Lily Stateline coverage of the state’s latest action on the coronavirus.
A Hollywood film producer has reportedly tried to use $ 1.7 million from the federal coronavirus business relief fund to pay personal credit card bills. Two New England men are said to have requested more than half a million repayable loans under the program, claiming to have dozens of employees at four companies. They didn’t.
Many fraudsters have submitted bogus unemployment claims to the state. In Washington State, the unemployment system temporarily collapsed under the weight of hundreds of millions of dollars in bogus claims payments.
These are just a few examples of what prosecutors say are tens of thousands of attempts to scam governments by fraudulently filing extended unemployment benefits or lying about demands for the Paycheck Protection Program, which has been designed to help small businesses forced to shut down or dramatically reduce returns due to the pandemic.
Due to the urgent need, officials designed the programs to send money quickly, but this speed also presented more possibilities for scams, experts said.
State Attorneys General from Massachusetts to California are monitoring potential fraud and warning legitimate businesses to be on the lookout.
Attorneys General are cracking down on bogus unemployment claims and working to get the money back. They are also collecting reports of alleged paycheck protection fraud the US Department of Justice has pursued in several high-profile cases.
And a number of attorneys general have warned banks that they are reviewing lender practices to make sure they are intercepting bad PPP loan applications and not compounding the problem with their own underhanded practices.
The number of scams is significant. the FBI PPP Fraud Task Force investigating $ 42 million in fraud. As of June 8, the Federal Trade Commission received 91,000 reports of fraud costing victims $ 59.2 million. And Google reported that it is blocking 18 million fraudulent emails everyday.
President Donald Trump sign an extension of the PPP on Saturday which will allow companies to apply for loans until August 8. Otherwise, the program would have expired today with about $ 130 billion unused. The extension also increases the risk of fraud, experts said, and they expect more complex deceptions to continue.
Brian Hayes, a partner at Holland & Knight’s Chicago law firm and a former Deputy U.S. Attorney and FBI special agent, said attorneys general are warning lenders to monitor claims from people claiming to own small businesses or claiming large numbers of assets. ’employees when they do not exist.
Small business owners should be wary of offers to help them get PPP loans, especially from businesses that want payment to do so, as the loan application is free.
“Circumstances demanded that help be made available to people quickly,” Hayes said in a telephone interview. He said federal administrators “have relaxed the due diligence and underwriting standards that would otherwise apply to commercial loans.” CA did [borrowing] easier but it was made necessary by the crisis.
Hayes also noted that aid for the pandemic has come in the form of large sums of money sent in one go. “It’s different from other government programs like food aid and unemployment, where money [usually] leaks in small amounts, ”he said. “You can end up with a really big check from some of these programs. This is unique in terms of suspected fraud.
The extent of unemployment fraud is now starting to surface, with states paying unprecedented millions to the record number of unemployed. In Washington state, authorities reported a theft between $ 550 million and $ 650 million, of which about $ 333 million was recovered. State officials said the thefts were the result of a large number of misrepresentations by people who were not entitled to benefits.
But efforts to stamp out fraud continue to slow down legitimate payments for tens of thousands of jobless people in Washington, said Suzi LeVine, commissioner of the Department of Employment Security.
New York Attorney General Letitia James, a Democrat, has released a list of warnings for small businesses that are at risk from scammers seeking to offer “help” in obtaining P3 loans. James has issued a cease and desist order for a fraudulent business with a website tagged SBA.com. The real Small Business Administration website is SBA.gov.
The bogus site advertises a link to “Covid-19 Relief,” James said in a press release, and a link to a button that says “Your Paycheck Protection Program Loan Starts Here.” James advised small businesses looking for loans to go directly to the government’s SBA website without seeking help from a third-party company.
“It is imperative that small businesses know about the financial aid available and not be fooled in the process of applying for these lifelines,” James said.
The .com / .gov confusion even fooled US Treasury Secretary Steven Mnuchin, who wrongly urged small businesses to visit SBA.com to learn more about PPP loans at a press conference in April. It was corrected by the White House.
James spokesperson Delaney Kempner said that in addition to advising businesses on how to spot fraud, the attorney general also accepts and prosecutes consumer-based fraud complaints.
“In terms of price increases, we have received more than 7,000 complaints, issued more than 1,590 cease and desist orders to companies for price increases in essentials,” Kempner said in an email. ” And U.S. too sued a big wholesaler for the drastic increase in the costs of Lysol in recent months.
Arkansas Attorney General Leslie Rutledge, a Republican and a senior member of the National Association of Attorneys General’s consumer protection committee, warned that crooks were contacting business owners claiming to be affiliated with the federal checks program. pay.
Like James, she advised traders to contact the Small business management directly.
“These paycheck protection loans are a key part of our economic recovery to help hard-working Arkansas businesses and their employees,” she said in a statement. declaration. “But, it is disgraceful and illegal to impersonate a government entity to provide bogus and deceptive services to businesses trying to use the paycheck protection loan to survive.”
Massachusetts Attorney General Maura Healey, a Democrat, examines several banks based in her state to see if they unfairly favored large clients over small businesses when it came to facilitating PPP lending, after her office received several complaints, the Boston Globe reported.
Banks under surveillance include Bank of America, Santander, TD Bank, and Wells Fargo. Additionally, Bank of America, Wells Fargo, JPMorgan Chase, and US Bank are the subject of a class action lawsuit filed by plaintiffs’ attorneys in California on behalf of an optometrist, restaurant, and promotion company. as representative clients of the group, charging that they favored regular large clients over smaller and newer clients in processing PPP loans. Other costumes are likely.
Bank of America spokesman Bill Halldin denied the accusation in an email. He said 73% of loans made by Bank of America under the PPP program were less than $ 50,000 and 82% were for companies with 10 or fewer employees.
Less than 2% of the loans went to companies with more than 100 employees, Halldin said.
Lee Henderson, spokesman for the US Bank, said it was “absolutely not correct” that he was prioritizing the richest customers, adding that the majority of loans the bank had made over the years. of phase 1 of the programs were aimed at “very small enterprises”.
A Wells Fargo spokesperson declined to comment and other banks did not respond to email requests for comment.
Healy, the head of a group of 24 attorneys general, sent rule-making comments to the federal Small Business Administration in May and a letter to Congress calling for more clarity in obtaining loans for small businesses.
Healy said the program “suffers from a lack of transparency, technical knowledge and functionality which has led to the distribution of funds in a way that excessively benefits large, well-connected businesses and leaves many small businesses underserved.” .
Anne Hartman, a partner in the Whistleblower Group in the San Francisco office of law firm Constantine Cannon, said that when it comes to fraudulent loan applications, “it is up to the banks to underwrite and their due diligence ”. Law enforcement officials should go after banks that give money without controlling borrowers, she said.
“PPP has rules that protect banks from liability. It doesn’t go any further, when faced with a borrower making statements that no reputable lender would rely on. But, she said, this kind of abuse will reveal itself more slowly.
Hollywood producer William Sadleir, 66, of Beverly Hills, allegedly paid off personal credit card debt and other personal expenses with the PPP loan, according to Brian Benczkowski, assistant attorney general in the criminal division of the US Department of Justice. Justice.
“As the ministry has made clear, those who defraud the PPP to line their pockets at the expense of the American people will be brought to justice,” Benczkowski said in a statement.
Samuel Yates, 32, of Maud, Texas, allegedly requested millions of dollars in SBA-guaranteed forgivable loans from two different banks claiming to have over 400 paid employees when in fact no employee worked for his so-called business, Benczkowski said. in a separate statement.
And prosecutors also charged David A. Staveley, 52, of Andover, Mass., And David Butziger, 51, of Warwick, Rhode Island, of setting up businesses and employees and asking for an estimated 544,000. $ loans under the program.