Justice Department Takes Action Against COVID-19 Fraud
A Department of Justice (DOJ) press release dated March 26, 2021 announced an update on DOJ’s efforts to combat crimes related to COVID-19 relief fraud, such as illegal schemes surrounding the Paycheck Protection Program (PPP), Economic Injury Disaster Loan (EIDL) program and Unemployment Insurance (UI) programs.
The release reported that DOJ has publicly charged 474 defendants with fraud connected to the COVID-19 pandemic so far. The defendants collectively attempted to obtain over $569 million and are being charged in 56 different federal district courts.
Attorney General Merrick B. Garland explained, “The Department of Justice has led an historic enforcement initiative to detect and disrupt COVID-19 related fraud schemes. The impact of the department’s work to date sends a clear and unmistakable message to those who would exploit a national emergency to steal taxpayer-funded resources from vulnerable individuals and small businesses.”
When the COVID-19 pandemic first placed the country on lockdown in March 2020, Congress passed the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide immediate financial assistance to unemployed Americans and suffering small businesses. The DOJ prepared for multiple investigations into fraud, foreseeing that hundreds of individuals might take advantage of the global pandemic. As a result, DOJ was able to locate and prosecute those who attempted to take advantage of this government program, and many more arrests are expected.
Around 120 defendants committed crimes surrounding the PPP, including business owners who inflated their payroll expenses to obtain larger loans and individuals who revived fake corporations to gain income. Under EIDL, scammers applied for EIDL advances and loans on behalf of ineligible newly-created, shell, or non-existent businesses, and diverted the funds for illegal purposes. To date, over $580 million in loan proceeds have been seized, with more seizures on the way. Under the UI program, domestic fraudsters ranged from prison inmates to identity thieves, and international fraudsters included organized criminal groups who targeted these funds by using stolen identities to file for UI benefits.
The DOJ also prosecuted several businesses who were selling non-approved personal protective equipment to American consumers, including ineffective masks and surgical gloves as well as fake “treatments” for coronavirus.
The DOJ is also using civil tools like the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and the False Claims Act (FCA) to prosecute these crimes and resolve claims. Some of the alleged crimes committed were reported by private citizens, who can report the actors who defraud these government programs. Under the FCA, private citizens with knowledge of fraud against the government may bring a lawsuit on behalf of the United States and share in any recovery.
Acting Assistant Attorney General Brian M. Boynton of the DOJ Civil Division furthered, “We will not allow American citizens or the critical benefits programs that have been created to assist them to be preyed upon by those seeking to take advantage of this national emergency. We are proud to work with our law enforcement partners to hold wrongdoers accountable and to safeguard taxpayer funds.”