The funds have 鈥渁ttracted the attention of individuals and organized criminal networks鈥� world-wide, the agency said in a news release, though its estimate of stolen benefits represents just a fraction of the trillions of dollars in government relief provided since last year.

The Secret Service said it would work closely with a variety of federal agencies鈥攊ncluding the Labor Department and Small Business Administration, which have key roles tracking and administering relief funds鈥攖o investigate and recover fraudulently disbursed funds.

The Justice Department separately said earlier this month that its fraud section has prosecuted over 150 defendants in more than 95 criminal cases stemming from fraud schemes involving the Paycheck Protection Program, which has been the centerpiece of the federal government鈥檚 pandemic aid to small businesses.

In a separate estimate recently released, the Labor Department said about $87 billion in unemployment benefits might have been paid improperly, 鈥渨ith a significant portion attributable to fraud.鈥�

Lawmakers have consistently raised concerns about fraud in the SBA鈥檚 aid offerings, particularly the COVID-19 Economic Injury Disaster program, which provides small businesses with loans and emergency grants. The SBA distributed more than $3.1 billion in loans and $550 million in grants to potentially ineligible recipients through those programs between March and November 2020, the agency鈥檚 inspector general said in a November report.

鈥淪BA鈥檚 lack of adequate front-end controls to determine eligibility contributed to the distribution鈥� of the funds to the potentially ineligible recipients, the report said.

The SBA鈥檚 inspector general previously also warned of potential fraud and abuse in the Paycheck Protection Program. The $961 billion program, which closed to new applications in May, offered small businesses forgivable loans issued through financial institutions and guaranteed by the SBA. It received bipartisan support for getting money out to businesses quickly. Citing the use of antifraud measures at the financial institutions that issued the loans, lawmakers have broadly raised fewer concerns about fraud in the PPP compared with the economic-injury programs.

The SBA under the Biden administration has said it implemented additional safeguards across its pandemic programs to better protect against fraud.

The Secret Service said its estimate is based on public reports issued by internal government watchdogs, with the bulk of the potentially misused funds stemming from fraud tied to unemployment insurance. Those analyses are based on 2020 activity and could overstate the amount of actual fraud or theft, in part because they also include mistaken payments to ineligible recipients who are not necessarily bad actors.

Source: Wall Street Journal

Nashville Tractor owner Rickey Carter pleaded guilty last week in federal court to one count of bank fraud.

Carter agreed to plead guilty to a criminal charge without being indicted. The charge says Carter took out a $5 million loan in 2016 that was backed by the Small Business Administration. He also agreed to a $625,000 line of credit. Carter admitted he falsified financial statements in order to obtain the loan for his financially troubled tractor dealership.

He also admitted to selling 88 pieces of equipment worth more than $1.5 million that Nashville Tractor held in trust for CNH Industrial, and other equipment he held in trust for Kubota, without notifying the manufacturers. Carter then used the cash to pay Nashville Tractor鈥檚 debts.

Carter also forged sale and lease contracts for 33 pieces of New Holland equipment, improperly receiving $1.25 million, then improperly selling the equipment to others without telling CNH.

In total, three banks, the SBA and manufacturer financing divisions lost $6.4 million to Carter because of the fraud. Carter is supposed to repay that amount in restitution.

He will be sentenced in September. The crime carries a maximum of 30 years in prison, but Carter is likely to be sentenced to far less under federal sentencing guidelines. He could also face up to a $1 million fine and up to five years of supervised release.

Source: Associated Press

Twenty companies are registered at that address, with names like Organic Ohio Berries LLC and Garlic Farming LLC. Those companies won government approval for loans and grants intended to support small businesses hurt by the pandemic.

In all, the owner of the home and his family members created 72 companies with agrarian-sounding names at three Cleveland-area addresses and then used them to get approval for loans and grants totaling $7.2 million from the Small Business Administration鈥檚 Economic Injury Disaster Loan program, state and federal records show.

There鈥檚 no sign of agricultural activity at any of the locations, or that any of the companies were active before Feb. 1, a requirement for pandemic aid. None of them was registered with the Ohio Secretary of State鈥檚 office before May.

A lawyer for Zaur Kalantarli, the owner of the home, has acknowledged that at least some of the loans were questionable and may have to be repaid. The lawyer said he contacted federal prosecutors in Ohio and brought the matter to their attention after Kalantarli received a media inquiry about the loans and contacted the lawyer.

The Kalantarli loans are the latest sign of mismanagement in the SBA鈥檚 $212 billion disaster-relief program, which the agency鈥檚 inspector general warned in July was beset by 鈥減otentially rampant fraud.鈥�

The disaster-relief program has distributed 3.6 million loans worth $192 billion to small businesses since March, as well as 5.8 million grants that don鈥檛 have to be repaid totaling $20 billion. It鈥檚 distinct from the SBA鈥檚 $525 billion Paycheck Protection Program, which relied on banks to distribute forgivable loans meant to cover payroll.

A $750 million computer program set up by the SBA in April was supposed to flag suspicious disaster-aid applications, but current and former SBA workers, as well as outside fraud investigators, have described widespread fraud that the computers had failed to catch. Even a person posing as President Donald Trump made off with a $5,000 grant.

A spokesperson for the SBA said the agency wouldn鈥檛 comment on individual borrowers but that it 鈥渢akes very seriously its stewardship of taxpayer funds and is committed to mitigating risks of fraud, waste and abuse.鈥�

Source: Bloomberg

The Small Business Administration has received more than 1,000 reports that business owners are fighting fraudulent Economic Injury Disaster Loan (EIDL) applications taken out in their name based on information that hackers pulled from PPP applications. The hackers have obtained information through other avenues as well.

A few of the firm鈥檚 clients who have been scammed realized it only after receiving a document by mail from the Small Business Administration informing them of a revised repayment schedule that the businesses did not request. Some business owners also have learned their information was stolen after performing new lien searches with lenders.

KCoe advises companies to take these steps to detect fraud.

Stay Alert. Pay close attention to your mail, emails, and lender communications. If anything seems suspicious, or you receive an official notice regarding EIDL and you did not apply for it, report it immediately.

Notify Lenders. Inform your lender (whether you participated in the EIDL program or not) so that they are aware of potentially fraudulent loans. Should the lender identify liens that shouldn鈥檛 have been filed, the owner will need to report the fraudulent loan to the SBA.

Be Proactive. Closely monitor personal credit reports. Put a hold/freeze on your credit to help monitor any authorized activity.

Report Immediately. With the uptick in fraudulent activity, it鈥檚 important to report your case immediately to SBA to start an investigation and address the business fraud. Contact the SBA Customer Service Center  at (800) 659-2955.

The CARES Act, the law adopted in response to COVID-19, increased the weekly unemployment benefit by $600 through July 31. Even though the additional $600 is no longer offered, many states are approved to participate in a federal $400 extra unemployment payment launched Aug. 8.

The prevalence of reported incidents from every corner of the country is staggering. Georgia found more than 130,000 false claims filed in July. Illinois identified more than 120,000 counts of unemployment insurance fraud in August. Maryland in early July announced 47,000 fraudulent claims. Pennsylvania reported that 10,000 prison inmates filed for benefits.

A group of tractor implement stores in Kansas with a 200-person workforce recently received its third fraudulent unemployment claim since the onset of COVID-19.

Among strategies for responding:

• Address identity theft. A fraudulent claim is a sign that an employee鈥檚 sensitive personal information is available to criminals.
• Let employees know about the spike in fraudulent claims and identity theft, and ask them to report fraudulent benefits claims to HR quickly.
• Notify employees quickly. Review whether the named applicant for unemployment benefits is a current or former employee. If it is a current employee, then the claim is likely fraudulent. If it is a former employee, contact the person to confirm whether he filed a claim.
• Report the fraud. Both HR and the employee should notify the state unemployment benefits agency and local police department. The U.S. Department of Labor provides resources on how to report unemployment fraud in each state.

Source: SHRM