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The cases of nationwide fraud in connection with federal relief funds distributed during the COVID–19 pandemic continues to rise.
President Donald Trump’s administration launched the Paycheck Protection Program (PPP) in early 2020. The program was intended to assist small businesses during the pandemic. The program ended on May 31, 2021, but not before giving out over $800 billion in PPP loans.
The U.S. Small Business Administration was tasked with administering the PPP program. Even though the program has been closed, more details continue to emerge about the vast amounts of funds improperly distributed through alleged fraud.
According to NBC News, about 10%, or $80 billion, was fraudulently distributed to applicants.
"Due to the volume and pace at which these funds were made available and a lot of the requirements that were lifted in order to release them, criminals seized on that opportunity and were very, very successful — and continue to be successful," Jeremy Sheridan, who directs the office of investigations at the Secret Service, told NBC News.
The PPP program is not alone in experiencing massive amounts of fraud. Some $90 billion to $400 billion is believed to have been taken from the $900 billion COVID unemployment relief program, a large portion of which was sent to foreign countries. The unemployment relief funds were administered through the U.S Department of Labor.
The Labor Department estimated in March that at least $163 billion in pandemic unemployment benefits could potentially have been improperly paid, most due to fraud.
Alabama PPP loans
In Alabama, the city of Clay discovered several individuals who received PPP loans without having a business license.
According to Ronnie Dixon, the City Manager for Clay, the city discovered around 15 PPP recipients who did not operate a business. This is in a city of fewer than 10,000 residents and fewer than 35 brick-and-mortar businesses.
“When we received information on the people within the city of Clay that got PPP loans, we checked to see if they had business licenses in the city, which they did not,” Dixon said. "When we called or emailed them to see if they had a legitimate business or a home business to say that they needed the proper zoning and licensing, they all denied that they had a business.
“We weren’t even thinking about PPP loans. When the feds put out the list, what we were trying to do was just make sure they were in compliance with our business license ordinance.”
Dixon had no knowledge of any outside investigation or prosecution enacted against the applicants. However, he did say that the city had no prosecutorial ability since the applicants were not actually operating businesses.
Dixon also suggested the Attorney General’s office would be prosecuting the crimes, but after reaching out to 1819 News, it is still unclear what role the Attorney General's Office would play.
According to U.S. Rep. Gary Palmer (R-Hoover), a sizeable portion of the fraud came from international criminals operating in rings.
“It’s unprecedented in the history of the United States,” Palmer said. “It looks like Alabama is about to start pursuing it, but they’re doing it in an interesting way: they are asking people to repay what they received."
“There were crime rings in the U.S. that were filing false unemployment claims, and the state was paying them.”
In April, one Tuscaloosa man was indicted on federal charges of wire fraud after he received two PPP loans totaling more than $220,000. The FBI investigated, and a federal grand jury claimed the man misrepresented that his business was in operation and had employees for whom it paid salaries.
Corine Campbell, a Saraland woman, pleaded guilty to wire fraud in December 2021. Campbell was indicted on federal charges for receiving over $1,000,000 in PPP loans after she and other conspirators submitted over 50 false applications.
'Biggest fraud in a generation'
Describing it as “the biggest fraud in a generation,” Palmer claims that his attempts to amend the laws to improve safeguards on PPP and unemployment distribution were stymied by Democratic lawmakers.
“I tried to address this in a bill we passed in 2020 for states to reinstate the safeguards that existed in the unemployment assistance program before the pandemic, to stop taking applications from foreign IP addresses, and to do more to validate that these were legitimate claims that were submitted,” Palmer said. “I could not get these amendments that I had drafted accepted by the Democrats.”
Despite the attempts to investigate the fraud on the part of the Department of Labor (unemployment) and the Small Business Administration (PPP), Palmer has small hopes of recovering the PPP and unemployment funds.
“I don’t know that we’re going to be able to recover the money,” Palmer said. “…The Small Business Administration has not really done a good job with this. They were not equipped to deal with this. The amount of money that they were dealing with on an annual basis was somewhere less than $3 billion, and then, all of a sudden, they are handling over $700 billion. Part of the problem was that they were simply not prepared for this. The other problem — and I hate to say it — but a fairly high level of incompetence in not having the right safeguards in place.”
According to Palmer, a large portion of the fraud came from overseas operations using Alabama citizens' stolen personal information to receive funds.
“There is massive amounts of money that were stolen from [Alabama] and other states around the country by these criminal rings,” Palmer said. “There were Nigerian rings, there are some involving Russian rings, and it was because they were taking applications from foreign IP addresses. I think a bell ought to go off in your head about that. [Alabama] was making payments to people that were out of state who applied.”
“[I]f we ever get to the bottom of this, I think it will go down as the single greatest theft of government money in the history of the United States.”
The government has released business names and amounts of those who received PPP loans. You can search the list by going to the Federal Pay website.
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