By Gregory Korte, USA TODAY
WASHINGTON (USA TODAY) - Despite thousands of fraud cases, the financial losses under the 2009 Recovery Act have been just a fraction of what the government expected.
Five years after President Obama signed the American Recovery and Reinvestment Act into law, investigators have proven 1,268 cases of fraud in the $840 billion stimulus program, resulting in $57 million in recovered funds.
Still, the amount of fraud discovered so far is far less than what investigators said they expected when Congress passed the stimulus package.
"We have not seen the level of fraud that I think many people feared," said Kathleen Tighe, the chairwoman of the board. The board, created by the Recovery Act, is charged with monitoring all the money spent in the stimulus and disaster relief funds from Superstorm Sandy. She credited unprecedented transparency, aggressive prosecutions and an emphasis on fraud prevention.
But with 97% of the money spent, investigators haven't closed the books yet. More than 1,550 active criminal investigations are ongoing, according to data from the Recovery Accountability and Transparency Board.
While the government keeps precise figures related to fraud, waste is more subjective. Government auditors say at least $8.1 billion could have been used more efficiently, even though it was properly spent.
A 2010 report by Sens. Tom Coburn, R-Okla., and John McCain, R-Ariz., listed 100 stimulus programs totaling $1.7 billion that they found to be wasteful. One example: a $68,891 grant to the University of Texas at Dallas to study citizen perspectives of the stimulus. It found, among other things, that citizens were more likely to give the credit to the president and Congress than state and local officials if their community received money from the Recovery Act.
Nothing since then has changed Coburn's mind. "Successfully pouring $840 billion down the drain with little spilling isn't success," said spokesman John Hart.
When Obama signed the Recovery Act into law five years ago Monday, less than a month into his first term in office, Republicans predicted a boondoggle. "The stimulus, by giving government agencies completely unprecedented amounts of money for sometimes nonexistent programs, also sets up near perfect conditions for waste, fraud and abuse," Sen. Lisa Murkowski, R-Alaska, said at the time.
A month later, the chief watchdog over that money - Tighe's predecessor Earl Devaney - told Congress he expected as much as 7% of it, $55 billion, to be lost to fraud.
The Recovery Board tracks fraud in a number of ways. But by even the most inclusive measures, the problems are fewer than Devaney predicted. Auditors have questioned $5.1 billion in costs because of issues like conflicts of interest or problems with eligibility.
Most susceptible to fraud were direct benefit programs like special one-time Social Security and Veterans Administration benefits and government-insured mortgages. But most of those cases were small, the most common being 503 cases of Social Security fraud involving a one-time $250 payment.
Other Recovery Act fraud schemes came in any number of forms:
• A father-and-son pair, Gregory and Terrance Yates, pleaded guilty Tuesday to defrauding a Department of Agriculture loan program of $1.7 million. The pair admitted to they did little or no work on the Casey, Ill., factory they were supposed to fix up in order to create 200 jobs, instead using their own construction company to dummy up invoices for work never performed. When sentenced in May, they could get up to 30 years in prison.
• Last year, Michael Booth of Brodhead, Wis., a subcontractor on a rural satellite broadband project in Wisconsin was sentenced to 15 months in prison after he claimed to have hooked up 273 fictitious accounts.
• Craig Grimes, a former Penn State University professor, was sentenced to 41 months in prison for a $3 million research grant fraud scheme. In one case, he tried to get two different federal agencies - the Department of Energy and the National Science Foundation - to pay for the same $1.9 million study, prosecutors said.
Some of these cases came because investigators were looking for fraud in ways they never had before. The nerve center of the operation is a "war room" a block from the White House that tracks data on every contract and grant, looking for warning signs of fraud like bankruptcies, foreclosures and prior wrongdoing by company officers.
Those fraud prevention efforts were expensive. The Recovery Act included $305 million to 29 inspector general offices to audit the spending and investigate allegations of fraud.
Federal officials also put an emphasis on preventing fraud, conducting 2,596 training sessions for federal and state officials to help them spot red flags.
Tighe tells of a training on grant fraud awareness she did for the Department of Education. A grant officer left the training, went back to his desk, and immediately found some paperwork that didn't look quite right - a high school tutor who tried to fraudulently collect on $3 million in bogus Recovery Act grants.
That instructor, Robert Friedland, 66, is now serving a 30-month sentence at a low-security prison in New Jersey.