D. Turner, acting inspector general of the U.S. Department of Labor, Office of Inspector General, said about the matter, “The amount of unemployment insurance benefits provided in response to the Covid-19 pandemic is unprecedented in the history of the nation’s unemployment insurance system. Unfortunately, the significant increase in benefits made the program a target for those seeking to defraud government programs.” Turner continued, “As the primary federal law enforcement agency responsible for investigating unemployment insurance fraud, the Department of Labor Office of Inspector General will continue to work with the U.S. Secret Service, the U.S. Department of Justice and all of our partners on the National Unemployment Insurance Fraud Task Force to vigorously pursue those who defraud the unemployment insurance program and safeguard benefits intended for unemployed workers.”
“The pandemic required a whole-of-government response, and the oversight of these funds also requires a whole-of-government effort,” said SBA inspector general Hannibal “Mike” Ware. “OIG values its partnership with the U.S. Secret Service and its counterparts across government to combat fraud in SBA’s pandemic response programs. The men and women of OIG and the Secret Service have taken this fight directly to the fraudsters.”
Assistant special agent in charge Roy Dotson, who was named to the new role at the agency, said about the allegations of massive fraud, “I’ve been in law enforcement for over 29 years and worked some complex fraud investigations for 20 plus years, and I’ve never seen something at this scale.”
Here’s the story behind the story:
During the chaotic days of the pandemic, it’s alleged that an international ring of nefarious fraudsters stole over $400 billion from the U.S. government. This staggering amount is around 50% of unemployment monies paid out.
The story sounds like a script for an upcoming movie, starring George Clooney, in which an international collective of bad actors from around the world, including China, Russia, Nigeria, Romania and right here at home, wantonly looted unemployment funds earmarked for out-of-work Americans by perpetrating fraudulent claims. Unknowingly, naive Department of Labor workers sent out checks to bad guys.
Haywood Talcove is the CEO of LexisNexis Risk Solutions. His firm powers identity-verification for the nation’s top 50 banks. The company is on the front lines of focusing on regulatory, fraud and other related matters. Talcove’s LinkedIn bio headline reads, “Stopping fraud, catching bad people.” In an hour-long conversation, Talcove divulged the brazen massive theft from right under the noses of the U.S. government.
It seems, in hindsight, political leaders knew about the possibility of fraud and theft, especially as the Payroll Protection Plan, a program to bailout small businesses, was co-opted by large corporations and other entities that were not entitled to participate.
The politicians turned a blind eye, as they felt money needed to get into the hands of the folks who were out of work and took the gamble that everything would work out well. Gene Sperling, a point person for President Joe Biden’s stimulus plan, blamed the fraud on Donald Trump’s administration, calling it “one of the most serious challenges we inherited,” according to Fox News.
Axios reported, “Unemployment fraud during the pandemic could easily reach $400 billion, according to some estimates, and the bulk of the money likely ended in the hands of foreign crime syndicates—making this not just theft, but a matter of national security.”
Talcove points out what now seems obvious. The U.S. relies upon an antiquated technology infrastructure, COBOL, a programming language that’s decades old and hopelessly flawed compared to the modern software we have. What happened in California highlights governmental ineptitude, leading to obvious criminal actions.
Talcove points out the world moved on from the 1980s COBOL, but the California Labor and Workforce Development Agency didn’t. When the outbreak happened, fraudsters at all levels of sophistication saw an easy target to exploit. For example, claims were filed in the names of known prisoners who weren’t eligible for unemployment checks. About 35,000 unemployment claims were paid out to California prison inmates this year, roughly 133 of whom are actually on death row.
Talcove alleges that the siphoned-off stolen funds were used, in part, for child trafficking, drugs and causing disruptions in the U.S. Kits were sold on the dark web to teach people how to steal someone’s identification and submit claims for unemployment benefits. The states didn’t have appropriate policies and procedures in place to catch the criminals. It’s similar to how the elderly were warehoused in nursing homes and tens of thousands succumbed to Covid-19 without any early interventions to stem the deaths.
Blake Hall, CEO and founder of ID.ME, said, “Fraud is being perpetrated by domestic and foreign actors.” Similar to Talcove, Hall is trying to highlight and put an end to this coordinated attack. He added, “We are successfully disrupting attempted fraud from international organized crime rings, including Russia, China, Nigeria and Ghana, as well as U.S. street gangs.”
Talcove says that this could all have been avoided. The tools needed to verify someone’s identity in real-time when a transaction occurs are now commoditized with numerous companies offering SaaS and API-based products. The failure of our government to utilize these solutions when it comes to programs that dispense tens of billions of dollars is actually symptomatic of a more central, underlying issue: in general, the government has not “gone digital,”and we have now witnessed the consequences.
Talcove points to another serious consequence of the identity thefts. With so many criminals taking advantage of the system, he questions the validity of the actual numbers reported by the Department of Labor in their weekly and monthly jobs report. It’s reasonable to believe that with the widespread fraud, the unemployment figures may have been artificially inflated by criminal activity and identity theft.
Due to the alarming high rate of unemployment, trillions of dollars were pumped into the economy. We’re all saddled with their debt and our kids and grandchildren will be paying it off.
The question is raised if decisions were made based on bad unemployment data. Did people and companies act on this misinformation to their detriment? Fearful of the seemingly dire situation, corporations put on hiring freezes and laid off personnel, which further worsened our economic predicament.
Source: Forbes
