The IRS has investigated more than 1,600 cases of potential COVID fraud and has indicted 795 people for alleged crimes, the agency said on Thursday.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 offered economic assistance to American workers, families, and businesses amid the COVID-19 pandemic.
However, some people obtained funds fraudulently and redirected the emergency money for their personal benefit. The IRS' Criminal Investigation (CI) unit has investigated 1,644 tax and money laundering cases related to the CARES Act, potentially totaling $8.9 billion, the agency said.
More than half the total amount comes from cases opened last year.
Such cases include fraudulently obtained credits, loans, and payments.
Of the nearly 800 people who have been indicted so far, 373 have received prison sentences, with the average sentence lasting 34 months. In the past four years, CI has seen a 98.5 percent conviction rate in the pandemic fraud cases that were prosecuted, the agency said.
“The work by IRS Criminal Investigation provides a vital role in protecting against fraud and serves a key part in the agency’s wider efforts to ensure fairness in the nation’s tax system,” said IRS Commissioner Danny Werfel in a statement. “Protecting taxpayers against fraud in pandemic-era programs is just one example of the important role that CI plays in the law enforcement community. A healthy budget for the IRS helps us get the job done, and the work of CI provides a critical safety net to protect the nation against fraud.”
The IRS said its work on fraud protection will be bolstered by Inflation Reduction Act funding. CI Chief Guy Ficco said that the division opened almost 700 new COVID fraud investigations in 2023 involving $5 billion worth of defrauded money.
“While COVID may no longer be top of mind to the average American when they wake up, the fraud committed through these different programs is very much top of mind to CI. Our special agents continue to seek out fraudsters who stole money from government loan programs for their personal gain,” Mr. Ficco said.
COVID Fraud
In March 2024 alone, Multiple individuals have been charged with, or sentenced for, engaging in COVID fraud. On March 7, a California man named Craig David Davis was charged for a scheme seeking to fraudulently obtain over $10 million in CARES Act loans, the agency said.Mr. Davis is alleged to have submitted fake business records and tax documents to three banks to obtain two loans under the Paycheck Protection Program (PPP) and one loan from the Main Street Lending Program.
PPP was a CARES Act initiative that set aside $349 billion to ensure that small businesses retained and paid workers rather than lay off employees due to the pandemic. Mr. Davis was charged with four counts of wire fraud and faces a 20-year prison term on each count.
On March 15, a man from Long Island named Rami Saab was sentenced to 10 years in prison for being the mastermind of a conspiracy to obtain millions of dollars’ worth of loans under the PPP and the Economic Injury Disaster Loan Program (EIDL). The defendant and his co-conspirators are said to have received over $9.6 million in COVID funds.
An Ohio man named Terrence L. Pounds was sentenced to 94 months in prison on March 19 for a fraudulent scheme aimed at obtaining PPP and EIDL loans.
In September last year, the IRS announced pausing the pandemic-era Employee Retention Credit (ERC) aimed at encouraging small businesses to keep workers on payroll.
The agency received about 3.6 million ERC claims over the course of the program, which is roughly a fourth of the total number of U.S. businesses that file tax returns annually.
At the time, the IRS had already referred thousands of ERC claims for audit. By July 31, 2023, the CI division initiated 252 investigations related to potential ERC claim fraud worth over $2.8 billion.
The CARES Act mandated that a beneficiary who worked in more than one state and became unemployed due to COVID-19 could only collect UI from one state. However, the OIG reported that many people claimed UI from two or more states.
“Individuals used a total of 991,793 Social Security numbers to receive potentially fraudulent UI benefits totaling more than $28.9 billion” through multistate claims, the report stated.
