Massive Fraud Missing From $318 Billion Stimulus, Biden Says

Some $318 billion in federal stimulus money has been paid out to build new roads and help the jobless as part of the American Recovery & Reinvestment Act that passed in February 2009. Since then, Vice-President Joseph Biden, asked by President Barack Obama to monitor the spending splurge, has feared a massive fraud case might undermine support for the program.

Thus far, it hasn’t happened.

The early success owes much to “crowd sourcing” and data mapping techniques the Obama administration has adopted to track stimulus outlays and detect fraud, Bloomberg Businessweek reports in its May 3 issue. “I expect it to be a template from this point on how the federal government deals with taxpayers’ money,” says Biden.

A website features splashy interactive graphics to detail spending -- and urges online visitors to e-mail tips about suspected fraud. It’s the surest way to prevent, say, a convicted contractor from reincorporating a new company under his wife’s name and applying for stimulus money, said Earl Devaney, the special inspector general who oversees stimulus spending.

“Only local folks can connect those kinds of dots,” he said.

A more aggressive anticorruption effort takes place from a Pennsylvania Avenue office, where a fingerprint scan is required for entry into a windowless “Recovery Operations Center.”

There, staffers scrub government databases and public records, looking for bankruptcies, past criminal records, tax liens, and other signs of trouble from individuals or companies seeking public stimulus funds.

Doppler for Scams

The aim is to catch fraud before it happens. Digitized maps are projected onto screens to analyze data from neighborhoods receiving federal spending.

It’s Doppler radar for scams: One map aggregates contract spending and crime levels, while another focuses on foreclosure rates or reported Medicare fraud. The data guide Devaney’s team about what projects might deserve scrutiny.

Devaney has opened 245 fraud investigations, though no indictments have been issued. Typically, U.S. programs lose 7 percent of their money to corruption, says the Association of Certified Fraud Examiners. Do the math, and that suggests $60 billion of the $862 billion stimulus program is at risk.

“You can’t throw that much money out that fast without having it abused,” says Senator Tom Coburn (R-Okla.). Biden and Devaney hope their surveillance system will limit the damage. “My rear end is on the line,” says Biden. “And the president’s credibility is on the line.”

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