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Identity Theft

Prosecutors Struggle to Catch Up to a Tidal Wave of Pandemic Fraud

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In the midst of the pandemic, the government gave unemployment benefits to the incarcerated, the imaginary and the dead. It sent money to “farms” that turned out to be front yards. It paid people who were on the government’s “Do Not Pay List.” It gave loans to 342 people who said their name was “N/A.”

As the coronavirus shuttered businesses and forced people out of work, the federal government sent a flood of relief money into programs aimed at helping the newly unemployed and bolstering the economy. That included $3.1 trillion that former President Donald J. Trump approved in 2020, followed by a $1.9 trillion package signed into law in 2021 by President Biden.

But those dollars came with few strings and minimal oversight. The result: one of the largest frauds in American history, with billions of dollars stolen by thousands of people, including at least one amateur who boasted of his criminal activity on YouTube.

39,000 investigations going. About 50 agents in a Small Business Administration office are sorting through two million potentially fraudulent loan applications.

Officials already concede that the sheer number of cases means that some small-dollar thefts may never be prosecuted. This month, Mr. Biden signed bills extending the statute of limitations for some pandemic-related fraud to 10 years from five, a move aimed at giving the government more time to pursue cases. “My message to those cheats out there is this: You can’t hide. We’re going to find you,” Mr. Biden said during the signing at the White House.

$5 trillion in relief money in three separate legislative packages — an enormous sum that is credited with reducing poverty and saving the country from a prolonged, painful recession.

But investigators say that Congress, in its haste to get money out the door, devised all three packages with the same flaw: relying on the honor system.

For example, an expanded unemployment benefit gave workers an extra $600 per week in federal jobless funds on top of what they received from their state. The program was funded by the federal government but administered by states, which often had loose rules around qualifying. Applicants did not need to provide proof they had lost income because of Covid-19; they simply had to swear it was true.

A similar we’ll-take-your-word-for-it approach was used in two loan programs run by the Small Business Administration.

Paycheck Protection Program, in which the government guaranteed loans made by private lenders, and the Economic Injury Disaster Loan program, in which the government itself gave out loans and smaller advance grants that did not have to be repaid. In both, the government trusted businesses to self-certify that they met key requirements.

using the email address of a burrito shop.

In the Paycheck Protection Program, private banks were supposed to help with the screening, since in theory they were dealing with customers they already knew. But that left out many small businesses, and the government allowed online lenders to enter the program. This year, University of Texas researchers found that some of those “fintech” lenders appeared less diligent about catching fraud.

turning fraud into a franchise — helping other people cook up fake businesses in order to get loans from the Economic Injury Disaster program.

Andrea Ayers advised one client to tell the government she ran a baking business from home, although she was not a baker, prosecutors said.

YouTube videos, where scammers offered to help for a cut of the proceeds. Some used the money on necessities, like mortgage bills or car payments. But many seemed to act out of opportunism and greed, splurging on a yacht, a mansion, a $38,000 Rolex or a $57,000 Pokémon trading card.

responsible for selling the card.

music video on YouTube, bragging in detail about how he had gotten rich by submitting false unemployment claims. His song was called “EDD,” after California’s Employment Development Department, which paid the benefits.

first reported by The Washington Post. In the Economic Injury Disaster Loan program, a watchdog found that $58 billion had been paid to companies that shared the same addresses, phone numbers, bank accounts or other data as other applicants — a sign of potential fraud.

“It’s clear there’s tens of billions in fraud,” said Michael Horowitz, the chairman of the Pandemic Response Accountability Committee, which includes 21 agency inspectors general working on fraud cases. “Would it surprise me if it exceeded $100 billion? No.”

The effort to catch fraudsters began as soon as the money started flowing, and the first person was charged with benefit fraud in May 2020. But investigators were quickly deluged with tips at a scale they had never dealt with before. The Small Business Administration’s fraud hotline — which had previously received 800 calls a year — got 148,000 in the first year of the pandemic. The Small Business Administration sent its inspector general two million loan applications to check for potential identity theft. At the Labor Department, the inspector general’s office has 39,000 cases of suspected unemployment fraud, a 1,000 percent increase from prepandemic levels.

But prosecutors face a key disadvantage: While fraud takes minutes, investigations take months and prosecutions take even longer.

pleaded guilty to mail fraud last month. His lawyers declined to comment.

first weeks of the pandemic, when the government gave out 5.8 million advance grants worth $19.7 billion in just over 100 days. In that program, fraud was easy to pull off, according to a government watchdog, which cited numerous loans given to businesses that were ineligible for funding.

Mr. Ware said he recently limited his agents to working 10 cases at a time, telling them: “You’re killing yourself. I have to protect you from you.”

told The New York Times in November.

“It’s a honey trap,” he added. “Richard Ayvazyan fell into that trap.” Mr. Ayvazyan was sentenced to 17 years in prison for participating in a ring that sought $20 million in fraudulent loans.

In the case of Mr. Oudomsine, the Pokémon card buyer, his lawyers argued in March that a judge should be lenient in deciding his sentence because the fraud had taken hardly any time at all.

“It is an event without significant planning, of limited duration,” said Brian Jarrard, who was Mr. Oudomsine’s lawyer at the time.

That did not work.

Judge Dudley H. Bowen Jr. of U.S. District Court sentenced Mr. Oudomsine to three years in prison, more than prosecutors had asked for, to “demonstrate to the world that this is the consequence” of fraud, according to a transcript of the sentencing.

Now, Mr. Oudomsine is appealing, with a new lawyer and a new argument. Deterrence, the new lawyer argues, is moot here because the pandemic-relief programs are over.

“There’s no way to deter someone from doing it, when there’s no way they can do it any longer,” said the lawyer, Devin Rafus.

Biden administration officials say they are trying to prepare for the next disaster, seeking to build a system that would quickly check applications for signs of identity theft.

“Criminal syndicates are going to look for weak links at moments of crisis to attack us,” said Gene Sperling, the White House coordinator for pandemic aid. He said the White House now aims to build a continuing system that would detect identity theft quickly in applications for aid: “The right time to start building a stronger system to prevent identity theft is now, not in the middle of the next serious crisis.”

In the meantime, the arrests go on.

Last week, prosecutors charged a correctional officer at a federal prison in Atlanta with defrauding the Paycheck Protection Program, saying she had received two loans totaling $38,200 in 2020 and 2021. The officer, Harrescia Hopkins, has pleaded not guilty. Her lawyer did not respond to a request for comment.

“You can’t have a system where crime pays,” said Mr. Horowitz, of the federal Pandemic Response Accountability Committee. “It undercuts the entire system of justice. It undercuts people’s faith in these programs, in their government. You can’t have that.”

Seamus Hughes contributed reporting.

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Judge nixes arrest warrant for Republican county clerk after bond breach

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Republican Secretary of State candidate for Colorado, Tina Peters, a county clerk and election denier who’s been indicted on criminal charges for tampering with voting machines, sings the National Anthem at her primary election night rally in Sedalia, Colorado, U.S., June 28, 2022. REUTERS/Kevin Mohatt/File Photo

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DENVER, July 15 (Reuters) – A Colorado judge on Friday nixed an arrest warrant for a county clerk who was indicted on felony charges of tampering with voting equipment and then lost a bid for the Republican nomination to Colorado’s top election-management post.

Mesa County District Judge Matthew Barrett said he was giving Tina Peters a break because her lawyer took responsibility for not relaying to his client an order barring her from traveling out of state without the court’s approval. The ban was part of the terms of her bail bond that permitted her pre-trial release from jail in March.

But Barrett warned Peters, who flew to Las Vegas this week to speak at a symposium of conservative law enforcement officers, during the 45-minute hearing that he would not be so lenient should it happen again.

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“She is a flight risk,” Barrett said. “She has resources and access to private jets.”

In March, Peters was indicted by a Colorado grand jury on election tampering charges stemming from an alleged breach of Mesa County’s voting equipment. She has been barred by Colorado’s secretary of state from overseeing elections in the western Colorado county this year.

According to the 10-count indictment, which included charges of criminal impersonation, conspiracy, identity theft and official misconduct, Peters gave unauthorized personnel access to the county’s election computer server.

The case gained national attention in part because Peters was outspoken in her support for former President Donald Trump’s baseless claims that the 2020 presidential election was rigged against him.

Peters has denied any wrongdoing and blamed her legal troubles on her political adversaries, including Colorado Secretary of State Jena Griswold, a Democrat.

Undaunted by her indictment, Peters sought the Republican nomination to challenge Griswold, who is up for re-election in November. But Peters, who was permitted to travel outside Colorado while she was a candidate for statewide office, lost the Republican primary last month.

Peters is due back in court on Aug. 5.

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Reporting by Keith Coffman in Denver; Editing by Alexandra Ulmer and Leslie Adler

Our Standards: The Thomson Reuters Trust Principles.

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Israeli private detective used Indian hackers in job for Russian oligarchs -court filing

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The Metropolitan Detention Center (MDC), which is operated by the U.S. Federal Bureau of Prisons, is pictured in Brooklyn, New York, U.S., December 8, 2020. REUTERS/Brendan McDermid/File Photo

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WASHINGTON, May 27 (Reuters) – An Israeli private investigator currently in U.S. custody used Indian hackers to conduct surveillance operations for ultra-wealthy Russians, a reporter said in a court filing late Wednesday.

Independent journalist Scott Stedman told a court in New York that jailed private detective Aviram Azari worked “on surveillance and cyber-intelligence operations at the behest of Russian oligarchs,” citing a mix of public reporting and confidential sources.

Stedman said in a declaration that one of the Russian oligarchs concerned was aluminum tycoon Oleg Deripaska, whom he said indirectly employed Azari in connection with a business dispute in Austria.

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Deripaska’s spokeswoman said in an email that the allegations were “blatantly untrue.” A lawyer for Azari, who last month pleaded guilty to conspiracy to commit hacking and aggravated identity theft in a separate case, did not return messages.

Stedman made his declaration in support of his request to subpoena Azari for evidence to fight a U.K. libel suit filed against him by British-Israeli security consultant Walter Soriano in 2020.

In a series of articles for his publication, Forensic News, Stedman claimed, among other things, that Soriano was a middleman between wealthy Russians and surveillance firms.

Soriano denied the allegations and sued over the articles, accusing Stedman of mounting a campaign of defamation, invasion of privacy, and harassment.

Stedman’s lawyer told the New York court that “multiple confidential sources” told the reporter that Azari “worked closely with Soriano for years” and thus the jailed private eye’s testimony and documents could “corroborate the truth of Forensic News’ reporting.”

In an email to Reuters, Soriano’s lawyer Shlomo Rechtschaffen said that Stedman’s claims were “false and unfounded” and that the reporter “has no evidence” that his client and Azari worked together as alleged.

In a statement to Reuters, Stedman said he had “very strong reason to believe that Mr. Azari worked with Mr. Soriano on cyber-related projects for multiple Russian oligarchs and other billionaires” and that he was subpoenaing Azari as part of an effort “to defend my journalism and my business.”

Azari is currently being held in federal prison in Brooklyn awaiting sentencing in relation to a hacking campaign tied to the defunct German financial technology company Wirecard AG , his lawyer said last month. read more

Reuters reported last year that Azari was accused of hiring the Indian hacking firm BellTroX on behalf of powerful clients. BellTroX, which has also been accused of hacking by cybersecurity researchers at Facebook and elsewhere, could not be reached for comment. read more

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Reporting by Raphael Satter; Editing by Daniel Wallis

Our Standards: The Thomson Reuters Trust Principles.

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How Identity Thieves Took My Wife for a Ride

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Insurance companies routinely check your credit when signing you up, so it was baffling that Progressive would have issued my wife a policy without her thawing her file. But it listed TransUnion as “the financial responsibility vendor” — an amusing euphemism if you know how long consumer advocates have been complaining because insurance companies use credit data to set rates — and sure enough, my wife’s frozen credit file indicated that Progressive had pinged it this month.

How? Incredibly, an exception often allows insurance companies to check your credit even if you want nothing to do with them. As we learned, that exception meant that Progressive could help itself to my wife’s file — which in turn helped someone pick the pocket of the State of New York and its taxpayers, like us.

In its wisdom, Progressive considered my wife responsible enough to warrant coverage. Fortunately for us, Mr. Pasternak was paying! The second page of our welcome packet said that “the authorization you gave for your first installment payment” was to come from a bank account with his name on it.

So meet our new best friend. With a name like Shiran Pasternak, he was a quick internet search away. Was he the thief? We wondered. But if he was, he was doing a pretty good job of hiding it. Like my wife, he had a “Welcome to Progressive” package and notes from the state about a mysterious unemployment claim that he had never filed. (The bank account and routing numbers in his Progressive packet were identical to ours, but neither had any connection to institutions where any of us do our financial business. Because the numbers were truncated, it was impossible to figure out if they came from a third person or were made up.)

Once we put all of that together, Mr. Pasternak — coincidentally a former New York Times employee — breathed a sigh of partial relief up in Irvington, N.Y., and let me push forward finding out what had happened to all of us.

Here’s how it works.

Automobile insurers — even the ones you don’t use — already know a lot about you. They share claims information among themselves to help weed out unprofitable or reckless customers who try to jump to another provider. They can also get access to your driver’s license number, your current auto policy data, and the make and model of your vehicle. Often, they buy this information from states (which end up sending money right back out when the buyers are careless and unemployment fraud proliferates).

The insurers want to make applying for a policy as easy as possible. So once you start entering information, they like to help you along and fill in some of those blanks for you. For some unfortunate victims, it was as simple for the scammers as copying down the driver’s license number that popped up, although it usually required more technical know-how.

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Tracii Hutsona: ‘Serial Con Artist’

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The couches were nice, and the Orange County home where Ms. Ellman picked them up was even nicer.

Ms. Ellman ended up really liking Ms. Hutsona, who volunteered to deliver the couches to her home later that evening. But Ms. Hutsona had a tale of woe: Her family’s new Malibu apartment had mold! Ms. Ellman, who had planned on renting out her Palm Springs home to vacationers, took pity.

“I learned that they were having to move out of this house and that they didn’t have a next step,” Ms. Ellman said. “I was like, ‘Wow, that’s pretty devastating. Whatever, whatever.’ I mean, that’s where, stupid me, I offered to let her stay in my place free of charge.”

But Ms. Ellman didn’t know that Ms. Hutsona had recently been evicted from the fancy Coto de Cazo home for trying to pay her $6,500 monthly rent with a bad check and by stopping payment on a second.

The women became close. Ms. Ellman allowed Ms. Hutsona’s family to crash on her couch when she and her husband had meetings in Los Angeles. When Ms. Hutsona, Mr. Vician and their two children were invited to tape an episode of the game show “Don’t Forget the Lyrics!” Ms. Ellman accompanied them as their guest and cheered them on.

Then, things — like Gucci purses — started going missing.

“She just knows how to navigate a person. She acts very reliable, and she becomes very close to you as though she’s your friend,” Ms. Ellman said. “She almost knows when you’re in a position to help, and she works it to the end. But she makes it where you offer it up. She works the angle that she’s in a bind, and she doesn’t know what to do.”

Fortunately, Ms. Ellman had filed a change-of-address form when she moved to Los Angeles. So the bill for a new credit card in her name, while it was addressed to the Palm Springs location, came directly to her. There were charges for a storage unit, car repairs and an Audi rental from Hertz.

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