Since 2020, Congress has passed six separate COVID related relief bills. The scope of the Government’s spending is unprecedented. As the CARES Act-established Pandemic Response Accountability Committee states, “[t]o put our job in perspective, just one pandemic relief program—the $800 billion Paycheck Protection Program (PPP)—is equal to the federal government’s entire response to the 2008- 2009 financial crisis.”
For reference, the $800 billion Paycheck Protection Program amounts to less than 20% of the Government relief spending. It is difficult to even imagine the scope of this spending. According to Forbes, the average value of an NFL franchise in 2021 was $3.5 billion, which means you could buy 228 NFL teams with just the PPP funding alone.
In total, it is estimated that over $5 trillion in direct relief spending has been obligated in the last two years. A vast majority of the relief funding (approximately $4 trillion) was authorized through two pieces of legislation: the March 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act and the March 2021 American Rescue Plan (ARP).
While much of the relief money has been spent, a significant portion remains unspent, and spending is scheduled to occur over the next several years. As such, while fraud has already occurred on a significant scale, it is likely to continue well into the future.
Now that two years have passed, we take the opportunity to look back at where the relief money was spent, what oversight exists, and what fraud, waste, and abuse has been found.
Who received the $5 trillion in COVID relief funds?
Congress has obligated approximately $5 trillion in response to the COVID pandemic although significant portions of this money remain unspent. For reference, in fiscal 2020, the total state spending for all 50 states was $2.28 trillion, or less than half of the pandemic relief spending. Of the obligated relief funds, approximately $1.8 trillion went to individuals and families through $844 billion in stimulus check payments and $666 billion in enhanced unemployment compensation.
Additionally, businesses received approximately $1.7 trillion, much of which came from the $835 billion Paycheck Protection Program (PPP) and $349 billion Economic Injury Disaster Loan (EIDL) Program. State and local governments received $745 billion, the health care industry received approximately $482 billion, and other remaining industries received approximately $288 billion.
It is estimated that over 175 million Americans received stimulus checks and more than 6 million small businesses received relief aid. Perhaps obvious at this point, the sheer volume of relief spending impacted all parts of American life.
Oversight and Enforcement of Relief Programs
While the scope of relief spending has been unprecedented, money meant for oversight of the relief funds has not been as robust. It is estimated only $1 in new oversight money was obligated for about every $12,000 in coronavirus stimulus spending. In light of this, whistleblowers are invaluable to help root out fraud.
The CARES Act established the Pandemic Response Accountability Committee (PRAC) to oversee pandemic relief spending. PRAC, which is comprised of 22 Inspector Generals, is responsible for conducting oversight of pandemic-related funds and preventing and detecting fraud. PRAC’s goals are, in part, to detect fraud, waste, abuse, and mismanagement and to identify and mitigate major risks that cross program and agency boundaries.
In May 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force, which works collaboratively with other government agencies to combat and prevent pandemic-related fraud. The Justice Department’s efforts to combat COVID-19 related fraud schemes have proceeded on numerous fronts, including cases and investigations involving the Paycheck Protection Program (PPP), Economic Injury Disaster Loan (EIDL) program, Unemployment Insurance (UI) programs, and COVID-19 health care fraud enforcement. The DOJ reports that approximately 500 defendants have been charged in over 340 cases with alleged intended losses of over $700 million relating to PPP and EIDL fraud. Additionally, DOJ has seized over $1 billion in EIDL loan proceeds.
Just a few weeks ago, the Justice Department announced that Associate Deputy Attorney General Kevin Chambers will serve as the Director for COVID-19 Fraud Enforcement to lead the department’s criminal and civil enforcement efforts to combat COVID-19 related fraud.
The DOJ also announced that the latest results of criminal and civil enforcement actions that include alleged fraud related to over $8 billion in pandemic relief. According to the DOJ, investigations have resulted in criminal charges against over 1,000 defendants with alleged losses exceeding $1.1 billion; the seizure of over $1 billion in EIDL proceeds; and over 240 civil investigations into more than 1,800 individuals and entities for alleged misconduct in connection with pandemic relief loans totaling billions of dollars.
In our next post, we will more fully examine where fraud has been uncovered so far and the types of schemes that may emerge going forward.
Written by Tim Granitz of Mahany Law