EDITORIAL: Coronavirus relief programs rife with fraud

For more than a year, the federal government has cut billions of dollars in checks to mitigate the economic fallout from the coronavirus pandemic. While much of that money helped struggling individuals and businesses, it should come as no surprise that a significant portion of that relief went to con artists and fraudsters.

In an expose published last week, ProPublica reported that a single “online lending platform called Kabbage sent 378 pandemic loans worth $7 million to fake companies.” One of those was in the Las Vegas area. Most of the phony fronts were set up as farms and “were structured as single-person operations and received close to the largest loan for which such micro-businesses were eligible.”

One such outfit passed itself off as a cattle ranch called Beefy King, ProPublica found, and appropriated the address of Joe Mancini, the mayor of Long Beach Township in New Jersey. “There’s no farming here: We’re a sandbar, for Christ’s sake,” Mr. Mancini told ProPublica reporters.

The report mirrors the findings of a January audit by the inspector general of the Small Business Administration, which found that 55,000 loans worth about $7 billion went to ineligible or fraudulent businesses. The report blamed the urgency of the program for many mistakes.

“SBA quickly made billions of dollars of capital available to millions of businesses affected by the COVID-19 pandemic,” the inspector general concluded. “However, although SBA made efforts to expedite capital to businesses as intended by the (CARES) Act, SBA lacks assurance that loans went to only eligible recipients.”

As ProPublica notes, however, there was more at play. The money was funneled through private-party lenders, who had little incentive to apply typical underwriting standards because Washington was providing the funds. “The loans were government guaranteed,” Pro­Publica reported, “and processors bore almost no liability, as long as they made sure that applications were complete.”

It’s no surprise that thieves — as bank robber Willie Sutton famously said — will go where the money is. But it’s disheartening that the federal government at this point has failed to aggressively pursue the fraudsters behind such schemes, which diverted money from those who truly needed it. There have been only a handful of prosecutions so far. Let’s hope there are many more to come.

Meanwhile, Democrats in Congress recently decided to send billions more in federal tax money to state and local governments under the guise of virus relief even though many of those same states currently face no pandemic budget shortfalls and are running healthy surpluses. Rest assured that the state and local politicians will do much the same with the cash as the con artists did.