Economy

$200 billion stolen from COVID relief programs

More than $200 billion may have been stolen from the U.S. government through two COVID relief programs according to estimates released by the Small Business Administration (SBA) inspector general.

Why it matters: The new numbers are much higher than previously predicted and highlight the scale to which fraudsters took advantage of the pandemic relief programs.

Driving the news: Around 17% of all COVID-19 Economic Injury Disaster Loan (COVID-EIDL) and Paycheck Protection Program (PPP) funds were distributed to potential fraudsters.

• The fraud estimate for the EIDL loan program is more than $136 billion and the PPP total is $64 billion, according to the inspector general.

• The inspector general found examples of how the fraudsters used the funds, which were intended to help businesses that were struggling through the pandemic.

• One group “used taxpayer funds to buy luxury homes, gold coins, diamonds, jewelry, luxury watches, fine imported furnishings, designer handbags, clothing, and a luxury motorcycle.”

Yes, but: Other members of the SBA refuted the report’s findings and said that it “contains serious flaws that significantly overestimate fraud and unintentionally mislead the public to believe that the work we did together had no significant impact in protecting against fraud.”

• SBA spokesperson Han Nguyen said “it is vital to clarify that 86% of the likely fraud ... occurred in the first nine months of those programs when, as the SBA IG has often noted, the rush to get funds out led to unwise decisions to pull down anti-fraud guardrails."

Context: The SBA inspector general previously estimated that fraud from the EIDL was $86 billion and $20 billion from the PPP.

Zoom Out: A separate study found that spending on everything from houses to consumer goods increased in zip codes where people received high amounts of fraudulent funds, which may have fueled inflation.

• In a twisted full circle story, fraudsters may have used COVID relief programs to obtain taxpayer money illegally - then spent that money - which drove up prices for said taxpayers.

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