While the spread of COVID-19 may finally be slowing, government enforcement of pandemic-related fraud is not. It is surging. And that may explain why you are hearing from the government more than usual, or will soon.
The U.S. Department of Justice (DOJ) announced last week that it has now charged nearly 500 defendants with crimes involving COVID-19 related fraud, warning that its coordinated enforcement efforts are moving at an “unprecedented pace and tempo.”
“The Department of Justice has led an historic enforcement initiative to detect and disrupt COVID-19 related fraud schemes,” said Attorney General Merrick B. Garland. “The impact of the department’s work to date sends a clear and unmistakable message to those who would exploit a national emergency to steal taxpayer-funded resources from vulnerable individuals and small businesses.”
Prosecutions have involved three main areas: the Paycheck Protection Program (PPP), Economic Injury Disaster Loan (EIDL) program, and Unemployment Insurance (UI) program.
Administered by the Small Business Association, the PPP is a loan program intended to provide small businesses with incentives and means to keep their workers on payroll, but carries strict limits on permissible uses of the funds available under the program. Of the 120 defendants charged with PPP fraud to date, most have misappropriated loan proceeds for impermissible purposes, the DOJ said.
The EIDL program was designed to provide economic relief to small businesses and nonprofit organizations experiencing a temporary loss of revenue. Defendants charged with EIDL-related fraud have been accused of applying for EIDL advances and loans on behalf of ineligible businesses, and diverting the funds for prohibited purposes. Partnering with the U.S. Secret Service to detect fraud as rapidly as possible, the DOJ has already seized $580 million in loan proceeds.
And, as for UI, the pandemic has brought an unprecedented amount of federal funds appropriated for UI: more than $860 billion. In response to instances of fraud and stolen identity, the DOJ established the National Unemployment Insurance Fraud Task Force, involving more than eight federal law enforcement agencies. As a result, over 140 defendants have been charged with federal offenses related to UI fraud, with many more investigations ongoing.
In addition to criminal enforcement, the DOJ is also using civil tools to address pandemic-related fraud, including the False Claims Act, which allows private citizens with knowledge of fraud against the government – or whistleblowers – to bring lawsuits on behalf of the government. According to the DOJ, whistleblower complaints alleging pandemic-related fraud are on the rise.
These unprecedented enforcement efforts not only create risks for corporations and individuals benefiting from pandemic-related relief programs, they also put in the line of fire banks, financial institutions, and other third parties. For the hundreds of defendants who have faced charges, thousands more individuals and institutions have been subject to investigations of pandemic-related fraud, whether as targets themselves or as witnesses subpoenaed for information and documents. And, according to the DOJ, there is no end in sight. “To anyone thinking of using the global pandemic as an opportunity to scam and steal from hardworking Americans, my advice is simple – don’t,” said Acting Assistant Attorney General Nicholas L. McQuaid of the Justice Department’s Criminal Division. “No matter where you are or who you are, we will find you and prosecute you to the fullest extent of the law.”
