In late March 2020, Haywood Talcove, a CEO at LexisNexis Risk Solutions, was packing up his office, having sent his employees home. He was worrying about laying off his staff, his family’s health, and how he was going to manage two young kids at home during the pandemic.
But when President Trump announced an initial $2.2 trillion relief package to bail out the millions of Americans desperate for cash during the national lockdown, his concern turned away from the coronavirus. An expert in cybersecurity, Talcove has worked in both the private and public sectors, and has been raising the alarm about the government’s exposure to scams for many years. And now, it was like all of his prior analysis and warnings about fraud had just become real.
“I said, ‘Oh, my God, they’re going to allow anyone to get unemployment-insurance benefits,” he recalls. “The systems are vulnerable. All you needed was a name, a date of birth, an address, and a social security number.”
Talcove understood that he had to act. So he called the White House, trying to warn of the threat. No response. Finally, after weeks of trying to get through, one night while he was playing with his kids, he got a call from an unknown number. It was Larry Kudlow, Trump’s director of the National Economic Council. “I’m like, ‘Mr. Kudlow, I really need to warn you that you have to do something about identity verification,’” Talcove recalls, “’or it’s going to be the biggest fraud in the history of our country.’” (Kudlow didn’t respond to requests for comment.)
He says he talked to Kudlow for about 15 minutes but couldn’t get him to budge. “Kudlow’s like, ‘The money has to get out quickly. You can’t have speed and security,’” Talcove says. “But I’m like, ‘That is bullshit. Sir, that’s just not true. Now you’re never going to get the money back.’”
Eventually, he says Kudlow told him to get in touch with the folks in charge of sending out small-business loans and the Pandemic Unemployment Assistance loans. But those guys told him they aren’t seeing any fraud. “I’m like, ‘Dude, you haven’t even given out any money yet! That’s why you’re not seeing it,’” Talcove says. “I’m sending them screenshots of the dark web. I’m explaining exactly how it’s going to go down. And I tell them you are going to have a $200 billion problem on your hands if you do nothing.”
It's history now: On March 27, 2020, during the height of the pandemic, Trump signed the CARES Act, pumping more than $2 trillion into the U.S. economy. The scale of the crisis was beyond anything we had ever seen, and so was the help. The money flowed like an open spigot and saved the livelihoods of millions of people. But Talcove was right. While many breathed sighs of relief, others saw the crisis as an opportunity — a chance to steal millions.
The list of various CARES Act schemes is endless and astounding: the couple who scammed some $20 million off unemployment insurance while living as high rollers in Los Angeles; the Chicago man under indictment for selling bunk Covid tests and allegedly raking in $83 million (he has declared his innocence); the Florida minister who the feds allege faked the signature of his aging accountant, suffering from dementia, to steal $8 million in PPP loans (in a twist, the pastor has been locked in a legal battle to determine whether he’s psychologically fit to stand trial). One particularly loathsome and effective plot: offering fake meals to underprivileged children in Minnesota to reel in a whopping sum of $250 million. Noted serial liar George Santos allegedly got in on the act: He was charged with receiving unemployment benefits while he had a six-figure job in Florida. (Santos has pleaded not guilty.) Other examples are admittedly funny: A guy named John Doe got unemployment money, as did someone named Mr. Poopy Pants, and so did a person going by the name of Diane Feinstein, presumably not the senator from California.
By the government’s own accounting, we potentially dished out some $16.2 billion to folks with “suspicious” emails; $267 million was sent to the identities matching current federal prisoners, some on death row; another nearly $29 billion to people living in multiple states; we even sent out more than $139 million to dead people. California alone accounts for a whopping $20 billion in pandemic unemployment-insurance fraud.
Factoring in President Biden’s and Trump’s relief efforts, the U.S. released more than $5 trillion into the economy — the biggest bailout in history. Department of Justice Inspector General Michael Horowitz told congress that more than a $100 billion in Covid aid money may have ended up misappropriated, but many experts and members of law enforcement think the number is much higher. The AP estimates $280 billion went to fraudsters and another $123 billion was misappropriated, some 10 percent of the relief money. For his part, Talcove estimates the actual losses blow past the tallies being thrown around. “The real number is much higher. I think the government lost a trillion dollars due to fraud in the pandemic,” he says. “One trillion.”
Talcove’s number is shocking and a higher estimate than many others. There could be instances of suspected fraud that were innocent mistakes. But when I asked Biden administration officials what the number might be, they admit that they “don’t know — the actual determination comes much later.” The DOJ’s Horowitz told the AP much the same thing, saying the official accounting is “at least a couple of years away.” Whatever the actual number is, the losses will be staggering.
It must be said that this should not be a red-versus-blue blame game; given the unprecedented nature of the crisis, some feel like the Trump administration acted correctly in releasing the money as fast as possible. “My liberal friends get mad at me for saying this, but the Trump administration handled pandemic unemployment as well as can be expected,” says Michele Evermore, former deputy director for Policy in the Office of Unemployment Insurance Modernization, which handles unemployment insurance. “The problem was so dire and so vast, and people needed help immediately. There was really no choice.”
Nonetheless, debates will continue for years to come over how the money was doled out — speed versus security. The problem was so large that millions of people were at risk; the necessity couldn’t have been clearer. But the cost? One trillion dollars possibly lost to crooks, many of them our fellow citizens gouging the government during a crisis. Thousands of potential victims, not to mention all of the folks who desperately needed the money and couldn’t get it. Thousands of criminals rewarded, many totally unpunished. Now, partisan gridlock and finger-pointing in Congress over the pandemic-era bailouts may halt any legislation and leaves the outcome of reform efforts less-than-certain. And after months reporting on the problem, speaking with the Secret Service agents hunting the fraudsters, victims saddled with debts they never incurred, and an afternoon spent with a scam artist, one can’t help but have serious concerns that the next time a crisis comes around, we sure as hell might get fooled again.
One law enforcement agency takes the lead when it comes to protecting the U.S. government from fraudsters: the Secret Service. Jason Kane, a Secret Service veteran of more than 20 years, was stationed in New York during those early-pandemic months and knew immediately that a wave of work was heading his agency’s way. “Any time there’s a crisis — Hurricane Katrina, the BP oil spill — people take advantage. It’s human nature,” Kane says. “Today we have initiated more than 3,000 criminal cases from the pandemic. We are still trying to seize back those assets but most of the money is likely gone.”
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Image: Haywood Talcove/uncredited
