Coronavirus Relief Theft
CORONAVIRUS RELIEF FRAUD: The beginnings
The massive ongoing federal government effort to get COVID-19 pandemic relief to struggling American families and businesses has unfortunately attracted new and well-practiced criminals. They are taking advantage of the situation to get their hands on government money (our tax dollars). With the government’s focus on the urgency to work quickly, there were inevitable opportunities for fraud. It’s only after the fact that government fraud units are able to sift through the transactions and identify the fraudsters.
One case particularly alerted me to the problem since it was in my own backyard.
Read below about how someone here in South Carolina tried to fraud the US government over stimulus money designed to help individuals and businesses that were negatively impacted by the Coronavirus.
The huge amounts of relief money that have been made available over the past two years provided a tempting target for fraud, money laundering, and identity theft.
This month we take a look at what we know so far about the extent of the fraud. I suspect the numbers will become larger since the speed with which the stimulus packages were launched provided opportunities for theft. Now, various government agencies are able to take the time to look more carefully at how the money was actually spent and pursue prosecution where necessary.
The DOJ, IRS and Bridgett Dorsey fo Blythewood, SC
The Department of Justice sentenced 39-year-old Bridgett Dorsey of Blythewood, SC, to two years in federal prison for fraud relating to $1.2 million in Coronavirus relief funds. In the period from April to August 2020, Dorsey fraudulently applied for and received the money through seven Economic Injury Disaster loans (EIDL) and two Paycheck Protection Program (PPP) loans, along with two EIDL cash advances for seven businesses for which she was the alleged owner.
Her application contained materially false information, including inflated business revenues and employee numbers as well as addresses where business did not exist. In some cases, she submitted false documentation or created businesses for the sole purpose of obtaining the loans.During the investigation, the IRS and the Treasury Inspector General for Tax Administration also discovered that Dorsey committed tax fraud through her businesses, Virtual Financial Services. Dorsey prepared multiple tax returns on behalf of others and claimed deductions she knew were false.
Between the DOJ and the IRS, the government seized more than $500,000 of stolen funds in bank accounts controlled by Dorsey and another account with approximately $130,000 was frozen. These funds will be applied toward the restitution owed by Dorsey, who paid approximately $184,000 in restitution before sentencing.
In the end, Dorsey was sentenced to 24 months in federal prison, to be followed by a three-year term of court-ordered supervision. There is no parole in the federal system. She is also ordered to pay more than $1 million in restitution stemming from coronavirus relief-related fraud in addition to $13,865 in restitution to the IRS for tax fraud.
Extent and Variety of Fraud Schemes
The CORONA-VIRUS government loans were offered as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act to help small businesses financially manage the economic toll of the pandemic.Small businesses received more than $640 billion in forgivable PPP loans to apply to expenses including payroll, mortgage interest, rent, and utilities. The EIDL program provided low-interest loans for items such as accounts payable and other bills.
To date, nearly $100 billion has been stolen from government COVID-19 relief programs, according to the US Secret Service. The estimate is based on Secret Service cases and data from the Labor Department and the Small Business Administration shared with CBS news by Roy Dotson, the national fraud recovery coordinator for the organization.
Most of that figure comes from unemployment fraud. The Agency says it has more than 900 active criminal investigations into pandemic fraud, with cases in every state and 100 people have been arrested so far. People thought they got away with it because they received the money and no one came after them, even after a couple of months.
The $100 billion does not include cases being prosecuted by the Justice Department. In late December 2021, the Justice Department had prosecuted over 150 defendants in more than 95 criminal cases and had seized over $75 million in cash proceeds derived from fraudulently obtained Paycheck Protection Program ({PPP) funds, as well as numerous real estate properties and luxury items purchased with the proceeds.
Each application contained false information including overstating the businesses’ revenues, inflating the number of employees or providing addresses to businesses that did not exist.
The losses will undoubtedly get larger as time goes on. The reality is that the most egregious cases were handled first and those will take longer in the court systems.
In another more complicated example from Grand Rapids, MI, and Atlanta, GA, in April 2021 five men were indicted by a grand jury on multiple federal charges for fraudulently obtaining and misappropriating PPP loan funds. The indictment alleges that the five men received approximately $1.495 million through the Small Business Administration and the PPP for two shell companies. It is further alleged that the defendants attempted to transfer the money to cover up the fact that it was fraudulently obtained. Although the case is not concluded, these charges are part of an Organized Crime and Drug Enforcement Task Force (OCDETF) investigation by law enforcement officers in Michigan and Georgia, including the IRS Criminal Investigation, the Drug Enforcement Administration, the FBI, the US Secret Service and other drug and narcotics departments.
So, what does that have to do with me?
In addition, there are other ways individuals can be personally frauded. The majority of CORONAVIRUS fraud that has been reported falls into two main categories – unemployment benefits and stimulus-check fraud.
- Typically, the way these criminals are able to attempt to fraud the government is to obtain an individual’s personal information and use it to file a fraudulent unemployment claim. They then begin collecting benefits, while the person may have no idea what’s going on, especially if the person is not filing for unemployment. Those people will discover the fraud only when they file 2020 taxes returns and get a notice from the IRS that they failed to declare unemployment benefits as income.
- A small percentage of Americans have reported stolen stimulus checks. In some cases, the criminals have hacked an individual’s account and had the deposit diverted to another account.
- Beware of fake scams and promises of protection against the virus with no basis in medical research.
- Identify theft continues to be a problem, and those who are retired and receiving a Social Security check are especially a target. That has not changed with the CORONAVIRUS.
Finally, most thefts are found by early reporting of concerned citizens. If you learn of COVID fraud, contact the FBI at tips.fbi.gov. If you have been a victim of fraud regarding unemployment benefits, contact your state employment office Immediately.
