“Inviting” PPP Loans to Fraudsters

The head of Covid relief told NBC News’ Lester Holt that programs like PPP were structured to be “an invitation” to fraudsters.

WASHINGTON- (Note: the video above is taken from a previous related story.)

They bought Lamborghinis, Ferrari and Bentley.

And Teslas, of course. A lot of Teslas.

Many of those who participated in what prosecutors call the biggest fraud in the history of the United States – the theft of hundreds of billions of dollars of taxpayers’ money intended to help those affected by the coronavirus pandemic – could not resist the purchase of luxury automobiles. Also mansions, private jet flights and posh vacations.

They got rich participating in what experts say is the theft of as much as $80 billion – or about 10% – of the $800 billion handed out in a Covid relief plan known as the Paycheck Protection Program, or PPP. That’s on top of the $90 billion to $400 billion allegedly stolen from the $900 billion Covid unemployment relief package — at least half taken by international fraudsters — as NBC News reported Last year. And another $80 billion potentially stolen in a separate Covid disaster relief programme.

The prevalence of Covid relief fraud has been known for some time, but the enormous scope and its worrying implications are only now becoming clear.

Even if the highest estimates are inflated, the total fraud in all the Covid relief funds amounts to a staggering amount of taxpayers’ money that could rival the $579 billion in federal funds included in President Joe Biden’s massive 10-year infrastructure spending plan, according to prosecutors, government watchdogs and private experts trying to plug the leaks.

“Nothing like this has ever happened before,” said Matthew Schneider, a former US attorney from Michigan who now works with Honigman LLP. “It’s the biggest fraud in a generation.”

Most of the losses are considered unrecoverable, but there is still a chance to stem the bleeding, as federal officials say $600 billion is still waiting to come out. The Biden administration imposed new vetting rules last year that administration officials say appear to have made a difference in the fight against fraud. But they recognize that 2020 programs have unnecessarily sacrificed security for speed.

Justice Department Inspector General Michael Horowitz, who oversees Covid relief spending, told “NBC Nightly News” anchor Lester Holt in an exclusive interview that Covid relief programs were structured to ripen for plunder.

“The Small Business Administration, by sending this money, basically told people, ‘Apply, sign, and tell us you really are entitled to the money,'” said Horowitz, president of the Pandemic Response Accountability Committee. “And, of course, for fraudsters, it’s an invitation. … What didn’t happen were even minimal checks to make sure the money was getting to the right people at the right time.

Criminal methodology varied by program. the epic scam of Covid unemployment assistance has been carried out by individual criminals or organized crime groups using stolen identities to claim unemployment benefits from state labor agencies disbursing federal funds. Each identity could be worth up to $30,000 in benefits, Horowitz said.

Looting the Paycheck Protection Program worked differently – and it could be a lot more lucrative. The program allowed banks and other financial institutions to provide businesses with government-backed loans, loans that had to be canceled if the businesses spent the money on business expenses. Nearly 10 million of these loans have already been cancelled. Many of the loans turned into grants were in the millions of dollars, according to public records.

Experts say millions of borrowers have inflated their number of employees or started businesses from scratch. For much of 2020, lenders did little to vet applications, prosecutors and experts say, in part because Congress demanded that the Small Business Administration, or SBA, which ran the program , emits explicit information. advice that in the interest of withdrawing the money quickly, lenders “will be held harmless if borrowers fail to comply with the program criteria”. The Office of Government Accountability warned the risk of fraud, but the program continued under this rule.

“The government has spent about $800 billion and made $21 million in loans to individuals,” said Haywood Talcove, CEO of Lexis Nexis, which works with the government to verify identities.

No one knows exactly how much was stolen. A academic document published last year estimated at least $76 billion in potential fraud, and the authors said it was conservative.

The SBA Inspector General has identified $78.1 billion in potentially fraudulent economic disaster loans, another Covid relief program for businesses. The Secret Service has its own estimate: $100 billion.

The basic scheme, Talcove said, was “really simple.” People went to state websites and took the names of existing businesses or registered new, fake ones.

“There is absolutely no security there. There is no validation of any information,” Talcove said. “There you have it, ABC Company with 40 employees and a payroll of $10 million. And you’re going to apply for a PPP loan. It was a piece of cake.”

To find more cases, the Pandemic Response Accountability Committee employs data scientists who use artificial intelligence to sift through 150 million records for patterns of fraud. In one case, he discovered that a gas station phone number in Houston had been used on 150 loan applications. He sends these leads to the federal agents who follow on foot.

One center for the fraud is Miami, where Juan Gonzalez is the US Attorney for the Southern District of Florida.

Gonzalez said unlike unemployment benefits, which went to everyone who qualified, lenders had to stop making PPP loans when the money ran out, even if demand continued. Fraud not only hurt taxpayers, it hurt those who needed the money.

The public, he said, “should be very angry.”

“It’s billions of taxpayer dollars that have been taken away from them,” he said. “And angrier should be the people who lost their jobs, who worked for companies who couldn’t ask for that money because it was gone. They really are the ones who should be the most angry of all.

Visit nbcnews.com to read the full version of this story.

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