White House Requests $1.6 Billion to Combat COVID-19 Aid Fraud

By Washington Post
Posted on 03/02/23 | News Source: Washington Post

Nearly three years after criminals first set their sights on the government’s generous coronavirus aid programs, President Biden on Thursday called on Congress to approve $1.6 billion to combat fraud, hoping to empower federal prosecutors and prevent such historic theft from targeting taxpayer money again.

The new request for funds foreshadows the years of costly and complicated work now ahead of Washington, after malicious actors set their sights on the more than $5 trillion that lawmakers intended for workers, families and businesses amid the worst economic crisis since the Great Depression.

But the push from the White House could still face familiar political obstacles on Capitol Hill. Seeking to punish criminals and secure new savings at a moment of rising deficits, lawmakers long have expressed alarm about the vast sums stolen during the pandemic – yet they have done little to address the root causes of the problem.

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 – primarily during the administration of Donald Trump – 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.

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 also endorsed policies that seek to respond to the most egregious crimes seen during the pandemic. That includes new rules meant to ensure criminals cannot obtain urgently needed federal assistance in the names of other people, dead people and prisoners – key ways that fraudsters stole aid during the unprecedented crisis.

In a briefing with reporters Wednesday, Gene Sperling, a senior adviser to the president, said Biden entered office and “inherited a historic degree of fraud” – and now faced the task to mount a response to it.

“On the whole, these programs did enormous good. But we also learned there were cases where guardrails were lowered that led to unnecessary and, in some cases, large-scale fraud,” he said.

The new White House request formalizes Biden’s commitment in his State of the Union address last month to combat fraud targeting coronavirus aid programs, arguing that a push to toughen enforcement would help return money to the government. “Every dollar we put into fighting fraud, the taxpayer will get back at least 10 times as much,” the president said.

Biden plans to include the new funding as part of his forthcoming budget request for the 2024 fiscal year, which the White House is set to release on March 9. The blueprint is expected to touch off fierce debate on Capitol Hill, where Republicans have pledged to slash federal spending – even if they have to seize on the country’s credit to secure dramatic cuts.

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.

The president’s new plan still seeks to address some of the most notorious, costly abuses identified over the past three years. At the center of the effort is a $600 million push to hire investigators, fund federal inspectors general and extend the statute of limitations on certain crimes. Together, Sperling said the moves would allow the government to “guarantee people they have the time for those prosecutions.”

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.

Sperling, meanwhile, said the president also planned to sign an executive order to combat identity theft targeting government benefit programs, which Biden first promised last year. In the meantime, the White House also called for an additional $600 million to help prevent identity theft in the future and recover stolen payments, and another $400 million to help its victims, particularly during the pandemic.

The new money would fund the creation of a new “early warning system” to notify individuals whenever someone tries to obtain state or federal money in their names. And Sperling said the aid would help harden the government’s defenses, after federal officials moved with such haste that they failed to query their own systems to spot obvious fraud.

Such lapses had opened the door for criminals starting in 2020 to take aim at the Small Business Administration, an agency tasked to manage roughly $1 trillion – more than its annual budget – to keep cash-starved companies afloat. The SBA chiefly oversaw two federal initiatives that provided loans and grants to companies, including the Paycheck Protection Program. But the efforts, while generally effective, still suffered at times from significant mismanagement, as top officials under Trump moved so hurriedly that they missed key signs of fraud.

In its latest estimate, a top pandemic watchdog estimated in January that the SBA awarded roughly $5.4 billion to firms that used potentially ineligible Social Security numbers. A year earlier, the SBA’s inspector general pointed to billions of dollars in additional money sent to ineligible foreign applicants and others suspected of identity theft. And the companies that helped the SBA review businesses for aid failed to conduct proper oversight, The Post uncovered, all the while collecting billions of dollars in lucrative fees.

This week, the White House pointed to the fact that the SBA under Trump made 57,000 loans, totaling more than $3.6 billion, that should have been flagged – if only the SBA had queried a federal anti-fraud system known as “Do Not Pay.” On Thursday, Biden proposed new funds for the Treasury Department, which manages the list, to expand its availability – and the president called on Congress to pass a law that would require a more rigorous review of applicants seeking federal relief dollars.