The Caucus Blog – Pandemic Fraud in Chicago

Hundreds of Chicago Municipal Employees Being Investigated for COVID Relief Fraud

More than 1,000 federal COVID-19 relief loans for struggling businesses went to city of Chicago employees. And while the city’s Inspector General said in a recent report that some of the loans had been obtained legitimately, a substantial number of the identified loans have indicators of potential fraud. 

Chicago City Hall Inspector General Deborah Witzburg said her office examined more than 350,000 federal COVID-19 loans approved in the Chicago area. Of those, she found more than 1,000 loans that city employees got from the Paycheck Protection Program and Economic Injury Disaster Loan Program. Disciplinary proceedings have started against a Streets and Sanitation Department worker who allegedly falsified tax records and reported fake business income for a hair salon.

The pandemic fraud investigation has lasted more than a year, and the list includes members of the police and fire departments. The investigation will prioritize people in positions of elevated public trust and will be pursued either administratively or criminally, Witzburg noted. COVID fraud has been rampant nationally, with a federal watchdog estimating that 17 percent of the $1.2 trillion handed out in various relief programs was obtained fraudulently. 

The IG’s jurisdiction includes all city employees, elected and appointed officials, and city contractors and vendors. In addition, other local watchdogs, including inspectors general overseeing Cook County, the Chicago Housing Authority, and Chicago Public Schools, have been investigating potential fraud or violations of personnel rules around ethics and secondary employment. 

The Cook County IG released two reports that found instances of federal fraud at the county’s Water Reclamation District and health system. Four employees at the MWRD office were found to have defrauded the government, and all were either terminated or resigned. An MWRD police officer used a $20,000 loan for a long-haul hazardous waste freight transportation business to make unauthorized purchases, the report indicated. Another MWRD employee received two PPP loans totaling $21,000, plus an Economic Injury Disaster Loan for at least three businesses she had claimed to own and operated. The employee obtained the loans and converted them to use for personal use and private gain. She did not comply with the investigation and later resigned. 

Six Cook County employees quickly resigned after they were found to be under investigation for fraudulently obtaining PPP funds that totaled more than $200,000. A seventh employee obtained loans over $50,000, with the investigation finding no records of running a business while also improperly spending funds on personal expenses. That employee has been recommended to be fired and placed on the ineligible for hire list. 

These reports come on the heels of over 170 state employees being investigated for defrauding the federal Paycheck Protection Program, one of the federal government’s COVID-19 relief efforts. Those investigations were described in September as far from being finished. 

And back in July, a Performance Audit Report of the Illinois Department of Employment Security (IDES) showed that Illinois overpaid unemployment benefits to the staggering figure of $5.2 billion during the first 18 months of the COVID-19 pandemic. Included in that sum were $6 million paid to deceased individuals and $40.5 million in unemployment checks to incarcerated individuals. And those numbers could be even worse once all investigations are concluded.