PROVIDENCE, R.I. (WPRI) – U.S. Sen. Jack Reed on Wednesday slammed the U.S. Small Business Administration for cutting off local control over a coronavirus disaster loan program, saying the unexplained decision helped open the door to fraudsters.
Rhode Island’s senior senator has called for a federal investigation into the program, known officially as Economic Injury Disaster Loans, spurred by a Target 12 report earlier this week that unveiled the SBA approved $3.8 million to at least 80 fake farm businesses in Rhode Island that don’t exist.
Many of the fake farms are listed at single-family homes, apartment complexes and other non-farm properties, which Reed claims would have been spotted easily if the Rhode Island district office had greater oversight of the program locally.
“They were essentially cut out,” Reed told Target 12 Wednesday. “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.’”
The SBA district office has declined to comment, and the federal office has not responded to a request for comment. But Reed said the district office is getting hamstrung because it had little control over administering the loans and no control over the response to fraudulent claims. That responsibility lies with the SBA Office of Disaster Assistance and SBA inspector general in Washington, D.C.
According to Reed, district offices were told “not to participate.”
“It was taken into the hands of Washington administrators,” he said, adding local officials, “don’t know what happened down there.”
Citing the Target 12 investigation, Reed sent a letter Tuesday to SBA Administrator Jovita Carranza, calling for an investigation into the widespread reports of fraud. As of Wednesday afternoon, the agency had not responded, although he said that’s not unusual for agencies under the Trump administration.
With President-elect Joe Biden poised to take over the executive branch next month, Reed is hopeful his fellow Democrat will name a new SBA administrator who will prioritize the issue. Biden reportedly offered the job to Atlanta Mayor Keisha Lance Bottoms earlier this week and she declined, casting a question mark over the cabinet position.
In Rhode Island, scores of people discovered they had fallen victim to the disaster loan scam after Target 12 published a database of addresses where the loans were approved. And many – including Greg Pizzuti of Providence – are now concerned about how the program is run.
“We clearly have a major problem with how these loans are given out,” Pizzuti said Wednesday.
Pizzuti recently started receiving mail from the SBA addressed to a “Pizzuti Pig Farm,” which he initially thought was junk mail. But after seeing an SBA transaction on his credit report, and then watching the Target 12 story earlier this week, he realized the mailings were actually bill notifications for a loan he never requested, and that the problem is widespread.
“Someone stole my identity and made a request for a small business loan,” he said.
Target 12 has confirmed a $9,600 loan was approved for Pizzuti Pig Farm and that the business does not exist. Pizzuti also checked the Target 12 database of addresses and discovered his father was also caught up in the scam. A $9,800 loan was approved to “Pizzuti Fish Farm,” listed at his father’s home address in West Warwick, which Target 12 has confirmed also does not exist.
“Now he’s also a victim of fraud, so I’ll work with him on how he’ll clear his name,” Pizzuti said.
Here are the addresses where disaster loans have been approved
Reed said these stories are the reason why the SBA must investigate the problem now, so any suspected criminal activity can be referred to the U.S. Department of Justice. In Massachusetts, federal investigators on Tuesday arrested two men suspected of stealing identities to fraudulently obtain SBA disaster loans and then launder the funds.
Darwyn Joseph, 24, of Lawrence and Ramon Joseph Cruz, 24, of Methuen, were charged with conspiracy to commit wire fraud and aggravated identify theft, according to Massachusetts U.S. Attorney Andrew Lelling’s office.
But court documents unsealed this week show federal investigators discovered the disaster loan funds while investigating the men for an unrelated scam involving stealing identities, purchasing cars and shipping them out of the country.
As part of that probe, investigators discovered the men also had fraudulent bank accounts — opened under false pretenses — and had obtained at least $452,204 in SBA disaster loan money. The money was deposited into the fraudulent accounts, which were tied to debit cards the men used to buy iPhones for resale, effectively constituting money laundering, according to court documents. Some of the funds were also wired out of the country.
Unclear from the charging document, however, is how the men stole people’s identities, and in what states the SBA disaster loans were meant to have been approved. There was no mention of Rhode Island in the criminal complaint.
To what extent the SBA disaster loan program is riddled with fraud remains unclear, which is why Reed argues a proper investigation is warranted. The congressman said the agency must nail down the facts, ensure victims aren’t harmed financially and then make sure it doesn’t happen again, so real businesses have access to that money.
“There were many legitimate small businesses who were looking for these and couldn’t get them,” Reed said. “Meanwhile, it appears many were getting them under false pretenses.”
Congress this week approved an additional $20 billion for the disaster loan “Advance” program, which is technically grants that are capped at $10,000 per business. And the SBA is expected to tighten its vetting process surrounding the disbursement of those funds.
But many remain skeptical, including Pizzuti, who’s hopeful someone at the SBA will step forward and accept responsibility for the mistakes that were made, so that the issue can be addressed before more money is doled out — potentially to fraudsters.
“Like all Americans and Rhode Islanders, we want to ensure that the people who really need the COVID money get it,” Pizzuti said. “So, whoever is in charge of these programs needs to step up to the plate and say, ‘I own it, I recognize there’s an issue, and we’re going to fix it before we issue more of these fraudulent funds.'”
Anyone who believes they might be the victim of fraud is encouraged to reach out to the following: