WHITE: Before the next stimulus, stop the fraud

Published 8:00 am Wednesday, December 8, 2021

By Shad White | Guest Columnist

Congress is debating a massive new stimulus bill. This comes on top of the previous stimulus spending which pumped cash into the economy over the past two years. Now that state and local governments have spent some of the first round of stimulus funds—called CARES Act funds—it’s time to reflect on what we know.

One of the first lessons is that there were not enough fraud prevention mechanisms in place when the federal government handed down this money.

For example, an audit from my office on Mississippi’s unemployment compensation revealed the state lost $117 million to unemployment fraud during the first few months of the pandemic. That’s more than the state spends in total on unemployment in a normal year.

Now we’re beginning to see fraud in other programs, too. Mississippi used some of its stimulus funds to establish a small business relief program called Back to Business. Earlier this month, my office arrested someone who tried to defraud the state of nearly $400,000 from that program. The defendant allegedly filed for these funds on behalf of businesses that were not eligible and filed multiple applications on behalf of the same business.

This is the first stimulus fraud criminal case my office has uncovered, but people thinking of stealing stimulus funds should know: it doesn’t have to be our last.

Thankfully, in that case, the bleeding was stopped before we lost too much blood. While the defendant submitted requests for almost $400,000, she was only able to steal $38,500. The state hired a law firm, Balch & Bingham, to review applications in the program. The firm spotted the suspicious activity relatively early, and they reported their findings to us.

Additionally, while the federal program for small business relief, called PPP, is outside my office’s jurisdiction, I still read headlines from federal prosecutors about PPP fraud. A reality TV star in Georgia used these funds to lease a Rolls Royce, buy expensive jewelry, and pay child support.

These stories show people are highly motivated to steal stimulus funds right now. The crush of new money flowing into the state made it tempting for fraudsters. And that temptation is about to escalate with a new round of stimulus spending from the American Rescue Plan Act coming soon. Congress may also drop another few trillion dollars on the country at the same time.

We need to take fraud prevention seriously. Otherwise, the helicopter loads of cash will be spent and drive up inflation but not benefit the taxpaying public. I’ve previously made recommendations about fraud prevention measures that could prevent some unemployment compensation fraud. Policymakers should now stop to think about what sort of additional staff or outside help is needed to stop fraud as they spend a new round of money. And Congress should reflect on whether trillions of additional spending is even necessary in the first place.

Shad White is the 42nd State Auditor of Mississippi.