A Felon On Home Confinement Was Caught Robbing The Government In Epic…

Here’s another story of fraud and abuse of pandemic relief programs that shows the government’s incompetence in distributing billions of dollars in aid.

Carlos Smith, a convicted felon who had already been serving time for tax fraud and identity theft, managed to steal more than $400,000 from federal pandemic relief programs while under house arrest. This case highlights the alarming lack of controls and oversight on the billions of dollars that the government disbursed as an aid in response to the pandemic.

Smith was sentenced to four years in prison this week for his pandemic fraud as part of a plea agreement with federal prosecutors. Court documents reveal that Smith had been released from prison and was serving out the rest of his sentence under home confinement when he started applying for money from the Paycheck Protection Program (PPP) and the Small Business Administration’s Economic Injury Disaster Loan program (EIDL).

But this was not Smith’s first brush with the law. In 2016, Smith was caught filing false income tax returns and aggravated identity theft. He used his company, CLS Financial Services Inc., to obtain personal information from people seeking help with credit repair or setting up credit card processing programs for businesses. He filed 92 false income tax returns, pocketed more than $1 million in tax refunds, and caused the Internal Revenue Service to issue $633,884 in fraudulent refunds.

In April 2020, after the pandemic hit, Smith used the same company, CLS Financial Services Inc., to apply for an Economic Injury Disaster Loan from the SBA. On the loan application, Smith claimed CLS Financial Services Inc. had two employees and gross revenue of $1.8 million in the prior year, even though the company had no employees and no revenue.

In July 2020, Smith used CLS Financial Services Inc. again to apply for a PPP loan, claiming he had 61 employees, but the company had no ongoing operations, employees, or payroll since Smith was in federal prison. In all, he got $421,900 in pandemic aid.

The pandemic relief programs, including the PPP, EIDL, and unemployment insurance program, were intended to help struggling Americans during the pandemic. However, they have shown to be highly susceptible to fraud, according to Michael Horowitz, chairman of the Pandemic Response Accountability Committee, who testified before federal lawmakers earlier this month. These three programs alone account for just under $2 trillion in pandemic spending, and yet they were administered without basic safeguards to prevent fraud.

Horowitz said some fraud could have been prevented by simply checking if the applicant was a legal entity that existed or whether the names, dates of birth, and social security numbers match. He further stated that many of these instances could have hit the pause button and taken a second look to ensure that the applicants were eligible.

As part of Smith’s plea deal with prosecutors, he will have to make restitution and is barred from conducting any business under CLS Financial Services Inc. He is also forbidden from tax preparation, fiduciary responsibility, telemarketing, direct mail or advertising, campaigns for businesses, and access to credit cards numbers, debit card numbers, social security numbers, or bank accounts not in his name during his three years of supervised release after serving his prison sentence.

This story highlights the urgent need for the government to implement effective controls and oversight to ensure that the pandemic relief funds are disbursed to those who need them the most. Until then, it is the taxpayers who will continue to bear the brunt of the government’s incompetence and lack of accountability.

Sources: Thepoliticalinsider, The Center Square