We must learn lessons from LI pandemic fraud

People were dying. Layoffs were ballooning. The economy was crashing. 

In the first months of the pandemic, fear and concern were pervasive. A time of urgency called for an urgent response. We stayed home and businesses of all kinds were required to shut. Our health was at risk; soon our jobs and finances were, too. Federal officials within the Trump administration acted quickly. They began issuing forgivable loans and grants through the $1.2 trillion Paycheck Protection Program, prioritizing getting money out the door, though that meant cutting corners on vetting whether applicants needed or deserved the funds. It's no wonder crooks got in line. There has to be a better way.

We are now learning the extent of the fraud. Nationally, about $200 billion was stolen, 17% of the money meant to keep small business afloat. Funds given to those gaming the system meant others were shut out, including some on Long Island. At least 20 Long Islanders have been arrested for fleecing the Paycheck Protection Program and the related COVID-19 Economic Injury Disaster Loans effort out of nearly $48 million.

The details are disheartening and should be a wake-up call for local, state and federal officials the next time an emergency program must be designed and put in place expeditiously. Money allegedly went to vacation homes, luxury watches, high-priced cars, and a yacht. Nail salon owners, an Olympic athlete, and the owner of Bayville Adventure Park were among the greedy. Even a Hempstead gang known as the Insane Crip Gang, or ICG, is accused of participating in PPP fraud.

As federal prosecutors target these criminals, it's unlikely the lost millions can be clawed back. We will never know how many businesses and jobs could have been saved had only verified claims been processed. Yes, the fog of the pandemic made such verification difficult. Some degree of fraud is inevitable in government relief programs. It's happened before — after Hurricane Katrina, Superstorm Sandy, and other disasters. But no one — including the private banks that should have known better — did their due diligence.

An analysis by the Small Business Administration's inspector general unveiled nearly a dozen indicators of fraud that were overlooked, from internet protocol addresses with foreign origins to suspicious phone numbers, addresses or employer identification numbers to multiple applications using a single bank account. Too often, fraudsters maneuvered around loose bank regulations, a lack of verification or updated technology, and other flimsy roadblocks.

This isn't just a problem that emerges during massive emergencies and it transcends political lines. The pandemic fraud hit under President Donald Trump's watch. But the Biden administration now is overseeing two massive programs focused on infrastructure and energy-related investments, ripe for potential trickery.

We have to do more than just talk about past failures. If we don't make significant fixes, we'll again face the loss of millions in fraud — and the same lessons will remain unlearned.