When COVID-related shutdowns started wreaking havoc on businesses, jobs and paychecks, Congress and the White House came to the rescue, providing a financial life preserver worth trillions of dollars. The payments are credited with helping stave off financial disaster for millions of individuals and small businesses.
But as the money flowed to individual bank accounts in the form of Paycheck Protection Program loans from the Small Business Administration and Labor Department-backed state unemployment checks, fraudsters, identity thieves and cybercriminals were salivating at the chance to take it.
Some criminals succeeded before Florida-based Secret Service Agent Roy Dotson and a 19-member team stopped them. Dotson’s pandemic relief recovery team ultimately shut down schemes affecting 54 states and territories, seizing more than $1.2 billion in stolen funds. The agents also helped identify more than $2.2 billion in additional funds that fraudsters had requested before they could get their hands on the money.
“The scope and scale of the damage prevented through the exceptional efforts of the Secret Service investigative team and their financial partners is of national level significance and cannot be overstated,” said Secret Service Director James Murray.
“The integrity of the CARES Act and other pandemic financial relief processes were undoubtedly preserved,” Murray said, referring to the Coronavirus Aid, Relief, and Economic Security Act of 2020 and the American Rescue Plan Act of 2021.
George Mulligan, the Secret Service’s chief operating officer, said “sophisticated criminals attacked the most vulnerable people at their most vulnerable time. To be able to stop that and prevent that was absolutely impactful.”
But the effort went beyond helping individuals and the integrity of the federal programs. It also assured the soundness of unemployment benefit systems in states across the country that were inundated with illegal claims and had to devote resources to protect their financial health and stop the flow of funds to illegal schemes.
“We were able to jump in there and rescue those programs in those states on a large, large scale,” Mulligan said.
Dotson’s previous work in law enforcement helped his team’s success. He started his career as a police officer and detective, then joined the Secret Service in 2003, where he successfully worked on two of the largest cases in Secret Service history: an international money laundering platform widely considered to be the original cryptocurrency, and an online $120 million Ponzi scheme.
“When it first started, I had contacts at a local bank that called me on cases regularly,” he said. “They called me to say that they had an individual who had received multiple state of Washington unemployment payments. And this was a Florida resident, and it was somebody I knew who was tied into moving money for bad people at times. I knew that was a red flag.”
Forty-five minutes later, he said, the bank “called me back to say, ‘We have another client who is doing the same thing.’”
Realizing that this was much broader “than just my little Central Florida area,” Dotson and his colleagues worked with the Treasury Department’s Financial Crimes Enforcement Network as well as the Department of Labor and Small Business Administration inspectors general, and other state and federal agencies’ investigative units, to alert the financial sector to this emerging fraud. The group asked the nation’s 30,000 banks if they, too, were seeing signs of similar fraud.
“And the phones have never stopped ringing since,” Dotson said.
Fraudsters included thieves who used the internet to submit fraudulent online applications for unemployment benefits and SBA loans. They used phishing schemes to socially engineer online relationships with individuals to assist with laundering the criminal proceeds. Some posed as potential romantic partners, others as people in dire need of help because of an unfortunate accident or incident.
The fraudsters included domestic criminal gangs as well as transnational organized crime groups, such as the South African criminal organization called Black Axe, that use technology to disguise their locations and identities while committing crimes.
“Roy and his team really pulled together to attack this fraud on a nationwide basis,” said SBA COVID Fraud Coordinator Michelle Blank.
The vast number of banks and people defrauded would normally have created a procedural nightmare requiring individual seizure warrants for each of thousands of accounts, taking months. But Dotson found a workaround and was able to seize multiple bank accounts with a single warrant. He and his team also helped train 1,500 law enforcement officials and financial sector investigators so the cases could be prosecuted.
“This has become an investigative model used across the federal law enforcement community,” he said.
With at least 196 arrests and more than 250,000 financial accounts impacted, this became the biggest fraud investigation in Secret Service history.
“You’re getting these individuals off the streets and safeguarding American citizens,” Murray said. “This is not something you can make up. This is what happens when you have a great cohesive approach to public and private sector engagement.”