US says more than $1.4 billion in pandemic relief funds was stolen

Some individuals used their stolen money to fund vacations while others purchased assets overseas, the US Justice Department (DOJ) said as it announced new charges for pandemic fraud that bring to more than $1.4 billion in COVID-19 relief funds stolen by more than 3,000 defendants.

The DOJ on Wednesday announced federal criminal charges have been filed against 371 defendants for offenses related to more than $836 million in COVID-19 fraud. The number of defendants came from a three-month "sweep" to combat the fraud, which ended in July and involved more than 50 US attorney's offices and dozens of federal, state and local law enforcement agencies. 

The DOJ said 119 defendants pleaded guilty or were convicted at trial during the sweep. More than $57 million in court-ordered restitution was imposed, and prosecutors worked with law enforcement to secure forfeiture of more than $231.4 million.

Attorney General Merrick Garland said in a statement: "This latest action … should send a clear message: the COVID-19 public health emergency may have ended, but the Justice Department's work to identify and prosecute those who stole pandemic relief funds is far from over."

At the end of June, the Labor Department said its  inspector general had about 163,000 open investigations focused on unemployment-insurance fraud from the pandemic.

The DOJ on Wednesday listed a range of fraud schemes, including defendants who were accused of using the money to solicit a murder, and individuals who laundered funds by shipping cars to Nigeria.

One case detailed by the department involved 30 individuals — all alleged to be members or affiliates of a Milwaukee, Wisconsin,  street gang known as the Wild 100s. They were charged in a scheme involving millions in fraudulently obtained pandemic unemployment insurance benefits. The funds were allegedly used to solicit a murder for hire and to purchase firearms, controlled substances, jewelry and clothing. Some defendants were also accused of transferring firearms knowing they would be used to commit violent crimes or traffic drugs.

In another case, the DOJ said Leon Haynes, a New Jersey tax preparer, for more than two years told some of his clients that the federal government was giving out "free money" and he filed more than 1,000 false tax forms, fraudulently claiming more than $124 million in COVID-19 employment tax credits or businesses that he and others owned. He was arrested at the end of July.

The exact amount of stolen relief funds is unknown, but the Small Business Administration's inspector general estimated that more than $200 billion — or at least 17 percent of the roughly $1.2 trillion in pandemic loans the agency gave out — had been disbursed to "potentially fraudulent actors".

Prosecutors and investigators are working to "claw back as much of that money as possible", said Michael Galdo, the DOJ's acting director of COVID-19 fraud enforcement. "When the money's out the door and we're chasing it, it's difficult to recover it all," he said.

Galdo added that some fraudsters were still actively trying to obtain funds through the employee-retention tax-credit program and that he expected to see more prosecutions in the coming months related to those schemes.

The department also announced the creation of two COVID-19 fraud enforcement strike forces at the US attorney's offices in Colorado and New Jersey, an addition to three strike forces that the department created in September.