It’s been more than six months since the pandemic hit the United States, and nearly six months since the CARES Act became law.  In that short amount of time, around $2 trillion of stimulus money has been distributed.

That’s a fortunate fact for millions of people, as well as their employers, who needed this money to pay for the most basic of needs during the economic shutdown.  Less fortunate is what inevitably happens when a multi-trillion-dollar stimulus needs to be built and implemented that quickly – fraud.

The new pandemic-focused Inspector General’s office will likely be the source of most fraud identification in the years ahead.  That office, however, is just getting off the ground.  The Special Inspector General for Pandemic Relief (SIGPR) was confirmed in June and released its first (and only) report to Congress in early August.

But thanks to the vigilance of fraud investigators, we’re already starting to get early glimpses of the behavior of bad actors.  Some recipients of PPP loans, which were primarily designed to support employee paychecks, used them in some bewilderingly bad ways.

It turns out that there’s a limit to what qualifies as a business vehicle.  One person faces federal charges for using the money on child support, jewelry and a Rolls-Royce.  Two others are charged (separately) with using the money to buy Lambroghinis.  While it’s extremely early to see charges arising from stimulus programs, these three weren’t exactly trying to fly under the radar with their purchases.

A US House analysis found that 10,000 borrowers applied for more than one loan; receiving more than one loan is prohibited by the law, and multiple applications should raise a red flag for potential fraud. 

Money was also distributed to companies who had a history of harming taxpayers.  Around $100 million dollars went to businesses who were prohibited from doing business with the federal government and an additional $200 million went to companies the government had flagged for performance or integrity issues (meaning they shortchanged taxpayers in the course of a federal contract).

There’s more to come.  JPMorgan sent a memo to its employees indicating that they’ve already found some of their own employees were complicit in fraud, and the SBA has warned of “strong indicators of widespread fraud”.  Hopefully, quick news of fraud prosecution from this first wave of stimulus will reduce the number of people who try to bilk the government in any future stimulus programs.

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