At the start of the COVID-19 epidemic, when offices and restaurants began to close, the federal government rolled into small businesses — the dream of the United States costing more than a trillion dollars to help protect millions of workers and businesses.
But even before the first checks were issued, the alarm went off.
The person who rings those bells loudly is Hannibal “Mike” Ware, Chief Inspector of Small Business Administration. The veteran insider says he has attended a series of meetings with Trump administration officials and SBA program analysts.
His warnings were ignored, and the fall took him “from black hair to gray hair.”
In a recent interview with ABC News, Ware said: “I was extremely upset. And now, a year and a half later, he says, “The level of fraud we see is unprecedented – unprecedented.”
As small businesses emerge from the epidemic, the Wage Protection Program (PPP) and the Economic Disability Loan (EDL) are disappearing as part of Congress’ CARES legislation. But for all the work they have done, their heritage can be ruined by an unusual amount of fraud – a fact that could derail professionals’ efforts to bypass emergency relief programs.
In terms of financial value, he said, the level of fraud in these Kovid aid programs is higher than any previous government program.
Experts say that all government programs are subject to some degree of fraud. And emergency programs are more vulnerable because of the pressure to speed up the approval of loans and the need to protect other fraudulent measures to verify applications and prolong the process.
In its October 2020 report, Warre’s office “reduced the SBA’s security measures” or “relaxed internal controls to speed up the process,” significantly increasing the risk of program fraud.
A senior SBA official in Binden’s administration agreed with Ware’s analysis, “We should not expect to sacrifice speed for sure – you can do both.”
The official said, “The history of 2020 for both Papi and EDL” is that the previous administration did not have enough control over the site to determine the individual’s identity or business identity. Various choices could have been made to limit the risk of fraud.
“With a few employees, a few technological tools, SBA and other agencies have put a lot of cultural control into approving simple or self-reported information,” said former deputy executive Linda Miller. Director of the Government Response Pandemic Responsibility Committee established as part of CARES law.
After his release from the PRAC, Miller wrote: But we could not do that in a hurry to spread the plague quickly and now we are chasing it. [funds that were fraudulently granted] … But the money returned will be less than what was stolen.
Ware said the office really wanted to get rid of it. Prior to the completion of the PPP and EIDL, the SBA’s Inspector General’s Office said in a statement that it had submitted “three detailed reports to the SBA. A.D. During the exams in the spring of 2020, SBN warned of “brakes” in the process.
“Scammers do what fraudsters do,” says Ware. But front controls reduce the risk of fraud, and doing so could save taxpayers a lot of heartache in the long run. Unfortunately, the heart disease has not gone away because of the way these programs have been implemented.
Former President SB, who resigned after President Trump stepped down. Former administrator Jovita Karanza could not be reached for comment. In a letter to Ware’s report last October, the Caranza Inspector said the SBA was “using fraudulent and effective system controls and certifications” to avoid fraudulent applications and “fraud, waste and misuse.” “
“Reduce the risk of fraud and waste and misery in the distribution of loans and grants,” said Isabella Casillas Guzman, BAD’s candidate for the SBA’s successor as Karanza’s successor. She said a series of measures taken in December – including face-to-face verification and tax information from applicants – had led to a “significant decline” in fraud in the past, and that she was working closely with War to further improve and monitor protections. And recover previously fraudulent broadcasts.
Warre agreed that controls at the end of last year helped curb fraud, but that efforts were too small, too late.
“At that time, they knew in advance how much money they had lost,” he said. A lot of money has been spent.
Among the aid programs, the previous administration drew a special test for EDL emissions. Former federal prosecutor James W. Cooper, along with Arnold and Porter, now called the program a “fraud magnet,” citing a provision that allows recipients to receive up to $ 10,000 in advance, “basically no strings attached.”
“That money is gone,” Cooper said.
But that did not stop him from trying to recover. His investigative efforts have linked 307 lawsuits, 205 arrests and 69 offenses to PPP and EIDL fraud and have so far recovered more than $ 600 million.
These figures, however, reflect only a small part of what experts believe is fraudulent. Of the more than $ 1 trillion distributed, Ware and more than 5% of transactions are estimated to be fraudulent – an astonishing rate of tens of billions of dollars lost.
P.P.P. The first allegations of fraud came just weeks after the program began, and will continue for years to come. Fraudsters have used a number of methods to obtain loans, including identity theft and the creation of fake companies.
The defendants include a former New York Jets soccer player accused of embezzling $ 2 million from a former “Love and Hip Hop: Atlanta” reality TV star. Jewelry and accessories from Gucci and Dior. Other swindlers looted Tesla’s stock and a 40-foot Katamaran boat.
NASA executives recently filed fraudulent loan applications for PPP. And the EDL pleaded guilty to embezzling more than $ 350,000 in personal expenses, including swimming and dog breeding. The prosecutor said the executive “treats COVID-19 aid programs as private pig bank.”
Convicted prosecutors want severe penalties. Last week, a Texas man filed fake documents worth more than $ 17 million in PPP. Bentley used the money illegally to buy several homes and luxury cars, including convertible Corvette Stingray and Porsche Mack.
But experts fear those bold and high-profile cases are just the tip of the iceberg — and warn that as time goes on, investigators will develop more complex scams.
“This first round of trials is focused on low-hanging fruit,” said former federal prosecutor Cooper. Interestingly, investigators eventually turned their attention to sophisticated and sophisticated fraud cases.
An unknown challenge for investigators is to crack down on the masterminds of widespread fraud. This includes schemes that allow a small number of individuals to apply for high-dollar low-credit loans and then cut income: a form of fraud, professionals.
“In many cases, individuals get loans on the orders of individuals or people who want more progress,” says Cooper. It will be very difficult for investigators to identify the real culprits.
These complex issues require more time and effort to filter out already thin resources. Brandon Brock, director of research on the project, said investigators should prioritize the most serious issues.
“The regulatory authorities are trying to cut and paste the information to determine where their time and resources will be stored,” Brockmeyer said. These are a huge number of transactions. They have no choice but to be strategic.
Given the problems, Ware estimates that the investigation will continue for years to come. And there is growing concern that experts could be even more at risk of losing money.
“People are relying on the government to run these large-scale programs,” Brockmeyer said. The level of fraud in these covide relief programs will be affected the next time a major emergency is needed.