Immense fraud in Corona aid
US inspectors are missing billions of dollars
By Roland Peters
2/17/2022, 9:17 p.m
In the first year of the pandemic, the US government quickly and without real control gives financial support to small business owners. But around 84 billion dollars should probably not have been paid out. The massive scam could take years to clear up.
When the corona pandemic began two years ago, public life was reduced to a minimum. Governments around the world imposed drastic measures to keep the risks as small as possible. Nobody really knew how the virus spread. How deadly it was. Many companies lost customers, orders and thus their income.
In order to cushion the economic consequences, the US government decided in March 2020, among other things, to provide historically high financial aid for sole proprietors and small companies. As a result, the government deficit was $3.13 trillion in 2020 and nearly $2.78 trillion in 2021. In previous years it was significantly less. The payment was uncomplicated. Overall, the United States disbursed trillions of dollars in aid programs and loans, including $1 trillion to small businesses. Now it is becoming increasingly clear that quite a few people took advantage of this and stole money.
One of the most important programs against the consequences of the pandemic were wage subsidies as part of the Paycheck Protection Program (PPP). It expired on May 31, 2021. Employers should use the money to cover their employees’ salaries, rent and other costs. The government loans have a term of two years and an interest rate of 1.0 percent. They only have to be repaid if they are not spent for these purposes within a certain period of time. The Small Business Administration (SBA) was responsible for disbursing the PPP – around $800 billion – as well as providing emergency aid to the self-employed. The US authorities estimate the financial aid obtained by fraud at a total of around 84 billion dollars.
Judgments and prison sentences
The cases should be examined in detail.
(Photo: REUTERS)
Some turned the applications into a business. Last condemned a court in the state of North Carolina several men for conspiracy to fraud, the head of the group to seven years in prison. The men had intentionally given false information and stole $2.7 million. From this they bought luxury items and withdrew the money for their private use. Another man received over $4 million from the SBA alone. He used it to buy expensive new cars and distribute money among acquaintances. The verdict is due in April. The offense carries a sentence of up to 30 years imprisonment. The US Department of Justice repeatedly publishes similar judgments on its website.
The authorities paid quickly. Too quickly, critics say, and without precautions. The problem was already known in mid-2020; Articles described how easy it was to trick the system, and there were even instructions on YouTube. According to auditors, the SBA also paid those who worked with stolen identities. Hundreds of thousands of applications were incorrect or forged. Individual entrepreneurs stated in the documents for emergency aid that they had employees who didn’t even exist; in fifteen cases even with the absurd statement of one million employees, as the “New York Times” writes. Corporations like Amazon or Walmart have that many employees.
SBA paid sole traders a maximum of $1,000, but an additional $1,000 for every 10 employees. The maximum was $10,000. The 20 billion emergency aid available was used up after 14 weeks. Almost a quarter of this was apparently paid out illegally or fraudulently, more than half of a total of over 700,000 people received the full $10,000. The mistake was obvious: the applicants did not have to provide their company’s employer number, which is also used to register employees, but their personal social security number.
“Could take years”
The authority also did not follow its own rules. Hundreds of applicants stated that they had more than 500 employees. They would no longer have been small business owners. The head of agency internal oversight said the SBA “never requested additional information from these self-employed workers to verify the number of employees” before disbursing the aid.
Alone because of the fake applications for emergency aid, 5.2 billion dollars were paid out. $704 million would have been eligible. A report to the Congressional Small Business Committee in January said the agency was still trying to understand the true extent of the fraud. The clarification could take many years.
“The immense fraud that has taken place during the pandemic, particularly on small business loans and unemployment insurance, is undoubtedly the biggest regulatory challenge the government of [Präsident Joe] Biden has inherited,” said a person responsible for the Washington Post. Now it’s a question of whether and how the authorities can get their around 84 billion money back from PPP and emergency aid. To do this, the auditors have to examine every payment and provide evidence of it request the applicants It is a Sisyphean task, which in some cases may simply be impossible.