The Republican proposal seeks to empower government officials to recover funds stolen during the coronavirus pandemic, when criminals laid siege to historically generous federal jobless aid, contributing to an estimated $190 billion in taxpayer losses.
While Democrats share a desire to combat fraud, they largely oppose the GOP measure, arguing that it is likely to harm innocent Americans. The White House, meanwhile, has threatened to veto the proposal, which for weeks had not garnered much attention in a capital that finds itself enmeshed in a fiscal crisis.
But the optics shifted considerably this week, as GOP leaders set in motion a plan to deliver on their electoral promise to stop government waste — just as one of their own members faced new scrutiny for allegedly engaging in it.
On Wednesday, federal prosecutors took Santos into custody on a wide array of fraud charges, including allegations unsealed later that he improperly collected more than $24,000 in unemployment benefits in New York. The Justice Department alleged that Santos received the weekly aid despite having a job at the time, which would have made him ineligible for help. The congressman has pleaded not guilty.
Hours later, the situation resulted in some uncomfortable questions for GOP leaders, who largely stood by Santos, arguing that they would wait for a court to render a verdict before commenting on his fate. In doing so, top Republicans tried to sidestep the controversy by touting their work to target the very crime that prosecutors say the embattled congressman committed.
“There is a legal process. … He’s going to have to go through the legal process,” said House Majority Leader Steve Scalise (R-La.). “But we’re going to continue to work to root out fraud, and there’s lots of it.”
For now, the brewing House fight underscores a real challenge facing Washington in the years after it approved roughly $5 trillion to aid workers, families and businesses during the coronavirus pandemic. The historic tranche of aid helped rescue the economy from the worst crisis since the Great Depression, but it also emerged as a tempting target for waste, fraud and abuse, as The Washington Post found in The Covid Money Trail, a year-long investigation.
Some of the greatest theft targeted unemployment insurance. During the pandemic, Congress repeatedly boosted the amounts that out-of-work Americans could receive each week, while expanding the aid to cover a larger category of workers. But the series of new federal mandates ultimately proved costly and challenging for state governments, some of which long had suffered from poor funding, chronic understaffing and outdated technology — deficiencies made worse amid a crush of requests for help.
Over the first two years of the crisis, criminals exploited these vulnerabilities. In many cases, they used identities stolen from real Americans — from average workers to people in prison — to obtain weekly checks, The Post uncovered. In total, federal officials now believe fraud is largely responsible for more than $190 billion in unemployment-related overpayments, a category of misspending that includes sums paid by mistake to those who enrolled legitimately.
With Santos, prosecutors this week accused the congressman of having engaged in a “fraud scheme” dating back to the earliest days of the pandemic, before he was elected to office. The indictment, unsealed Wednesday, said he applied for jobless aid in New York around June 17, 2020, claiming to have been unemployed since that March. Each week, Santos repeatedly attested — as the program requires — that “he was unemployed, available to take on new work and eligible for benefits,” the Justice Department alleged.
But the indictment charged that Santos actually had been a regional director at a company that prosecutors obscured in the complaint as “investment firm #1,” describing it as a “Nevada corporation with its principal place of business in Melbourne, Florida.” In total, the government alleges that Santos collected $24,744 in unemployment benefits “based on a false application and false weekly certifications,” all the while collecting an annual salary of $120,000 from the investment firm.
Responding to the indictment, Santos described the charges at a news conference on Wednesday as part of a “witch hunt.” Asked specifically about allegations that he improperly collected unemployment insurance checks, the New York Republican said that he doesn’t “understand where the government is getting information,” adding that his “employment was changed” at the time.
Soon after his election to Congress, Santos became one of 35 co-sponsors on a GOP bill that aims to root out unemployment insurance fraud, according to federal records. On Tuesday, the same day that his charges became public, party lawmakers took the first steps in bringing the measure — known as the Protecting Taxpayers and Victims of Unemployment Fraud Act — to the floor in the hopes of holding a vote later this week.
The proposal would empower states to pursue unemployment benefits that they erroneously paid to either criminals or innocent workers, while allowing them to use those funds for future fraud prevention. It also extends the statute of limitations for the government to bring criminal charges to 10 years from the current five years.
Appearing before the House Rules Committee on Tuesday, Rep. Jason T. Smith (R-Mo.), the chief sponsor of the bill, described the problem as the “largest theft of tax dollars in American history.” In doing so, he faulted Biden, claiming the president had “dropped the ball” after promising to pursue covid fraud during his State of the Union addresses this year and last.
The White House, however, threatened to veto the bill earlier this week, arguing it would “strip” states of “essential resources to fight fraud, combat identity theft, and recover overpayments, and would set back the goals of strengthening program integrity and combating systemic fraud.” While Republicans later tweaked the legislation, the Biden administration has maintained its support for the president’s own plan, which called for $1.6 billion and a host of new federal powers to pursue the theft of covid aid dollars.
House Democrats, meanwhile, said this week that the measure could result in hard-hit workers receiving surprise bills, since some of them may not have known they received erroneous checks while unemployed. Some states take steps to waive or forgive those amounts, since the mistakes are not the fault of aid recipients.
“In contrast, the Republican solution is to gut federal funding to fight fraud, to impose cruel surprise bills that harm innocent workers that were unemployed during the pandemic, and to weaken state unemployment systems,” said Rep. Danny K. Davis (D-Ill.), who testified in front of the panel.
Rep. Jim McGovern (D-Mass.), the top Democrat on the panel, later expressed his own “frustration” that Republicans were focusing on such legislation while what he said were more pressing issues — from a civil jury finding that former president Donald Trump was liable for sexual abuse, to the latest mass shootings — had been left unaddressed.
“On this same day, we find our your Republican colleague George Santos, if that’s his real name, has been criminally charged by the Department of Justice,” McGovern continued. “I will tell you objective observers watching what we are doing have to be scratching their heads saying, ‘What the hell is wrong with this place?’”
