U.S. seeks $1.6B for covid-aid fraud fight

Congressional OK still needed

The Associated Press
President Joe Biden speaks about the economy to union members at the IBEW Local Union 26 on Wednesday in Lanham, Md.
The Associated Press President Joe Biden speaks about the economy to union members at the IBEW Local Union 26 on Wednesday in Lanham, Md.

President Joe Biden's administration is asking Congress to approve more than $1.6 billion to help clean up the mess of fraud against the massive government coronavirus pandemic relief programs.

In a strategy announced Thursday, the administration called for money and more time to prosecute cases, to put into place new ways to prevent identity theft and to help people whose identities were stolen.

On a call with reporters, White House American Rescue Plan coordinator Gene Sperling had hope that Congress, including the GOP-controlled House, would see the spending as an investment.

"It's just so clear and the evidence is so strong that a dollar smartly spent here will return to the taxpayers, or save, at least $10," Sperling said, pointing to recoveries that have already happened. The U.S. Secret Service last year got back $286 million sent out in fraudulently obtained loans through the Small Business Administration.

Sperling said the request would be part of the budget proposal Biden is scheduled to make March 9 -- but the bulk of it will be separate from the one-year appropriation request. Details would need to be ironed out with Congress.

Beginning in March 2020, Democrats and Republicans banded together to adopt a series of laws that injected trillions of dollars into the economy. The unprecedented aid provided extra weekly checks to unemployed workers; offered easy, forgivable loans to cash-starved businesses; and guaranteed urgently needed money for hospitals, schools and local governments under immense financial strain.

But the haste with which the government disbursed its aid also turned federal relief programs into a tempting target for criminals, as The Washington Post found in a year-long investigation called the Covid Money Trail. Fraudsters soon siphoned away billions of dollars from key federal agencies, though the nation's top watchdogs admit that they still do not know the full extent of the losses.

Money went to boost unemployment insurance programs, help those in the gig economy who lost work, cover government costs and keep businesses afloat.

"On the whole, those programs did enormous good," Sperling said. "There were also cases where guardrails were unnecessarily lowered, which led to unnecessary and massive fraud."

A congressional committee found that financial technology companies did not properly screen applicants for the giant Paycheck Protection Program. Fraudulent claims for unemployment benefits overwhelmed state computer systems, which sometimes had trouble identifying the fake ones while slowing down many legitimate filings. The Labor Department estimated there was $164 billion in improper unemployment insurance payments alone -- much of it to fraudsters.

Many of the scams relied on fake or stolen personal information.

In response, the White House on Thursday urged Congress to provide top federal watchdogs and law enforcement agencies more money, power and time to pursue legal cases, citing the fact that existing federal rules -- and chronic underfunding -- had hamstrung their ability to prosecute.

Biden's plans aim to deal with prosecutions and prevention. He's asking for $600 million for prosecution, including funds to create at least 10 new Justice Department strike forces in addition to the three that already exist to go after criminal syndicates and other fraudsters. He's also calling on increasing the statute of limitations for such crimes to 10 years from the current five, giving more time to investigate and prosecute cases.

For the Biden administration, a primary focus is the nation's unemployment insurance program, which lawmakers expanded greatly during the pandemic to offer more generous payments to a wider category of workers. A crush of applicants overwhelmed outdated, underfunded state labor agencies that manage federal jobless aid, in a move that ultimately opened the door for Washington to make roughly $191 billion in wasteful payments, according to one federal estimate. Officials said they believe the projection includes a substantial amount of fraud.

In many cases, criminals bilked old, mismatched state and federal computer systems, often applying for jobless aid in multiple states using the names of other people -- from innocent workers in need of help to prisoners, who are ineligible for unemployment assistance. In response, the White House proposal would make it easier for federal watchdogs to review and share claims data, addressing a lapse in oversight that has hampered the government at times since the Trump administration.

And he's calling for policy changes to make sure that the Labor Department inspector general's office has ongoing access to data showing where the same identity was used to apply for benefits in multiple states. That office and other inspector general offices would share at least $300 million to hire investigators.

In rare alignment with the White House, Republican lawmakers have signaled since taking control of the House that they share a desire to pursue criminals who stole from the roughly $5 trillion approved since the start of the pandemic. Party lawmakers have already held multiple oversight hearings this year, and they advanced new legislation this week that seeks to claw back money improperly paid to unemployed workers. But the two sides at times have clashed politically, as some GOP leaders have tried to use the issue as a political cudgel by blaming Biden for fraud -- even though much of the spending was bipartisan and adopted under Trump.

Adding to the difficulty, lawmakers from both parties have ignored repeated requests in recent years for new money and greater resources to pursue pandemic wrongdoing. In December, for example, Democrats and Republicans failed to deliver on Biden's earlier proposal to allocate more funds to the Justice Department to prosecute fraud targeting covid aid. Instead, lawmakers adopted a $1.7 trillion deal to fund the government -- and avert a federal shutdown -- that continued to fund the nation's top watchdogs at lower amounts than they requested, The Post found.

Biden is also planning eventually to issue an executive order directing federal agencies on how to take action on identity fraud, including modernizing government systems to prevent identity theft.

A portion of the money would go to improve a Federal Trade Commission website, IdentityTheft.gov, a place for people to report identity theft and get help.

The proposal also notes that $1.6 billion from the American Rescue Plan -- the last of the big relief measures, adopted in 2021 -- will be made available by June to help states improve their anti-identity theft measures.

Information for this article was contributed by Geoff Mulvihill of The Associated Press and by Tony Fromm of The Washington Post.

Upcoming Events