IRS probe finds nearly $2 billion in coronavirus stimulus-related fraud

IRS investigators have uncovered more than $1.8 billion in fraudulent activity related to federal COVID-19 stimulus funds, the agency said Wednesday.

Two years after the Trump administration passed the first trillion-dollar stimulus package, which provided $1,200 checks to individuals and forgivable loans to small businesses as the US economy shut down, the IRS said it has closed 660 criminal cases related to various stimulus bills prompted by the pandemic.

“These cases included a broad range of criminal activity, including fraudulently obtained loans, credits and payments meant for American workers, families, and small businesses,” the IRS Criminal Investigation division said in a statement.

Many of these are wire fraud cases in which people made false claims about their business or financial situation in order to obtain money from the government. 

One such case involved the CEO of a non-functioning non-profit organization who pleaded guilty to lying about having 25 employees and an average monthly payroll cost of more than $120,000. He received more than $300,000 from the Paycheck Protection Program, which was deposited into his personal account.

“In reality, [the nonprofit] had no employees or payroll expenses,” the IRS wrote in a December 2021, statement.

Another case highlighted by the agency involved a married couple who used made-up and stolen identities, including some belonging to deceased people and foreign exchange students, to submit more than 150 fraudulent loan applications.

The federal government has paid out more than $3.6 trillion dollars and is committed to pay $4.2 trillion in response to the pandemic, totaling almost 20 percent of U.S. GDP. 

Attorney General Merrick Garland, at the behest of the White House, set up a task force in May 2021, specifically to go after pandemic-related fraud cases.

In March, the White House said the task force would involve specialized prosecutors and agents focusing on major targets of pandemic fraud, such as those committing large-scale identity theft.

Despite major busts, the IRS Criminal Investigation division says it is underfunded, noting its workforce “has shrunk by 25% over the course of the last decade, which is consistent with diminishing resources across the agency.” 

The division received a $21 million budget boost for new technology in the omnibus spending package passed earlier this month. Senate Finance Committee Chair Ron Wyden (D-Ore.) has called for increased support for the division in light of its role in going after sanctioned assets of Russian oligarchs.

“Success when it comes to these highly-complex financial investigations often comes after months, if not years, of effort,” he said in a statement. “We need sustained funding over the long-term to ensure these efforts are successful.”

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