Federal government struggles to understand scope of pandemic fraud three years into COVID-19

Richard Ayvazyan was, Marietta Terabelian and Tamara Dadyan had been arrested last year in Montenegro. This small area of wealth was not yet in existence. EuropeThey had already used up millions of dollars from small-business pandemic aid programs.

The three California Residents Living lavishly. They bought diamonds and gold coins, three luxurious houses, and a Harley-Davidson Motorcycle.

CITIES GRAPPLE AFTER PANDEMIC WITH MAJOR MAJOR CHANGES FOR THREE YEARS

Ayvayzan purchased a $35,000 Rolex. Dadyan and Terabelian, two women who were part of the fraud ring that included eight people, bought designer handbags as well as fancy clothes.

They’d been under more than a decade of law enforcement scrutiny and had fled to escape prison.

Federal agents raided the home that Terabelian, Ayvazyan’s wife, bought in Los Angeles with stolen pandemic relief in November 2020. Terabelian ran from the back door, as agents broke in. Assembled throwing She tried to escape by throwing her bag of groceries into the trees; law enforcement agents found $450,000 in cash inside.

After the raid, Terabelian and Ayvazyan allegedly took off their ankle monitors and headed towards Montenegro.

Los Angeles’ fraud ring displayed a brazen type of fraud that plagued small business pandemic programs.

The scheme involved eight individuals who created fake businesses, tax documents, payroll records, and employee identities in order to apply for loans. Congress was trying to keep small businesses afloat during lockdowns. The scheme involved eight Californians who obtained 151 small business loans totaling $18 million.

To blunt the effects of the pandemic, Congress created two programs in 2020 that allowed fraudsters the ability to exaggerate their business or create them all.

The Economic Injury Disaster Loan Program was designed to assist businesses in sustaining revenue loss. The Paycheck Protection Program was intended to protect employees and keep them on the payroll.

The Small Business Administration was given $377 billion by Congress to implement them. The federal government is just beginning to realize how much money was lost due to fraud.

“These programs, these were the biggest welfare programs put in place since the New Deal, and they were put in place with weeks of development — not even weeks of debate,” Joel Griffith, research fellow at the Thomas A. Roe Institute for Economic Policy Studies of the Heritage Foundation, shared his experience with the Washington Examiner. “These were just shoved through Congress as quickly as possible.”

The urgency of the situation was an important factor in the rise of fraud.

“You had just a massive number; you had millions of entities that were applying for these government resources to ostensibly keep millions and millions of people on their payroll,” Griffith also added. “The Department of Labor couldn’t expand their staff tenfold … it was not as if they had time to staff up.”

Federal officials did little to verify identities of people and businesses applying for assistance during the first months of the programs, despite having a limited staff and an overwhelming number of applications.

“Word spread very quickly that this was being done in an expedited manner, and people were getting away with it,” Griffith said.

There was widespread fraud at both the individual and business level, with the combined effect of enhanced unemployment benefits and business aid. Thieves still had more lucrative options with the small-business loan.

The Pandemic Response Accountability Committee consists of 20 inspectors from different parts of the government, who are charged with monitoring pandemic assistance. Announcement In January, its investigators discovered nearly 70,000 “questionable” The possibility of fraud is high because Social Security numbers were used to get more than $5B from the Small Business Administration’s pandemic loan programs.

Some Estimates Place the loss of small business assistance due to fraud at $80 billion

The Paycheck Protection Program was a relief program that helped businesses keep employees on the payroll during lockdowns using forgivable loans. It was particularly vulnerable to abuse in the initial months of the pandemic. This is because the federal government didn’t even take basic steps in 2020 to verify borrowers claims.

“The initial implementation of PPP prioritized the speed of disbursing funds rather than the scrutiny of applicant eligibility, a trade-off that contributed to widespread fraud,” The pandemic watchdog panel wrote in a January report.

Small Business Administration representatives did not even verify applicants against existing applications “Do Not Pay” To verify the identities of potential recipients of federal funds, the Treasury Department maintains a list.

Some fraudsters were unable to hide their crimes.

According to PPP, a Louisiana woman applied for numerous small business loans using the same name as the fake business she created, Natural Hair Afro LLC. prosecutors. Investigators discovered that 110 small businesses in Thibodeaux (La.) had requested loans and that all had the same name. They also found forged documents.

Pandemic unemployment insurance programs had weaknesses that allowed theft.

The inspector general of the Department of Labor Witness testimony last year that at least 1 out of every 5 dollars paid out through pandemic unemployment programs — around $163 billion — went to fraud or waste, and noted that based on the watchdog office’s work up to that point, the actual amount of money lost “was likely higher” Rather than the 19% estimate.

Some officials in certain states have found evidence to prove it. California could have been involved Loss of up to 27% The pandemic of jobless benefits it paid to the theft in 2020

To cash in on expanded jobless benefits, enterprising fraudsters employed a variety of strategies. Some of them applied for the money in multiple state; others stole identities of living and deceased people.

Even officials charged with overseeing benefits distribution were attracted to siphon off larger amounts of the freely-flowing funds because of the strong incentives.

Michigan was one example. A contractor working for the state’s unemployment agency used her access the agency’s computer network to approve fake unemployment claims. These were submitted by friends and people they had recruited.

She received kickbacks in exchange for pandemic unemployment cash. This money was given to those who invented or stole identities to file claims. According to the Justice Department, she owes the government more than $300,000.

COVID-19’s unemployment programs saw some money disappear, but not because of fraud, but because of mismanagement.

Last week, the Labor Department’s inspector General testified before the House that the guidance on pandemic unemployment programs exempted states from the obligation to recover billions of dollars they had improperly paid.

According to the government watchdog, the Labor Department had given “guidance to states on waiving the recovery of overpayments when the claimant was without fault and if the repayment would be contrary to equity and good conscience.”

“As of January 22, 2023, states reported waiving $4.7 billion in pandemic-related overpayments,” The inspector general Witness testimony.

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The scale of pandemic assistance fraud and waste is hard to track down. The federal government does not know where COVID-19 money is, and it doesn’t have a way to track what has disappeared.

President Joe Biden is pushing for more money to be recovered from fraud victims. Biden had earlier asked Congress for $1.6 billion to be used specifically for fraud recovery.