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More Than $200 Billion in COVID-19 Aid May Have Been Stolen, Federal Watchdog Says

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2 years ago

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More than $200 billion may have been stolen from two large COVID-19 relief initiatives:

According to new estimates from a federal watchdog looking into federally funded programs that assisted small businesses survive the worst public health crisis in more than a century, more than $200 billion may have been stolen from two significant COVID-19 relief initiatives.

The figures revealed on Tuesday by the U.S. Small Business Administration inspector general show how much more vulnerable the Paycheck Protection and COVID-19 Economic Injury Disaster Loan programs were to fraudsters than the office’s earlier estimates. This was especially true during the early stages of the coronavirus pandemic.

The inspector general’s report said “at least 17 percent of all COVID-EIDL and PPP funds were disbursed to potentially fraudulent actors.” According to the report, the COVID-19 Economic Injury Disaster Loan Program fraud estimate is more than $136 billion, or 33% of the program’s overall budget. The inspector general estimated that the Paycheck Protection fraud cost $64 billion.

A senior SBA official disputed the new numbers in comments that were included with the report. SBA’s interim associate administrator for capital access, Bailey DeVries, stated that the inspector general’s “approach contains serious flaws that significantly overestimate fraud and unintentionally mislead the public to believe that the work we did together had no significant impact in protecting against fraud.”

The COVID-19 disaster loan program and the Paycheck Protection program both had fraud estimates of $86 billion and $20 billion, respectively, by the SBA inspector general.

According to a June 13 AP report, scammers and swindlers may have stolen about $280 billion in COVID-19 emergency aid, and another $123 billion was lost or misused. The two SBA programs and another to provide unemployment benefits to workers suddenly out of work due to the economic upheaval caused by the pandemic account for the majority of the potential losses. President Joe Biden took over the three projects that were started by the Trump administration. The total loss estimated by AP amounts to 10% of the $4.2 trillion in COVID relief aid that the US government has already paid out.

The amount of potential fraud that the federal government has now disclosed is $276 billion, which is consistent with the AP’s calculations.

During the first nine months of the pandemic, while President Donald Trump was in office, 86% of the fraud—or potential fraud—in the emergency loan programs occurred, according to Gene Sperling, a senior White House official in charge of overseeing pandemic relief spending.

“$200 billion is a very big number, but this, again, should be remembered as potential fraud,” Sperling said. “We think the amount of likely or actual fraud is significantly less, significantly under $100 billion, perhaps around $40 billion.”

But he added, “whichever it is, it’s unacceptably high.”

The SBA inspector general, Hannibal “Mike” Ware, said in a statement Tuesday that the report “utilizes investigative casework, prior (inspector general) reporting, and cutting-edge data analysis to identify multiple fraud schemes used to potentially steal over $200 billion from American taxpayers and exploit programs meant to help those in need.”

Ware, in an interview with The Associated Press earlier this month, said these latest fraud figures won’t be the last ones issued by his office.

“We will continue to assess fraud until we’re finished with the investigations on these things,” Ware said. That could be a long while. His office has a backlog of more than 90,000 actionable leads into pandemic relief fraud, which amounts to nearly a century’s worth of work.

The SBA published a report on its own anti-fraud policies on Tuesday. The report details “the effective measures added to fight fraud and hold bad actors responsible,” according to an email statement from the agency’s administrator, Isabella Casillas Guzman.

SBA previously told The Associated Press the federal government has not developed an accepted system for assessing fraud in federal programs. Previous analyses, the agency said, have pointed to “potential fraud” or “fraud indicators” in a manner that conveys those numbers as a true fraud estimate when they are not. For the COVID-19 Economic Injury Disaster Loan program, the agency said it’s “working estimate” found $28 billion in likely fraud.

According to Larry Turner, inspector general for the Labor Department, fraud in pandemic unemployment assistance programs has reached $76 billion. That is a reasonable guess. According to his testimony, an additional $115 billion was inadvertently distributed to individuals who weren’t eligible for the benefits.

In order to combat widespread fraud, the Biden administration implemented stricter regulations, including the use of a “Do Not Pay” database. Additionally, Biden recently put forth a $1.6 billion plan to increase law enforcement’s capacity to pursue pandemic relief scammers.

Bob Westbrooks, a former executive director of the federal Pandemic Response Accountability Committee, said in an interview the $200 billion number is “unacceptable, unprecedented and unfathomable.” Westbrooks published a book last week, “Left Holding the Bag: A Watchdog’s Account of How Washington Fumbled its COVID Test.”

“The swift distribution of funds and program integrity are not mutually exclusive,” Westbrooks said Tuesday. “The government can walk and chew gum at the same time. They should have put basic fraud controls in place to verify people’s identity and to make sure targeted relief was getting into the right hands.”

According to John Griffin, a finance professor at the University of Texas at Austin’s McCombs School of Business, the fraudulent payouts have consequences.

In a recent paper, Griffin and colleagues claimed that fraud in pandemic relief drove up home prices.

Even after adjusting for other variables that affect home prices such as land supply, prior house price growth, and the ability to telework, the study found that people who fraudulently obtained Paycheck Protection loans were more likely to purchase a home than people who obtained legitimate loans and that housing prices increased by an average of 5.7 percentage points in ZIP codes with high levels of fraud during the pandemic. That would add $22,800 to a house worth $400,000.

Griffin said Tuesday that the study also discovered rises in consumer spending in ZIP codes where people had received significant amounts of fraudulent money, which may have fueled inflation more generally.

“If you paid too much for your house because fraudsters pumped up the house prices in your ZIP code and then your house price ends up going down, you could be the victim of an unintended consequence of fraud,” he said in an interview. “It’s another reason why we should care about fraud.”

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Biden Administration

The Biden Admin’s Attempt to Ban Cigarettes Just Days Before Trump Returns Setting Up For Boost in Criminal Cartels and Black Market

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1 week ago

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January 7, 2025

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Biden Administration’s Nicotine Ban: A Move Toward Regulation or a Boost for Cartels?

In a controversial move during its final days, the Biden administration is advancing a proposal to drastically lower nicotine levels in cigarettes, effectively banning traditional products on the market. While the administration frames the measure as a step toward reducing smoking addiction, critics argue it will backfire, fueling black markets and empowering criminal cartels.

Regulatory Shift with Broad Implications

The Food and Drug Administration (FDA) confirmed that its proposed rule to establish maximum nicotine levels in cigarettes has completed regulatory review. The measure is part of a broader effort to make cigarettes less addictive, potentially shaping one of the most impactful tobacco policies in U.S. history.

FDA Commissioner Robert Califf previously stated that the initiative aims to “decrease the likelihood that future generations of young people become addicted to cigarettes and help more currently addicted smokers to quit.” However, opponents warn that this policy could create new public safety and economic challenges.

A “Gift” to Organized Crime

Critics of the proposed regulation, including former ATF official Rich Marianos, are sounding the alarm. Marianos described the plan as a “gift with a bow and balloons to organized crime cartels,” arguing that it would open the floodgates for illegal tobacco trafficking.

Mexican cartels, Chinese counterfeiters, and Russian mafias are well-positioned to exploit the demand for high-nicotine cigarettes. These groups, already entrenched in smuggling operations, would likely ramp up efforts to meet consumer demand. This shift would not only enrich organized crime but also compromise public health by introducing unregulated, potentially more harmful products into the market.

Unintended Consequences for Public Health

While the FDA’s goal is to reduce smoking rates, experts suggest the policy may have the opposite effect. Smokers could resort to “compensatory smoking,” consuming more cigarettes to achieve their desired nicotine levels. This behavior increases exposure to harmful chemicals like tar, negating the intended health benefits.

Additionally, the regulation could discourage smokers from transitioning to safer alternatives, such as vaping or nicotine replacement therapies. By removing higher-nicotine products from the legal market, the government risks alienating individuals who might otherwise seek healthier pathways to quitting smoking.

National Security and Economic Concerns

Beyond health implications, the nicotine ban raises significant national security issues. A 2015 State Department report highlighted the role of tobacco trafficking in funding terrorist organizations and criminal networks. Reducing nicotine levels in cigarettes could expand this illicit market, providing criminal groups with a lucrative new revenue stream.

Moreover, law enforcement agencies could face increased pressure as they work to combat tobacco smuggling alongside ongoing efforts to address opioid and fentanyl trafficking. This strain on resources could compromise broader public safety initiatives.

Balancing Public Health and Freedom

The proposed nicotine reduction also ignites debates over personal freedom. While reducing addiction is a laudable goal, critics argue that adults should retain the right to make their own choices regarding tobacco use. For many, the measure feels like government overreach, imposing a paternalistic approach to health regulation.

As the Biden administration pushes forward with its nicotine reduction proposal, the policy’s broader implications remain uncertain. While intended to curb addiction and promote public health, critics warn of significant risks, including empowering organized crime, increasing smoking rates, and straining law enforcement resources.

A more balanced approach—focused on education, harm reduction, and access to cessation resources—may better address smoking-related challenges without creating new societal harms.

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McDonald’s to Scrap DEI Practices

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2 weeks ago

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January 6, 2025

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McDonald’s has announced plans to scale back certain diversity, equity, and inclusion (DEI) initiatives, citing a “shifting legal landscape” following the U.S. Supreme Court’s 2023 decision to end affirmative action in college admissions.

The fast-food corporation intends to retire specific diversity goals for senior leadership positions and discontinue a program that encouraged suppliers to implement diversity training and enhance minority representation within their leadership teams. Additionally, McDonald’s will pause participation in external surveys that assess workplace inclusion, a move similar to recent actions by companies like Lowe’s and Ford Motor Co.

Despite these changes, McDonald’s emphasizes its ongoing commitment to fostering an inclusive environment. The company reports that 30% of its U.S. leaders come from underrepresented groups and that it has achieved gender pay equity across all levels since setting that goal in 2021. McDonald’s also plans to continue supporting efforts to maintain a diverse base of employees, suppliers, and franchisees, and will keep reporting its demographic information.

This development aligns with a broader trend among major corporations reassessing their DEI strategies in response to legal and societal shifts. Companies such as Walmart, John Deere, and Harley-Davidson have similarly rolled back diversity programs following the Supreme Court’s ruling and subsequent conservative backlash.

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Tesla Accused of Replacing Thousands of Laid-off U.S. Workers With Foreign Employees on H-1B Visas

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2 weeks ago

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December 31, 2024

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Reports have surfaced alleging that Tesla replaced thousands of laid-off U.S. workers with foreign employees on H-1B visas, prompting scrutiny of the company’s hiring practices and raising questions about broader labor policies. This controversy gained traction following Tesla’s April 2024 layoffs of approximately 15,000 employees, particularly in Texas and California, and the company’s subsequent requests for over 2,000 H-1B visas—more than three percent of the total available nationwide.

The H-1B visa program allows U.S. companies to hire foreign workers for specialized roles when there is a shortage of qualified domestic candidates. However, critics argue that the program is sometimes exploited to replace higher-paid American workers with lower-cost foreign labor. In Tesla’s case, some former employees have claimed that senior engineers were replaced by younger, less experienced foreign engineers at significantly lower salaries.

This has sparked concerns about potential misuse of the H-1B program, with critics alleging that companies like Tesla may be prioritizing cost-cutting measures over the retention of skilled U.S. workers.

Tesla CEO Elon Musk, who is an immigrant and has benefitted from U.S. visa programs, has been an outspoken defender of the H-1B program. In a recent post on his social media platform, X, Musk sharply responded to critics calling for reforms to the program. He emphasized the importance of H-1B visas in attracting talented individuals who have contributed to the growth of companies like SpaceX and Tesla, which he argued have played a significant role in strengthening the U.S. economy. Musk’s comment, quoting a line from the film Tropic Thunder

, sparked a wide range of reactions, further polarizing opinions on the issue.

Supporters of the H-1B program, including Musk and entrepreneur Vivek Ramaswamy, argue that the U.S. faces a shortage of skilled workers, especially in STEM fields, and that foreign talent is essential for innovation and economic progress. They contend that the H-1B program helps fill these gaps and sustains U.S. competitiveness on the global stage.

On the other hand, critics, particularly from conservative groups, argue that the program is often misused to displace American workers and should be reformed to ensure it is used for its intended purpose—addressing real talent shortages rather than cutting labor costs.

The Tesla situation adds to the broader debate over immigration and labor policies in the U.S. As the discourse continues to intensify, Tesla’s use of the H-1B program may serve as a focal point in discussions about labor policy and its impact on American workers, particularly in the technology sector.

SOURCE: ELECTREK

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