Billions of dollars in public funds intended to help with COVID relief were misused and the total loss may be much larger than we originally thought, according to the Government Accountability Office.
For years, the News 3 Investigative Team has been exposing cases involving COVID relief fraud cases in Hampton Roads.
Recently, federal court records outline how Lapondia Wallace of Newport News is accused of being the leader in a ring that filed 22 fraudulent COVID relief loans totaling over $100,000.
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Prosecutors reported that she spent the money on travel, gambling and luxury clothes and shoes.
Ebony Spivey got about $93,000 in COVID relief money for running a childcare and clothing store out of her Hampton home that didn't exist.
She has now pleaded guilty to making a false statement to the Small Business Administration. Her lawyer said they had no comment about the allegations.
Records show that government contractor Yaw Ayim, who also owns the Veteran Communications Group LLC, is accused of wrongly taking $107,000 in COVID relief funds between 2020-2022. His lawyer said no comment.
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Legal Analyst Sonny Stallings from the Stallings Law Group has been practicing law for decades. He said it was too simple for people to take advantage of the system when this money was given out.
“It’s a staggering amount of money the government lost by just making it too easy to get this money,” said Stallings.
The Government Accountability Office now estimates a total loss across all unemployment insurance programs during the pandemic to be between $100 billion and $135 billion - which is about 11% to 15% of the total unemployment insurance benefits paid out during the pandemic.
Seto Bagdoyan is the Director in G.A.O.'s Forensic Audits and Investigative Service Team.
“This was a government-wide fail. Basically, at the federal level, the Labor Department didn't have adequate oversight. The guidance was mixed and then the states themselves had control failures across the board,” said Bagdoyan.
He said no state did fraud risk management well, but said there were varying levels of poor.
Bagdoyan said as of May of last year, cases involving fraud with pandemic-era programs in Virginia saw a loss of $69 million, with most of that money gone.
“So Virginia... recovered 7 cents on the dollar for every dollar it paid out fraudulently, so that kind of crystallizes the problem upfront. If it's gone, it's gone. You're not going to get much of it back,” said Bagdoyan.
Experts say in the future, there needs to be a focus on preventing fraud and recovery.
Jared Smith, a Chief Statistician from the Government Accountability Office, said, “Agencies need to take serious consideration about the taxpayers' money, and that they're doing what's necessary to ensure it's being spent properly.”
“We may never really know the actual extent of fraud because you don't know whether you've uncovered everything,” said Bagdoyan.
The Justice Department reported as of August, over 3,000 people nationwide are facing federal charges related to COVID relief fraud.
“I don't think judges are going to be sympathetic with these folks. This isn't somebody scamming on welfare to feed their children. These are sophisticated schemes to defraud the government," said Stallings.
