U.S. Small Business Administration, Office of Inspector General

Recently, the U.S. Small Business Administration, Office of Inspector General - Western Region Special Agent in Charge Weston King joined United States Attorney Robert Trisotto of the District of Oregon to announce that an Arizona man and three co-defendants are facing federal charges for their roles in a $178 million COVID-19 fraud conspiracy scheme. According to the superseding indictment, from January 2021 and continuing until at least March 2022, the defendant carried out a scheme whereby he conspired with recruiters, to gather fraudulent business information from customers, including his co-conspirators, and used the information to submit fraudulent Paycheck Protection Program (PPP) loan applications to the U.S. Small Business Administration (SBA). To facilitate the scheme, the defendant and his co-conspirators created fictitious documents to support their fraudulent loan applications, including false payroll information and tax documents. In total, the defendant submitted or caused to be submitted at least 1,300 PPP applications, which together attempted to obtain at least $178 million from SBA. Approximately $105 million in loans were funded in response to these fraudulent applications. Conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering is punishable by up to 20 years in federal prison, three years’ supervised release, and fines of up to $250,000 or twice the gross gains or losses resulting from the offense. Read more: https://ow.ly/fJlR50TrKcx

This week, IG Hannibal “Mike” Ware had the opportunity to speak with future oversight officials at Georgetown Law School. During this presentation, IG Ware spoke to the students about his role as an Inspector General, how our office is approaching the fraud landscape that represents more than $200 billion in potentially fraudulent Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loans (EIDL), and the benefits of pursuing a career in public service.

Recently, the U.S. Small Business Administration, Office of Inspector General joined United States Attorney Erek L. Barron of the District of Maryland and our law enforcement partners of the Maryland Fraud Strike Force to announce that a Maryland man was sentenced to a year and a day in connection with a COVID-19 fraud scheme. According to the guilty plea, in March 2021, the defendant and co-conspirator submitted a fraudulent Paycheck Protection Program (“PPP”) loan application to obtain a PPP loan for a company the defendant owned. The PPP loan application contained numerous material misrepresentations, including that the defendant’s company in 2019 had 16 employees and an average monthly payroll of more than $100,000. In support of the loan application, a fabricated 2019 Internal Revenue Service (“IRS”) form was submitted, which falsely stated that the company’s total payments to employees in 2019 were more than $1,200,000. Based on the false representations and fraudulent submissions made on behalf of the defendant as the owner of his company, the PPP loan was funded on March 22, 2021, and approximately $250,000 was distributed to a bank account controlled by the defendant. The defendant agreed to pay his co-conspirator kickbacks totaling $75,000 for his work in submitting the false application and obtaining the fraudulent PPP loan. After receipt of the PPP loan, the defendant established payroll services for his company to facilitate documentation that would later be used to substantiate a request for the PPP loan to be forgiven. Read more: https://ow.ly/X2Bz50TqnXO

Read the latest U.S. Small Business Administration, Office of Inspector General's inspection report that presents the results of the U.S. Small Business Administration’s (SBA) corrective actions for the four recommendations from the Office of Inspector General audit report SBA’s Microloan Program (Report 17-19). Accordingly, our objective was to determine the effectiveness of SBA’s actions for 1) improving the information system to include outcome-based performance measurements and ensuring the data captured could be used to effectively monitor Microloan Program compliance, performance, and integrity 2) implementing a site visit plan to monitor microloan portfolio performance and ensuring program results could be evaluated program-wide 3) updating SOP 52 00A to clarify requirements regarding evidence for use of proceeds and credit elsewhere and 4) updating the microloan reporting system manual to reflect current technology capabilities. Read more: https://ow.ly/ei0B50Tpynp

Recently, the U.S. Small Business Administration, Office of Inspector General - Western Region Special Agent in Charge Weston King joined United States Attorney Jason M. Frierson of the District of Nevada to announce that a Nevada man was convicted of $11.2 million in COVID-19 pandemic relief fraud. According to court documents the defendant engaged in a scheme to submit fraudulent loan applications under the Paycheck Protection Program (PPP). The defendant submitted three fraudulent PPP loan applications to federally insured banks, purportedly for the benefit of companies that the defendant controlled and obtained more than $11.2 million in proceeds from those loans. The evidence at trial showed that the defendant falsely represented certain material information in his loan applications, including information about payroll, employees, and use of the loan proceeds. After fraudulently obtaining more than $11.2 million in PPP funds, the defendant laundered and/or spent the proceeds by, among other things: buying approximately 25 residences and two luxury cars, funding a personal investment account, and gambling extensively. After he was originally charged, the defendant continued laundering criminal proceeds by selling five of the residences that he acquired with the fraudulently obtained PPP funds. Read more: https://ow.ly/NKNq50TovjN

Recently, U.S. Small Business Administration, Office of Inspector General- Central Region Special Agent in Charge Brady Ipock joined the United States Attorney of the Western District of Wisconsin to announce a Wisconsin man was sentenced to 28 months for stealing Paycheck Protection Program (PPP) funds.   Throughout 2020 and 2021, the defendant submitted fraudulent PPP loan applications for several businesses. In these PPP loan applications, the defendant falsely claimed that his businesses earned hundreds of thousands of dollars in revenue, and paid employees tens of thousands of dollars in payroll per month. The defendant also provided lenders with forged payroll reports and tax forms to corroborate his false statements. Evidence presented at trial proved that none of the defendant’s companies formally employed anyone besides the defendant, and none of the companies had the revenue necessary to cover the inflated claimed payroll.    In total, the defendant stole $406,211 and attempted to steal an additional $400,378 in PPP loan proceeds. The defendant also laundered a portion of his fraudulently obtained PPP funds when he purchased $19,000 worth of Bitcoin.   Read more:  https://ow.ly/icJ350ToooO

#DidYouKnow: The U.S. Small Business Administration, Office of Inspector General has an Insights and Tips page with advice on how small businesses can protect against scams and fraud. Check it out here: https://ow.ly/BmsW50Ss5yB

The U.S. Small Business Administration, Office of Inspector General remains committed to protecting the interests of American taxpayers by addressing the fraud in the COVID-19 relief programs and identifying billions of tax dollars. Here are some of the top stats from last month’s congressional newsletter highlighting our oversight work in the areas of audits, data analytics, and investigations in our continuous effort to improve the integrity, accountability, and performance of SBA and its programs for the benefit of the American people.

Recently, the U.S. Small Business Administration, Office of Inspector General joined United States Attorney Erek L. Barron of the District of Maryland to announce that a former Baltimore City Department of Finance employee pled guilty to conspiracy to commit wire fraud involving a scheme to defraud a financial institution and the United States Small Business Administration (SBA) in order to obtain fraudulent loans under the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program for various purported businesses. The defendant also admitted to engaging in a bribery scheme for over eight years, in exchange for bribes from various property owners in Baltimore. The defendant would use his official position as an employee of Baltimore City to extinguish various financial obligations owed to the City, including for water bills and property taxes. Based on the false representations and fraudulent submissions made on behalf of the defendant as the owner of an investment company, the PPP loan was funded on March 6, 2021, and approximately $138,000 was distributed to a bank account controlled by the defendant. The defendant agreed to pay the co-defendant kickbacks totaling $38,000 for his work in submitting the false application and obtaining the fraudulent PPP loan. After receipt of the PPP loan, the defendant established payroll services for his investment company to facilitate documentation that would later be used to substantiate a request for the PPP loan to be forgiven. According to the plea agreement, beginning in or about early 2016 and continuing until about September 20, 2023, the defendant engaged in a bribery scheme in which he abused his position of trust as a public official for his own personal gain. Read more: https://ow.ly/s7hg50TlqXc

If you have a question about an SBA loan or SBA program that’s not fraud, waste or abuse, here's what to do: Get in touch with your local SBA District Office or the SBA Answer Desk by telephone (1-800-U-ASK-SBA).