#COVID-19 is no excuse for #US fraud

As the United States enters a critical phase in the battle to contain COVID-19, the federal government is unleashing billions of dollars in aid to contain the disease and help soften the devastating impact on an economy that has come to a grinding halt both nationally and globally. But the aid itself is creating a new set of concerns, writes Henry St. George.

Government watchdogs and integrity experts in the US are warning that the massive sums of money being made available are vulnerable to waste and abuse, at a time when authorities are seeing a significant rise in swindles in the US meant to capitalize on public fears.

In a telling sign, Congress appears to be taking the threat seriously. In their historic $2 trillion relief package --which included money for health-care providers, lending programs for American businesses and aid for distressed industries -- lawmakers agreed on strict oversight requirements.

But experts caution that the potential for fraud is much larger than any one set of safeguards, given past history and the sheer breadth of the US government’s response, which has called on the support of a vast array of federal agencies that oversee domestic and foreign affairs.

The US military, for example, is being charged with handling a major part of the nation’s response both in the country and abroad. The military’s involvement came after much debate over the precise role that the armed forces should have in combatting the crisis, even as military leaders tried to contain outbreaks among troops stationed around the world.

In the U.S., the military is deploying personnel and much-need supplies and resources to localities and states around the country to combat the spread of the pandemic. The American military has been pressed into action internationally, too, with President Trump recently announcing a mobilization of troops against drug cartels that are trying to exploit coronavirus as the U.S. and other countries turn their attention to confronting the pandemic.

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"As governments and nations focus on the coronavirus, there's a growing threat that cartels, criminals, terrorists and other malign actors will try to exploit the situation for their own gain," Trump said. "We must not let that happen."

But like other arms of the federal government, the military has long been vulnerable to waste and fraud. This is in part because the Department of Defense relies heavily on outside contractors, awarding $350 billion in contracts in fiscal year 2018 alone for an array of goods and services, according to government auditors.

In fact, as recently as last December, the Government Accountability Office, a nonpartisan federal watchdog agency, issued a report warning that the Defense Department must do more to detect fraud among the contractors it hires.

The defense agency has certainly had more than its share of scandals involving contractors in recent years. And sometimes the problems appear to be of its own making.

Consider the case of Agility, a Kuwait-based company that once held a contract to provide food to all US troops stationed in Iraq, Syria, Kuwait, and Jordan.

In 2017,  the company agreed to pay a $95 million settlement and give up another $249 million in claims after it was indicted for overcharging the Pentagon up to $374 million by procuring food from another family owned business – the Sultan Center chain of supermarkets – and then inflating those costs when billing the US. It was also charged with soliciting $80 million in kickbacks from US suppliers.

But remarkably enough, the scandal apparently did little to sideline the company from the lucrative business of military contracting. After being indicted in 2007 for the scheme, the company was banned from doing business with the US military.

But in subsequent years, it wound up being granted at least 14 separate waivers by the USDOD – an unprecedented number – to continue receiving US contracts. Notably, a senior Agility official had previously served in the office responsible for approving many of the waivers, the Defense Logistics Agency.

More than that, the 2017 settlement imposing fines on Agility included surprisingly good news for the company: it was permitted to begin bidding once again for US contracts without the need for waivers.

The treatment Agility received, particularly the waivers, prompted Rep. Jackie Speier of California, a member of the House Armed Services committee, to write to USDOD officials in 2018 demanding answers.

The Defense Department is not the only arm of government susceptible to abuse. As the federal government begins releasing trillions of dollars to individuals, businesses and others, authorities are vowing to crack down on anyone engaging in scams reminiscent of those committed in response to the massive bailout Congress approved during the 2008 financial crisis.

In March 2010, for instance, a former president of the Park Avenue Bank in Manhattan was charged on with fraud and embezzlement in what authorities said was the first criminal prosecution of a case involving the defrauding of the bailout program approved by Congress.

The bank executive, Charles J. Antonucci Sr., accused of engaging in a complex scheme to mislead state and federal authorities in an application for more than $11 million from the federal bailout program known as the Troubled Asset Relief Program, or TARP.

He attempted to convince authorities that he had arranged an outside investment of $6.5 million to the bank, when in fact he had secretly used the bank’s own money by employing an elaborate money-transfer network.

He surreptitiously funneled the bank money into a group of entities he controlled and then bought a controlling stake in the bank – though in the name of fictitious investors. That, in turn, allowed him to report that the bank had twice the amount of money it actually had in an $11 million application for bailout money under the TARP program.

Now, with episodes like these forming part of the backdrop, a task force was created by the Justice Department to investigate cases of fraud that may arise. Federal agencies directly involved in the response efforts are also on high alert, including the Food and Drug Administration, which sent letters warning companies suspected of marketing flawed or bogus coronavirus treatments and tests.

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