Back in December the Secret Service estimate as much as $100 billion worth of COVID relief funds from the Paycheck Protection Program had been stolen by fraudsters. Today NBC News has a story reflecting on the total scope of pandemic fraud. Turns out if you start handing out money with few safeguards, a lot of people will line up to take it.
Many who participated in what prosecutors are calling the largest fraud in American history—the theft of hundreds of billions of dollars in taxpayer money intended to help those harmed by the pandemic — couldn’t resist purchasing luxury automobiles. Also mansions, private jet flights and swanky vacations.
They came into their riches by participating in what experts say is the theft of as much as $80 billion — or about 10 percent — of the $800 billion handed out in a Covid relief plan known as the Paycheck Protection Program. That’s on top of the $90 billion to $400 billion believed to have been stolen from the $900 billion Covid unemployment relief program — at least half taken by international fraudsters — as NBC News reported last year. And another $80 billion potentially pilfered from a separate Covid disaster relief program…
“Nothing like this has ever happened before,” said Matthew Schneider, a former U.S. attorney from Michigan now with Honigman LLP. “It is the biggest fraud in a generation.”
How did it work? PPP was set up to allow businesses to take out loans backed by the government, but in light of the pandemic those loans didn’t have to be paid back so long as the money was spent on legitimate “business expenses” such as payroll. In short order the government gave out $800 billion. Fraudsters looking to grab some of that loot invented companies that didn’t exist or inflated the number of employees they had and skimmed money off the top.
For much of 2020, lenders did little to verify the applications, prosecutors and experts say, in part because Congress required the U.S. Small Business Administration (SBA), which ran the program, to issue explicit guidance that in the interest of getting the money out fast, lenders “will be held harmless for borrowers’ failure to comply with program criteria.” The Government Accountability Office warned of fraud risk, but the program continued under that rule.
“The government spent approximately $800 billion and provided 21 million loans to individuals,” said Haywood Talcove, CEO of Lexis Nexis, which works with the government to verify identities…
“There’s absolutely no security on there. There’s no validation of any information,” Talcove said. “And voila, you have company ABC with 40 employees and a payroll of $10 million. And you go and apply for a PPP loan. It was a piece of cake.”
Based upon his false statements and fabricated documents, [DInesh] Sah received over $17 million in PPP loan funds and diverted the proceeds for his personal benefit, using them to purchase multiple homes in Texas, pay off the mortgages on other homes in California and buy a fleet of luxury cars, including a Bentley convertible, Corvette Stingray and Porsche Macan. Sah also sent millions of dollars in PPP proceeds in international money transfers. As part of his guilty plea, Sah agreed to forfeit, among other property, eight homes, six luxury vehicles and more than $9 million in fraudulent proceeds that the government has seized to date.
A Florida rapper named “Baby Blue” was sentenced to 20 months for a similar scam involving $24 million. He used some of the money to buy himself a Ferrari. Earlier this year three fraudsters in California were arrested in Montenegro for stealing $18 million.
The three fugitives were among eight members of a California crime ring convicted of stealing more than $18 million in Covid relief loans.
Prosecutors said they used fake or stolen identities to submit fraudulent applications to receive about 150 Covid relief loans from the Paycheck Protection Program and the Economic Injury Disaster Loan program. The fraudsters used the stolen money for down payments on luxury homes and to buy such items as gold coins, diamonds and a Harley-Davidson motorcycle…
Federal authorities believe the couple cut off their ankle monitoring bracelets and fled their home, leaving behind their three children, after they were convicted in June.
You may be noticing a theme, one that NBC mentioned. A lot of these conspicuous fraudsters used the money for luxury automobiles and sports cars. Last year an alleged fraudster named Mustafa Qadiri, who lives not far from me in southern California, collected $5 million in PPP loans and spent it on “a 2011 Ferrari 458 Italia, a 2018 Lamborghini Aventador S and a Bentley.” That’s his Lambo being removed from his house in the photo above.
Over 100 people have been charged with PPP fraud but the total number of people who made fraudulent claims is far higher and chances of ever seeing that money again are slim, unless you get passed by a Ferrari on the freeway. Here’s a local news report about the Mustafa Qadiri story.