COVID Frauds of the Week: The DOJ Drumbeat Goes On, with Help from an Investigative Journalist

This past week, the drumbeat of government enforcement actions to address rampant fraud in COVID-19 contracts and small business loans continued, with a remarkable assist from an investigative journalist.

An Investigative Journalist Takes a Ride – and Discovers PPE Fraud

In Virginia, Robert S. Stewart, Jr., the founder, and president of an Arlington-based company, ironically named Federal Government Experts LLC, pleaded guilty to making false statements to three federal agencies as part of a multi-faceted scheme to obtain more than $38 million in COVID-19 related government contracts and loans, as well as military service benefits.

Stewart’s fraudulent actions appear to have been brought to the government’s attention last spring by reporting by a ProPublica investigative journalist, J. David McSwane, who traveled along with Stewart on a 36-hour quest aboard a private jet to collect six million N95 masks that Stewart had agreed to provide to the Department of Veteran Affairs at a total cost of $35 million.  The masks were supposed to be provided to nurses and doctors fighting the COVID-19 pandemic in the VA healthcare system.  But, as is now apparent from his guilty plea, Stewart never had the masks to begin with.  He had lied to procurement officials at the VA and FEMA to win several lucrative non-bid contracts.  And he lied to officials at the Small Business Administration to obtain $261,500 under the Paycheck Protection Program and Economic Injury Disaster Loan Program.  Stewart used some of this money on extravagant personal expenses, such as the private jet flight (with his parents in tow!) described in the ProPublica article.

Stewart’s gross incompetence in attempting to deceive the government would be almost comical but for the cost and delay it caused to honest efforts by others to fight the pandemic.  It also raises serious questions about possible corruption within the government by well-connected individuals who enabled Stewart’s fraud.  As reported by J. David McSwane, prosecutors this week did not object to Stewart’s request to remain free under court supervision following his guilty plea, saying that Stewart was needed to assist in a separate congressional investigation into the flawed coronavirus response, hinting that more damning facts may yet come to light.

Other DOJ Enforcement Actions Related to PPP, PPE, and UI Fraud

In other federal enforcement actions this past week:

• A California man pleaded guilty to fraudulently obtaining more than $1 million in PPP loans for a sham company.
• A Mississippi businessman was charged with hoarding PPE and price-gouging health care providers, including numerous VA hospitals.
• Six individuals were indicted for fraudulently obtaining more than $1.5 million in PPP loans for multiple businesses in Georgia and South Carolina; five men plead guilty in connection with this scheme.
• A North Carolina man pleaded guilty to fraudulently applying for more than $150,000 in COVID-19 Unemployment Insurance from multiple states.
• A federal grand jury in Buffalo, New York returned an indictment charging two brothers with filing eight fraudulent PPP loan applications seeking $7 million for their company.

As these indictments and guilty pleas demonstrate, DOJ is continuing to aggressively root out fraud in COVID-19 related relief programs, spawned, no doubt, by the rushed manner in which these trillion dollar government programs were rolled out together with the brazen greed of some individuals.  There remains an open question about how much of this fraud against government programs is the result of past or present corruption within the government itself.  Whistleblowers with knowledge of suspicious interactions between private actors and public agents can help solve this puzzle.

If you have information about frauds related to COVID-19, or any other fraud on government programs, please contact us.

Read more:

• COVID-19 Fraud
• Our other posts on COVID Frauds of the Week
• Fraud in Government Programs
• Government Loan Programs
• False Claims Act
• SEC Whistleblower Program
• The Constantine Cannon Team
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