Fed Crackdown on COVID-19 White-Collar Crime: Is It Working?

By TCR Staff, Thecrimereport.org

A Minnesota man has been charged in connection with an $800,000 fraud scheme involving the Paycheck Protection Program (PPP), in the latest example of stepped-up federal vigilance over white-collar crime during the pandemic.

According to the indictment announced last week, Kyle William Brenizer, 32, submitted “false and misleading” applications for financial relief under the federal CARES Act, enacted in March to provide monetary assistance to businesses facing financial struggles as a result of COVID-19.

Three days earlier, a Taiwanese national living in New York City named Sheng-Wen Cheng was charged in connection with an alleged scheme to fraudulently obtain over $7 million in loans from the PPP and the Economic Injury Disaster Loan (EIDL) program.

Both cases may represent the tip of the iceberg in what experts warn is a growth in COVID-related fraud that undermines legitimate businesses who are struggling to stay afloat, despite claims by federal authorities that “rigorous” measures” are in place to combat it.

Schemes ranging from price-gouging and hoarding of personal protective equipment (PPE) to false claims for business relief are likely to increase as the financial impact of the crisis widens, Bridget Rohde, former Acting United States Attorney for the Eastern District of New York, told a panel last June at the University of Maryland.

“You’re going to see accounting fraud, you’re going to see insider trading, you’re going to see all sorts of misrepresentations,” said Rohde.

Federal authorities say they are stepping up efforts to meet the threat.

“This isn’t the first case of…fraud we’ve seen, and it won’t be the last,” FBI Assistant Director William F. Sweeney Jr, said in a statement announcing the charges against Cheng.

“But rest assured those who try to buck the system will be met with federal criminal charges wherever and whenever possible.”

In late July, the Small Business Administration’s Office of the Inspector General announced it had identified $250 million in taxpayer-subsidized coronavirus loan funds given to “potentially ineligible recipients,” and warned of increasing fraud involving the federal stimulus program, the Washington Post reported.

Potential fraud identified in the watchdog report included some $1.9 million in pending SBA transactions made to accounts outside the United States, and about 3,000 “suspicious” transactions worth $73 million.

“We are alarmed by these reports, but they are consistent with our investigations, which indicate pervasive fraudulent activity,” the Inspector General’s report said.

The SBA has been criticized for not developing internal preventive measures against abuse, a claim SBA Administrator Jovita Carranza refuted, saying the agency had put in place a “comprehensive, rigorous, end-to-end infrastructure to reduce the risk of fraud in the EIDL COVID program.”

According to the indictment against Brenizer, he tried twice to obtain relief in the name of the same firm. The first application was denied, and he allegedly re-submitted it under another name.

He allegedly used the some of the money to purchase a $29,000 Harley-Davidson motorcycle, as well as “other retail and entertainment expenditures for his personal benefit,” the indictment claims.

The Cheng case also allegedly involved using the names of other individuals to falsely obtain relief from the Small Business Administration and five financial institutions, claiming that he operated companies with over 200 employees and was responsible for a $1.5 million monthly payroll.

In fact, authorities said, his companies had no more than 14 employees.

Additional reading:

 Citibank Warns of Rising Payments Fraud During COVID

 Attorney General William Barr warns in a March memo that financial misconduct during the pandemic “cannot be tolerated.”

 This summary was prepared by TCR intern Laura Bowen.

Article Source: Thecrimereport.org

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