Top Republican investigators demanded answers Monday from the Biden administration about how taxpayer money meant to go to unemployed Americans during the COVID-19 pandemic has been stolen by Chinese or Russian syndicates.
The probe, announced by Rep. James Comer of Kentucky, the top Republican on the House Oversight and Reform Committee, and Rep. C. Scott Franklin of Florida, a committee member, follows a report in The Washington Times that as much as $140 billion in U.S. pandemic unemployment money flowed to Chinese, Russian and other state-sponsored fraud syndicates.
Justice Department officials told Congress last month that they brought charges in cases worth about $1 billion in COVID-19 fraud, but that leaves hundreds of billions of dollars unaccounted for, Mr. Comer and Mr. Franklin said in a letter to Deputy Attorney General Lisa O. Monaco.
“It’s unacceptable that tens of billions of taxpayer dollars were stolen by foreign adversaries,” Mr. Comer said in a statement announcing the probe. “The Justice Department must provide us with answers about how it plans to combat and prosecute these crimes.”
Mr. Franklin called the theft of unemployment money “a breach of our national security.”
A dozen other Republicans on the oversight committee joined the congressmen in their call for answers.
The Times last month reported on calculations by Haywood “Woody” Talcove, CEO for LexisNexis Risk Solutions’ government division, who figures about 40% of more than $700 billion spent on pandemic unemployment benefits went to fraudsters. Most of that — $175 billion — went to foreign actors, and $140 billion went to organizations backed by other governments, Mr. Talcove estimated.
Given the prominence of Russian, Chinese and Iranian hacking groups and their attempts to sow dissent in American politics, U.S. taxpayers likely funded some of those anti-American efforts.
Congress approved an unprecedented increase in unemployment benefits at the start of the pandemic with a $600-a-week boost beyond what states paid. It also eased eligibility checks. Applicants needed only to self-certify their employment situation.
More than 30 million people have filed initial unemployment claims during the pandemic. In August 2020 and early September 2021, California recorded more than 400,000 new claims a week. With that level of activity, experts say, massive attempts at fraud were unavoidable.
But paying out claims wasn’t inevitable, Mr. Talcove said. He said a simple identity filter would have limited a lot of the fraud.
State unemployment programs weren’t prepared, though.
Mr. Comer said he has been prodding his committee to investigate pandemic fraud, but the Democrats who control the panel “have refused to hold a single hearing on this gross mismanagement of taxpayer dollars.”
The Washington Times reached out to the office of committee Chair Carolyn B. Maloney, New York Democrat, for comment.
The Justice Department declined to answer questions from The Washington Times for its original report.
The department did brief committee members on prosecutions on Nov. 19 with details of cases that accounted for $1 billion in intended fraud and hundreds of millions of dollars in payouts. That is far short of the total estimates of fraud.
Justice personnel “refused to share how many active cases involve transnational organizations or state-sponsored organizations,” the Republican lawmakers wrote.
Some unemployment scams are basic. Prisoners would apply, even though they were ineligible. Other prisoners would work with associates on the outside, who would file applications using names of inmates scooped up on the inside.
More extravagant schemes involved scammers culling lists of names from the internet and then buying their personal identifying information from the darknet for a couple of dollars per name.
Even if just 1 in 10 of the identities assembled works out, that’s a $20 investment. Mr. Talcove said the average pandemic unemployment benefit topped $25,000 in total payments.
Fraudsters, particularly the big syndicates, were usually already running identity scams against other programs, such as IRS refunds. They turned to unemployment once Congress pumped hundreds of billions of dollars into the program and found a system vulnerable to their attacks, Mr. Talcove said.
In Georgia, federal prosecutors won a guilty plea from Bamidele Muraina, a Nigerian citizen living near Atlanta, who hacked into accounting and tax preparation firms’ systems and stole their clients’ identifying information.
He used those identities to file bogus IRS refund claims and collected more than $2.6 million from 2018 to 2020.
He then turned his attention to unemployment fraud. In the span of one week in May 2020, he filed 50 bogus claims with Washington state’s unemployment system and collected more than $280,000 in benefits before he was caught a few weeks later.
Muraina was sentenced to five years and 10 months in prison and ordered to pay more than $560,000 in restitution. Prosecutors also won a guilty plea from his money launderer, Gabriel Kalembo, who was sentenced to more than four years in prison and ordered to pay nearly $300,000.
Mr. Talcove said fraudsters shared instructions for crafting bogus applications on messaging services such as Telegram. The sheer volume of applications overwhelmed some state systems and hindered legitimate applicants’ ability to get their money, Mr. Talcove said.
Unemployment is just one of the government programs to face a tsunami of fraudulent claims during the pandemic.
Emergency small-business loans and the Paycheck Protection Program, which was designed to pay businesses to keep employees on their payrolls rather than lay them off and add to unemployment, were also targeted by scammers.
The fraud tracking database maintained by Arnold & Porter, a law firm, shows nine Justice Department prosecutions involving at least $20 million in suspected fraudulent behavior and 16 more prosecutions of frauds from $10 million to $20 million.
