By ANDREW SPARKS
In March 2020, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act, which provided $2.2 trillion in economic relief. The Act was designed to quickly get money to millions of Americans suffering from the pandemic. Unfortunately, this relief provided ample opportunity for fraud. As the COVID pandemic begins to ease, the Department of Justice’s efforts to prosecute this COVID-19 fraud is intensifying. To date, the Department has charged nearly 500 defendants with criminal offenses for attempted fraud in excess of $550 million. The focus of the prosecutions have been schemes targeting the Paycheck Protection Program, Economic Injury Disaster Loan program, Unemployment Insurance programs, and relief funds for health care providers.

Anticipating that fraudsters would attempt to profit from the pandemic, the Department created multiple initiatives to combat theft. According to Attorney General Merrick Garland, “[t]he Department of Justice has lead an historic enforcement initiative to detect and disrupt COVID-19 related fraud.” This initiative includes, among other law enforcement techniques, using data analysis capabilities to identify potential areas of fraud. To date, the Department has focused on a handful of key programs:

• Paycheck Protection Program. Over 120 people have been charged nationwide for PPP fraud, including business owners who have inflated payroll expense to obtain larger loans than they qualified for; individuals who have misappropriated PPP funds for prohibited uses, such as cars and personal luxury items; and individuals who have established shell corporations and have simply stolen the paycheck funds.

• Economic Injury Disaster Loans. This fraud has centered on shell companies claiming to have suffered business losses. In these schemes, no actual business ever existed. To date, over $580 million of fraudulent disaster loan funds have been seized by the government.

• Unemployment Insurance fraud. This fraud centers on people who have claimed unemployment benefits they are not entitled to. This has included internationally organized crime syndicates who have stolen identities, as well as domestic fraudsters, including inmates, that have improperly applied for and received unemployment funds. The Department of Labor has estimated that more than $26 billion in fraudulent unemployment benefits will be lost to criminals during the pandemic, and many experts say the total loss of taxpayer funds will exceed $100 billion.

• Identity theft. According to the Department of Health and Human Services, scammers are using telemarketing calls, text messages, social media platforms, and in some instances door-to-door visits to defraud people. Under these scenarios, the criminals offer COVID tests, prescription cards or grants in exchange for personal information. This information is then used for a variety of illicit purposes, including fraudulently billing health care programs.

While these are the most common frauds, other schemes also exist. For example, scam artists have also set up sham charities, have marketed fake virus cures, and have defrauded people out of their stimulus checks. According to the Federal Trade Commission, this fraud has cost American citizens more than $382 million, in addition to the direct fraud of the government relief programs.

Federal and state authorities in Michigan have combined to investigate and prosecute COVID related crimes. As a result, Michigan has seen several criminal indictments for COVID fraud. In February, a woman was charged with health care fraud for submitting claims for treating COVID patients, while in reality her home health agency was not operational during the pandemic. In April, five men were charged with creating shell companies and receiving over $1 million under the Paycheck Protection Program. Last fall, a man was charged with attempting to fraudulently obtain over $3 million for overstating business operations and payroll expenses for nineteen different companies.

The Department’s efforts to combat COVID fraud is not limited to the criminal arena. One such avenue for civil recovery in the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) which allows the government to impose civil penalties for violations of certain federal criminal statutes. The most pertinent qualifying statute involves fraud on financial institutions. In California, the government successfully brought a FIRREA action against an internet retail company for making a false PPP loan application.

The government’s primary tool for combating fraud civilly, the False Claims Act, has also been successfully used against individuals submitting false applications for PPP and economic disaster loans. The False Claims Act permits private citizens with knowledge of fraud against the government to bring a lawsuit on behalf of the United States and to share in any recovery. These whistleblower cases have been on the rise during the pandemic, and will continue to be an important source of new leads to help discover COVID related fraud.

There are several potential areas where the government will likely utilize the False Claims Act. For example, any contractor that knowingly sells defective Personal Protective Equipment to the government would be liable under the False Claims Act. Likewise, defective or inaccurate COVID tests may very well give rise to a False Claims Act case if the provider acted intentionally or recklessly in administering the tests. Laboratories that process the COVID tests that lack qualified personnel or proper certification also face liability. Finally, any healthcare provider that intentionally falsifies billing records for treating COVID patients in order to receive higher reimbursement would be subject to three times the amount billed, plus penalties.

Individuals with information regarding COVID 19 fraud may report it to the government at https://oig.hhs.gov/fraud/report-fraud/ or by calling 800-HHS-TIPS.