'Run on the honor system': Feeding Our Future case among hundreds involving pandemic aid
News this week that Minnesota nonprofit Feeding Our Future is allegedly at the center of a $250 million fraud scheme wasn't just local news; it made national headlines. The nonprofit's founder has pleaded not guilty.
Though the case’s size is notable, it's not the only one involving the misuse pandemic relief funds. Investigative reporter David Fahrenthold has been tracking this for The New York Times and joined All Things Considered Friday to talk about how so many people were able to exploit pandemic relief programs.
To hear the conversation, click play on the audio player above, or read a transcript of it below. The interview has been lightly edited for clarity and length.
When he announced indictments in the Feeding Our Future case, U.S. Attorney Andrew Luger called it “brazen” and emphasize the sprawling nature of the case. What stood out to you when you heard the news?
Just the size of this, both in terms of the amount of money — allegedly stolen 240 plus million dollars — and the end the number of people — 48 have been charged so far. But within that you see that they lay out six different conspiracies under this broader umbrella. So it wasn't just that one person went bad or one group of people went bad. Allegedly there were six different groups of people operating versions of the same scheme and getting away with it. For quite a long time and getting quite a lot of money that way.
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This isn't the only case of people exploiting federal aid. I read on the Department of Justice Major Fraud Unit webpage that, as of March, there were criminal charges against over 1,000 defendants with over $6 billion of CARES Act funds in question. Walk us through similar cases you've seen.
Most of the cases so far have come out of three different federal relief programs. There was unemployment insurance — people could get expanded unemployment benefits under these acts — and there were two loan programs, the Paycheck Protection Program and something called the Economic Injury Disaster Loan, or EIDL program. All of those were giving out huge amounts of money to people all over the country and, unfortunately, all over the world, too.
The flaw they all shared was that they were run effectively on the honor system. So you could say, “Hey, I had a business and it was affected by COVID. I need this relief.” And that was just about all that it took to get this money. And we're finding out now that many people used that honor system to get lots of money they didn't deserve.
Just to pick one example that I think stands out and illustrates how brazen this became, there was a guy in California who was a rapper named Nuke Bizzle. He made a rap video, posted on the Internet in late 2020, that described without really even using euphemisms how he was stealing unemployment benefits from the state government in California. He even named the song “EDD,” which is short for Employment Development Department, the department in California that he was stealing the money from. He talked about his methods, he showed the envelopes he was getting from the state. That kind of thing was happening all over the country.
I think we can all agree that in the early days of the pandemic, it really called on all of us — people, government and nonprofits — to take action overnight. In fact, I can't remember a time when so much government money was distributed so quickly. So maybe it is understandable that safeguards fell by the wayside. But are those weaknesses or loopholes limited to the pandemic?
You're right. What happened in the first days of the pandemic was an incredible outpouring of money. It was very different than the closest recent parallel, which would have been the 2008 financial crisis. The government gave money, a lot of money, but to limited numbers of people, banks and governments. [What we saw during the pandemic] was a huge amount of money being given to just everyday people.
But often the programs that they used to distribute the money had existed before, but in much smaller and more restricted ways. And they were troubled by fraud anyway, [before] they expanded them from limited programs to programs that just about anybody can access. And they explicitly took away some of the safeguards that had existed before COVID, telling for instance, the program in Minnesota that state regulators don't have to go out and see if you're actually feeding children at the site where they're paying you to feed children.
Here in Minnesota, Republican lawmakers have been critical of Democratic Gov. Tim Walz and his administration for lack of oversight in the Feeding Our Future case. How culpable are state governments in all of this?
What happened in Minnesota does stand out. We know this program that was allegedly stolen from the Minnesota was active in every state, but only Minnesota had this gigantic fraud.
The state's response has been that they tried to stop this. They actually put a hold on some of the new applications Feeding Our Future was sending them to start new sites, to give them more scrutiny. But Feeding Our a Future sued and it worked.
What lessons do you think government agencies need to learn, and where should they focus their attention to prevent future fraud cases?
You would hope that before the next pandemic, the next disaster, where people expect the government to play this role, that there is some effort put into using IRS data, Social Security data or something else to build an effective system within the government that can be used to check identities, that can be used to check claims about people's financial information — and do it quickly enough that it's plausible to do it in the middle of an emergency. It would be terrible if after this experience, after all these sort of hard lessons, the government sort of starts at zero and just uses the honor system again.