Fraud has many formulations and iterations; corruption, cronyism, nepotism, parochialism, patronage, influence peddling, and outright theft. In this country it has become dispiritingly common place. The blatancy apparent in whichever direction we look. Is this dwindling of basic economic honesty beginning to fester, to grow, and create a doubt. Is there a sense that our democracy and our economy may be crumbling from the bottom up, slowly but methodically. Not by a directed sense of purpose, but rather by our obsessively looking the other way.
Outwardly, those in government corridors, put on a stern and concerned face when confronted with financial matters that go wrong. They give us solace and point to our economic stability, point to our formidable banking institutions, and of course our stable democratic government. But are we rotting through incompetence, disinterest and a lack of investigative desire? Are we being effected not suddenly by a heart attack of malfeasance, but instead a slow eating cancer of general ineptitude.
Fraud, even in its most basic clear cut form is continually around us. Just consider that in a recent survey by Price Waterhouse Coopers it was estimated that half of the companies in Canada report being victims of fraud. When the Covid “waves” hit, how do we ignore and countenance that during the much celebrated Liberal CERB benefit program over $500 million was paid out to persons who were multi-collecting; from CERB, the Canada Revenue Agency, or the Employment and Social Development Canada office.
In terms of just the CERB payments, a recent House Finance committee heard further discouraging testimony that the Auditor General can not even look into the fraudulent obtained payments– for another year– even though they have known about it since 2020. The CRA confirmed that they are not expecting to make a dent in the wrongful payments until 2023, probably about the same time that Federal government workers will actually have to go back to the office. Apparently, we are waiting on the Canada Revenue Agency to get their act together.
Is it a minor problem? You decide. CERB was budgeted to cost $24 billion –it came in at $81.6 billion. In July 2020 Employment and Social Development Canada knew already that $442 million was sent out to 221,320 people in the form of those double payments.
One must always “follow the money.” Where the money goes is where you will find people looking to take benefit from it and see it as an opportunity. The structure of these particular Covid programs created enticing pots of gold. Very little deception was needed.
Since Canada seems “reluctant” to undertake any kind of investigation or go after those that ripped the system, one wondered whether this was a North America wide malaise. Did this exceptional level of forgiveness for the under-handed equally permeate all of the liberal governmental establishments in the U.S. and Canada. As it turns out the American response to the potential for fraud that they too are now uncovering was in fact distinctly different.
In fact, the contrast in our two countries, even though they were running similarly intended programs is startling. If we reflect on the differences in approach and put Canada up to the mirror, our fermenting complacency boldly looks back at us.
Of course, the money amounts in the U.S. are staggering due to the size of their population versus Canada. The PPP as it was called in the U.S. was almost a carbon copy to that of CERB in Canada. (PPP was the Paycheck Protection Plan) The Canadians and the Americans also had more than one plan in effect. For instance, the U.S. also had the Covid disaster relief fund, and the unemployment relief fund.
Before one looks at the numbers, remember that the overall justification in Canada was at the onset of Covid, also echoed by the U.S. government. In Canada sacrificing “security for speed”, getting out the cheques to the populace was more important than the “security” of the system and the quick dispensation of the monies. The U.S. authorities also admit that most of the money was and is, “unrecoverable”.
Unlike Canadians, the Americans are a little more harsh in their language. They have no hesitancy in saying the program was: ” an invitation to fraudsters”, and the “largest fraud in U.S history”. That according to the official who was overseeing the payouts.
The Americans estimate that 10% of the monies paid out under their PPP was fraudulent. (We have seen estimates in this country under CERB of up to 30%). The Americans paid out $800 billion, therefore they estimate that $80 billion was paid out to fraudsters.
In addition, they estimate that $90 billion at a minimum and up to a maximum of $400 billion was taken from the secondary unemployment relief fund. Another $80 billion from a third program, the Covid disaster relief fund. Interestingly, they estimate that at least 1/2 of the stolen funds from the unemployment relief fund were stolen by “international fraudsters”.
Unlike Canadians, the Americans seem upset. They have set up the Pandemic Response Accountability Committee which is headed by General Mike Horowitz. This group has been given a mandate of 10 years to pursue the fraudsters.
Their results so far are in their words “minimal”, with only 178 people “convicted” so far. One wonders if in this country in the last thirty years if we have charged that many with significant fraud. What the investigators have uncovered is that the size and scope of the fraud may be overwhelming, continually expressing surprise on”how blatant it was”.
Using AI programming they are now scanning over 150 million records to identify patterns of fraud, such as the gas station in Houston whose phone number was used for over 150 applications for PPP. The perpetrators are appearing and being charged in increasing numbers; David Hines in Miami took them for $3.9 million; another person $7.2 million, some spending their financial gains on Lamborghini vehicles and mansions. A California couple stole $18 million and eventually pled guilty– the husband getting 17 years in prison, while his wife got 6 years. Yes, in the U.S. they also go to jail.
They have found that the service provider BlueVine, who was contracted to help the government dole out the funds and gave out $4.5 billion bragged about processing applications in less than 5 minutes. They estimate that a stolen identity or a fraudulent single identity could translate into a possible $30,000 in possible claims and benefits. The perpetrators would steal legitimate company names from the internet, inflate the number of employees or create the employees and then apply for the business loans.
One of the more blatant fraudsters was Danielle Miller out of Boston. Taking names from the state website and applying for Covid relief loans allowed her in 40 minutes make $100,000.
There is another myth that is also now also being dispelled. In speaking with experts in the fraud industry and in talking with private businesses they are quickly finding that “trade offs between speed and security” is simply not true. As one person pointed out, if this were true, why wouldn’t large private industries with a consumer facing business and who featured rapid response; why are they not going bankrupt? They describe it as categorically “false” narrative that speed necessitates neglect and oversight.
Of course, maybe none of this could happen in Canada, maybe we are much too honest here.
Auditor General Karen Hogan released a report which included the fact that the Employment and Social Development Canada (ESDC) and the Canada Revenue Agency (CRA) “focused on delivering the benefit quickly…both organizations understood the rules…” and they “relied on applicants good faith”.
Let’s remember that the Canadian CERB program allowed anyone over the age of 15, who made a minimum of $5,000 in 2019, could apply for $2,000 for a period of 28 weeks; following an extension of the program in August 2020. If that was not enough, once the CERB ended for these folks, the government then directed them to a revamped Employment Insurance Program.
The Auditor General admitted that a “pre-payment screening structure could have been put in place” and that telling the government agencies to “ignore warnings or red flags” of fraud may not have been a good thing. The CRA did open a “snitch line”. The thinking must have been, if they couldn’t find the fraud, maybe the public could lead them to it.
The Canadian Anti-Fraud Centre by the end of January 2021 had 8500 cases of CERB related identity theft.
In a 2020 FINTRAC Report made public in November 2021, that the CERB program was “knowingly and actively defrauded ” by scammers, organized crime, and that payments were made to people engaged in illegal or suspicious financial activity”.
Have we learned anything? In 1991 in Vancouver, Murray Pezim was investigated for fraud, the classic pump and dump strategy in mining stocks. In 2022 the U.S. Securities firm (not the Canadian authorities) charged David Siddoo for employing the same system. In 2021 the Cullen Commission exposed billions of dollars in money laundering. Really, nothing has changed.
In this country we are structurally not set up to look for fraud, or any variation of fraud. And if we aren’t looking we are sure to never find anything. The RCMP were recently investigating Trudeau and the Aga Khan who were allegedly influence peddling through elaborate vacations– and lo and behold they found that there are no rules that really apply.
The RCMP which should be the first stop in large scale fraud investigations in this country, as an organization has proven itself time and time again as incapable in the field of economic crime. Investigations in this country are talked about in years, not days, weeks or months. The solution is either that this type of crime is pulled from their organizational mandate, or they need to be dismantled and re-built and resourced to 2021 standards.
Maybe, the general public is willing to let their rage to continue to bubble away just below the surface. The Liberals and the NDP are counting on it. Is it that we are so complacent, so ensconced in our own sphere of security and relative prosperity that we just shrug it off, politically helpless, morally and ethically spent.