“Capitalism” 2.0: Stimulus Fraud Could Reach About $50 Billion
June 12th, 2009Via: MarketWatch:
Swindlers, con men, and thieves could siphon off as much as $1 out of every $10 spent as billions of dollars in stimulus money begin flowing into all corners of the economy in coming months.
Companies will face increased pressure to try to stem the tide, and need to be prepared to safeguard data as well as the cash, according to David Williams, the chief executive of Deloitte Financial Advisory Services.
Williams said this week that the money flowing from the current stimulus package is particularly vulnerable to fraud because almost all movement of money is now done electronically.
“We’re telling our clients to be very careful and to make sure their firms are resilient in terms of dealing with the potential opportunities for fraud and waste,” Williams said.
That means keeping an eye out for the traditional scams such as billing for services not performed. But it also means firms must become even more diligent about electronic records and network security.
“It becomes ever more important that firms remain diligent about their data,” Williams said.
Earlier this month, FBI director Robert Mueller warned the nation to brace for a potential crime wave involving fraud and corruption related to the economic stimulus package. “These funds are inherently vulnerable to bribery, fraud, conflicts of interest, and collusion. There is an old adage, that where there is money to be made, fraud is not far behind, like bees to honey,” Mueller said. See full story.
Earlier this month, Vice President Joe Biden said some stimulus-related scams had already happened and that mistakes were inevitable. President Barack Obama said Monday that the White House is trying to make sure the stimulus money isn’t being ill-spent.
He said many of the safeguards and transparency measures “so far seem to have worked” but added his administration will have to stay vigilant.
“At a time when everybody is tightening their belts, the last thing the American people want to see is that any of this money is being wasted,” Obama said.
Potential damage
Williams suggested that the fraud and theft losses from the roughly $787 billion stimulus package approved earlier this year could reach about $50 billion.
“The rule of thumb typically is that of the about $500 billion worth of money that’s going to run through the procurement process, somewhere between 5% and 10% of that usually finds it way into potential problems,” Williams said. “That’s sort of the benchmark that I use.”
What’s the difference between money falling into the pocket of a con artist and money falling into the pocket of Sam Walton? The con artist’s use of his money will be less damaging to the overall welfare of the world community than that falling into the pocket of Sam Walton. Just another example of the nightmare logic that underlies advanced civilizations.
Only $50 billion? We should be so lucky.
Funny how ‘swindlers, con men, and thieves’ are the ones we’re warned might pull this sort of thing, while high placed executives and bureaucrats go unmentioned, and by implication stimulus that reaches its intended destination ISN’T a swindle.