Fraud Nation

Though private fraud gets the bigger headline (think Bernie Madoff), fraud in federal government programs is now so pervasive that even the Obama press is taking notice. The scope of fraud in all federal programs dwarfs the corruption in the private sector the media loves to sensationalize.

Consider the fraud in the Wall Street bailout. Here’s just one example.

This past week, the Inspector General for the TARP $700 billion bailout reported that taxpayers will "almost certainly" lose money on their investments in the "too big to fail" financial institutions.  One reason, it’s safe to say, is contained in Neil Barofsky’s revelation that he is conducting 65 separate investigations of possible fraud involving TARP funds.

Barofsky criticized then-President of the New York Federal Reserve (and now Treasury Secretary) Tim Geithner specifically for the bailout of one of those institutions, AIG (American International Group), the largest insurance conglomerate in the world.  Barofsky says that the initial $85 billion credit line given AIG came with a bailout plan designed by Geithner the terms of which “were unworkable".

That’s being polite. The Barofsky report documents that credit default swaps worth 40 cents on the dollar were bought at 100 cents on the dollar under the Federal bailout terms, funneling "tens of billions of dollars of government money…inexorably and directly to AIG’s counterparties"–including Goldman Sachs.

According to Bloomberg news this week, Geithner arranged for Goldman Sachs to receive full payment on credit default swaps they had purchased rather than 40 cents on the dollar AIG proposed. A Fed-run entity called Maiden Lane III was used to sell these CDSs, which cost American tax payers at least $13 billion dollars at the time. It is currently estimated that due to a continuing decline in value, this bank favoritism case could cost the American tax payer $35.6 billion.

To quote Bloomberg: "The deal contributed to the more than $14 billion that over 18 months was handed to Goldman Sachs, whose former chairman, Stephen Friedman, was chairman of the board of directors of the New York Fed when the decision was made."

Consider the fraud in the "American Recovery and Re-Investment Act of 2009"–the infamous "Stimulus Bill"

With about half of the $787 billion authorized in this bill now spent, the president is desperate to show jobs "created or saved" since over 3 million jobs have disappeared in the ten months of the Obama Presidency.

Last week, the president proudly proclaimed that 650,000 jobs had been "created or saved" and that the Great Recession would have been much worse had it not been for his leadership.

Sadly, fraud again. The Recovery Act set up the Recovery Accountability and Transparency Board ($84 million annual budget) which spent another $18 million to launch the website to "foster greater accountability and transparency" by tracking the "created or saved" jobs.

This is the site proudly documenting the "650,000" jobs figure and backing it up with state by state breakdowns of the projects and the jobs.

Heritage Foundation and ABC News (among others) were quick to report that thousands of jobs and millions of dollars were reported in Congressional Districts that did not exist.

New Mexico Watchdog was the first to report that the listing at of $26 million spent on New Mexico’s 13 Congressional Districts must be a mistake–New Mexico has just 3 Congressional Districts.

Similar reports soon followed from Virginia, West Virginia, Kansas, Ohio, New Hampshire, and Minnesota.

Then an avalanche of ridicule.  South Carolina’s 7th District is listed as receiving $27 million in stimulus funds–that District was eliminated in 1930.  Virginia’s 12th District got $2 million–there hasn’t been a 12th Virginia since the start of the Civil War.

So, was this near doubling of the House Districts a clerical error, or a fraudulent puffing of the figures, or what?  Ed Pound, "Communications Director" for the Board said the site merely reported "what the recipients submit to us" and unless "an egregious error is noted" the site posts the information exactly as submitted.

Ed didn’t define "egregious error" but reporting that the "99th District" of North Dakota received $2 million should have qualified since that state has only one Representative.  For North Dakota to have 99 Representatives, it would need a population over 60 million or 24 million more than California.

Calling even more attention to this fiasco, abruptly reduced without explanation the "created or saved" number by 60,000 while stating that no further corrections would be made until January.

As the Senate considers the Health "Reform" bill, consider the fraud in the health programs already administered by the Feds.

According to a report this week from Obama’s own Centers for Medicare and Medicaid Services (a program of the Federal HHS), Medicare fraud costs American taxpayers $47-60 billion per year!

Example:  In Houston, Medicare paid $5000 each (total $1 million) for wheelchairs for a clinic where every order was a fraud.

Recent press reports from around the country tell of organized crime rings bilking Medicare and Medicaid.  The total numbers are staggering.

Example:  12.4% or $47 Billion was paid by Medicare in FY 2009 in fraudulent fee for service claims.

Example:  The same report states that 9.6% or $18.1 Billion in fraudulent Medicaid claims was paid in FY 2009

No wonder many Americans wonder why the President doesn’t clean up existing federal health programs before claiming it would save money to have the feds run the rest of the health care system.

This week’s report on hunger in America set off yet another call in the Obama Administration and the Congress to expand the food stamp program.  Congress should first look at the fraud in that program.

A 57-count indictment handed down in Federal Court in Louisiana this week accuses fourteen people, mostly state health workers, of diverting emergency food stamp money meant for hurricane victims to themselves and their families.

A bloated nanny state federal government is injury enough to the Constitution that once limited government and bestowed the blessings of liberty. Pervasive fraud in our federal government adds an insult that should cause every American to oppose the Obama expansion of every one of these fraud ridden programs.