New Haven Register (Sunday) (New Haven, CT)
Coronavirus fraudsters keep prosecutors busy
A Hollywood film producer allegedly tried to use $1.7 million from the federal coronavirus business relief fund to pay personal credit card bills. Two New England men allegedly applied for more than half a million in refundable loans through the program by claiming to have dozens of employees at four businesses. They had none.
Many fraudsters have submitted false state unemployment claims. In Washington state, the unemployment system temporarily crashed under the weight of hundreds of millions of dollars in payments for fake claims.
These are just a few examples of what prosecutors say are tens of thousands of attempts to rip off governments by fraudulently filing for expanded unemployment benefits or lying on applications for the Paycheck Protection Program, which was designed to assist small businesses forced to close or drastically cut back due to the pandemic.
Because of the urgent need, officials designed the programs to send out money quickly, but that speed also presented more opportunities for scams, experts said.
State attorneys general from Massachusetts to California are watching for potential frauds and warning legitimate businesses to be on the lookout.
Attorneys general are cracking down on fake unemployment claims and working to recover the money. They also collect reports of alleged paycheck protection frauds; the U.S. Justice Department has prosecuted several highprofile cases.
And a number of attorneys general have warned banks that they are looking into the lenders’ practices to make sure they catch bad PPP loan applications and don’t add to the problem with any underhanded practices of their own.
The amount of scamming is significant. The FBI’s PPP Fraud Working Group is investigating $42 million in fraud. The Federal Trade Commission as of June 8 received 91,000 reports of fraud costing victims $59.2 million. And Google reported it is blocking 18 million scam emails every day.
President Donald Trump signed a PPP extension Saturday that will allow businesses to apply for loans until Aug. 8. Otherwise, the program would have expired today with about $130 billion left unused. The extension increases the chances for fraud as well, experts said, and they expect more complex deceptions to continue.
Brian Hayes, a partner in the law firm Holland & Knight’s Chicago office and a former assistant U.S. attorney and FBI special agent, said attorneys general are warning lenders to watch for applications from people purporting to own small businesses or claiming large numbers of employees when they don’t exist.
Small-business owners should be leery of offers to help them obtain PPP loans, especially from companies that want a payment for doing so, since applying for a loan is free.
“Circumstances required that the aid be made available quickly to people,” Hayes said in a phone interview. He said federal administrators “relaxed due diligence and underwriting standards that would otherwise apply to commercial loans. That made (borrowing) easier but it was necessitated by the crisis.”