$163 Billion of COVID Unemployment Money Either Stolen Or ‘Misspent’

A top watchdog for the Labor Department estimates that “at least” $163 billion in COVID unemployment funds were either stolen or “misspent.” 

This information came out during a Congressional hearing – where it promptly went missing just like the money, until the Washington Post covered it yesterday.

By way of comparison, that figure is larger than the entire total economies of 138 of the world’s 193 countries.

An estimated $163 billion from pandemic unemployment benefits was stolen or misspent. The money may never be recovered. https://t.co/mnpsRRzvZ4

— The Washington Post (@washingtonpost) May 15, 2022

Just How Bad Is It?

It’s terrible. In Maryland, fraudulent claims for unemployment outnumbered legitimate requests for unemployment benefits.

$20 billion went to criminals in just California alone. What is most alarming is that the dollar amount includes $810 million that went to currently in prison.

If you were wondering, people in prison aren’t allowed unemployment benefits, for obvious reasons.

Three people helped a Pennsylvania inmate operate a $2.2 million scam by submitting over 240 fraudulent COVID unemployment claims. The inmate was having the funds funneled into their commissary account. That’s a whole lot of smokes for one prisoner. 

It wasn’t just fellow American identity thieves that cashed in on the opportunity to bank on some COVID relief. Scattered Canary, a famed Nigerian crime syndicate, got in on the action. Criminal crime rings like the one in Nigeria have been preying on our weak government systems since long before COVID but found an easy opportunity with the rush to provide relief.

Scattered Canary Evolves From One-Man Operation to BEC Giant – by @sergheihttps://t.co/trBVY4nySx

— BleepingComputer (@BleepinComputer) June 5, 2019

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Poof

To provide relief quickly to Americans facing an economic challenge not seen since the Great Depression, the federal government and states loosened restrictions and requirements.

This goodwill gesture predictably created more pain than relief. As a result, requirements for applicants to provide proof of identity and other documentation were lifted. 

These relaxed requirements allowed for an environment primed for identity thieves to take advantage of. 

According to Michael Horowitz, inspector general for the Justice Department:

“The ability to engage in identity theft has grown exponentially, and the federal government has not kept up.”

Horowitz stressed how it would’ve been prudent for the government to, at a minimum, verify identities and that there are numerous conduits in which to do so.

Fraud: $163 BILLION in COVID Unemployment Funds Stolenhttps://t.co/y6hjNYpjoX

— @Atomic_79 (@atomic_79) May 16, 2022

In particular, is the Do Not Pay list housed within the Treasury Department.

“It turned out 57,000 loans were paid out in those first few weeks to individuals who were on the do no pay list.”

One can postulate that these loans would’ve been caught had the time been taken to verify applications against this list that already exists.

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Who Hurts the Most

The sad reality is this kind of fraud is not a victimless crime. On the contrary, it almost always affects those most detrimentally affected. 

The $40,000,000,000 for Ukraine is bad…but what about $163,000,000,000 in fraud/waste in Covid relief? #Corruption #USA https://t.co/A9nisfEbBn

— Darian Miller (@darianmiller) May 15, 2022

When the fraud ran rampant and questions needed to be answered, some states took drastic measures.

Pennsylvania and Washington went so far as to pause the delivery of benefits already getting paid out. This was done to investigate any fraudulent behavior but affected those who needed those benefits now put on pause.

In California, they shut down legitimate applicants’ accounts so they could investigate claims. Once cleared, the difference here is that those legit applicants now needed to go back through the arduous application process again.

And of course, printing up hundreds of billions in new money hurts everyone, due to inflation.

So Who Is to Blame?

The short answer is the government. Although in typical fashion, the blame game in Washington is similar to that of hot potato. 

According to Gene Sperling, a top adviser to President Biden who oversees pandemic spending:

“The unprecedented explosion of unemployment claims, combined with years of disinvestment in our unemployment system, lack of state-by-state data sharing and weak identity controls, created a perfect storm for the fraud and identity theft in 2020 that we inherited.”

President Biden has been in politics and government for a long time; he often touted it as one of his main selling points during the election. So if the above is accurate, then I would assume President Biden is as much to blame for the issue as any other past administration.

The government machine adds to the pain felt by Americans with various departments not wishing to work together. Many of these fraudulent activities went undetected because the Labor Department, for a time, refused to cooperate with federal fraud investigations. They only later agreed because of the White House intervention.

Jon Cross, Vice President of Risk, Fraud, and Compliance at Thomson Reuters said:

“We’ve seen states where literally as many as 3 out of 4 claims into [the program] were highly suspicious and likely fraudulent.”

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Fraud Extends Further into COVID Money

It’s not just the unemployment benefits made more vulnerable to fraud. It’s estimated that over $100 billion in fraud surrounds the Payment Protection Program.

Worth minding this. Outlines systems and scale of plunder of #US Government #Covid Relief Package #PPP
I’d need to explore in more detail, but do believe #Universal nature of #UBI concept means scope for administrative error & fraud could be minimisedhttps://t.co/BMRGZKEtTz

— Basic Income Earth (@BasicIncomeOrg) March 29, 2022

Tom Schatz, President of Citizens Against Government Waste, said:

“It’s a systemic failure both in the Executive Branch and in Congress, where the real responsibility lies with getting this under control.”

He goes on to state:

“The Federal government, they’re still using paper. They don’t verify, they’re in a rush to get it out, they’re not trained sufficiently.”

None of this surprises any of us who have had to deal with government bureaucracy at any given point. Although I find it interesting that I need two forms of identification, two bills with my address, my blood type, and a retina scan to obtain a driver’s license, getting COVID relief seems to be much easier.

I’ll leave you with this last nugget. Of the $163 billion in unemployment fraudulently paid out, the government has recouped $4 billion. That’s 2.4% of the wrongful payments. Money well spent?