After his imprisonment, scammers warned about PPP, other emergency loans
Taking out a loan for a paycheck protection program (PPP) or other federally backed aid to weather the pandemic will make your problem worse if you don’t have a realistic plan for the money, says a former business owner convicted of federal loan fraud in a White Collar Week podcast.
Jeff Grant, whose 20-strong law firm struggled when the federal government provided emergency loans after the 9/11 terrorist attacks, said he rushed to get the money without thinking about how best to use it. The result was a 13 month prison term.
“It was sheer desperation,” said Grant, who today is focused on helping other white collar criminals live post-crime lives. “At that point I lost my business. I would have done anything for every breath to save my business.”
Grant applied for a $ 250,000 loan under the Small Business Administration’s (SBA) Economic Injury Disaster Loan (EIDL) program, a resource that the federal government, along with the Paycheck Protection Program (PPP), has re-made available, this time for Pandemic companies hit.
To increase his chances of getting the money, he said in his application that his store would be across from Ground Zero in Manhattan when it wasn’t – a form of wire transfer fraud – and he used the money to make his Personal Information To Pay For Debt – A form of money laundering as the program’s debt clauses restricted the money for business use only.
“I ran up [my credit card debt] in the months before [to 9/11]to save my business, “he said.” I paid 24% interest on the credit cards. The EIDL loan was around 3%. It seemed to make sense: replace the 24% money with 3% money. “
Two years later, Grant said, he had no idea that he was being investigated.
“The risk of an exam never crossed my mind,” he said. “It was immediately after 9/11: a huge problem for the nation. I was just that little guy who never had to be held accountable for anything.”
In addition to his business troubles, Grant struggled with personal problems that had jeopardized his license to practice law. Facts emerging from legal proceedings related to his practice may have led the government to investigate him, he said.
“I just got a call from two federal agents who told me there was an arrest warrant against me,” he said.
Instead of fighting the charges, he admitted his crime.
“Just like making a business decision, you work back from the bottom line,” he said. “I knew I had done something wrong. I wanted to pay for my crime. I made it up to you in full. Lots of people spend a lot of time and money wriggling their way out, but we find ourselves in a world where over 95% of criminal prosecutions result in settlement negotiations. There are practically no processes. The government gives you a stumbling block to defend yourself in court and an incentive to resolve the problem quickly. “
Huge sums of money
In light of the pandemic, Grant said the type of fraud he committed after 9/11 is likely much bigger today, with hundreds of billions of billions of federal loan funds available for troubled businesses, essentially on an honor system, there Applicants simply tick a box to certify their eligibility.
“One of my worries is that people are just wading in [to these programs],” he said.
Unlike EIDL loans, PPP loans do not require repayment if the proceeds are used for eligible purposes such as payroll and business expenses.
The government is providing nearly $ 300 billion in PPP aid under the latest funding round, which was decided in December. The application deadline is the end of the first quarter. Prior to that final round, the program had allocated around $ 500 billion, so there could be more than $ 800 billion in circulation by the end of the first quarter.
Grant does not recommend using the funds, even if easily available, to prop up a company that either struggled before the pandemic or has no realistic plan to get through it, as the cash injection is no solution for one The problem is a systemic problem.
“You fall prey to magical thinking,” he said. “Money usually makes problems worse without a good plan.”
He later worked with a non-profit organization that charged less to get customers than it brought in to provide services. As a result, the more services she provided, the more money she lost. It took a $ 1 million government grant.
“Without fixing the business model, it blew up $ 1 million in 18 months,” he said.