As the Trump administration prepares to take office in less than a month, addressing government waste and fraud is a top priority for the newly-formed Department of Government Efficiency (DOGE). The advisory group, led by Elon Musk and Vivek Ramaswamy, is focusing on quick wins, particularly targeting fraud in COVID relief funds, as billions of dollars may have been distributed to potentially fraudulent entities.
In a recent letter to Musk and Ramaswamy, Sen. Joni Ernst, R-Iowa, reports that at least 17% of COVID-19 Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program (PPP) funds, or more than $200 billion, were distributed fraudulently, citing a 2023 report from the US Small Business Administration (SBA). The Office of the Inspector General (OIG), the SBA, and other federal agencies have seized and returned about $30 billion in COVID-19 EIDL and PPP funds to the SBA.
“In the rush to swiftly disburse COVID-19 EIDL and PPP funds, SBA calibrated its internal controls,” reads the report. “The agency weakened or removed the controls necessary to prevent fraudsters from easily gaining access to these programs and provide assurance that only eligible entities received funds.”
In 2022, NBC reported that fraudsters spent about $80 billion, or about 10% of the $800 billion distributed under the PPP, on luxury automobiles, private jets, mansions, and elite vacations.
In 2021, federal prosecutors alleged that out of a $900 billion Covid unemployment relief program, between $87 billion and $400 billion of that was allegedly stolen by international fraudsters.
Also, SBA Inspector General Hannibal Ware identified $78.1 billion in EIDL and $3.6 billion in PPP funds as potentially fraudulent. According to Department of Justice (DOJ) Inspector General Michael Horowitz, at least 98 investigations launched by law enforcement were publicly announced into PPP and EIDL fraud.
Joshua Bellamy, former wide receiver for the Kansas City Chiefs, was sentenced to 37 months in federal prison in December of 2021 for fraudulently obtaining over $1.2 million in PPP loans.
The DOJ also charged Maurice Fayne, an Atlanta reality TV star, with bank fraud after he got $3.7 million in PPP loans and allegedly used the proceeds to purchase $85,000 in jewelry. Expenditures included a Rolex Presidential watch, a diamond bracelet, a 5.73-carat diamond ring, the lease of a 2019 Rolls Royce Wraith, loan payments, and $40,000 of child support, according to a news report.
Another example involves a Texas couple who were indicted by the DOJ and accused of filing hundreds of fraudulent EIDL applications.
In September, Congresswoman Virginia Foxx, R-D8, chair of the Education and the Workforce Committee, subpoenaed Kamala Harris’ running mate, Gov. Tim Walz of Minnesota, in the alleged COVID-19 fraud scheme.
Many prosecutors are referring to this as “the largest fraud in US history.”
In her letter to the DOGE advisory group, Ernst urged that Congress extend the investigative unit on pandemic relief fraud. It’s work is slated to end in March of 2025.
“Some swindlers who uploaded pictures of Barbie dolls as photo identification on the applications were even approved to receive money, but the Biden administration is being lax recollecting the cash and time is running out,” Ernst’s letter reads. “The Special Inspector General for Pandemic Recovery investigating the grift expires in March, unless Congress extends its mission until every penny is returned.”
Through our Waste Watch series, Carolina Journal shines a spotlight on wasteful government spending at both the state and federal levels, exposing projects that squander taxpayer dollars.