(WATCH) Covid Spending

When COVID happened, the U.S. health response may have left something to be desired. But one thing our public officials turned out to be very good at was rushing taxpayer money out the door without proper oversight. More than $6 trillion in COVID funds poured into the economy. A lot of it, relief funds for small businesses. We’re now learning the eye-popping scope of the fraud committed, as the hunt continues to catch more of the crooks. In today’s cover story, we follow the COVID money.

The following is a transcript of a report from “Full Measure with Sharyl Attkisson.” Watch the video by clicking the link at the end of the page.

Mike Ware is the Inspector General at the Small Business Administration, or SBA.

The SBA paid out the COVID relief funds intended for small businesses through the Paycheck Protection Program, PPP, and the Economic Injury Disaster Loan program, EIDL — most of it distributed through banks.

Mike Ware: We conservatively estimated that $200 billion in potential fraud existed in these programs.

Sharyl: That’s shocking. I mean, that, I think your report said, means at least 17% of the funds were disbursed to potentially fraudulent actors, more than $136 billion in EIDL and $64 billion in PPP. So 17%— that’s unacceptably high, isn’t it, for fraud?

Ware: Yeah, I would absolutely agree with you that it is, especially when you’re talking about $200 billion.

Sharyl: How do you find out about most of your fraud cases?

Ware: Yeah, well, that’s a great question. Initially, we had incredible partnerships, off the bat, with the banks. The banks, of course, have their own internal control structures set up and their own investigations divisions within the banks. And, off the bat, we had like 5,000 complaints in a week. Off the bat, you have a problem.

Sharyl: What were the kinds of things the banks were saying?

Ware: Oh, “These folks don’t own a business. They never owned a business before.”

Sharyl: Which they have to have a business to get, obviously, a loan to help their small business.

Ware: Yes. Yes.

Sharyl: Let’s talk about a couple of the notable cases. One, I guess was profiled in a TV show, American Greed. Where it said eight people submitted at least 150 fraudulent loan applications and got $18 million?

Ware: A couple of things stood out on this case. One of them was, we found duffel bags full of money buried in the backyard. So that was one. Secondly, once they were arrested, they were home, waiting for sentencing with monitors, home monitoring, home arrest, and they fled the country. And with the FBI, we were able to apprehend them in Montenegro as they were trying to board a crossing and brought them back.

The group, including this married couple, managed to get its hands on over $18 million in taxpayer money. They splurged on luxury homes, gold coins, diamonds, jewelry, watches, fine furnishings, designer handbags, clothes, and a Harley-Davidson motorcycle.

Many of the cases top $1 million and involve criminals submitting fraudulent loan applications for fake businesses to pay nonexistent employees.

Former NFL player Joshua Bellamy got three years in prison for a $1.2 million scam. He admitted spending it on jewelry, and at the Seminole Hard Rock Hotel and Casino.

Lee Price III got nine years in prison for stealing $1.6 million in relief funds and buying a Lamborghini, a Ford F-350, and a Rolex.

Reality star Maurice Fayne of “Love & Hip Hop: Atlanta” got 17.5 years in prison for a fraudulent $3.7 million COVID relief loan. Prosecutors say he used it on his extravagant lifestyle, and to buy custom-made jewelry and lease a Rolls-Royce.

Mustafa Qadiri got 4.5 years in prison for cheating taxpayer out of $5 million and buying personal items including Ferrari, Bentley, and Lamborghini cars.

Thirty people took part in a $9.2 million scheme led by Sherry Joseph, who committed the crime on pretrial release for separate fraud charges.

Baby Blue of the hip-hop group “Pretty Ricky” was convicted in a $24 million con, released early after serving one year of a 20-year sentence.

Amir Aqeel got 15 years in prison for leading a fraud ring involving at least 14 others and more than $35 million.

And then there are violent gangs that apparently figured out COVID relief funds were easier money than the typical street hustle. In Puerto Rico, 111 gang members have been arrested so far in COVID relief scams amounting to more than $9 million.

And in Charleston, South Carolina, these suspects are among dozens arrested in Operation Trendsetter, where investigators caught members of the gang, Sex, Money, Murder, taking part in a racket that involved submitting fraudulent COVID relief applications.

Ware: Where of course they were being investigated for all manner of crimes. But it was so much easier during the pandemic to attack SBA’s pandemic programs. You’re not going to be shot at behind a computer, I would guess, I would assume. And we were able to use our link analysis techniques to arrest over 36 gang members and bring them in.

In all, the Small Business Administration puts the potential fraud at $200 billion, involving 4.5 million loans and grants. There have been more than a thousand arrests so far and $41 billion in fines, forfeitures, and other returned money.

Sharyl: What happens to the money that you’ve been able to claw back? Where does that go?

Ware: It goes back to the Treasury.

It looks like Ware’s team at the Small Business Administration Inspector General’s office is going to stay busy for a long time. The agency recently got a 10-year extension on the time limit to go after the crimes.

Ware: I would say the number-one thing that I have learned through all this is that the government needs a blueprint for standing up any emergency program. Really. They need a blueprint to stand up any program that requires the internal control environment to be seriously considered prior to a single dollar going through the door.

Sharyl: Because when an emergency happens, typically a program starts up, Congress appropriates money, it flows out the door without many controls, and then inevitably we find a lot of it was misspent.

Ware: Correct.

Sharyl: But you’re saying on the front end, there could be sort of a standing way of operating, so there would be controls on the front end?

Ware: This is true, but, to be honest, why don’t we have that? This should be in place for any program.

Sharyl (on-camera): Ware says the Pandemic Response Accountability Committee that he serves on hopes to create a blueprint for federal agencies to use in the future, with processes for up-front controls before emergency funds go out the door.

Watch video here.

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