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Mount Vernon employees ordered to report if they got questionable pandemic loans

Jonathan Bandler
Rockland/Westchester Journal News

Talk of a federal investigation into a kickback scheme involving fraudulent loans for pandemic relief has prompted Mount Vernon Mayor Shawyn Patterson-Howard to direct any employees who might have taken part to alert City Hall officials. 

In a memo to all employees Tuesday, Patterson-Howard wrote:

"If you applied for and/or received a loan, grant or ANY form of payment as part of the recently discovered 'process' that required you pay a portion of the disbursement back as an application fee, you will need to contact your commissioner, HR commissioner Holly Francis-Merritt or Chief of Staff Darren Morton immediately."

Mount Vernon City Hall.

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It follows weeks of talk about a probe into a brazen effort in the spring to create fake businesses hard hit by the pandemic and collect federal loans or advances for them. Dozens of city employees, including many in the police department, might have taken part.

Public information officers at the U.S. Attorney's Office in Manhattan and the New York field office of the FBI have said they are unfamiliar with any such investigation. 

Nationwide, there has been widespread fraud related to federal pandemic relief efforts, including the Small Business Administration’s economic injury disaster loan program. That made available up to $10,000 in grants almost immediately and $2 million in loans, and was augmented by the $660 billion Paycheck Protection Program established in the Coronavirus Aid, Economic Relief and Security Act.

The money was intended only for businesses seriously affected by the pandemic.

Last month, federal prosecutors in Manhattan charged 57 people with fraudulently receiving $175 million in PPP loans. Among the numerous fraud charges around the country, a North Carolina man was arrested this month and accused of getting loans for 14 fake companies he created with names borrowed from “Game of Thrones.”

Rumors have swirled in Mount Vernon in recent weeks of an investigation based on an aggressive sales pitch by at least one employee of the police department who spread the word of the availability of the pandemic loans in the spring. That employee, or someone associated with them, was also said to have completed the applications using the employees' pedigree information and getting some of the money from the loans for their effort. 

The employees who got loans either did not actually have businesses of their own or had businesses that were unaffected by the pandemic.

The employee who solicited others to apply for the loans owns a business and told The Journal News/lohud earlier this month that she applied for a loan but got a grant instead. She acknowledged telling others about the program but said she knew nothing about commissions being taken or any fraud related to the effort.

Police Commissioner Glenn Scott told the newspaper earlier this month that he was unaware of any investigation. He said that while pandemic loan fraud was an issue nationally he did not believe there was any such problem in Mount Vernon. 

Mount Vernon Police-Court building

On Sunday night, a city spokesman insisted the allegations were not true. The following afternoon, Patterson-Howard went live on Facebook to address speculation that arrests were imminent, saying the "rumors and innuendos" were being looked into but that no one from federal, state or county law enforcement had contacted city officials. 

"No one has been arrested. No one has turned themselves in," she said in a nearly 4-minute update, adding at the end, "we are praying for the best, but if it is true, we are prepared to deal with the worst."

Later, Scott said he had reached out to law enforcement agencies and could not confirm the existence of an  investigation. He said his department maintained a good relationship with federal agencies — and suggested that a report the FBI was in police HQ Friday as part of the probe was wrong. There was an FBI agent there that day, he said, but it was to conduct a background check for a city detective who was in line to join an FBI task force.

The issue comes as the new mayor has tried to move the city away from years of political infighting and government dysfunction. She is set to deliver her first State of the City address Wednesday night.

Police reform was also a priority and the prospect that police were heavily represented in any loan scheme would draw even more attention to that effort. 

The department has been tarnished by the unrelated arrests of four of its members over the past year. But even more so by the revelation of a police whistleblower’s secret recordings of fellow officers talking about false arrests, planted evidence, thefts from suspects and excessive force, primarily by a detective in the narcotics unit.

Although no charges have resulted from that probe, Scott disbanded the narcotics unit and months later put the detective on desk duty.

Last week, the mayor announced the formation of a police reform commission, as mandated by Gov. Andrew Cuomo. But an independent group, the Mount Vernon Coalition for Police Reform, contends city officials have not acted swiftly enough to overhaul the department.

Twitter: @jonbandler