Bay Area prosecutors warn of stimulus fraud

August 12, 2009 7:18:58 PM PDT
A rare gathering of several of the Bay Area's top prosecutors in San Francisco today came with a warning to anyone thinking of taking advantage of the billions of dollars in federal stimulus money coming California's way: they're watching closely.

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The news conference at the U.S. Attorney's Office was led by California Inspector General Laura Chick, appointed in April by Gov. Arnold Schwarzenegger to oversee the state's spending of funds under the American Recovery and Investment Act. Similar events are planned throughout the state, she said.

"Any waste or fraud will be hit early, and it will be hit publicly," Chick said. She said the message today was about "deterrence."

Chick was flanked today by U.S. Attorney Joseph Russoniello and district attorneys from San Francisco, Alameda, Santa Clara, San Mateo and Napa counties.

Russoniello and the various district attorneys pledged there would be a cooperative federal, state and local effort to quickly identify scammers and other cheats, and carry through prosecutions of fraud.

Russoniello said they would "give high priority to the prosecution of unscrupulous individuals and enterprises intent on illegally benefiting from programs designed to help Californians get through this economic downturn."

The event was also attended by city auditors from San Francisco, Oakland and San Jose. They are expected to help ensure government disbursement of stimulus dollars is above board.

Russoniello said of the collaborative effort that he was "very hopeful that we will be able to make a significant impact here."

Officials are worried that some fraudsters will prey on the desperation of those most affected by the downturn in the economy.

Today they estimated that about 10 percent of the federal stimulus money could be lost not only to fraud, but also to waste and abuse.

According to Chick, California could receive between $50 and $80 billion in federal stimulus money in the next two years. About $10 billion would go to local government grants and community organizations.

Chick said she was concerned primarily about non-governmental organizations taking advantage of consumers or overcharging the government for services, but also about corruption such as fraudulently formed "shell companies" and rigged bidding for contracts "to your buddy who's funded your last campaign."

It's not just about fraud, Chick added, it's also about "stupid spending."

"This money is very much intended to help the economy, to create jobs," she said.

"This is public money," said District Attorney Kamala Harris.

"We are going to expect that the recipients of this federal money are going to follow the rules," Harris said.

The group did note that groups should not be afraid to apply for stimulus funding, but should contact local officials with questions.

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