COVID-19 Funding Fraud Schemes

By Victoria Kitts, CPA, CFE

Government funding and relief programs during the COVID-19 pandemic helped many individuals and small-businesses stay afloat. However, some saw this as an opportunity to cheat the system and fraudulently take advantage of unemployment benefits, government grants, and other pandemic related outreach.

While pandemic relief has slowed down, schemes still exist to take advantage of government programs and organizations who need aid. The following are recent high-profile cases that exhibit what to watch out for:

Pair of NFP Activists Divert Federal Funds and Donations to Personal Use

A couple in Boston who ran a not-for-profit were charged with falsely filing for unemployment benefits and using not-for-profit funding and donations for personal expenses. The organizer and her husband were accused of using public donations and grants from government organizations meant for their nonprofit to instead pay for personal expenses such as their housing mortgage, a new car, and a long list of UberEats deliveries.

The couple falsified unemployment documents and failed to respond to the city’s requests for adequate financial forms and information on how the not-for-profit handled awarded grants. They also collected upwards of a combined $90,000 in pandemic unemployment while still being employed, as well as writing themselves paychecks from the not-for-profit’s fundraising. The couple has since plead not guilty and are facing a pending 30 years in prison and $1 million in fines.

Missouri State Representative Promotes False COVID-19 Treatment

In July, a Missouri GOP representative was convicted of 22 federal charges for committing COVID-19 funding fraud, marketing a fake stem cell treatment, and distributing illegal drugs.

The representative originally applied for $900,000 in CARES ACT funds for her organization, eventually receiving $300,000 for a not-for-profit clinic that was not actually operating during the pandemic. To cover up her fraud, the representative provided false invoices and expenditures for more than 3,000 COVID-19 laboratory tests.

She also falsely marketed a stem cell treatment as a potential cure for COVID-19. However, the fluid contained no stem cells whatsoever. After investigators revealed that the medicine and aid being marketed was false, the Missouri GOP representative resigned from her position. It was later found that, on top of the fraudulent use of funding and false Covid treatment, she was also distributing drugs like Oxycodone and Adderall without valid prescriptions.

Nursing Home Pays $1.75 Million After Facilitating Ineligible COVID-19 Vaccinations

The CEO and numerous board members of a long-term care facility in West Palm Beach, Florida recently agreed to pay $1.75 million to the United States. They were found guilty under the False Claims Act after providing hundreds of individuals with the early Covid-19 vaccine intended to be strictly administered to the facility’s residents and staff only.

The CEO gave board members and donors doses of the vaccine in hopes to gain their financial support. Additionally, he allowed the vice chairman of the board to invite 300 ineligible family, friends, and other various individuals to receive the vaccine. Of the 976 people vaccinated in their clinic, 567 were ineligible and not considered long-term care facility residents or staff. They were found guilty of fraudulent use of funding after failing to strictly distribute the vaccines to the necessary residents and staff of the facility.

Georgia Mayoral Candidate Sentenced to Prison for Abusing PPP Loan Funding

A former mayoral candidate in Georgia was recently convicted for stealing $323,000 from the Paycheck Protection Program (PPP). Using the awarded funding, she installed a new pool, bought new furniture, and paid off the mortgage to her home.

She was able to get the funding after submitting fraudulent evidence that her company employed 54 people before COVID-19 began. A later investigation showed she had not paid any taxes or employee wages several years prior to the pandemic. All information was found to be false and forged regarding any employees in association with her company at all.

Scammer Preying on Minority-owned Small Businesses Shut Down by FTC

The FTC has shut down a fictitious grant-writing service and the individual behind it after they used PPP loans to prey on minority-owned small businesses that sought pandemic relief. The service stole thousands of dollars from these businesses after making false promises to offer them access to millions in grant funding.

What the service offered would later materialize into nothing, leaving the businesses without any assistance and a lack of precious funds to stay afloat. They were reported to have violated many laws, including the COVID-19 Consumer Protections Act and the FTC Act, and were later shut down and prosecuted for their crimes.

In Conclusion

COVID-19 relief programs were a lifeline to many organizations during the pandemic. However, bad actors have taken advantage of loopholes and unclear guidance to defraud individuals and companies. If you have any questions or concerns about a COVID-19 program or need help navigating the required paperwork, contact Clark Nuber.

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