On his Instagram page, Hadi Isbaih of suburban Palos Heights lists some of the services his Bridgeview company provided, including tax preparation, bookkeeping and translation for immigration documents. He neglected to mention one other: COVID-19 relief fraud.
The 42-year-old Isbaih, convicted on June 10, is among at least 3,500 defendants charged in federal court with stealing funds intended for pandemic relief. Every day, it seems, a new case is being brought or a new conviction announced. And, shockingly, the estimates about just how much was stolen keep rising.
Pandemic fraud is shaping up to be the biggest financial scam in U.S. history. Of the $5 trillion in relief that former President Donald Trump and President Joe Biden authorized, hundreds of billions are believed to have been ripped off. The pandemic’s first year was especially bad, with an estimated 20% of every dollar paid out going to criminals.
The Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL), both aimed at helping small businesses, were among the favorites for fraudsters. Unemployment insurance, disaster food stamps and the government Medicare and Medicaid programs also lost a fortune in bogus payouts.
In Illinois, the accused include everyone from state police and dozens of other state employees to postal workers and opportunists like Isbaih. Across the country, prosecutors have taken down violent criminals and gang members who got into the pandemic-fraud act. They busted a Minnesota ring accused of stealing $250 million in relief funds earmarked for feeding needy children.
CityMD, a Walgreens-affiliated urgent-care retail chain, just settled allegations that it took millions in improper reimbursements for virus testing.
Federal and state lawmakers are acting to extend the statute of limitations for pandemic crimes so cases can be brought for years to come. Asked what he would tell those who believe they’ve gotten away with stealing relief funds, a federal prosecutor in Florida replied, “No one has gotten away with it. They just haven’t been arrested yet.”
The tough talk is good to hear, but unfortunately most of the stolen money is gone forever. Even after winning thousands of convictions, the Justice Department as of April had only recovered about $1.4 billion, a large sum to be sure but a fraction of the amount taken. The government knows who got the money — it’s a matter of public record, after all. But prosecuting all the criminals would take decades.
If you wonder how it could be so easy to steal so much, consider the charges brought against Isbaih. It didn’t take a master criminal to cheat these programs.
His Flash Tax Service advertised on billboards and social media, pulling in hundreds of customers who paid for his help submitting phony applications to the PPP and EIDL programs, according to Isbaih’s indictment.
When copies of tax returns showing business income, expenses and number of employees were needed, it was no big deal for Flash Tax to cook up fakes, resulting in millions of dollars going from the government to its customers. Flash Tax charged several hundred dollars upfront for its service, plus an additional kickback after the government money came through, according to the indictment.
It should have been simple for the Small Business Administration to work with the Internal Revenue Service and Treasury Department to verify the applications. But the CARES Act approved in the early days of the pandemic discouraged the SBA from taking obvious steps. As a result, even incarcerated prisoners were able to make successful applications. In Illinois, some inmates have been accused of using PPP loans to bond themselves out of jail on their felony cases. Unbelievable.
Congress lowered the usual guardrails in early 2020 because the economy had shut down, people needed money fast and a more bureaucratic approach would have slowed disbursements. It’s obvious today that even rudimentary checks taking hardly any time would have saved taxpayers billions. Instead, it was like a bank opening its vault and asking customers to leave an IOU as they helped themselves. And inflation for everyone was one of the consequences.
One of the main lessons is that allowing people to “self-certify” their eligibility for big pots of government money invites catastrophe. Fraud controls, including those for detecting identity theft, need to be built into government spending programs. As big banks have learned, artificial intelligence and data analytics can automate vetting processes to make the first lines of defense almost instantaneous. Federal and state governments have restored guardrails that came down in 2020, but they surely need to make better use of today’s technology for fraud prevention.
Know anyone who ripped off Uncle Sam during the pandemic? Plenty of people who stole relief funds bragged about it, including some of those who’ve been prosecuted. Some citizens have reported the crooks by calling the DOJ’s disaster-fraud hotline at 866-720-5721 or filing an online complaint form.
It’s sickening to consider how, in the midst of a crisis that was killing more than 1 million Americans and disrupting countless livelihoods, so many of our fellow citizens seized an opportunity to exploit relief efforts for personal gain.
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