More than two years after the first federal dollars became available through the Paycheck Protection Program, the Economic Injury Disaster Loan program, the Restaurant Revitalization Fund and other relief programs, the DOJ is criminally prosecuting fraud cases and cracking down on those who misused the funds.
In the early days of the pandemic in 2020, COVID relief funds became available and easy to get in hopes of helping individuals and businesses stay afloat. In the first two weeks of the Paycheck Protection Program, more than 14 years of lending went out of the door from the Small Business Administration alone, said Michelle Blank, COVID desk officer special agent, Office of Inspector General, U.S. Small Business Administration. But it quickly became evident that controls and processes were not as strong as they should have been to ward off fraud. People obtained funds that were used to buy boats, luxury cars and homes and even cryptocurrency.
The scale of the fraud has been unprecedented, said Colin M. Huntley, deputy director, Civil Division, Fraud Section at DOJ. The programs were rolled out so fast that it was “like building an airplane while flying it,” he said.
Huntley sees the future of pandemic-fraud enforcement as “busy.” Fraud cases will be prosecuted as civil and/or criminal cases. The False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act are the main tools used to go after alleged fraudsters in civil cases.
“Fraud cases take a long time to prosecute. But some of these cases were so blatant,” said Leslie S. Garthwaite, assistant chief of the Market Integrity and Major Frauds Unit, Fraud Section, Criminal Division at DOJ. “We’re going to see the same types of schemes we’ve always seen,” such as those used in health care and Medicare fraud.
Congress has presented legislation to President Joe Biden that establishes a 10-year statute of limitations for criminal charges and civil enforcement against a borrower who engages in fraud with respect to certain COVID-19 economic injury disaster loan programs. Because it takes so long to investigate and prosecute fraud cases, “more time is always better,” Garthwaite said.
Financial institutions have been great partners in tracking down fraudsters, helping to identify trends in where the money is going, said Michelle Blank, COVID desk officer special agent, Office of Inspector General at the SBA. Data analytics — analyzing emails, Employer Identification Numbers, tax records, audit reports and more — have been heavily used and help to identify the full scope of the fraud. “You can dive into data a million different ways,” Blank said.
Whistleblowers have also played an important part in uncovering COVID relief fraud, Huntley said. “We rely on whistleblowers a great deal.”
In May 2021, the DOJ established the COVID-19 Fraud Enforcement Task Force and last March appointed a director for COVID-19 Fraud Enforcement. Such moves as well as collaboration between federal agencies like the DOJ and SBA help to stop or at least curb the rampant fraud, the panelists said.
However, despite all the government’s continued and successful efforts, “We will never know the full extent of the fraud,” Blank said.
The program, sponsored by the Criminal Justice Section, was moderated by Daniel Suleiman, partner at Covington & Burling in Washington, D.C.