Unraveling the Web of Corona Fraud: How Scammers Exploited the Pandemic

The COVID-19 pandemic brought unprecedented challenges, not only in terms of public health but also in the realm of fraud. As the world grappled with the crisis, unscrupulous individuals and organized criminal networks seized the opportunity to exploit the situation for personal gain. In this article, we will delve into the insidious world of "Corona Fraud" by examining the various schemes and scams that emerged during the pandemic, backed by information from reliable sources such as the SMP Resource Center, NBC News, the House Oversight Committee, the Associated Press, the Department of Health and Human Services (HHS), and the U.S. Department of the Treasury.

What Is PPP Loan Fraud? How Do I Report PPP Loan Fraud?

What Is PPP Loan Fraud?

How Many Years Will It Take Businesses To Fully Recover?

Estimates Are Based on a muted and contained virus scenarios

1. Arts, entertainment, and recreation
2. Hotels and food services
3. Educational services
4. Transportation and warehousing
5. Manufacturing 
6. Mining, quarrying, oil & gas extraction
7. Wholesale trade
8. Administrative and support services
9. Utilities 
10. Finance and Insurance
11. Construction 
12. Retail Trade
13. Management of companies and enterprises
14. Real estate, rental, and leasing
15. Professional, scientific and technical services. 
16. Information services
17. Healthcare and social assistance 

12 Ways COVID is Changing Business Both Positive & Negative

Covid is going to change business in many ways that are positive and negative.  Here are the top 10

1. Meeting structures and changes
2. How leaders lead day-to-day
3. Use of technology and systems 
4. Core processes and how the company is run
5. Approach to talent and skills training
6. New cultural aspiration and behaviors/mindsets
7. Approach to innovation 
8. Decision making and how business is organized
9. Interactions with external stakeholders
10. Product and service portfolio
11. Partnerships and the broader ecosystem 
12. Corporate purpose

Here is the full report from McKinsey & Company. 

(Poll) How Much Rent Did you Pay or Receive in May?

If You Pay or Receive Rent for a Home or Business How Much Did you Pay or Receive in May?

— Disaster Relief Maps (@disastermapping)
May 5, 2020

(Poll) If You Pay or Receive Rent for a Home or Business How Much Did you Pay or Receive in May? 

A new Insider poll found 23% of Americans who owe a rent or a mortgage payment on Friday aren't sure they'll be able to pay it.

While 77% of respondents said they were set to make this month's payment, 12% said they don't have the money and 10% said they aren't sure if they'll have all of it.

Housing data previously found that about a third of renters did not pay rent to their landlord for the month of April.

Half of Small Businesses Haven’t Paid Full April Rent Rent, Early Poll Suggests

In what is likely the largest coordinated rent strike in the U.S. in recent history, people affected by the coronavirus shutdowns are telling their landlords not that they’ll pay rent later, but that they won’t pay at all.

The situation has led to the largest coordinated rent strike in the U.S. in decades: On May 1, tens of thousands of tenants are expected to join together as they tell their landlords they can’t pay rent. Some tenants who still have jobs will participate in solidarity. But for most, “this isn’t a matter of choice,” says Peter Meyer Reimer, an organizer with the groups Five Demands Global and Rent Strike 2020. “Thirty percent of Americans didn’t pay any rent at all last month, and this month it’s only going to be worse. A lot of those people are involuntary rent strikers. We’re trying just as quickly as we can to connect them up with other people so that they have some political cover, and so they have a chance at getting out of this without being saddled with debt for something that’s not their fault.”

In L.A., membership in the Los Angeles Tenants Union grew from 3,000 tenants before the pandemic to 8,000 by the middle of April; those tenants are all expected to strike. In New York, nearly 12,000 people have pledged not to pay rent on May 1, and some have coordinated building-wide strikes. Nationally, nearly 200,000 renters may participate.

USA Tenant Protections & Rent Strike Map

More than 30 million Americans have filed for unemployment in the last six weeks, and millions more have tried but failed to file claims—and as overwhelmed unemployment offices are slow to pay benefits, many people don’t have the money to pay rent. Millions of people still haven’t received their stimulus checks; in cities like New York, where the rent for a typical one-bedroom apartment is nearly $3,000, a stimulus check for $1,200 won’t go far.

It Took 26 Days To Receive This Email from the SBA Disaster Loan Assistance

Important Information from Small Business Administration (SBA) - Your EIDL Application

Dear Applicant,

We understand the challenges your business is facing due to the massive disruption caused by the Coronavirus (COVID-19) pandemic. You are receiving this message as a notification that your Economic Injury Disaster Loan (EIDL) application is currently being processed in the order it was received. You will receive an email notification when there is a change to your application status.

Without question, COVID-19 has caused an extraordinary impact on our nation's small businesses, and the demand for emergency working capital provided by the EIDL program is at historic levels. The SBA is processing applications from small businesses and private non-profit organizations across the country as quickly as possible. We thank you for your patience and understanding as we work to assist as many applicants as possible.

Additional information on available resources to assist your business during the effects of COVID-19 may be found online at www.sba.gov/coronavirus.

Here are some questions I have after receiving this email. 

1)  Has any small business with only a few employees or sole proprietor received a loan?

2)  There can't possibly be any SBA Lending Fraud?  How can the Lakers, Shake Shack, Ruth Chris, Brentwood School, Harvard all get paid within a few days and the real small businesses have nothing?

3)  How many SBA Disaster Loans Were Submitted?

Big Businesses Receive Largest Sums of Government Aid Intended for Small Businesses

Why Are Banks Taking 1% to 5% in Fees to Process No Risk Loans?

Some of the public companies, listed in order of their market value, who have received loans from the Paycheck Protection Program set up to help small businesses

For every Government backed loan transaction made, banks took in 1% to 5% in fees, depending on the amount of the loan, according to government figures. Loans worth less than $350,000 brought in 5% in fees while loans worth anywhere from $2 million to $10 million brought in 1% in fees.  Are there any ethical banks that are processing loans for free and waiving fees?

For example, on April 7, RCSH Operations LLC, the parent company of Ruth's Chris Steak House, received a loan of $10 million. JPMorgan Chase & Co., acting as the lender, took a $100,000 fee on the one-time transaction for which it assumed no risk and could pass through with fewer requirements than for a regular loan.

Banks handling the government's $834 billion loan program for small businesses made more than $10 billion in fees — even as tens of thousands of small businesses were shut out of the program, according to an analysis of financial records by NPR.

Loans are then funneled up to the SBA Administration to process. The banks took in the fees while processing loans that required less vetting than regular bank loans and had little risk for the banks, the records show. Taxpayers provided the money for the loans, which were guaranteed by the Small Business Administration.

One law firm, the Stalwart Law Group, filed five class action lawsuits this week — four in California and one in New York — alleging that banks processed clients with larger loans first because they stood to generate more money in fees. By the time the banks tried to process loans from their smaller clients, the lawsuit alleges, the program had run dry.

Banks dispute these allegations. JPMorgan said it handled the applications fairly.  Banks stood by the fees, telling NPR that the program had “significant vetting requirements” such as “collecting, personally examining, and storing data” that’s needed for the applications.

Some banks might now be waiving fees as this bad loan fee publicity has made its way through the media.  Do a page search for "fees" on this Bankrate page for more details on what each bank is doing.   There are 5 banks listed on this page that are waiving fees.

Small Business Lending Fraud

With roughly 26 million Americans filing jobless claims over the last two weeks, and millions of small businesses seeking government aid to stay afloat, the need for the government to immediately push out money to Americans and into the staggering economy could hinder efforts to filter out efforts from potential fraudsters to seek relief funds.

How can 3,500 SBA employees possibly handle 20+ million small business loans?  The SBA just wasn't setup for this administrating disaster relief loans of millions.  

“Everybody’s acceptance of some or a lot of fraud is going to have to be high, because it’s going to happen,” said Earl Devaney, who served as the top watchdog of the Recovery Accountability and Transparency Board, which tracked the stimulus spending following the Great Recession in the late 2000s. Read article. 

This mentality that fraud will be accepted is just wrong. Though the legislation mandates multiple oversight bodies, if even a small percentage of the funds are misused, it could mean fraud on the scale of potentially millions, if not billions, before there are any efforts to recoup losses, according to experts.

They see the $834 billion in funding earmarked for small businesses in the form of forgivable loans as particularly susceptible to abuse. Millions of small business owners began applying to banks for the loans on Friday, though many applicants and lenders experienced problems with the program's rollout.

Other veteran investigators are concerned that the review process, which leaves it up to banks to vet potential borrowers and applicants to attest to their eligibility, doesn’t give authorities enough time to effectively weed out potential fraud.

The $2.2 trillion, 880-page CARES ACT approved by Congress last week included oversight provisions, modeled after some of the safeguards implemented to track the financial system bailout and stimulus money after the Great Recession.

Lawmakers and coronavirus stimulus watchdogs won’t just have this historic $2.2 trillion coronavirus package to police. Conversations have already started on Capitol Hill around a fourth phase of relief funding, including more money for small businesses.

The SBA's directives could create a more equitable distribution of lending power across the industry and get more loans in the hands of businesses, though it's likely that applicants will still struggle to secure them.

The changes mean that the biggest banks may not be able to dominate lending through the PPP, creating an opening for smaller banks. During the first round of PPP fund distribution, more than 25% of the total funding went to fewer than 2% of firms that got relief, in part because banks prioritized existing customers and larger loan applications to yield higher fees — both of which triggered lawsuits — even though the program was supposed to operate on a first-come, first-served basis.

The SBA's new directives mean that some big banks are likely nearing their lending capacity, which could lead some applicants to turn to smaller banks instead, relieving some pressure on application pipelines. And pacing applications could prevent big banks from flooding the SBA with applications, making it less likely that any one lender will receive a disproportionate amount of the available funds. Smaller banks can therefore take advantage of this opportunity to establish relationships with small businesses that were shut out of PPP loans elsewhere.  Read More