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.
"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.
Germany wants to use Regeneron's COVID-19 antibody therapy more broadly
Germany would like to use Regeneron’s COVID-19 monoclonal antibody cocktail as a treatment for this disease more broadly but needs to finalize some details on reimbursement, Health Minister Jens Spahn said on Thursday (15 April), writes Caroline Copley.
“The drug is available in Germany, we need it much more and we want it much more and we are working on rolling it out across the nation,” he told a weekly news conference.
President von der Leyen on developments in the Vaccines Strategy
In a press statement on 14 April, President of the European Commission, Ursula von der Leyen, announced an agreement with BioNTech-Pfizer to accelerate the delivery of 50 million vaccine doses to the second quarter of this year, starting this month: “We are in a race against time. The faster we reach our target of having 70% of adults in the European Union vaccinated, the better chances we have of containing the virus. And the good news is: Vaccination is picking up speed across Europe! Member states have received over 126 million doses of vaccines as of yesterday (13 April). And I am happy to say that today we have reached 100 million vaccinations in the EU. This is a milestone that we can be proud of. Of these 100 million vaccinations, more than a quarter are second doses – which means that we have now more than 27 million people fully vaccinated I am pleased to announce that we have reached an agreement with BioNTech-Pfizer to, once again, speed up the delivery of vaccines. 50 million additional doses of BioNTech-Pfizer vaccines will be delivered in quarter 2 of this year, starting in April. This will bring the total doses delivered by BioNTech-Pfizer to 250 million doses in the second quarter. These doses will be distributed pro-rata to the population, among all the member states. This will substantially help consolidate the roll-out of our vaccination campaigns.” As part of preparations for the medium term, the Commission is also entering into a negotiation with BioNTech-Pfizer for a third contract, to foresee the delivery of 1.8 billion doses of vaccine over the period of 2021 to 2023. This contract will entail that not only the production of the vaccines, but also all essential components, will be based in the EU. The President's full statement is available online in English, and French and shortly in German. You can watch it here.
Coronavirus response: Commission proposes to exempt vital goods and services distributed by the EU from VAT in times of crisis
The European Commission has proposed to exempt from Value Added Tax (VAT) goods and services made available by the European Commission, EU bodies and agencies to Member States and citizens during times of crisis. This responds to the experience gained during the course of the Coronavirus pandemic. Among other things, it has shown that the VAT charged on some transactions ends up being a cost factor in procurement operations that strains limited budgets. Therefore, today'sinitiative will maximise the efficiency of EU funds used in the public interest to respond to crises, such as natural disasters and public health emergencies. It will also strengthen EU-level disaster and crisis management bodies, such as those falling under the EU's Health Union and the EU Civil Protection Mechanism.
Once in place, the new measures will allow the Commission and other EU agencies and bodies to import and purchase goods and services VAT-free when those purchases are being distributed during an emergency response in the EU. The recipients might be Member States or third parties, such as national authorities or institutions (for example, a hospital, a national health or disaster response authority). Goods and services covered under the proposed exemption include, for instance:
- Diagnostic tests and testing materials, and laboratory equipment;
- personal protective equipment (PPE) like gloves, respirators, masks, gowns, disinfection products and equipment;
- tents, camp beds, clothing and food;
- search and rescue equipment, sandbags, life jackets and inflatable boats;
- antimicrobials and antibiotics, chemical threat antidotes, treatments for radiation injury, antitoxins, iodine tablets;
- blood products or antibodies;
- radiation measuring devices, and;
- development, production and procurement of necessary products, research and innovation activities, strategic stockpiling of products; pharmaceutical licences, quarantine facilities, clinical trials, disinfection of premises, etc.
Economy Commissioner Paolo Gentiloni said: “The COVID-19 pandemic has taught us that these kinds of crises are multifaceted and have a wide-ranging impact on our societies. A rapid and efficient response is essential, and we need to provide the best response now in order to prepare for the future. Today's proposal supports the EU's goal to react to crises and emergencies in the EU. It will also ensure that the financial impact of EU-level relief efforts to fight the pandemic and support the recovery is maximized.”
The legislative proposal, which will amend the VAT directive, will now be submitted to the European Parliament for its opinion, and to the Council for adoption.
Member States shall adopt and publish, by 30 April 2021 the laws regulations and administrative provisions necessary to comply with this Directive. They shall apply those measures from 1 January 2021.
The Coronavirus pandemic has thrown into sharp light the importance of coherent, decisive and centralised EU-level preparation and response in times of crisis. In the context of the Coronavirus pandemic, the von der Leyen Commission has already outlined plans to strengthen EU preparedness and management for cross-border health threats, and presented the building blocks of a stronger European Health Union. At the same time, the Commission has proposed to strengthen cooperation between EU Member States through the EU Civil Protection Mechanism with the aim of improving responses to future natural or man-made disasters. For instance, in the context of the new European Health Union, the Commission announced the creation of the Health Emergency Response Authority (HERA) to deploy rapidly the most advanced medical and other measures in the event of a health emergency, by covering the whole value chain from conception to distribution and use.
The EU has already taken action in the field of taxation and customs to support the fight against and the recovery from the coronavirus pandemic. In April 2020, the EU agreed to waive customs and VAT charges for imports of masks and other protective equipment needed to fight the pandemic. This waiver remains in place and plans are underway for its extension. In December 2020, EU member states agreed on new measures proposed by the Commission to allow a temporary VAT exemption for vaccines and testing kits being sold to hospitals, doctors and individuals, as well as closely related services. Under the amended Directive, member states can apply either reduced or zero rates to both vaccines and testing kits if they so choose.
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