Stanch the flow

Fraudsters have stolen an unprecedented amount of U.S. COVID-19 relief funds — possibly more than the GDPs of many world economies. But millions of dollars had already been streaming from government programs long before the pandemic, and those cases hold valuable lessons. Here’s how to stanch the flow of money from vulnerable agencies.

Fraud in federal programs is getting bigger, more complex and more ambitious than ever. Although the unprecedented public spending in the wake of the COVID-19 pandemic — and the similarly unprecedented amount of taxpayer dollars lost to fraud — have drawn more attention to this problem in recent years, the government’s fraud woes long predate the pandemic. Consider the complex fraud case of Eugene Sickle, the former deputy executive director of the Wits Reproductive Health and HIV Institute, a South African research institute focusing on sexual and reproductive health and vaccine-preventable diseases. The U.S. Agency for International Development (USAID) was the institute’s primary source of funding, and Sickle administered U.S. grant funds for its projects.

In October 2015, Sickle and his boss signed a noncompetitive $206,250 subcontract with a company called Alzar Consulting Services Ltd. to develop a mobile phone software application to facilitate safer childbirth deliveries in South Africa. An individual, named “Dr. Carla Das Neves,” signed the contract on behalf of Alzar. However, both Alzar Consulting and “Carla Das Neves” were complete fabrications. Subsequent investigation revealed that Sickle created Alzar in the British Virgin Islands, and he was the sole owner of the company. Sickle created email accounts for Alzar and numerous fake Alzar employees, including “Carla Das Neves,” to mislead USAID and his colleagues at the Wits Institute. He even created a fake LinkedIn page for “Carla Das Neves” to support her supposed credentials as a trained expert in international development. Sickle didn’t perform any of the work required under the contract, nor did anyone else. None of the USAID grant money was used for its intended purpose to facilitate safer childbirth in South Africa. Instead, Sickle diverted the money to himself and an accomplice. [See “Former Deputy Executive Director of USAID Contractor Sentenced for Theft of Grant Funds,” U.S. Department of Justice (DOJ), Aug. 1, 2017.]

Sickle’s scheme involved elements of diversion, contract steering, subcontract self-dealing, document falsification, fictitious entities with opaque ownership and ghost employees, and even social media deception. His case demonstrates the deviousness of some fraudsters who stole U.S. government grant funds — long before the disbursement of COVID-19 relief monies.