WASHINGTON–At least 75 companies that don’t appear to have existed prior to applying to and receiving funds from the Paycheck Protection Program (PPP) have fraudulently received tens of millions of dollars in forgivable loans, according to an investigation by the Miami Herald/McClatchy and the Anti-Corruption Data Collective.
Among the allegedly bogus businesses identified in the investigation are a suspicious online university whose curriculum appears to be cut and pasted from a European school, two companies with nearly identical websites and two others with practically no internet presence — all five connected to the same Texas man. Those businesses received $3.65 million in PPP loans.
The investigation identified the 75 suspect businesses from among those that received loans of at least $150,000 from the PPP but which don’t appear to have existed before this spring or to have met other eligibility criteria for the program. Collectively, the questionable loans, which are publicly reported as a range of values rather than a specific amount, totaled somewhere between $20 million and $50 million, the Miami Herald reported.
Applicants based in Florida accounted for more than one out of every four businesses that fit the pattern, according to the report. Data on companies receiving less than $150,000 was not released by the SBA, which administered the PPP.
‘Disturbing at All Levels’
According to the report, former federal agents and prosecutors who spoke with the Miami Herald/McClatchy expressed alarm at the findings and the lax fraud controls in the program.
“This is disturbing on all levels,” Ben Curtis, a partner in the Miami office of McDermott Will & Emery and the former assistant chief of the Criminal Division Fraud Section at the U.S. Department of Justice, told the news organization. “You have a federal government that is somehow comfortable releasing massive amounts of money to the general public with very little diligence on the front end. And because they structure this program like a glorified honor system, you have an almost salivating group of bad actors ready to fleece it from inception.”
As CUToday.info reported earlier, prosecutors have brought charges against more than 20 other businesses for fraud under the CARES act, which authorized the loan program, and a recent report by the House Committee on Oversight suggested that there could have been billions of dollars’ worth of fraud in the PPP program.
“This is going to be the biggest fraud in government history, the magnitude of which we will not know for many years to come,” Vic Hartman, a former FBI agent and author of a 2019 book about fraud based on lessons from his career, was quoted as saying.
How Investigation Was Conducted
According to the Miami Herald/McClatchy and the Anti-Corruption Data Collective, the analysis matched data made publicly available about more than 600,000 businesses that received PPP loans greater than $150,000 with corporate registration data from the open source database OpenCorporates, which draws its data from state corporation records across the country.
“Newly created businesses flagged in the analysis were then manually reviewed by researchers and reporters to determine which businesses appeared to be in potential violation of the program’s rules,” according to the report.
In a statement to the Miami Herald, the SBA said, “The SBA does not comment on individual borrowers. Evidence of waste, fraud, and abuse with any of SBA’s loan programs is not tolerated and should be reported ... The SBA successfully distributed 5.21 million loans and $525 billion to small businesses in an unprecedented amount of time, through the Paycheck Payment Program.” The SBA misstated the name of the Paycheck Protection Program in its statement.
Two Newly Formed Businesses
Among the types of businesses that received funds, according to the Miami Herald, were two newly created Florida businesses that got PPP loans that have virtually no footprint — physical or digital — but appear to be connected to the same Florida family.
“Buccaneer Technologies received a PPP loan between $350,000 and $1 million on May 11, three days after the business was registered with the Florida secretary of state. Sonata Technologies, meanwhile, was approved for a PPP loan of between $1 million and $2 million on May 26, eight days after the business was registered with the state,” the Herald reported.
A number of other businesses also appear to have double-dipped in receiving funds, the report states.
The full story can be found here.