This is the first in an eight-article series on “Restoring Trust in Public Health: Lessons from COVID-19.” Four years of the Biden-Harris administration has left Americans rightly skeptical of public health institutions. This series highlights key findings from several congressional oversight reports, including the final report of the U.S. House Select Committee on the Coronavirus Pandemic, and offers lessons for Congress and the new administration on ways to restore trust in public health.
With the onset of the COVID-19 pandemic, America experienced massive business closures, supply disruptions, and record unemployment that reached 14.7% by April of 2020. Unfortunately, the well-intentioned efforts to address this incredible distress through new economic relief programs were marred by immense waste, fraud, and abuse of taxpayers’ money, much of which is detailed in the U.S. House Select Subcommittee on the Coronavirus Pandemic’s final 2024 report.
In March of 2020, Congress and the first Trump administration enacted the Coronavirus Aid, Relief, and Economic Securities Act, known as the CARES Act. The law provided a hefty $2.2 trillion in spending assistance and created the Paycheck Protection Program to be administered by the Small Business Administration.
The Paycheck Protection Program provided special taxpayer-funded loans (initially $349 billion) for small businesses with less than 500 workers to help them retain employees while their operations were shut down or significantly curtailed by government edict. The law also expanded the existing unemployment insurance program to cope with a massive increase in unemployment claims that resulted from the shutdowns.
In May of 2021, Congress and the Biden administration increased the total funding for the Paycheck Protection Program to $813 billion. By February 2022, spending on the unemployment insurance benefit programs totaled $872 billion.
A Hotbed of Fraud
The Paycheck Protection Program, according to the select subcommittee, lost “at least” $64 billion to criminals. In the language of its report:
PPP was susceptible to many forms of waste, fraud, and abuse due to its rapid implementation and reliance on self-verification by applicants. The most common ways this program was exploited was through inflated payrolls costs, misrepresenting employee numbers, misuse of loan proceeds, submitting multiple applications, creating false certifications, committing identity theft, loan stacking, and fake documentation.
Fraudsters filed false loan applications. For example, a California citizen claiming to own a business with 100 workers provided falsified applications and fake Social Security numbers of nonexistent employees to secure a stunning $27 million in taxpayer-funded loans, which he used for personal expenses.
Investigators found that criminals not only defrauded the Paycheck Protection Program but also defrauded the Economic Injury Disaster Loan program. Using thousands of “questionable” Social Security numbers, criminals received about $5.4 billion in fraudulent loans from the disaster loan program, according to estimates from investigators.
Meanwhile, the Small Business Administration failed to keep tabs on the Paycheck Protection Program. Not only did the agency fail to provide guidance to lenders to detect fraud, but it lacked the internal capacity to combat it. According to the subcommittee report, “SBA was one of many federal agencies that did not implement internal controls, fraud prevention measures, or adequate financial and risk management capabilities, even though they were required by law.”
Taxpayers lost big time. According to an Aug. 23, 2023, New York Times report, only 3,195 defendants had been charged and only $1.4 billion in relief funds—a tiny fraction—had been recovered. But that loss was nothing compared to the losses incurred under the unemployment insurance program.
Unemployment Insurance Fraud
In the spring of 2020, with the onset of federally recommended and state-imposed lockdowns, the massive business closures resulted in massive joblessness, and unemployment insurance claims soared to 58 million.
To cope with this unprecedented disruption, the Trump White House and Congress unleashed federal spending for relief. Under the CARES Act, Congress and the first Trump administration expanded and extended unemployment benefits and the length of time that persons could claim them from the standard 26 weeks to 79 weeks. The law also created the Pandemic Unemployment Assistance program for self-employed workers.
Under the Consolidated Appropriations Act of 2021, Congress and the Biden administration attempted to establish stronger “integrity” measures to prevent fraud, as the subcommittee notes, requiring state verification procedures for applicants.
Nonetheless, in 2023, the Government Accountability Office estimated that between 11% and 15% of unemployment insurance claims were fraudulent, with an estimated loss to the taxpayers of between $100 and $135 billion. In December 2023, the inspector general of the Department of Labor upped the total loss estimate to a jaw-dropping $191 billion.
How did this happen?
A key reason was that the special Pandemic Unemployment Assistance program had also become a hotbed of fraud. According to the subcommittee report:
In August 2023, the Department of Labor (DOL) reported an improper payment rate of 35.9% for the PUA program. During the first nine months of the program, claimants were not required to provide any documentation or evidence of earnings, despite states certifying individuals’ eligibility for benefits. State workforce agencies, responsible for distributing funds to claimants, lacked the necessary information to verify the credibility of claims.
In fact, many states routinely failed in their own oversight responsibilities even before the pandemic, and the costs of that failure dramatically increased during the pandemic. According to the subcommittee report, “For more than 20 years, Department of Labor’s inspector general’s office consistently reported that the UI program has some of the highest improper payments in the federal government. In 15 of the past 19 years, improper payments in the regular UI program exceeded 10%.”
Organized Crime
It’s no surprise that international criminal organizations took advantage of America’s national medical emergency. Sophisticated cybercriminals and their international networks were able to secure Americans’ personal information, such as Social Security numbers; take advantage of “preexisting” data breaches; and rob America’s COVID-19 relief programs.
The subcommittee thus reported:
It is estimated that at least half of the federal funds lost through the PPP and UI relief programs were stolen by international fraudsters. This exploitation of pandemic relief programs has not only undermined domestic recovery efforts but has also fortified organized crime syndicates, underscoring the urgent need for enhanced global cooperation and enforcement to safeguard public funds. (Emphasis added.)
There were numerous cases of such theft. But the select subcommittee highlighted three egregious examples.
In the first example, according to a 2022 NBC News report, hackers linked to the Communist Chinese regime stole an estimated $20 million COVID-19 relief funds.
In the second, in 2024, the U.S. attorney for Massachusetts discovered that a Nigerian government official “organized” a cyber theft operation, filing a total of 191 fraudulent claims and stealing $10 million in pandemic relief.
In the third example, in 2022, the Department of Justice charged a man from India with submitting 17 applications for firms that did not exist and stealing $8.2 million from the Paycheck Protection Program. At the same time, as the subcommittee notes, American “street-level criminal organizations”—low-level thugs dealing in drugs—also participated in unemployment insurance fraud schemes.
Stopping the Fraud and Abuse
In its comprehensive report, the select subcommittee concluded: “Federal and state agencies had significant lapses in coordination, insufficient resources for oversight, weak data sharing and reporting mechanisms, and delays in enforcement and accountability for pandemic relief programs.”
To restore trust in public health interventions, including economic and financial interventions, American taxpayers must be confident their tax dollars are not funding fraud and abuse. President Donald Trump should task the Department of Government Efficiency, also known as DOGE, to assess the defective operations of the federal relief agencies. That special team should also make recommendations to improve financial controls and prevent such stupendous waste, fraud, and abuse in any future crisis.
This article was originally published at www.dailysignal.com
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