Federal investigators want you to speak up about PPP fraud

Federal investigators want you to speak up about PPP Fraud
Published: Nov. 16, 2021 at 5:29 PM CST
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BATON ROUGE, La. (WAFB) - The Paycheck Protection Program, known as PPP, provided a lifeline for millions of business owners when the pandemic was at its worst. The forgivable loans were meant to cover payroll for employees and, later, other eligible expenses at a time when customers weren’t coming in. Nearly 11.5 million people filed applications, resulting in more than $792 billion worth of loans. Each loan paid out was guaranteed using taxpayer money.

“The Paycheck Protection Program saved millions of jobs. It was this difficult road that we had about a week, but our bankers got it done and, and our businesswomen and businessmen stepped up to the plate and took advantage of it,” said Sen. John Kennedy, R-La.

However, not everyone taking part in the federal program was looking to keep their business doors open.

The Department of Justice confirms they are looking into reports of PPP fraud across the nation. In Louisiana, a federal grand jury recently indicted a Plaquemine woman named Lestreonia Rodrigue on fraud charges. She’s accused of making up fake businesses to collect more than $20,000 through a PPP loan and another $500,000 in prepaid debit cards through unemployment claims.

“I don’t know why it is that that some people take advantage of a program like this in a time of crisis. To me, it’s like looting after a hurricane. And I, I think we ought to prosecute every single one of them to the full extent of the law,” said Kennedy.

The program worked like this. A borrower applied for a PPP loan from a lender or bank. The lender got to keep a fee based on the size of the loan. If the borrower can prove they used the money to pay employees and eligible expenses, they can ask the SBA for loan forgiveness. If approved, the SBA pays the lender back using federal funds. Otherwise, the borrower is on the hook for the money. If someone defaults, or can’t pay it back, the SBA will still reimburse the lender.

It’s up to the SBA and the Justice Department to go after anyone caught stealing PPP money. Sen. John Kennedy says in the rush to get help to people in need as quickly as possible, Congress didn’t have time to build many safeguards against fraud into the program.

“With more time, we might have been able to implement some preemptive fraud measures, but we knew there would be some fraud,” said Kennedy.

According to the SBA, lenders are responsible for vetting applications and making sure the applicant is telling the truth in whatever way they see fit.

“The SBA has very broad rules, very, very large leeway on what the lender had to request from the bar to get that guarantee secure,” said the SBA Louisiana District Director Michael Ricks.

PPP loan information is available to the public through the SBA, and several groups have even published that information in the form of online searchable databases that anyone can use.

Using that public data, the 9 News Investigators took a close look at PPP loans given out in Louisiana. Barbershops were one of the most common businesses to apply. For example, in the city of Gonzales, there were 70 people claiming to own a barbershop who applied for loans. The amounts varied from less than $2,000 to more than $20,000. Nearly a dozen of those people took out two loans. All totaled, in that city of 43,000 people lenders approved $1.3 million dollars just for barbershop owners.

The largest loan paid out was $20,833. Lenders approved that amount for eight people, seven of whom got checks. Two people were approved for that amount twice, and one of those people got paid twice.

However, a check of public records for business licenses with the Secretary of State’ office revealed no active business licenses for those eight individuals. At the request of WAFB, the Louisiana Board of Barber Examiners also searched their apprentice, student, barber, and shop records for those eight names and addresses, and came up empty as well.

According to the Board of Barber Examiners, to legally run a barbershop, an owner must have a business license and a barber license if they are cutting hair even if that business is run out of a home. However, industry insiders say the barbershop industry is largely cash-based, making it easy to operate under the radar.

Director for the Louisiana SBA District Office Michael Ricks said while that information may raise some red flags on the surface, he explained that not complying with an industry’s licensing requirements does not necessarily disqualify someone from being eligible for a PPP loan.

“As far as the state of Louisiana is concerned, there is no requirement that a sole proprietor have a specific license at the state,” said Ricks. “You have to understand from the lender’s perspective, really, they’re just looking at income. They’re not checking licenses. You know, is it something that they should have done? Maybe, maybe not all.”

Senator Kennedy admits the program may have had some holes in it, due to how quickly it was rolled out, and the loan program has been updated many times to expand eligibility. So now, he says agencies must go after anyone who might be taking money they’re not entitled to.

“My directive to SBA and to the Department of Justice will be to work with our state attorneys general, work with local DHS, work with local sheriffs, and make sure people understand if you steal money, these are these are finite resources,” said Kennedy. “If you’re going to steal money, finite resources from people who need them, then, by God, we’re going to prosecute you.”

However, both Kennedy and Ricks say the good the program did far outweigh any possible fraud.

“My feeling is that despite the fraud, the program helped far, far, far more of my people than it hurt,” said Kennedy.

Federal investigators cannot comment on active investigations or give an estimate on how much fraud may have occurred through federal pandemic relief programs, but a spokesperson for the U.S. Attorney’s Office of the Middle District of Louisiana confirms there were fraudulent applications submitted in Louisiana through several relief programs including the PPP. According to the U.S. Attorney’s Office, there have been dozens of people charged with fraud nationwide and there are five pending Federal civil procedures where agencies are looking to get back $2.3 million worth of fraudulent assets including two high-end cars, a house, and cash.

Both the U.S. Attorney’s Office and the Louisiana Attorney General have encouraged the community to report suspected fraud. The National Center for Disaster Fraud (NCDF) is in Baton Rouge and reports can be filed here.

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