As aid to the pandemic was directed to the main street, criminals seized PPP, EIDL

Korena Keys ’small business was a big hit when the pandemic debuted last year.

His digital media company, KeyMedia Solutions, in Sioux Falls, South Dakota, saw its sales fall 60% in May of the previous year. He got a loan from the Small Business Administration Payroll Protection Program for $ 115,000 to keep workers busy until things stabilized.

So when Keys received SBA paperwork in January that there was an additional $ 150,000 loan taken out on behalf of his company under the economic disaster loan program for financial injuries, he thought it might be a mistake. .

“We had made a conscious decision not to ask for any other help,” Keys said. “We thought we should leave these funds to companies that weren’t working so well.”

Although he says he did not receive the funds, the loan is very real and payments of about $ 800 a month will begin in November. Keys claimed the loan was approved, even though the app had inaccurate details about his business, including an incorrect phone number, email address and financial information.

“The shock really turned into frustration and anger,” said Keys, who added that other companies in his community had similar stories of identity theft in these aid programs.

He has filed complaints with the SBA’s Office of Inspector General and his fraud department, but his responsibility has not yet been removed, although he expects things to be resolved before the loan matures. They have spent hours, remaining in their business, trying to settle the loan.

“It has definitely caused some sleepless nights,” he said. “Until it’s in writing, I’m always worried. I’ll just stay tuned until it’s over.”

When the U.S. government and SBA rushed to get loans for companies ravaged by the pandemic last year, criminals exploited these aid programs, in some cases stealing identities from business owners to use this. information to fraudulently obtain loans for profit. A recent analysis of SBA’s OIG project fraud within the Covid-19 small business programs could reach $ 84 billion.

In all, the U.S. government has allocated more than $ 1 trillion in Main Street aid through the Check Protection Program and the Economic Disaster Loan Program. The PPP allows small businesses to borrow loans that can be forgiven if the borrower uses most of the payroll capital, while the Covid-19 EIDL program allows borrowers to access loans based on temporary loss of income due to the pandemic. There was also an advance grant available under the EIDL.

Reviews of both programs by the OIG warned of the potential for criminal exploitation due to the rapid nature of the deployment and the unprecedented demand for assistance, and a recent note from the Select Chamber Subcommittee on the Coronavirus Crisis establishes its extent. Up to $ 79 billion was made in potentially fraudulent EIDL loans and advances and up to $ 4.6 billion was made in potentially fraudulent PPP loans, the note said.

There have been 1.34 million EIDL loans and grants sent from the SBA to the OIG, including about 750,000 referrals on suspicion of identity theft and more than 585,000 referrals for other potentially fraudulent activities. There have been about 150,000 calls to the OIG GIS on advice and complaints about possible fraud, an increase of 19,500% over previous years, the note said.

The Justice Department has raised $ 626 million in funds confiscated or confiscated as a result of civil and criminal investigations by the EIDL and PPP, according to the March subcommittee’s analysis. The group’s report notes the Trump administration for its refusal to “implement basic controls” in previous iterations of last year’s aid programs.

In a statement to CNBC, the SBA said the Biden administration takes its responsibility seriously to safeguard taxpayer dollars and prevent fraud, waste and abuse in federal programs.

“In recent months, new improved controls have been established to intensify system validations that are used to mitigate the occurrence of fraud in economic disaster protection and check protection programs,” he said. “In cases of alleged fraud, SBA closely coordinates with the Office of the Inspector General, the Department of Justice and other law enforcement agencies to share information and support criminal investigations.”

“While the agency does not comment on individual borrowers, the lessons learned from these coordinated efforts with federal partners help inform and strengthen internal controls,” he added.

Some victims of program scams last year don’t even have small businesses.

Max Hebert is a veteran of the Marine Corps Reserve and is currently in the National Guard. It also meets grocery deliveries for Walmart. Last summer he received a notice in the mail at home in Eau Claire, Wisconsin, after being deployed in Ukraine with the National Guard. The letter had his name misspelled as “Max Herbert,” notifying him that an EIDL had been taken out of his name for $ 45,000, more money than he earns in a year.

Hebert, who has had a state-registered LLC for more than a decade that never finished using for a company, says he called the SBA and spoke with a customer service representative, which let him know that the account would be marked. He also went to IdentityTheft.gov to submit a report that had stolen his identity and that he has also contacted the GIS OIG.

“When I spoke to the SBA agent over the phone, he confirmed to me that they had my Social Security number, that they had my address, that they had enough information about me to complete all these paperwork,” Hebert said. , and added that he was stuck in many phone loops trying to reach the right person to report the crime.

Hebert said he also sought advice from other victims on Reddit. After completing the report about five months ago, he recently followed up with the SBA and was told his loan was on hold and was branded as potentially fraudulent – progress, but not resolution.

But Hebert has received a letter saying he should start making loan payments of $ 220 a month from July.

“There’s no good way to pay for it,” he said. “I’m worried about what he’ll do if he doesn’t resolve it. For example, for the next fiscal season, will they try to confiscate my return? Will they garnish my payroll if I don’t resolve the situation in time?”

Richard Clarke, a police detective in Lauderhill, Florida, told CNBC that his department recently arrested 32-year-old Xavier Taylor. While answering a call, officers realized that Taylor had an arrest warrant from August for allegedly trying to trick the SBA by stealing the identity of the owner of a business.

The ordinance indicated that Taylor was able to access $ 81,100 through the PPP. He is accused of taking the information of the owner of a business, applying for the loan and transferring the postal address of the owner to his. Through his attorney, Taylor declined to comment, but he did not plead guilty to multiple charges of fraud.

“It sounds ridiculously easy. In my experience, many people, especially since Covid loans and PPPs, have taken advantage of system failures to personally benefit from applying for loans, either deceptively or using information from others. people, “Clarke said. “My hope is that there will be due diligence in certifying, verifying and qualifying people to be beneficiaries of these business loans.”

Back in Wisconsin, Hebert said he is confident his situation will be resolved, although it may take time and work. But beyond his concerns that his personal information is compromised, he is simply disappointed that the program has been used in this way.

“The most important thing for me is that at a time when all Americans are struggling, someone would take advantage and do all these dishonest things to try to grab the money they need to go to small businesses that are really struggling.” He said.