While aid for the pandemic was rushed to Main Street, the criminals were confiscated with PPP, EIDL

Korena Keys’ small business was severely affected when the pandemic hit her last year.

Its digital media company, KeyMedia Solutions in Sioux Falls, South Dakota, saw its sales decline by 60% in May compared to the previous year. She was able to obtain a $ 115,000 loan from the Small Business Administration’s Wage Protection Program to keep employees employed until things stabilize.

So when Keys received the papers from the SBA in January, there was an additional $ 150,000 loan taken out on behalf of her business under the crash loan program, she thought it might be a mistake.

“I made a conscious decision not to ask for any other assistance,” Keys said. “I thought these funds should be left to businesses that weren’t doing as well.”

Although he says he did not receive the funds, the loan is very real, and payments of almost $ 800 a month will begin in November. The loan was approved, Keys said, even though the app had inaccurate details about her business, including a wrong phone number, an email address and financial data.

“His shock really turned into frustration and anger,” Keys said, adding that several other companies in her community had similar stories of identity theft in these aid programs.

She filed complaints with the SBA’s inspector general’s office and his fraud department, but has not yet been released from liability, although he hopes things will be resolved before the loan comes. Hours were spent at the expense of her business, trying to pay off the loan.

“It definitely caused a few nights of sleep,” she said. “Until it’s written, I’m always worried. It’ll stay on me until it’s finished.”

While the U.S. government and the SBA rushed to take out pandemic-ravaged business loans last year, criminals exploited these aid programs, in some cases stealing the identities of business owners to use that information to fraudulently obtain loans for pandemics. I earn. A recent analysis of the fraud of SBA’s OIG projects under the Covid-19 small business programs could reach $ 84 billion.

In total, the US government has allocated more than $ 1 trillion in aid on Main Street through the Wage Protection and Disaster Loan Program. The PPP allows small businesses to borrow loans that can be forgiven if the borrower uses the majority of the capital on salary, while the EIDL Covid-19 program allows lenders to access loans based on temporary loss of income due to the pandemic. There was also an advance grant available under EIDL.

The revisions of both programs by the OIG have warned of the potential for criminal exploitation due to the rapid nature of the launch and the unprecedented demand for aid, and a recent note from the home subcommittee selected for the coronavirus crisis shows how widespread it could be. $ 79 billion was made in potentially fraudulent EIDL loans and advances, and up to $ 4.6 billion was made in potentially fraudulent PPP loans, the report said.

There were 1.34 million EIDL loans and grants sent from the SBA to the OIG, including nearly 750,000 complaints for suspected identity theft and more than 585,000 complaints for other potentially fraudulent activities. There have been almost 150,000 direct phone calls to the SBA OIG for advice and complaints about potential fraud – an increase of 19,500% over previous years, the memo said.

The Justice Department has raised $ 626 million in funds confiscated or confiscated as a result of civil and criminal investigations by EIDL and PPP, the subcommittee’s analysis said in March. The group’s report points the finger at the Trump administration for its refusal to “implement basic controls” in previous iterations of aid programs last year.

In a statement to CNBC, the SBA said the Biden administration takes its responsibility to protect taxpayer dollars and prevent fraud, waste and abuse in federal programs.

“In recent months, new and improved controls have been put in place to step up system validations used to mitigate fraud in economic loan schemes in the event of injury and wage protection,” he said. “In cases of suspected fraud, the SBA closely coordinates with the Office of the Inspector General, the Department of Justice and other law enforcement agencies to share information and support criminal investigations.”

“While the agency does not comment on individual borrowers, the lessons learned from these coordinated efforts with federal partners help inform and strengthen internal controls,” she added.

Some victims of fraud in last year’s program did not even have small businesses.

Max Hebert is a Marine Corps Reserve veteran and is currently in the National Guard. It also meets food deliveries for Walmart. Last summer, he received a mail notification at his home in Eau Claire, Wisconsin, after being seconded to Ukraine with the National Guard. The letter had his name misspelled as “Max Herbert”, informing him that an EIDL had been issued in his name for $ 45,000 – more money than he earns in a year.

Hebert, who has been a state-registered company for more than a decade and has never finished a business, says he called the SBA and spoke with a customer service representative, who told him the account would be signaled. He also went to IdentityTheft.gov to file a report stealing his identity and contacting the SBA OIG.

“When I spoke to the SBA agent on the phone, he confirmed that they had my social security number, that they had my address, that they had enough information about me to complete all these documents,” Hebert said, adding that he was caught in many phone loops trying to reach the right person to report the crime.

Hebert said he also sought advice on Reddit from other victims. After completing the report about five months ago, he recently followed the SBA and was told that his loan is pending and is reported as potentially fraudulent – progress, but has no resolution.

But Hebert received a letter saying he would have to start paying $ 220 a month in July.

“There’s no good way to pay for that,” he said. “I am worried about what he will do if I do not solve it. For example, until the next fiscal season, will they try to account for my tax return? Will they guarantee my salary if you do not resolve the situation in time? “

Richard Clarke, a police detective in Lauderhill, Florida, told CNBC that his department recently arrested 32-year-old Xavier Taylor. While answering a call, officers realized that Taylor had a warrant for his August arrest because he allegedly cheated the SBA by stealing the identity of a business owner.

The warrant said Taylor was able to access $ 81,100 through the PPP. He is accused of taking the information from the owner of a company, requesting the loan and transferring the postal address of the owner to his. Through his lawyer, Taylor declined to comment, but he pleaded not guilty to several charges of fraud.

“It sounds ridiculous. Based on my experience, a lot of people, especially from Covid and PPP loans, took advantage of the losses in the system to personally benefit from the loan application – either deceptively or using other people’s information.” Clarke said, “My hope is that there will be the necessary diligence in certifying, verifying, qualifying the people who are going to be the beneficiaries of these business loans.”

Returning to Wisconsin, Hebert said he was confident his situation would be resolved, although it could take time and work. But beyond his worries that his personal information is compromised, he is simply disappointed that the program has been used in this way.

“The biggest thing for me is that at a time when all Americans are fighting, that someone would take advantage and do all these dishonest things to try to take money that has to go to the small businesses that are really struggling right now. ”. he said.