A recent report by the U.S. Pandemic Response Accountability Committee (PRAC) identified $5.4 billion in potential COVID aid fraud. Under the False Claims Act (FCA), whistleblowers have already proven to be a key tool in rooting out COVID fraud.
PRAC identified 69,323 “questionable” Social Security Numbers (SSNs) used to obtain loans through the Small Business Administration’s (SBA) COVID-19 Economic Injury Disaster Loan (COVID-19 EIDL) program and Paycheck Protection Program (PPP). These programs paid out nearly $1.2 trillion to small businesses affected by the COVID pandemic.
“COVID-19 EIDL and PPP were more susceptible to fraud due to the elevated urgency for agencies to provide timely relief to applicants in response to the COVID-19 pandemic,” the report states. “SBA’s initial approach to implement these programs quickly made billions of dollars available to millions of borrowers affected by the pandemic, but used few program controls to verify applicants’ eligibility prior to disbursing funds.”
Under the FCA, individuals with knowledge of fraud may file qui tam suits on behalf of the government. In successful suits, whistleblowers are entitled to 15-30% of the recoveries made by the government. Since the FCA was modernized in 1986, whistleblowers have allowed the government to recover over $72 billion from fraudsters.
In May 2021 the U.S. Department of Justice (DOJ) announced the establishment of the COVID-19 Fraud Enforcement Task Force. The Task Force aims to “marshal the resources of the Department of Justice in partnership with agencies across government to enhance enforcement efforts against COVID-19 related fraud.”
On September 22, 2022, the DOJ announced the first-ever PPP fraud whistleblower case in which the government intervened in the suit. In the case, Pan African Interchange LLC and Stanley Damas paid over $220,000 to resolve charges that Pan African Interchange LLC received more than one PPP loan.
While whistleblowers are a proven tool in the DOJ’s efforts to fight fraud, whistleblower advocates are concerned with how the DOJ has treated whistleblower cases in recent years. On February 7, the DOJ released FCA statistics for the 2022 Fiscal Year. Whistleblower attorneys described the results as “a disgrace” and “shocking.”
“It is the first time in the history of the False Claims Act of 1986 that whistleblower recoveries in government declined cases exceeded the recoveries obtained by the government in intervened cases. And it wasn’t close,” explained whistleblower attorney David Colapinto of Kohn, Kohn & Colapinto (KKC). “But for the whistleblowers, who recovered over $1.1 billion compared to the $776 million obtained in government-intervened cases, this would have been a disastrous year for the government’s most important anti-fraud program.”
“A majority of whistleblowers cannot afford to proceed with qui tam suits without DOJ intervention,” added KKC’s Stephen M. Kohn, who also serves as the Chairman of the Board of the National Whistleblower Center. “The DOJ’s continual failure to intervene in strong FCA cases allows fraudsters to walk away with millions in taxpayer dollars.”
Further Reading:
FRAUD ALERT: $5.4 Billion in Pandemic Loans Used Questionable Social Security Numbers