Federal official warns $191 billion in covid unemployment aid may have been misspent

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The U.S. government may have misspent roughly $191 billion in pandemic unemployment benefits, a top federal watchdog told Congress on Wednesday, as Washington continues to uncover the vast and still-growing extent of the waste, fraud and abuse targeting coronavirus aid.

The new estimate — computed by Larry D. Turner, the inspector general of the Labor Department — galvanized House Republicans as they intensified their scrutiny of the roughly $5 trillion in emergency funds approved since the start of the crisis.

Turner presented the information at a hearing Wednesday convened by Rep. Jason T. Smith (R-Mo.), chairman of the House Ways and Means Committee, according to testimony shared early with The Washington Post.

Opening the inquiry, Smith described the problems plaguing unemployment insurance as the “greatest theft of taxpayer dollars in American history.”

In doing so, Smith pledged additional oversight still to come: “The new Republican majority is turning on the lights,” he said.

When millions of Americans suddenly found themselves thrust out of a job in early 2020, Democrats and Republicans banded together to approve a historic expansion of the country’s unemployment insurance program. Their efforts — signed into law starting under President Donald Trump — at one point added an extra $600 to weekly unemployment checks and provided new benefits to those who previously would not have qualified for federal help.

The money helped rescue the economy from the worst crisis since the Great Depression. But it also invited an unprecedented wave of theft and abuse, as criminals seized on the government’s generosity — and its race to disburse aid — to bilk state and federal agencies for massive sums.

On Wednesday, top watchdogs told the House Ways and Means Committee that they still cannot compute the total amount of federal covid aid subject to fraud and abuse. But Turner’s testimony noted that the country’s misspending on unemployment benefits, in particular, may be far greater than previously known.

His new estimate — “at least $191 billion” in possible improper payments — is significantly more than the roughly $163 billion that the government identified a year earlier. Like before, though, the figure is a projection that reflects fraud as well as sums erroneously paid to innocent Americans. Federal officials computed it after surveying unemployment spending, computing a rate of misspending and applying that to the wider set of jobless aid over the pandemic.

But Turner’s prepared testimony said that a “significant portion” of the money is “attributable to fraud.” He also noted that the “unprecedented infusion of federal funds into the [unemployment insurance] program gave individuals and organized criminal groups a high-value target to exploit.”


The Covid Money Trail


It was the largest burst of emergency spending in U.S. history: Two years, six laws and more than $5 trillion intended to break the deadly grip of the coronavirus pandemic. The money spared the U.S. economy from ruin and put vaccines into millions of arms, but it also invited unprecedented levels of fraud, abuse and opportunism.

In a yearlong investigation, The Washington Post is following the covid money trail to figure out what happened to all that cash.

Read more

For Republicans, the hearing Wednesday came a day after Biden touted his economic record during his annual State of the Union address — and recommitted to seeking new money and federal power to pursue criminals that preyed on the government’s aid.

“Now, let’s triple our anti-fraud strike forces going after these criminals, double the statute of limitations on these crimes and crack down on identity fraud by criminal syndicates stealing billions of dollars from the American people,” Biden said. “For every dollar we put into fighting fraud, taxpayers get back at least 10 times as much.”

Biden made a similar promise in his 2022 State of the Union address, announcing the Justice Department would tap a special pandemic-focused prosecutor to oversee its work. But the attorney later named to the post — Kevin Chambers — departed the job at the end of last year. Another top Justice Department official, Assistant U.S. Attorney Michael Galdo, declined to testify at the Wednesday hearing, according to the committee.

The Justice Department said it could not make Galdo available as a result of timing issues, adding that the agency offered an informal briefing and written statement but Republicans declined.

The gathering still marks Republicans’ latest probe of federal pandemic aid as party leaders look to ferret out wasteful spending and take political aim at the Biden administration. Even though GOP lawmakers also voted for much of the money now at the heart of their criticism, they still have focused their recent attacks on Democrats — who adopted the final pandemic bill, the roughly $1.9 trillion American Rescue Plan, over unanimous Republican opposition in 2021.

Last week, the House Oversight and Accountability Committee held its own first-ever hearing on covid aid, as the panel’s chairman, Rep. James Comer (R-Ky.), faulted Democrats for inadequate oversight. He promised “many more of these hearings” to come and pledged that Republicans would “get to the bottom of the greatest theft of American taxpayer dollars in history.”

In response, top federal watchdogs pleaded for lawmakers to grant them new resources to help them find and prosecute fraud targeting pandemic funds. But many of those requests long have gone unheeded on Capitol Hill, where lawmakers have quarreled over the political and economic legacy of their roughly $5 trillion in spending.

Smith, meanwhile, similarly has pledged ongoing oversight of federal pandemic funds and the agencies that oversee it. Convening his powerful tax-focused committee for the first time in January, he promised that the new GOP majority would “not be shy about our duty to seek accountability from the Washington Bureaucracy and the Biden administration.”

Appearing before the panel Wednesday, top federal watchdogs planned to point to a series of significant deficiencies that have plagued state and federal unemployment systems since the Trump administration. Many of the troubles were documented by The Post in a year-long investigation, The Covid Money Trail.

Gene Dodaro, the comptroller general and leader of the Government Accountability Office, pointed in his prepared testimony to the outdated computer systems that plagued state agencies at a time when they were overwhelmed by a deluge of claims for benefits. That opened the door for criminals to apply for benefits in the names of real Americans, evading the government’s detection. His remarks cited “substantial levels of fraud” in the unemployment insurance program, estimating it cost taxpayers about $60 billion.

Adding to the trouble, the U.S. government opted at the height of the pandemic against requiring significant documentation from workers who sought benefits under the Pandemic Unemployment Assistance program. The initiative paid gig-economy workers who otherwise would not have been eligible for normal jobless aid — but it also opened the door for a wave of fraud as Washington raced to stand up the critical endeavor in record time.

“This, combined with ongoing UI program weaknesses and the challenge of processing historic volumes of claims, enabled criminals to defraud the programs,” Michael Horowitz, inspector general of the Justice Department and chair of the Pandemic Response Accountability Committee, said in his prepared remarks.

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