Government asking for the public’s help to report fraud
By: Jamie Grey and Sandra Jones
Originally Published: April 19, 2021
(InvestigateTV) – A year after the government authorized trillions of dollars in relief for Americans as the pandemic set in, federal prosecutors say people tried to steal at least $569 million from those programs.
The money intended to help businesses and individuals stay afloat instead paid for salon visits, luxury cars, gold coins and designer handbags, according to court documents.
People created fake lists of employees from random name generators online.
Some filed claims using the names of people currently in prison.
Others created sham companies and forged documents.
Now the federal government is going after people around the country.
As of March 26, federal prosecutors had charged 474 people with crimes dealing with pandemic-related fraud.
“The impact of the department’s work to date sends a clear and unmistakable message to those who would exploit a national emergency to steal taxpayer-funded resources from vulnerable individuals and small businesses,” U.S. Attorney General Merrick B. Garland said in March.
Many struggling businesses couldn’t get help
In March 2020, President Donald Trump signed the Coronavirus Aid, Relief and Economic Security Act (CARES). As part of that massive package, billions were set aside to help small businesses.
Business owners rushed to fill out paperwork to get loans to pay their bills and employees through the Paycheck Protection Program. Then, the $349 billion in funding ran out.
Less than a month after Trump signed the CARES Act, the Small Business Administration announced it was unable to take any more applications because the PPP funding was depleted.
“There was a lot of loss last year,” said Ajay Brewer, owner of Brewer’s Café in Richmond, Virginia.
Brewer was able to get a $20,000 loan through the PPP. But he said it wasn’t enough to cover the losses at the beginning of the pandemic.
“Continuing to sell things, keeping our doors open, paying our staff the appropriate salary while not being able to fully operate at full capacity,” Brewer said.
He struggled and had to get creative to stay afloat. He knows he’s among the lucky ones.
“It’s been really disheartening to see how many small businesses have really gone by the wayside because we were expendable,” Brewer said.
Also disheartening – that others took advantage of programs meant to help people with businesses that really needed the money.
Of the hundreds of people charged with CARES Act fraud crimes, at least 120 of them are accused of trying to acquire – or successfully obtaining – money through the PPP.
Prosecutors: People received money and spent it on improper expenses
An InvestigateTV review of dozens of news reports, government agencies’ press releases and federal court records details cases of fraud across the country.
A North Texas man applied for more than $24 million in loans using fake business and employee information. Court documents say he received $17 million and used that money to buy multiple homes and a fleet of luxury cars including a Bentley, a Corvette, and a Porsche. He pleaded guilty in March.
“The Paycheck Protection Program was designed to aid struggling business owners, not to line the pockets of crafty profiteers,” Acting U.S. Attorney Prerak Shah of the Northern District of Texas said in a March statement.
In California, prosecutors say there was an entire fraud ring in Los Angeles, with suspects accused of using CARES Act money to buy gold coins, diamonds, designer handbags and cryptocurrency.
In Ohio, a former Cincinnati mayoral candidate is accused of using loan money for personal expenses such as salon and restaurant visits.
In Virginia, a woman pleaded guilty after she and others were accused of defrauding the unemployment system. Prosecutors say the group collected information from 15 prison inmates and used it to file fraudulent benefit claims – with a total payout of around half a million dollars.
“While some struggled to make ends meet, this defendant and her co-conspirators worked to defraud an unemployment system which exists as a safety net for those in need,” Acting U. S. Attorney Daniel P. Bubar said in a statement.
Government takes tips to find fraudsters
Each agency involved with the distribution of CARES Act Funds, as well as the Department of Justice, has ways for people to report potential fraud.
In addition, the federal government runs a decades-old hotline called Fraudnet that has been getting a lot of traffic in the past year.
Fraudnet has been around since the late 1970s and is part of the Government Accountability Office, a watchdog agency. Over the years its calls, letters, faxes – and now emails – have led to thousands of investigations.
J. Howard Arp, the GAO Director of Forensic Audits and Investigative Service, likens the hotline to Crimestoppers – but for government fraud.
Arp said as soon as the relief programs began, it was clear there would be cases to investigate.
“Unfortunately, whenever there’s significant opportunities, such as provided by the amount of funds directed toward relief efforts… some people identify that as a great opportunity for them to take advantage,” Arp said.
In the past year or so, Arp said Fraudnet has received about 1,500 tips related to the CARES Act and pandemic funding.
His office sent the majority of those tips on to the applicable inspectors general for further investigation – and possible prosecution.
“We ensure that information is communicated to the appropriate authority that has the jurisdiction to deal with that substantive issue directly,” Arp said.
Hard times drive desperation
While it takes time to investigate fraud claims, Arp said the government is working through them and criminals will be caught.
“That is the message that ultimately goes out, and unfortunately, for some that message isn’t enough,” Arp said. “Whether it’s greed, to a very small extent, (or) potentially desperation, given consideration. Maybe, somebody’s lost their job, you know, they’re trying to keep the lights on. But no explanation makes it okay to commit fraud.”
Brewer, the café owner, agrees. Times have been tough, so he understands why people may look for more money. But fraud is deeply disappointing when owners like him are struggling.
“It does not surprise me that people do that because people are already in a messed-up position, it’s just kind of is what it is. I don’t agree with it,” Brewer said. “My daddy taught me to be an honest man. So, I choose to be an honest man and teach my son to be an honest man.”
Now, he looks forward to brighter days.
“For me, I have to focus on myself. I have to focus on, you know, how do I raise the capital that I need to keep my businesses thriving,” Brewer said.
Arp hopes people will continue reporting potential fraud: “It’s very informative, very helpful for the work we do.”
Fraudnet is open to anyone to call, not just government employees. You can call 1-800-424-5454 or click here.
In addition to helping investigate and move tips toward prosecution, the GAO is the agency that responds to Congressional requests for examining government programs. In effect, Arp said tips to Fraudnet can help the GAO see trends or gather information on program issues Congress may ask about.