The Ease of Finding Pandemic Disaster Loan Cheaters

In 2021, the SBA Inspector General suggested that nearly $80 billion of funding may have been fraudulent and the number is getting larger. However, while many criminal cases include complex investigations, finding EIDL or PPP fraud on the surface is quite easy. This article highlights how easy it really is to find those who may have committed COVID-19 Relief fraud and several techniques that the government can and probably is using to find those who committed fraud from the pandemic funding programs.

By Thomas Tramaglini, Managing Director at BRP Onesta
info@BRPOnesta.com
www.backofficedepot.com
www.thomastramaglini.com
About Thomas Tramaglini

Since the onset of COVID-19 Relief offered small businesses during the pandemic, fraud has been reported as rampant. Considerable action has been taken to underscore the importance of oversight as well. Since President Biden vowed to ramp up oversight of the Pandemic Programs passed by Congress during the Trump Administration and after as well, the Department of Justice has prosecuted many small business owners and legislation has been passed that make oversight a long-term reality.

However, finding pandemic fraud is not hard. Video evidence is not needed. The proof is in the data and the trail of data which applications can be tied to.

Pandemic fraud was easy.

Many small business owners (and some were not small business owners) used a host of different tactics to defraud the US Government’s PPP and EIDL programs from March 2020 through August 2021. Some of these tactics include bank and wire fraud, identity fraud, as well as the submission of false documents such as quarterly tax reports and taxes.

In our industry, we have seen fraud for many years. Commonly, we see fraudulent bank statements regularly, as well as other fake documents such as false payroll data, tax forms, etc. However, when the Trump Administration rolled out pandemic relief in good faith, many small business owners did not return

the favor. They saw “free money” and clearly did whatever it would take to get funded.

We have written extensively about many of the fraud cases and background of cases that continue to pop up in the news, as well as new indictments and convictions in the following articles:

Small Business owners are accountable for what they attested to when submitting their pandemic relief applications

When small business owners filed applications for PPP and for EIDL, they attested that the information they were submitting was true. For instance, in the standard PPP application, the small business owner had to “certify that the information provided in this application and the information provided in all supporting documents and forms is true and accurate in all material respects. I understand that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law, including under 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a federally insured institution, under 18 USC 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.”

Therefore, small business owners who knowingly filed requests for disaster relief funding knew in advance of accountability, and they hedged that they would never be held accountable for submitting false (or verifiable) information.

Evidence is Easy to Be Found

Unlike many criminal cases that are cloak and dagger and require massive, complex investigations to uncover hidden evidence, investigating COVID-19 fraud is relatively easy because there are verifiable data and a paper trail leading the way to who done it.

Anyone Can Mine EIDL and PPP Data

The SBA has released a host of PPP and EIDL data which can be found here:

BackOffice Depot Data for Download

Feel free to download all public data as because the data are public data under the Freedom of Information Act (FOIA).

Cross-Checking Data is Not Hard

In many cases, people believe that the government is not very smart.

However, what is needed to find fraud is not hard and the government does not have to be smart to outsmart stupid. Anyone who has access to data can find those who possibly committed fraud with a simple V Lookup or the use of a Pivot Table using Microsoft Excel. Here are a few simple ways that the government is using data to find those who may have committed fraud.

Were the companies who submitted applications, operating?

During review and underwriting their EIDL or PPP loans, the SBA and many lenders did not ask for articles of organization or incorporation or even back up that the company was operating. For instance, anyone can download any of the spreadsheets that we have on our website (see above) to pull the data for themselves. We have easily accessible datasets listing have every pandemic relief loan given from March 2020 through October 2021.

One can go through the list of businesses and just Google the businesses. It is easy to find businesses who are operating and who are not. Websites report scores of data on businesses including number of employees, how many trucks are in operation, and more.

The easiest data to find discrepancies are with the larger EIDL and PPP loans that were taken by small businesses. For instance, I was able to download all loans for PPP over $150K and then sort the column with loan amounts. I was easily able to then choose 10 loan recipients at random. Just in my cursory review I was able to find 1 trucking company that received $700,000+ but they only had listed on the USDOT site that they had 2 trucks. The same business also showed on the EIDL website that they had listed 4 employees. Given the PPP rules for how much salary was able to be delivered in funding, something there seems fishy. The other company I found listed in the 10 companies I reviewed also received $700K+. The company seemed to not have a website, business in good standing, did not file an annual report for more than 6 years, or have any notable information which demonstrated a legitimate business. I even Googled the business address, and the business address was a vacant home sold more than 2 years ago.

Matching tax data with PPP/EIDL Applications

Tax data. It is that simple.

Simply put, the IRS has a record of every tax return and report of quarterly payroll data.

One can easily take the PPP dataset, combined with the data from the IRS (which the Department of Justice or Inspector General for the SBA) should be able to cross-reference using a V Lookup or Pivot Table and find matching and non-matching numbers. Those who submitted quarterly payroll data (940/941) which does not match the IRS records should immediately be investigated.

I am going to guess (however, I cannot give the government that much credit) that the IRS and SBA have begun cross-checking these data and found many fraudulent applications.

The same governmental agencies should also be able to cross-check income from 1040s or 1120 (or other forms) to see if what was submitted was really what was submitted. That is, many people or small businesses do not file taxes. However, when submitting their applications everyone did. It wasn’t until much later on during the pandemic that the SBA began asking for tax transcripts. One can only think of the millions of loans that were approved without any check of tax forms or the infamous 3506T review.

Were some people really that stupid?

The answer is yes.

As aforementioned above, we have written extensively on the subject, as far as ranking the most dubious losers who defrauded the government.

Congress recently passed legislation that extends the statute of limitations out to 10 years for pandemic fraud. It is likely that those who cheated, will be called on it.

Dr. Thomas Tramaglini is the Managing Director for BRP Onesta, a company that supports small businesses. By offering a host of important and affordable services that small

Plenty of Blame to Go Around: Who is to Blame for The Biggest Fraud in American History?

Over the last year, we have written extensively at the breadth of fraud associated with the Federal Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) Programs during the COVID-19 Pandemic. In recent weeks, the US Small Business Administration Office of the Inspector General (OIG) released a scathing report of the performance of the US SBA during the COVID-19 Pandemic and its attention to fraud during the PPP program. Not only are some small business owners and some lenders to blame for fraud, so is the US Small Business Administration. Clearly, they failed to adequately do their part in preventing fraud, ultimately leading to what some have called the biggest fraud in the history of the United States.

By Thomas Tramaglini, Managing Director at BRP Onesta
info@BRPOnesta.com
www.backofficedepot.com
www.thomastramaglini.com
About Thomas Tramaglini

How bad was the fraud?

Bad. In past articles we have highlighted the many FRONTLINE ZEROES OF THE PANDEMIC. That is, the countless losers who have defrauded the people of the United States by using a host of strategies to collectively secure millions of dollars and in most cases misappropriately use the funds which were to keep America’s businesses open. In a previous article, we underscored this from a report made by Ken Dilanian and Laura Strickler of NBC.

They called it the largest fraud in the history of the United Stated:

“Even if the highest estimates are inflated, the total fraud in all Covid relief funds amounts to a mind-boggling sum of taxpayer money that could rival the $579 billion in federal funds included in President Joe Biden’s massive 10-year infrastructure spending plan, according to prosecutors, government watchdogs and private experts who are trying to plug the leaks.

“Nothing like this has ever happened before,” said Matthew Schneider, a former U.S. attorney from Michigan who is now with Honigman LLP. “It is the biggest fraud in a generation.”

Most of the losses are considered unrecoverable, but there is still a chance to stanch the bleeding, because federal officials say $600 billion is still waiting to go out the door. The Biden administration imposed new verification rules last year that administration officials say appear to have made a difference in curbing fraud. But they acknowledge that programs in 2020 sacrificed security for speed, needlessly.”1

What the cases of COVID-19 Loan Fraud demonstrated

While there are a bunch of cases which have different ways in which PPP or EIDL fraud were conducted, the justice department has already brought criminal charges against hundreds of small business owners for fraud since 2020. The Biden Administration currently has implemented tougher oversight and investigation since Biden took office which has shown hundreds of millions in fraud were committed – More is to come.

What have been the lenses of COVID-19 fraud which have been prosecuted?

A nice overview of the Justice Department’s investigations have been made by the Project on Government Oversight (POGO). They have kept a great database on their website here:

https://docs.google.com/spreadsheets/d/1Z8p-hj2E_VgM3-lRo4eG2CI__iKpiu4UK_SRPqRI7sU/edit#gid=0. A review of their database suggests the following were the main cases of COVID-19 fraud:

  • Accused individuals allegedly falsified payroll documentation to justify either getting a loan or getting a bigger loan than they were eligible for;
  • Accused individuals allegedly created fake tax documents used for verifying details in loan applications;
  • Accused individuals allegedly created bogus companies to get loans;
  • Accused individuals allegedly used defunct companies to get loans;
  • Accused individuals used stolen identities or aliases while applying for loans;
  • Accused individuals allegedly falsified ownership of existing legitimate businesses;
  • Accused individuals also obtained Economic Injury Disaster loans (some of these individuals have been accused of fraudulently obtaining these loans as well).

More of the article can be found here

Who is to blame for the fraud?

This is an interesting question: But there is plenty of blame to go around. While we could explore this topic on many angles, we have selected three main areas: small business owners, lenders, and the US SBA.

Small Business Owners

Small business owners have extensively been prosecuted for fraud in the aforementioned areas and others. What is clear, many small business owners tried to take advantage of the Federal Government. What is not understood is how these people thought they were not going to be cross-checked from the IRS on data such as 940/941.

If there is thing, small business owners were eager to get help that was needed. However, some small business owner clearly saw opportunity to score some easy and free money.

We have underscores other things small business owners did which regard the level of stupidly or ineptitude.

Articles

Maseratis, Jaguars, Mercedes, Investments, Swimming Pools…. Getting Caught for PPP/EIDL Fraud.

Getting Caught: Small Business Owners Committing EIDL and PPP Fraud.

Fake 940/941s, More Lamborghinis, Rolexes and Real Estate Oh My.

The Frontline Zeroes of the Pandemic.

Lenders

Without a doubt, many lenders were to blame for much of the PPP fraud. Banks, who generally oversee SBA loans make the process to acquire loans very difficult continued tough oversight during the Pandemic. However, other lenders like FINTECH companies have been blamed for poor oversight, and at a minimum have been investigated for allowing PPP loans to be fraudulently received.

Bloomberg reported about a University of Texas at Austin study in 2021 that Fintechs were found to be five times more likely to ok suspicious PPP loans.

As a company who sent many of its client’s applications to lenders including FINTECHs, we could clearly see the level of oversight differences. For instance, PNC Bank required much more back up for their loans and reviewed documentation with a fine-tooth comb. Other lenders like Cross River Bank prided themselves in using technology to speed up the review process. Clearly, one can see how many more SBA loans would be provided if banks did “technologically driven automation” to underwrite and review loan applications.

Clearly, there is much blame to go around, but there clearly was poor oversight with many of the SBA providers. Congress has recently held hearings and brought to light these issues.

Small Business Administration

While policy makers in Congress were quick to point fingers at the lenders and further call for going after fraudulent business owners, The United States Small Business Administration is one who many have suggested to share the blame.

In May the SBA Inspector General issued a report which reviewed PPP loans and how the SBA contributed to what is considered one of the best and worst government programs ever.

Among the findings, the Office of the Inspector General found:

  • There were no established procedures for PPP which could track and address potentially fraudulent applications. Therefore, lenders, many of who were not equipped with trained underwriting staff were left to look for fraud or accuracy.
  • There were no fraud risk frameworks established before the program was released.
  • The SBA was unable to handle the speed of which the program was delivered and employed.
  • Lenders had little guidance for how to handle certain situations, such as finding multiple processes to handle cautionary reviews or uncommon questions.
  • There were few steps established which checked for the accuracy of information, such as if someone had created a false 940 or 941 form.

The full report, which can be found here, describes the COVID-19 fraud and how the SBA contributed to the fraud in the report. In the report, the Office of the Inspector General said:

“The Office of Inspector General (OIG) found that the Small Business Administration (SBA) did not have an organizational structure with clearly defined roles, responsibilities, and processes to manage and handle potentially fraudulent Paycheck Protection Program (PPP) loans across the program. In addition, the agency did not establish a centralized entity to design, lead, and manage fraud risk. This problem occurred because the agency did not establish a sufficient fraud risk framework at the start of and throughout PPP implementation. Management stated this was partly due to the speed of the delivery of PPP and the continuous and rapid discovery of different kinds of fraud schemes. Lenders also were not always clear on how to handle PPP fraud or recover funds obtained fraudulently from the PPP that remained in the borrower’s account. SBA did not provide lenders sufficient specific guidance to effectively identify, track, address, and resolve potentially fraudulent PPP loans.

In the end of the report, the OIG recommended that the SBA establish clearly defined and detained roles, procedures and adopt procedures for finding fraudulent loans.

References

1 – https://www.nbcnews.com/politics/justice-department/biggest-fraud-generation-looting-covid-relief-program-known-ppp-n1279664

Dr. Thomas Tramaglini is the Managing Director for BRP Onesta, a company that supports small businesses. By offering a host of important and affordable services that small business owners tend to not have time to do themselves, the team at BRP Onesta can help small businesses grow infinitely. Although located in on the famous Jersey shore, BRP Onesta serves clients in all 50 states, Puerto Rico, Mexico and Canada.

The growing teacher shortage: What can we all do?

By Thomas W Tramaglini

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How bad has it really become? 

I recently came across this news story on CBS by Aimee Picchi.

You can read and watch the story here: https://www.cbsnews.com/news/americas-new-education-crisis-a-teacher-shortage/

Aimee’s story profiles a growing, yet continual problem in the nation where schools having a harder and harder time finding teachers to fill their positions.  For several reasons, education is constantly losing qualified heroes for our children.

Ingersoll and Purda have a great slide which suggests the real reasons why teachers leave (or never come into) the profession:

Why_Teachers_Leave

An article that Ingersoll and Purda (2008) wrote can be accessed here for more on the status of teaching as a profession: https://www.gse.upenn.edu/pdf/rmi/SSSAE-RMI-2008.pdf

In reading the CBS story by Aimee Picchi, a very interesting section I found particularly interesting and noteworthy is written below:

“The teacher shortage emerged in the wake of the Great Recession, when school districts cut their staffing as funding dried up. But student enrollment has only grown, adding to the pressures on local schools. At the same time, fewer college students are opting to become teachers because of the economics of college debt, said Linda Darling-Hammond, the president and CEO of the Learning Policy Institute, a nonpartisan organization that focuses on education policy. 

“There are studies about this that show people choose careers based on the salary in relation to the debt they have from college,” Darling-Hammond said. “In many many states, salaries were frozen and never kept up with inflation.” 

She added: “People can’t stay in a profession where they can’t afford to support their own families.””

We need to think differently

Being a school leader has been one of the most rewarding experiences and perhaps one of the best parts about being a school leader has been the experience of hiring great people who can educate students, so they can accomplish their dreams.

There are plenty of candidates out there, but I would agree with the researchers, as well as Aimee Picchi’s piece, the base of teachers is diminishing.

From my experiences, the problem is complex and there are many reasons for the growing shortage.  For one, in recent years I have seen our teachers take a beating from the pressure of attaining higher test scores.  Also, some teachers have been challenged by a highly programmed learning environment which is standardized thus taking flexibility away from the teacher to customize learning experiences which master teachers artfully design.  Two great reads which not only paint this picture well, but also lead to what to do about it are written by Professor Chris Tienken of Seton Hall University.  I highly recommend both books:

The School Reform Landscape (Tienken & Orlich)

https://www.amazon.com/gp/product/1475802587/ref=dbs_a_def_rwt_bibl_vppi_i0

Defying Standardization (Tienken)

https://www.amazon.com/gp/product/B01N3Z1ZCV/ref=dbs_a_def_rwt_bibl_vppi_i2

And while I would suggest that it has always been my intention as a leader to take teachers’ focus off test scores, policy makers, Boards of Education and communities’ value higher student achievement and school leaders and teachers feel the pressure for sure to produce higher test scores.  Simply put, education isn’t what it used to be.

So, what can we do to solve the teacher shortage?  What can you do?  How can we continue to inspire our children?  Higher pay?  Better benefits?  Privatize schools?

Please share your ideas and start a conversation by posting your ideas to my social media accounts:

Follow me on Twitter: @TomTramaglini
LinkedIn: https://www.linkedin.com/in/thomaswtramaglini-8538b4167/ 
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Is Redshirting the way to go?

In my time as a parent and educator, I have long seen parents grapple with the concept of holding their children back from entering kindergarten until they were 6.  I too, grappled with this idea with my own children.

Anna Orso of the Philadelphia Inquirer wrote a very interesting piece which I saw in a recent publication of the US News & World Report.  The article is a great read which I believe captures the essence of “redshirting” children, including the pros and cons of holding kids out of school until they are older.

Click here to read Anna’s article Does ‘Redshirting’ Benefit Kids? Kindergarten Decision Looms