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Massive fraud found in pandemic relief payouts

By MAY ZHOU in Houston | China Daily Global | Updated: 2022-08-24 10:56

The US government was in such a rush to send out money to help people and companies dealing with the pandemic-related economic hardships in 2020 and 2021 that minimal oversight and few requirements for the money has led to one of the largest frauds in US history.

The US government has issued $5 trillion — $3.1 trillion by the Trump administration and $1.9 trillion under the Biden administration — to help the country in response to the COVID-19 pandemic.

But the fraudulent cases are so numerous that the Office of Inspector General (OIG) at the Labor Department said that it has received more than 144,000 unemployment insurance (UI)-related complaints and opened more than 39,000 investigations. The OIG opened about 120 cases a year pre-pandemic.

The OIG estimated that more than 18.7 percent of pandemic UI payments were "improper". With a total of $872.5 billion in pandemic UI payments, that means $163 billion was paid improperly.

As of June 2022, the Labor Department has issued 875 UI fraud-related indictments and recovered more than $850 million. With so many fraudulent cases, officials concede that some small-dollar thefts may never be prosecuted.

An inspection of the Small Business Administration (SBA) by the OIG discovered that one bank account received 38 loans totaling almost $5 million; one physical address received 97 loans totaling $1.37 million.

It was so easy to defraud the government that some lawyers representing defendants even argued that their clients should be judged less harshly for stealing because the government made it so easy.

Ashwin Ram, a lawyer for a convicted client, called the government's COVID-19 relief program a "honey trap", reported The New York Times.

Konstantinos Zarkadas, a Long Island, New York, physician, was able to apply with false information and easily receive 11 PPP (Paycheck Protection Program) and EIDLP (Economic Injury Disaster Loan Program) loans totaling approximately $3.7 million from March to July 2020.

Zarkadas spent part of the money to buy himself a $1.7 million yacht and expensive watches. He was caught and sentenced to 51 months in prison in March 2022 and ordered to pay $3.5 million in restitution.

At the SBA, where the PPP package totaled $739 billion, an analysis by three researchers from the University of Texas at Austin concluded that 1.41 million loans with a balance of $64.2 billion were potentially fraudulent under four suspicious indicators. The researchers said that supplemental analysis indicates that likely fraudulent loans may be twice as large.

Don Cisternino from New York was able to obtain $7.2 million in PPP loans by forging W-2 forms and tax returns. The money was used to buy luxury cars including a Lincoln Navigator, Maserati and Mercedes-Benz, and a mansion of more than 12,000 square feet in Florida. He was arrested and charged in May 2022.

It was so easy to get free money from the government that it became a business for some.

James Stote and Phillip Augustin, two Florida men in their 50s, first obtained PPP loans with falsified documents for Augustin's company. Easy success led the pair to file similar applications for themselves and their associates. They filed a total of 79 applications and obtained $35 million. The pair now face sentences of up to 20 years in prison.

Gabriela Llerenas, a former employee at the California Employment Development Department, managed to have the UI payments in the form of debit cards sent to her residence, her husband's business location, her mother's apartment and the addresses of friends and other family members.

She also solicited business and helped some individuals file false claims, making money by taking a cut from the payments. She caused the government to issue 197 debit cards totaling $4.29 million.

The fraud was so widely known and spread that it was discussed in chat rooms and on social media platforms. A Brooklyn-based group of 11 members filed for UI payments with stolen identities and obtained $4.3 million.

The members of the group posted photos of themselves on social media flashing gang signs, standing in front of luxury vehicles, and holding stacks of US currency. Some appeared in a YouTube music video with lyrics such as "unemployment got us workin' a lot".

Fontrell Baines, a California rapper who performs as Nuke Bizzle, filed more than 90 false UI applications and obtained more than $700,000 from the federal government.

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