Gangs used pandemic aid to rake in money for crimes; weak screening opened big opportunity

The Insane Crip Gang was a fearsome presence on Long Island in New York, blamed for two dozen attempted murders, at least three successful slayings and a host of other crimes.

In recent years, the group started funding its activities in a most unusual way: by stealing pandemic benefits.

The gang worked up a fraud manual to help members fabricate businesses, submit pandemic loan applications to the Small Business Administration, defeat the screening software meant to weed out bogus claims and collect the cash.

Gang members also rushed to apply for unemployment benefits. California’s notoriously frail program was a particular target.

During a single month in 2020, Insane Crip Gang (ICG) members managed to bilk the state out of $200,000 in bogus unemployment payouts.

“They used this money to fund the gang, buy guns and live a lavish lifestyle,” Carolyn Pokorny, first assistant U.S. attorney for the Eastern District of New York, said in announcing the charges this spring.

Federal authorities say street gangs, including the Woo gang in Brooklyn, New York, and the Step and Die gang in Shreveport, Louisiana, figured out what Russian and Chinese hackers, Nigerian scammers and regular American grifters knew during the pandemic: that the government was giving out money with little regard to who was asking.

Authorities say taxpayers gave money to fuel the gangs’ activities.

Two of the three big pandemic assistance programs involved small-business lending and enhanced unemployment benefits. Authorities are still struggling to put a dollar figure on the fraud but have indicated it runs into the hundreds of billions of dollars.

Those relief programs are over, but the gangs have moved on to other government programs such as food stamps and unemployment insurance, said Haywood Talcove, CEO of government at LexisNexis Risk Solutions.

The numbers may be slightly smaller than the pandemic payouts, but the cash still flows.

“The benefit programs are providing the capital that these criminal organizations use to invest in their business,” Mr. Talcove said.

The gangs sometimes spend the money on conspicuous consumption like most other white-collar criminals. That means vacations, real estate and particularly flashy cars.

Other times, Mr. Talcove said, it is used as seed money to engage in sex trafficking, load up on more firepower or buy shipments of drugs to sell on the street.

Prosecutors say the ICG was trying to defraud the Small Business Administration, which doled out more than $1.4 trillion in grants and loans to keep businesses afloat, and to defraud the unemployment system. Gang members walked away with more than $200,000 from California’s unemployment program.

The indictment also covers murders, attempted murders and firearms offenses.

“This gang celebrated its violence on social media, using that same social media as a recruiting tool, and financed its activities by systematically stealing from government benefit programs designed to aid the unemployed and those adversely impacted by COVID,” said Anne T. Donnelly, district attorney in Nassau County, New York.

Flaunting on social media is a common thread in gang cases.

Members of Step or Die, the Louisiana gang, posted photos of themselves fanning out cash and clutching firearms.

Authorities say 24 gang members filed more than 40 bogus pandemic business loan applications worth $2.2 million and were paid about $600,000 of that.

In Brooklyn, members of the Woo gang bragged in a music video on YouTube about stealing pandemic unemployment benefits.

Prosecutors say they used more than 800 stolen identities and filed nearly 1,000 unemployment claims with New York totaling $20 million. They collected $4.3 million.

The 11 people charged have accepted plea deals and await sentencing.

One defendant in the case against the Step or Die gang has agreed to plead guilty. The others are awaiting trial.

The defendants in the Crips case out of Long Island have also pleaded not guilty and are preparing for trial.

Sen. Joni Ernst, Iowa Republican, finds the whole situation appalling.

She said the SBA was running “a drive-thru for fraudsters.”

“The agency cut billions of dollars of checks to almost anyone who asked, in any amount requested, without even doing simple background checks or verifying the accuracy of applications,” Ms. Ernst said.

Mr. Talcove said punishments for the pandemic cases tend to run lower than other criminal activities.

Indeed, one former Crips gang member in California cited that fact in pleading for a lower sentence.

Christina Smith, a onetime member of the Hoover Crips out on parole, had her friend still inside prison gather inmates’ identities. Smith then submitted unemployment applications under those names that netted more than $200,000 in bogus pandemic payments.

Smith, who spent some of the money on plastic surgery, got a five-year prison sentence.

Her attorney said she seemed to be punished more than other pandemic fraudsters because of her criminal gang history.

“It simply should not be that a mentally ill, African American woman who has endured poverty and strife her entire life should be penalized more harshly than white-collar professionals for similar or much less egregious conduct,” said Jaya C. Gupta, the public defender who handled Smith’s case.