The goodfellas would be proud. It’s probably one of the biggest heists in American history.
I’m referring to billions of dollars doled out this year in Small Business Administration government loans to businesses and individuals to offset COVID-19-related shutdowns.
I’m not talking about the honest recipients. This is about billions stolen by crooks in identity theft scams, and also money given to companies that didn’t deserve it or, when they got it, misspent it.
You’re watching this in real time, right before your eyes.
And it’s about to happen again as more money may be distributed.
The Watchdog heard from North Texans who’ve been victimized by these loans. I’ve heard how others took money in their name. I’ll show you how the scam works, how you can prevent it — and what to do if it happens to you.
Starts with credit check
Pam Rogers received a text message showing that someone had checked her husband’s credit history. “I thought it odd as we did not apply for anything,” she says.
She saw that it was the SBA. She called and learned that two different parties applied for $57,000 in her family’s name. She talked to an investigator who told her there were thousands of similar cases.
The loans were blocked. “Our lives and our credit would have been destroyed,” she says.
Individuals and families need help desperately. Surely, most recipients need these emergency handouts.
What bothers me is the monumental incompetence of our government to protect honest people from crooks and companies that selfishly grabbed the funds and then misspent them (buying company stock, for instance).
Company closed? So what
Retiree John Childs owned Circle C Energy, but he closed it six years ago. He also closed its bank account. Recently he received a letter from the SBA about his $21,000 loan. What loan?
The money for Circle C was sent to the crook. Childs contacted the SBA’s fraud department. “Of course, all you can do is fill out forms,” he says. “You can’t talk to a real person.” He received another letter saying he owes the money. He filled out more forms.
This was an important week in the history of the corona heist. A federal judge ordered the SBA to release a complete list of recipients of Paycheck Protection Program and Economic Injury Disaster loans. The newly published data is on home.treasury.gov. Another way to find it: go to https://www.sba.gov/about-sba/open-government/foia and scroll to bottom of the page to “Frequently requested records.”
A lawsuit filed by 11 media organizations, some of whom sought loan money too, challenged the SBA’s attempt to keep the complete list a secret. The SBA argued that releasing everyone’s loan information would hurt business competition and possibly bring public embarrassment to recipients.
Federal Judge James E. Boasberg ruled that privacy concerns were not as important as rooting out fraud.
The list was released Tuesday showing all loans, but I ran into problems. Not all data appears to be included. (Note: A previously released list only gave data on loans above $150,000.)
The real advantage of the release of the complete list is not to embarrass but to find fraud.
In a statement, the SBA praised “historically successful” COVID relief programs that helped millions of small businesses and tens of millions of American workers when they needed it most.
On the flip side, so far at least 73 people are accused of theft. This is a drop in the bucket of the $525 million lent to 6 million companies. Investigations continue.
Part of the problem is the paperwork to obtain economic disaster loans was much easier than normal SBA requirements. That’s how Congress wrote the law and how the Department of the Treasury set up the rules. Paperwork requests were minimal, and proper verification wasn’t required. That made it easier for the honest folks, but also for the crooks.
Loan coupon book
Chris Taylor received an unexpected payment coupon booklet from the SBA showing she took out a loan for $9,500. Only her first name was on it, not her last. Weird. She contacted the SBA’s fraud department, the Texas attorney general’s office and her county sheriff. Then she put a fraud alert on her credit report. “This nightmare continues. I still don’t have resolution from the SBA,” she says.
Federal law enforcement is investigating fraud tips, the SBA says in a statement.
“Evidence of waste, fraud and abuse with any of SBA’s loan programs is not tolerated and should be reported,” SBA spokeswoman Nina Ramon told me.
The SBA’s internal watchdog cited “strong indicators of widespread abuse and fraud.” He released a report showing that billions of dollars were approved for distribution to potential criminals, but not all of that was distributed.
Companies who didn’t qualify received loans. Some were pop-up companies created simply to secure money. Others already owed the government money.
“The SBA has now approved and disbursed more loans for COVID-19 relief than all other disasters combined in the agency’s history,” the SBA noted. Because loan applications came in by the millions, loan officers usually had very little time to spend on each loan.
Change of address
Patrick Carew figured out how the scam was done. His crook set up a bank account in Carew’s name using stolen information. The crook applied for a debit card. Then the crook applied for the disaster loan, which didn’t require as much paperwork as the paycheck loan. He or she asked for direct deposit into the new account.
The crook also filed a change of address form at the post office so Patrick’s mail would go to the crook. Once the loan money and debit card arrived, the crook could use the card for cash advances and purchases.
Carew says the postal change-of-address verification form comes with discount coupons, causing confusion, so don’t automatically throw it away. When the debit card arrived at his house instead of going to the crook’s address, “I thought the debit card was a credit card offer. Instead, it was the actual card.”
Loan amount taken out in his name: $77,000. But the money was never sent because Carew paid attention, acted fast and blocked it. “I’m fortunate it was not worse,” he says. “It was dumb luck that I saw the debit card and thought enough to investigate, connect the dots and stop the fraud.”
Now with more money possibly going out to Americans, here we go again.
PERSONAL NOTE: Spend an hour with me on Zoom as I talk about Amon “Mr. Fort Worth” Carter and his decades-old battle with Dallas. I’ll tell stories from my award-winning play and companion book, AMON! The Ultimate Texan. My fun talk, hosted by the Dallas Public Library, begins at 1 p.m., Saturday, Dec. 5. Free signup is at https://bit.ly/amon-in-dallas.
Sidebar
Report fraud to the Small Business Association
The SBA stopped receiving complaints by email.
Call the SBA hotline at 800-767-0385. www.sba.gov/oig/hotline.
Or submit a complaint by mail to: Office of Inspector General, 409 Third St. SW, Suite 7150, Washington, D.C., 20416.
Contact the bank involved immediately. Check your credit report for free at annualcreditreport.com/index.action. As a preventive measure, consider a security freeze on your credit.
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The Dallas Morning News Watchdog column is the 2019 winner of the top prize for column writing from the National Society of Newspaper Columnists. The contest judge called his winning entries “models of suspenseful storytelling and public service.”
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* Helping a waitress who was harmed by an unscrupulous used car dealer
