PROVIDENCE, R.I. (WPRI) – The FBI has launched an investigation in the wake of a Target 12 report showing the U.S. Small Business Administration approved millions of dollars for Rhode Island businesses that don’t exist through a disaster loan program.
Target 12 has confirmed the R.I. State Police is forwarding all local complaints tied to program to the FBI for further investigation. The federal agency has declined to comment.
Meanwhile, victims of the fraud continue to come forward. “I’m just wondering how this money is being received so easily,” said Kelly Porter, a Warwick resident, who discovered a $52,500 loan was made for a company that doesn’t exist listed at her home address.
Porter learned about the loan after her parents watched Target 12’s report and then looked up her address using the database below.
Here are the addresses where disaster loans have been approved
The SBA Office of Disaster Assistance approved $562 million last year for at least 10,000 borrowers with Rhode Island addresses through its Economic Injury Disaster Loan program. The hastily established program — created as businesses were floundering financially due to pandemic-related shutdowns during the spring — was quickly infiltrated by fraudsters.
The criminals successfully bilked millions of dollars using stolen identities and fake business names. In Rhode Island, farms were a popular disguise.
Target 12 identified $3.8 million approved for at last 80 “farm” businesses that don’t exist, using addresses at apartments, single-family homes or other non-farm properties. Since the first report was published, dozens of other people claiming to be victims of the program have contacted Target 12, reporting other types of fake businesses, including several named after people.
For Porter, the fake business listed at her property was named after her uncle, who she said grew up in the house long before she purchased it 11 years ago. Her property has also been targeted by fraudsters in other ways, including through the recent unemployment insurance fraud at the R.I. Department of Labor and Training — a common crossover that has emerged among victims of the SBA disaster loan program.
“It’s very, very frustrating,” she said, saying she’s taken several different steps over the years to try and protect her identity. “I’m wondering why I’m always targeted.”
Since Target 12’s report, the SBA district office has become so inundated with fraud claims, inquiries and complaints that officials set up automatic email responses to explain all complaints should be directed toward the SBA inspector general and Office of Disaster Assistance in Washington, D.C.
Anyone who believes they might be the victim of fraud is encouraged to reach out to the following:
The SBA regional office has declined to comment on any issue related to fraud, but Target 12’s reporting spurred U.S. Sen. Jack Reed to call on the federal agency to investigate the claims.
The Rhode Island Democrat has since said a major program failure occurred when the federal SBA office took over control of the program from district offices, meaning SBA workers in Providence couldn’t vet any of the loans made with local businesses.
With greater local control, Reed argued, officials would have had an easier time identifying fake companies, especially when the businesses were so outlandish — such as a cattle farm listed in the middle of an East Providence residential neighborhood.
“They were essentially cut out,” Reed told Target 12 last month. “If you were running this program, you would want local input. You would want someone calling up saying, ‘There’s something wrong with these loans. We know practically all the farms in the state and we’ve never heard of these.’”
It remains unclear how the SBA fraudulent loans will be resolved. As it stands right now, approved borrowers are still on the hook to pay back the debt, which in many cases is tens of thousands of dollars, although payments have all been deferred one year.
Several people interviewed by Target 12 said the only guidance they have received from officials is to continue to report the fraud claims whenever receiving bill notifications in the mail. For many, mailings have been coming each month since summer.
The SBA isn’t commenting publicly, and has even pushed back on an SBA inspector general report in October that suggested the disaster loan fraud was widespread across the country. Bloomberg in November reported SBA leadership actively discouraged employees from using the term “fraud” when discussing the program.
Whether that approach changes under President-elect Joe Biden, whose inauguration is Jan. 20, remains unclear. But the former vice president highlighted fraud during a speech nominating Isabel Guzman, who will become the agency’s next administrator, pending U.S. Senate confirmation.
Guzman, who currently serves at the SBA office in California, previously served in Washington under the Obama administration.
“I promise you we will investigate waste and fraud in these programs, so that money goes to companies that deserve it,” Biden said.
Porter, like many others who have been caught up in the scheme, says she’s frustrated that the federal relief money is going to fraudsters instead of small businesses that are struggling to stay afloat during the coronavirus pandemic. And she’s concerned it may be still happening, as new federal funding has been approved for the SBA to continue offering loans and grants to struggling businesses.
“I have friends that own small businesses in the state and they haven’t received any funding,” Porter said. “Then, you have these random people who can so easily get this money. It’s just kind of mind-boggling how it all happens.”