The United States government’s historic spending on pandemic aid in 2020 and 2021 was accompanied by a historic amount of fraud and theft, with potentially hundreds of billions of dollars stolen.
Valesky Barosy was an up-and-coming entrepreneur, having immigrated from Haiti and quickly making a name for himself in southern Florida as a million-dollar deal-maker.
When the pandemic hit, he saw a ticket to even faster wealth by helping others steal from COVID-19 business loan programs. He took up to 30% as his cut that prosecutors said he spent on flashy clothes, fancy watches and a fast car — a Lamborghini Huracan Evo.
Barosy, convicted at trial last month for the scam, is far from the only one.
Yet despite much excellent investigative reporting into Covid relief fraud and various government investigations into it, it’s never really risen to dominate the news agenda or made much of a political impact. It’s become the sort of issue that burbles on in the background, not a major scandal demanding everyone’s attention.
The Covid relief bills did an enormous amount of good, cushioning devastating economic blows from the abrupt halt to much in-person activity in 2020 and helping millions of people across the US. Still, I have been surprised that the high level of fraud hasn’t gotten at least a bit more attention, considering the staggering sums of money involved, and how much the right obsessed with overblown controversies over far smaller amounts of supposedly misspent funds in President Barack Obama’s stimulus law.
The main reason for the relatively muted reaction is likely that focusing on this doesn’t play to either party’s political advantage. Democrats and Republicans collaborated to pass the Covid relief bills at issue under President Donald Trump. And the specifics of the fraud don’t really fit with either party’s current top messaging priorities, with Democrats hesitant to demonize big-spending government aid programs, while Republicans are increasingly consumed by the domestic culture war.
How the fraud happened
As the federal and state governments tried to get pandemic relief funds out quickly to people and businesses who needed it in 2020, fraudsters and scammers pounced.
NBC News’s Ken Dilanian and Laura Strickler wrote in March that, per experts they consulted, pandemic fraud across three major relief programs could reach the $250 billion to $560 billion range (though no one really knows because the exact amount is difficult to estimate). The federal government approved about $5 trillion in total pandemic relief money, per the Washington Post.
Matthew Schneider, a former US attorney, told NBC that this was “the biggest fraud in a generation,” adding, “nothing like this has ever happened before.” And ProPublica’s Cezary Podkul wrote that the pandemic relief fraud “may turn out to be the biggest fraud wave in U.S. history.”
Some culprits were domestic, but much of the fraud was targeted internet crime from foreign scammers operating in countries such as Russia, China, and Nigeria. These included self-motivated hustlers just trying to pick up what they saw as easily available money, while others were more organized criminals. It turns out that when US government or state entities offer free money on the internet with minimal safeguards for identity verification, people will come along and try to take that money.
The main programs targeted included the expanded unemployment insurance benefits and the Paycheck Protection Program. Both of these were signed into law in the March 2020 CARES Act by Trump after being passed by a Democratic House and a Republican Senate. That means the Trump administration was in charge of the executive branch when much of the theft took place — though it was often antiquated state unemployment benefit systems that were specifically targeted. After President Biden took office in 2021, Democrats passed their own pandemic aid plan that extended the expanded unemployment insurance benefits several more months.
Why the politics are playing out this way
All of the above makes for a messy picture of political culpability. Republicans can’t frame this as a purely Democratic scandal when Trump signed the bill and was president while much of the theft happened. Democrats, for their part, helped craft the initial relief bill and extended it further under Biden. So that’s an incentive for both parties not to look too closely at what might have gone wrong. Unless, of course, some Republican with an incentive to make Trump look bad — like his possible 2024 presidential primary rival Ron DeSantis — decides to lay it at his feet.
Among Democrats, there’s likely a generalized fear that making too much about any fraud in government benefits will be used to discredit the use of government benefits to help people generally (harking back to the “welfare queen” attack from Ronald Reagan). Both mainstream and left Democrats were thrilled at the generosity of vastly expanded unemployment benefits, and hoped they could make these changes permanent in some form. Dwelling too much on all the money that was stolen would not be helpful here.
One would think, though, that it would be anti-spending Republicans who would typically make a big stink about an issue like this. And yet with the GOP increasingly fixated on the domestic culture war, the specifics of the pandemic relief fraud (money stolen by foreign hackers) don’t seem to fit too well with their current message.
This is evident in an amusing recent exchange on the pages of the Wall Street Journal. Rep. James Comer (R-KY), the incoming chair of the House Oversight Committee, wrote an op-ed on pandemic relief fraud, along with five other issues he plans to investigate. But his most specific concern was that some states and localities used pandemic relief funds for “electric buses and controversial ideologies.” In an earlier press release, his office claimed to find evidence that pandemic relief money funded “woke initiatives.”
American Enterprise Institute fellow Matt Weidinger responded to Comer’s op-ed with a letter to the Journal urging him to focus on the bigger fraud picture so it could be stopped from happening again. “Criminal gangs, including some based in Russia and China, used stolen identities to seize U.S. tax dollars on an industrial scale,” Weidinger wrote. This could be read as saying: Focus on the real issue, please, not just the culture war crap. We will see next year whether the GOP House majority listens.
Finally, and more broadly, there could well be a general feeling of leniency from both the political system and the public because this was an unprecedented situation, and many people who did need help got it — even if many scammers got some too. Some fraud was inevitable, and sure, this might be a lot. But haven’t the past few years been a lot for everyone?
Little oversight in the spending. The Federal Government a mess as always. But it’s not their money.
Unemployment benefits funded by the pandemic relief bill, the Department of Labor inspector general estimated that by program end, $87 billion out of $872 billion in COVID FUNDS.
The Department of Labor estimates that $163 billion of pandemic spending have been lost to fraud, with some outside estimates putting that number as high as $400 billion. Congressional Democrats have refused to hold hearings on wasteful, misused, and fraudulent pandemic spending, despite repeated requests from Republicans.
Haywood Talcove, the CEO of LexisNexis Risk Solutions, estimates that at least 70% of the money stolen by impostors ultimately left the country, much of it ending up in the hands of criminal syndicates in China, Nigeria, Russia and elsewhere. USA Today reported on one Nigerian scammer who feasted on American tax dollars.
They came into their riches by participating in what experts say is the theft of as much as $80 billion — or about 10 percent — of the $800 billion handed out in a Covid relief plan known as the Paycheck Protection Program, or PPP. That’s on top of the $90 billion to $400 billion believed to have been stolen from the $900 billion Covid unemployment relief program — at least half taken by international fraudsters — as NBC News reported last year. And another [$80 billion potentially pilfered from a separate Covid disaster relief program.
In fiscal year 2021, there was an estimated $281 billion in improper payments, according to agency data reported to OMB. That number was up $75 billion over FY2020 and double the level reported in FY2017.
Since that measure includes mistakes beyond fraud, like under- and over-payments, it doesn’t offer a clear picture of fraudulent payments specifically.
And it’s also not a complete estimate, since some agencies haven’t handed over data, and others gave estimates that aren’t “rigorous,” said Gene Dodaro, head of the Government Accountability Office.
