News and Analysis

Billions In COVID Small Business Aid Went To Fraudsters, Dead People
Economic impact payment check from the US treasury
Douglas Sacha/Getty Images

Roughly $3.7 billion in federal aid went to fraudsters barred from receiving federal dollars, according to a report from the Small Business Administration.

The agency offered low-interest, fixed-rate, long-term aid to help companies survive COVID-19 and the lockdown-induced recession. However, tens of thousands of people abused the system amid bureaucratic incompetence.

The New York Times reported:

The finding adds to a mountain of evidence chronicling what the Small Business Administration’s inspector general, Hannibal Ware, called an “unprecedented amount of fraud” in the agency’s pandemic relief efforts. In October, Mr. Ware’s office chastised the agency for improperly doling out billions in relief money to self-employed people who made “flawed or illogical” claims of having additional workers on their payroll.

Its Economic Injury Disaster Loan program distributed more than $210 billion last year in loans and grants. The program was organized in a hurry by the Trump administration as millions of businesses temporarily shut down because of the coronavirus and was designed to quickly send out money to help companies keep up on their bills.

Ware’s office released a report explaining that the agency neglected to cross-reference applications against the Treasury Department’s “Do Not Pay” system:

The Do Not Pay system was set up in 2011 to reduce improper payments to people who are dead, convicted of tax fraud or barred from receiving federal contracts, among other red flags. Mr. Ware found 117,135 applicants who got grants and 75,180 recipients who got loans despite matches in the system indicating a “high likelihood” that the payments were improper.

Other reports indicate that the federal government’s enhanced unemployment aid program wasted billions of dollars on fraudulent requests. 

In June, Axios revealed that as much as half of all unemployment benefits — around $400 billion — paid during COVID-19 may have been lost to scams and fraud, many of which were located outside of the United States.

“Unemployment fraud during the pandemic could easily reach $400 billion, according to some estimates, and the bulk of the money likely ended in the hands of foreign crime syndicates — making this not just theft, but a matter of national security,” Axios explained. Up to 70% of the stolen funds “likely left the country,” flowing to groups based in China, Nigeria, Russia, and other hostile nations. The remainder was likely “stolen by street gangs domestically, who have made up a greater share of the fraudsters in recent months.”

Indeed, the Department of Justice has been devoting resources into catching and prosecuting the fraudsters.

For instance, Fontrell Antonio Baines — an amateur rapper also known as “Nuke Bizzle” — abused debit cards pre-loaded with unemployment benefits administered by the California Employment Development Department. The Justice Department said that before his scheme was uncovered, Baines “bragged about his ability to defraud the EDD in a music video posted on YouTube and in postings to his Instagram account.” 

In a music video entitled “EDD,” Baines boasted that he would “go to the bank with a stack of these” as he held up envelopes from the agency. Another rapper in the video said that “you gotta sell cocaine, I just file a claim.”

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