Pandemic opened door for scammers

474 people charged in fraud schemes

The Justice Department has charged 474 people over the past year with trying to steal more than $569 million by using criminal fraud schemes connected to the covid-19 pandemic and has seized at least $580 million in civil proceedings, officials announced Friday, demonstrating how taxpayer-funded programs meant to ease the economic burden of the crisis have become susceptible to scammers.

The department said it has seen fraud attempts connected to several government aid programs. The Criminal Division’s Fraud Section, for example, has charged at least 120 people in connection with fraud of the Paycheck Protection Program, a taxpayer-subsidized loan program regulated by the Small Business Administration which has long been of concern because of how funds were disbursed with relatively little oversight.

The department said it had also seen immense fraud in connection with the Economic Injury Disaster Loans program, and, along with the Secret Service and U.S. attorney’s office in Colorado, had seized $580 million of possibly stolen money from that program through administrative procedures. That money, authorities said, is separate from the funds explicitly tied to criminal charges.

The department said it had found business owners inflating payroll expenses to get Paycheck Protection Program loans larger than what they would have qualified for, as well as “serial fraudsters” reviving defunct corporations or purchasing shell companies with no operations to apply for large loans.

In one case in Texas, the department said, a man pleaded guilty to submitting 15 fake applications under various business names to try to obtain $24.8 million in loans, when none of the businesses had employees or paid the wages he claimed they did. Most of those charged, the department said, spent the government aid on houses, cars, jewelry and other luxury items.

“The Department of Justice has led an historic enforcement initiative to detect and disrupt covid-19 related fraud schemes,” Attorney General Merrick Garland said in a statement.

The department said it had also seen significant fraud in connection with unemployment insurance, the use of which ballooned during the pandemic.

The department said it had charged more than 140 people with such fraud since the start of the pandemic, and it had found organized, international criminal groups trying to apply for the funds using stolen identities, as well as more run-of-the-mill fraudsters in the U.S.