%1

The U.S. government may have misspent roughly $191 billion in pandemic unemployment benefits, a top federal watchdog is set to tell Congress on Wednesday, as Washington continues to uncover the vast and still-growing extent of the waste, fraud and abuse targeting coronavirus aid, the Washington Post reported. The new estimate — computed by Larry D. Turner, the inspector general of the Labor Department — is likely to galvanize House Republicans as they look to intensify their scrutiny of the roughly $5 trillion in emergency funds approved since the start of the crisis. Turner plans to present the information at a hearing Wednesday convened by Rep. Jason T. Smith (R-Mo.), chairman of the House Ways and Means Committee. When millions of Americans suddenly found themselves thrust out of a job in early 2020, Democrats and Republicans banded together to approve a historic expansion of the country’s unemployment insurance program. Their efforts — signed into law starting under President Donald Trump — at one point added an extra $600 to workers’ weekly checks and provided new benefits to those who previously would not have qualified for federal help. The money helped rescue the economy from the worst crisis since the Great Depression. But it also invited an unprecedented wave of theft and abuse, as criminals seized on the government’s generosity — and its race to disburse aid — to bilk state and federal agencies for massive sums. On Wednesday, top watchdogs plan to tell the House Ways and Means Committee that they still cannot compute the total amount of federal COVID aid subject to fraud and abuse. But Turner’s prepared testimony notes that the country’s misspending on unemployment benefits, in particular, may be far greater than previously known. His new estimate — “at least $191 billion” in possible improper payments — is significantly more than the roughly $163 billion that the government identified a year earlier. Like before, though, the figure is a projection that reflects fraud as well as sums erroneously paid to innocent Americans. Federal officials computed it after surveying unemployment spending, computing a rate of misspending and applying that to the wider set of jobless aid over the pandemic.

The U.S. government may have awarded roughly $5.4 billion in coronavirus aid to small businesses with potentially ineligible Social Security numbers, offering the latest indication that Washington, D.C.’s haste earlier in the pandemic opened the door for widespread waste, fraud and abuse, the Washington Post reported. The top watchdog overseeing stimulus spending — called the Pandemic Response Accountability Committee, or PRAC — offered the estimate in an alert issued Monday and shared early with The Washington Post. It came as House Republicans prepared to hold their first hearing this week to study the roughly $5 trillion in federal stimulus aid approved since spring 2020. The suspected wave of grift targeted two of the government’s most generous emergency initiatives: the Paycheck Protection Program, known as PPP, and the Economic Injury Disaster Loan, dubbed EIDL. Started under President Donald Trump — and managed by the beleaguered Small Business Administration — the roughly $1 trillion in loans and grants aimed to help cash-strapped companies stay afloat financially during the worst economic crisis since the Great Depression. But the money also served as a wellspring for criminal activity, as malicious actors took advantage of SBA and its poor oversight to bilk Washington out of seemingly massive sums. In the latest example, the PRAC found that the SBA failed to prevent a wave of applications from collecting federal money using suspect Social Security numbers. Studying more than 33 million applicants, the PRAC uncovered more than 221,000 ineligible Social Security numbers on requests for small-business aid. That included thousands of cases where the number was “not issued” by the government, for example, or it did not match the correct name and birth information. More than a quarter of those applications, using nearly 70,000 suspect Social Security numbers, were still approved between April 2020 and October 2022 despite the questionable data — and the government loaned those applicants about $5.4 billion, the watchdog found.

About a year ago, the used-car business was a rollicking party. The coronavirus pandemic and a global semiconductor shortage forced automakers to stop or slow production, pushing consumers to used-car lots. Prices for pre-owned vehicles surged. Now, Americans, especially people on tight budgets, are buying fewer cars as interest rates rise and fears of a recession grow, the New York Times reported. And improved auto production has eased the shortage of new vehicles. As a result, sales and prices of used cars are falling and the dealers that specialize in them are hurting. “After a huge run-up in 2021, last year was a reality check,” said Chris Frey, senior manager of economic and industry insights at Cox Automotive, a market research firm. “The used market now faces a challenging year as demand weakens.” According to Cox, used-car values fell 14 percent in 2022 and are expected to fall more than 4 percent this year. That shift means many dealers may have no choice but to sell some vehicles for less than they paid. The industry’s difficulties have been exemplified by Carvana, which sells cars online and became famous for building “vending machine” towers where cars can be picked up. The company recently reported a quarterly loss of more than $500 million, and has laid off 4,000 employees.

A Tampa, Fla.-based food hall operator has filed for chapter 11 protection to reorganize the debt on an Orlando location, the Tampa Bay Business Journal reported. Jamal Wilson, who launched his food halls with The Hall on Franklin in 2017, told the Tampa Bay Business Journal on Wednesday that he is reorganizing his debt "due to high construction costs" during the COVID-19 pandemic. Wilson's Orlando location, The Hall at the Yard, opened in 2021. The bankruptcy filing will not affect day-to-day operations at The Hall at the Yard, Wilsons said, and he doesn't plan to file for bankruptcy protection for any other locations. "The cost of the tenant improvements was higher than expected," according to the bankruptcy filing. "Unfortunately, the debtor borrowed funds from various MCA lenders. The debt to the MCA lenders and the exorbitant fees and costs associated therewith has been crippling. The debtor filed this case to restructure its debts and reorganize for the benefit of all creditors." The filing lists 10 MCA lenders who are owed a combined $901,055, though the amount owed to G and G Funding Group LLC is unidentified. The lenders are owed amounts ranging from $44,000 to $181,000. Secured debt also includes a $4.2 million loan to Newtek Small Business Finance. There is also a $359,000 Paycheck Protection Program loan from Kabbage LLC that is "likely unsecured," according to the filing. The largest unsecured creditors have claims that range from unknown to $119,000.

Unemployment fraud from pandemic jobless benefits may have topped $60 billion, according to a new report from the U.S. Government Accountability Office (GAO), The Hill reported. The federal watchdog said the Labor Department reported fraud estimates of about $8.5 billion for regular unemployment insurance programs in 2021. However, the government created four new unemployment programs during the COVID-19 pandemic aimed at alleviating the toll on workers. The GAO estimated that if the rate of fraud were extrapolated to total spending across all unemployment insurance programs during the pandemic, the fraud total would come out to more than $60 billion. The federal government paid out around $878 billion in unemployment insurance benefits between April 2020 and September 2022, according to Labor Department statistics. The report notes that unemployment insurance programs have long had integrity issues, and the GAO recommended that the Labor Department come up with an anti-fraud strategy based on guidance from the watchdog. The GAO said in the report that the department “partially” agreed with the recommendation and said it plans to address it.

The federal government allocated funds for distressed homeowners as part of its expansive efforts to help Americans cope with the pandemic’s financial strains. Unlike some other stimulus programs, such as checks mailed to individuals, this money moved slowly. The nearly $10 billion Homeowner Assistance Fund was administered through the U.S. Treasury Department, but relied heavily on individual states to set up programs to distribute aid, the Wall Street Journal reported. Some were slow to get up and running. Others struggled with a backlog of applications. For homeowners, getting money before the foreclosure went through could be a race against time. The fund doled out about $2 billion to more than 150,000 households through the end of September, according to the National Council of State Housing Agencies, a trade group. The money serves a narrow slice of the population: There were some 324,000 foreclosure filings last year, below prepandemic norms but more than double 2021, according to real-estate data firm Attom. The funds were made available to homeowners who experienced pandemic-related hardships and whose household incomes were below a certain threshold. Most states gave the money as grants. About 200 homeowners have complained about the program through the Consumer Financial Protection Bureau’s complaint portal, including a handful about foreclosures moving forward while they were waiting on assistance. CFPB warned in March that foreclosing on a borrower who has a pending assistance application “will merit increased scrutiny.” Government officials, as well as representatives of mortgage companies and states, said the assistance program has picked up speed, particularly in recent months, and everyone is working together. Servicers benefit more from taking the money than taking the home in a foreclosure, they said.

The Supreme Court turned away a Missouri appeal that sought to ensure states can cut taxes even as they receive $195 billion in federal pandemic-relief money, Bloomberg News reported. The justices without comment left in place a federal appeals court decision that said Missouri lacked legal standing to press a lawsuit over the requirements imposed under the American Rescue Plan Act. Missouri is among several Republican-led states that sued after President Joe Biden signed the $1.9 trillion measure into law in March 2021. The law includes a provision that says a state can’t use the money “to either directly or indirectly offset a reduction in the net tax revenue of such state.” Missouri said that provision prohibits only the deliberate use of relief funds to pay for a tax cut. The state argued that the Treasury Department’s interpretation of the law would sweep more broadly, blocking any new state tax policy that reduces revenue without some sort of offset. The St. Louis-based 8th US Circuit Court of Appeals faulted Missouri for not pointing to any particular state policy that might run afoul of the federal rule. The state was seeking “a quintessentially advisory opinion,” something federal courts don’t issue, Judge Jane Kelly wrote for the panel.

The owner of a Massachusetts food truck business pleaded guilty Tuesday to filing fraudulent loan applications to obtain $1.5 million in federal pandemic relief funds, federal prosecutors said, the Associated Press reported. Loc Vo, who was arrested last summer, pleaded guilty to wire fraud. He faces up to 20 years in prison at a sentencing hearing set for May 3. An attorney for Vo said that he acknowledged his applications for pandemic relief contained false statements and will return about $600,000, the remains of the funds he received. Prosecutors say Vo owned Smart Gourmet LLC, a food truck business in Massachusetts, as well as a dormant Maryland company. Between April 2020 and July 2021, Vo submitted loan applications on behalf of the businesses under three Small Business Administration pandemic relief programs, requesting about $1.5 million that was supposed to be used for rent, mortgage interest, payroll, and utilities, among other eligible expenses, prosecutors said. Instead, Vo transferred most of the money to brokerage accounts in his name to invest in the stock market, purchasing shares in an electric car manufacturer and a biotechnology company, among others, authorities said.