Loose SBA controls facilitate massive fraud In COVID relief lending: IG report

This week's Golden Horseshoe is awarded to the Small Business Administration for relaxing internal controls, contributing to massive fraud in the Paycheck Protection Program, which the Department of Justice is continuing to investigate.

The SBA was charged with overseeing several COVID-relief programs including the PPP program, which was intended to help businesses shuttered during the pandemic to retain employees.

The PPP program was the target of massive fraud, and the SBA Office of Inspector General continued to raise the alarm about the agency cutting corners to expedite loans to businesses.

"SBA's efforts to hurry capital to businesses were at the expense of controls that could have reduced the likelihood of ineligible or fraudulent businesses obtaining a PPP loan," the OIG reported several months after the rollout of PPP. "As a result, there is limited assurance that loans went to only eligible recipients."

The PPP fraud cases continue to mount, including one in which a Georgia woman was sentenced to 41 months for scheming to obtain nearly $8 million in PPP loans, according to the DOJ.

Hunter VanPelt, aka Ellen Corkcrum, 49, pleaded guilty after submitting six fraudulent PPP loan applications to four different lenders on behalf of six businesses she owned. She sought to obtain $7.9 million and received $6 million.

Court documents show VanPelt lied about employee and payroll expenses in all the loan applications and submitted falsified tax records, payroll reports and bank statements.

Another case involved two Florida men who applied for $35 million in PPP loans.

The two men recently pleaded guilty to the COVID fraud scheme and are awaiting sentencing. James Stote and Phillip Augustin of Coral Springs submitted 79 fraudulent loan applications for approximately $35 million for one company, Clare Vision Music Group LLC. 

Both men planned on submitting more loan applications using falsified documents, court documents showed.

Assistant Attorney General Kenneth A. Polite Jr. of the DOJ criminal division said that their "convictions, and the numerous convictions of others involved in this wide-ranging conspiracy, demonstrate that people will be held accountable for defrauding the PPP Program." 

"Fraud against PPP programs directly harms taxpayers and undermines public trust in essential government support during the pandemic," Polite said. "We will continue to combat fraud and ensure that COVID-19 relief goes to those who deserve it."

Yet another case involved three New Jersey residents who were charged with obtaining $2.1 million in fraudulent PPP loans and an Economic I Disaster Loan from the SBA. One of the defendants purchased real estate, and another bought a luxury Lamborghini SUV. 

Another Florida man also made his first appearance in court before the new year. Valesky Barosy was charged with fraudulently obtaining $2.1 million in PPP loans on behalf of himself and other accomplices.

Barosy allegedly went on a shopping spree and bought a Lamborghini, a Rolex and other high-end clothing.