DOJ announces COVID-19 fraud strike force teams

“These Strike Force teams will build on the Department’s historic enforcement efforts to deter, detect, and disrupt pandemic fraud wherever it occurs,” US Attorney General Merrick B. Garland said in a DOJ release. “Since the start of this pandemic, the Justice Department has seized over $1.2 billion in relief funds that criminals were attempting to steal, and charged over 1,500 defendants with crimes in federal districts across the country, but our work is far from over.”

In addition to criminal investigations, there have been civil investigations involving 1,800 individuals and entities for alleged misconduct in connection with pandemic relief loans totaling more than $6 billion. The three strike force teams will operate out of US Attorney’s offices in the Southern District of Florida, the District of Maryland, and in a joint effort between the Central and Eastern Districts of California.

AG Garland established the COVID-19 Fraud Enforcement Task Force in May 2021, to better coordinate resources between the DOJ and other “agencies across government to enhance efforts to combat and prevent pandemic-related fraud.” The DOJ has worked closely with law enforcement partners to “analyze the extraordinary amount of data” from the states and the Small Business Administration, which administered several major pandemic loan programs. This data analysis has been the “key to identifying and prosecuting the organized criminal groups and networks of overseas fraudsters who stole pandemic relief funds.”

The DOJ efforts to combat COVID-19-related fraud schemes include investigations involving the Paycheck Protections Program, Economic Injury Disaster Loan program, Unemployment Insurance programs and COVID-19 healthcare fraud enforcement.

Pandemic fraud enforcement highlights

Within days of announcing the three new strike force teams, the DOJ announced federal criminal charges against “47 defendants for their alleged roles in a $250 million fraud scheme that exploited the federally-funded child nutrition program” during the pandemic. According to the allegations, employees of a nonprofit organization participating in the federal child nutrition program recruited individuals and entities to open more than 200 program sites throughout Minnesota. These sites then “fraudulently claimed to be serving meals to thousands of children a day within just weeks of being formed.” The defendants created “dozens of shell companies” to enroll as program sites and also used shell companies to launder proceeds from the scheme. As a result, the defendants allegedly “obtained, misappropriated, and laundered millions of dollars that were intended as reimbursements for the cost of serving meals to children.”

In another incident, the DOJ filed a civil injunction suit in May to permanently bar nine tax preparers from preparing federal income tax returns for others. According to the suit, the “tax return preparers prepared more than 1,300 returns in 2021 and over 3,100 returns in 2022” that “falsely claimed over $53 million in credits and refunds intended to provide COVID-19-related relief for self-employed individuals.” In addition to the permanent bar, the suit requests that the court require the defendants to disgorge the fees the obtained by preparing false and fraudulent tax returns.

In April, the DOJ also announced a coordinated law enforcement action on healthcare-related COVID-19 fraud. In the action, the DOJ brought criminal charges against 21 defendants for their roles in healthcare “fraud schemes that exploited the COVID-19 pandemic” and resulted in $149 million in false billings to federal programs and theft from federally funded pandemic assistance programs. The schemes involved offering COVID-19 testing to “induce patients to provide their personal identifying information and saliva or blood sample.” That information was then used to submit false claims to Medicare for “unrelated, medically unnecessary, and far more expensive tests or services.”

Another scheme exploited telehealth policies intended to increase access to healthcare during the pandemic by “billing for sham telemedicine encounters.” The DOJ also brought charges against two defendants for misappropriations of Provider Relief Fund monies and charges involving fake COVID-19 vaccination record cards.

A May 2021 enforcement action resulted in criminal charges against 14 defendants involved in similar schemes with losses exceeding $143 million. In addition to the criminal charges, the Centers for Medicare & Medicaid Services (CMS) announced adverse administrative actions against more than 50 medical providers for their roles in healthcare fraud schemes related to COVID-19 or the “abuse of CMS programs” that were intended to increase access to care during the pandemic.

Additionally, just in the last few months, several individuals have been prosecuted for their efforts to defraud the Paycheck Protection Program (PPP), including:

• • • A Southern California man who was sentenced to 135 months in prison in July for submitting fraudulent applications for money from the PPP, submitting false statements to a financial institution, and money laundering. He submitted 27 loan applications to four banks on behalf of eight companies he owned, seeking $27 million in PPP loans.
    • Two Florida men were sentenced in May for “leading a nationwide scheme to defraud” the PPP for millions of dollars. Both men pleaded guilty to conspiracy to commit wire fraud. One of the men “submitted or facilitated at least 79 fraudulent loan applications worth at least $35 million.” The other man was “responsible for at least 34 fraudulent loan applications worth at least $15 million.”
    • In April, an Oklahoma woman pleaded guilty for a scheme to defraud the PPP of more than $43.8 million. She admitted to conspiring to submit at least 153 fraudulent applications on behalf of at least 111 entities. The entities received approximately $32.5 million in PPP funds through the fraudulent applications, and she personally received at least $1.7 million.

Although the impact of the pandemic itself appears to be lessening, the impact of COVID-19-related fraud likely will continue for years to come.