Everyone Agrees Fraud Is Bad

President Joe Biden on Fighting Government Fraud – “The watchdogs are back.” In President Biden’s State of the Union speech on March 1, 2022, at 1:03:23 of video, he said:

President Joe Biden

“In my administration, the watchdogs are back. We are going to go after the criminals who stole billions of relief money meant for small businesses and millions of Americans. I am announcing the Justice Department will name a chief prosecutor for pandemic fraud.

Political leaders on both sides of the aisle are now aghast at the Trillion Dollar fraud bonanza that resulted from all of the federal government’s pandemic relief efforts, not to mention the usual medicare and military spending fraud. It is ongoing now. So let us unite on this one issue, at least, and work together to get our money back from the fraudster hustlers. That is what Fraud Is Bad (“FIB“) is all about.

Senator Chuck Grassley on Fighting Government Fraud with Qui Tam Whistleblowers

Senator Grassley is one of FIB’s favorite Republicans because fighting fraud has always been his political focus. Senator Chuck Grassley encourages whistleblowers who, like us, believe that Fraud Is Bad. Often whistleblowers, not bureaucrats and over-worked DOJ lawyers, are the best watch dogs that the American people have. In this speech to the Federal Bar Association in 2021, Senator Grassley provides a good introduction to the False Claims Act and reminds everyone that “Congress depends on the American public to be vigilant and to speak up if they see something happening that they know is terribly wrong.

Senator Charles Grassley

In the next Senator Grassley video he elaborates on the importance of whistleblowers and dives deeper into those defense attorneys who have twisted the meaning of the False Claims Act to aid fraudsters. In his words:

Its the brave whistleblowers who make the law successful. The whistleblowers are the governments eyes and ears on uncovering and deterring fraud. Without whistleblowers the False Claims Act would simply not work.

Unfortunately, the False Claims Act is constantly under attack by industries looking to make it easier, to make a dollar out of defrauding the government. And I know that makes you sick. Their army of lawyers do their very best in these industries to twist the meaning of the False Claims Act and exploit misrepresentations and misinterpretations from the courts.

The Senator is so right. Ralph was once part of that army, but no more. He joined the ranks of whistleblowers back in 2002, got lucky with a big case, then took a hiatus to perfect discovery, and is back again. Here is Senator Grassley’s video.

Senator Grassley Video – the False Claims Act is now more important than ever

In the video you’ve seen Senator Grassley mention some of the legal issues and efforts by big business lawyers and, in the past at least, by the DOJ itself, to weaken the False Claims Act. He specifically references how the army of lawyers have contorted a Supreme Court opinion to say that if the government pays for a claim despite knowledge of that fraud, then the fraud wasn’t material, and can’t be prosecuted. We all know that is not how things work in the real world. As you will see in our page on the Big Case Experience of Losey and Coe, that is exactly what happened to George Coe and his Boise trial team when, after beating the army of defense lawyers at trial and receiving the then largest Qui Tam jury verdict in history for his whistleblower client, the verdict was, over the trial judge’s objection, taken away and reversed on appeal on this materiality issue.

Ralph Losey’s Two Minutes Talk Show Excerpt on Qui Tam

Before we go into the Department of Justice’s video and recent comments on Qui Tam, here is a two minute video of the author of this blog, Ralph Losey. Ralph explains in this excerpt of an informal interview by the e-Discovery Channel how he came to start Fraud Is Bad and why he thinks it is important for whistleblowers to come forward. This is at the conclusion of a lengthy interview Ralph gave on March 21, 2022, shown right, in case you want to hear more from Ralph on a variety of topics.

Ralph Losey’s Two Minutes on Qui Tam

The Department of Justice and Pandemic Related Fraud

Now here is a more formal view of the False Claims Act and the pandemic crisis by pre-Garland, acting Attorney General of the United States, Nicholas McQuaid.

On March 10, 2022, the DOJ, by Attorney General Merrick Garland, announced that Associate Deputy Attorney General Kevin Chambers, shown below, will serve as the Director for COVID-19 Fraud Enforcement. Mr. Chambers said he “plans to focus on large-scale criminal enterprises and foreign actors who sought to profit at the expense of the American people.” We share that plan.

Merrick Garland announcing appointment of Kevin Chambers

The DOJ states that their efforts on Covid fraud to date have already resulted in criminal charges against over 1,000 defendants and over 240 civil investigations. Pretty good start, but there is a lot more work to do and the DOJ itself has limited resources. As Attorney General Merrick B. Garland stated:

“The Justice Department remains committed to using every available federal tool — including criminal, civil, and administrative actions — to combat and prevent COVID-19 related fraud, We will continue to hold accountable those who seek to exploit the pandemic for personal gain, to protect vulnerable populations, and to safeguard the integrity of taxpayer-funded programs.”

One of the most important tools of the DOJ is the False Claims Act and the brave whistleblowers who come forward to report these claims and file suit in the government’s behalf as a Qui Tam Relator. The work ahead is enormous. As the DOJ said on March 10, 2022:

Due to the COVID-19 pandemic, up to $860 billion in federal funds have been appropriated for UI benefits through September 2021. Early investigation and analysis indicate that international organized criminal groups have targeted these funds by using stolen identities to file for UI benefits. Domestic criminals, ranging from identity thieves to violent street gangs to prison inmates, have also committed UI fraud.

On March 26, 2021, the Department of Justice made another statement on their on-going efforts to combat COVID-19 related fraud, including schemes targeting the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided more than $2.2 Trillion in relief for individuals and businesses supposedly suffering by the pandemic. The over TWO TRILLION DOLLARS in CARES Act funds alone were funneled into government programs such as the Paycheck Protection Program (PPP), Economic Injury Disaster Loans (EIDL), Pandemic Unemployment Assistance (PUA), and the Federal Pandemic Unemployment Compensation (FPUC).

Biggest Government Spending in History and Biggest Fraud

The Washington Post reported in its March 10, 2022, article Justice Department reports more than $8 billion in alleged fraud tied to federal coronavirus aid programs, that the “extent of the fraud alleged and uncovered by the Justice Department is vast, touching nearly every major facet of the roughly $6 trillion that Congress adopted over a two-year period to support families, workers and businesses.” We have seen many different trillion dollar figures mentioned, depends on what you include, but however you count it this is the biggest federal benefits give-away in history.

Many experts believe the total fraud is actually between ten to twenty percent of the total government give-away, meaning between $600 Billion and $1.2 Trillion. Wow! Truly crazy high numbers, but so too are the fraud schemes. Our favorite so far is the Pokémon fraud.

Pandemic relief small-business loan used to buy this Pokémon card for $57,789

Here the fraudster was Vinath Oudomsine, 31, of Dublin, Ga., who, according to prosecutors, spent most of his Covid business loan on one item, a $57,789 Pokémon card (charizard). Another particularly fast and crazy fraud was by David T. Hines, 29, of Miami, who pleaded guilty to using his Paycheck Protection Program funds for such things as a $318,000 Lamborghini. Nice. The DOJ states he submitted fraudulent loan applications with false statements about payroll expenses. The financial institution approved and funded approximately $3.9 million in PPP loans.

Here is the money flow diagram the DOJ released to explain how this simple, but effective PPP fraud works. (This is just one of many possible frauds.) This big lie fraud worked because the government in the emergency pandemic environment did little, or nothing, to investigate the loan requests and neither did the banks. The government pays the banks, so they did not care, and then the government usually just writes off the borrower’s debt to the government. What a scam and opportunity for con men.