CFE David P. Weber asks U.S. Small Business Administration Inspector General Hannibal “Mike” Ware about fraud trends during the Covid-19 pandemic.
David P. Weber, an attorney, CFE, and forensic accounting professor at Salisbury University, asked CFE and SBA Inspector General Hannibal “Mike” Ware to talk about the kinds of fraud the agency is seeing during the Covid-19 pandemic. Big thanks to them both for shedding some light on these new variations on fraud and how private investigators can play a role in fighting them.
DAVID P. WEBER: What kinds of fraud have proliferated since the pandemic began?
HANNIBAL WARE: Inspectors General across the Federal Government have seen fraud in programs aimed at the pandemic response. SBA’s pandemic response programs are a particularly attractive target for fraudsters, and SBA OIG’s oversight work has identified gaps in SBA’s internal control environment for these programs. We have seen everything from identity theft to false statements, to fraud schemes perpetuated by sophisticated crime rings.
WEBER: I’m getting a lot of emails about grants, stimulus payments, and the like—some of which I assume are fraudulent. Is most of the fraud you’re seeing of this type, targeting consumers with robocalls and emails, in hopes of getting financial or personal information?
WARE: The short answer is, all of the above. Fraudsters have taken aim at SBA’s lending programs and have mounted a concerted attack to identify internal control vulnerabilities. We have seen fraud schemes proliferate through the use of social media and even on the Dark Web. SBA OIG and its law enforcement partners are working in concert to root out this fraud and bring those responsible to justice.
WEBER: Are these scam reports widespread and large scale? Are the scammers succeeding?
WARE: In July, my office issued a management alert pertaining to SBA’s Economic Injury Disaster Loan Program. This preliminary review and our investigative findings identified concerns with internal controls and potentially rampant fraud in the program. At that time, our investigative staff had initiated dozens of investigations into suspected fraud in the economic injury loan program. We published our complete findings in October, and we saw continued increases across the areas of concern that are indicative of this potential fraud.
WEBER: What about end-user scammers making fraudulent claims for SBA relief? How widespread has this been, and how successful?
WARE: Our investigations have identified end-user scammers in both the Paycheck Protection Program and the Economic Injury Disaster Loan Program. Our work is ongoing to determine the extent of the fraud; however, our oversight efforts have found areas where little or no assurance is available that only eligible recipients were accessing these programs.
WEBER: Who is investigating these fraudulent claims, and is the US Government managing to claw back many of the incorrect payouts?
WARE: SBA OIG is working with law enforcement partners across the nation, to include the FBI, the U.S. Secret Service, the Department of Homeland Security’s Homeland Security Investigations, and our Inspector General counterparts across Government, the Council of the Inspectors General on Integrity and Efficiency’s Pandemic Response Accountability Committee, and others to combat fraud in SBA’s programs. SBA OIG’s Investigation Division and other law enforcement agencies recently seized over $450 million from more than 15,000 fraudulent COVID-19 Economic Injury Disaster Loans. SBA OIG and other law enforcement partners continue to seize additional fraudulent loan funds stemming from the risk areas identified in this report.
There have been more than 70 arrests for fraud in the Paycheck Protection Program associated with millions of dollars of loan proceeds. This is the tip of the iceberg with more arrests and recoveries on the horizon.
WEBER: What kinds of fraud should consumers be on the lookout for?
WARE: SBA OIG sought to inform the public before the first SBA loan associated with the pandemic response went out the door. We have a Scam and Fraud Alerts webpage dedicated to informing the public, and we have sought to inform the public through social media and other outreach efforts. In short, if you have not initiated contact with SBA, be wary.
WEBER: How can private investigators and fraud examiners investigate these claims on behalf of clients?
WARE: In most instances, lending partners and those associated with SBA’s programs have a responsibility to report fraud, waste, or abuse. Financial institutions across the country have contacted OIG about thousands of loans that they believe to be suspicious because the deposits were made to account holders claiming to use the funds to open a business, account holders attempting to transfer funds to foreign accounts, and other suspicious banking activity. As a result, millions of dollars in COVID-19 Economic Injury Disaster Loans have been returned to financial institutions. This is happening on a regular basis.
WEBER: What if a client feels he has been falsely accused of making a fraudulent claim to the SBA? How can an investigator help with defense?
WARE: As a law enforcement official, it would not be appropriate to respond.
WEBER: If a private investigator would like to assist in fraud fighting for the government, can you suggest avenues for them? Are there current contract vehicles or federal partners looking for investigative support?
WARE: Offices of Inspectors General and law enforcement agencies across the nation are unleashing the power of data analytics. In my opinion, this is an area where oversight officials are seeking private sector support in building and refining data analytic capabilities to root out fraud, waste, or abuse.
WEBER: Does having investigators on staff provide commercial or compliance advantages for SBA lenders, with regards to claims made against that lender? How can investigators articulate their value to clients in this space, since investigators do not generate revenue?
WARE: This is a question best addressed to federal financial regulators; however, SBA lending partners and financial institutions do have a role in identifying and reporting illicit activity to responsible authorities.
About the author:
David P. Weber is a clinical assistant professor of accounting at the Perdue School of Business at Salisbury University. He is a certified fraud examiner, registered private investigator, and licensed attorney. He completed more than two decades of public service in 2013 as the Assistant Inspector General for Investigations at the U.S. Securities and Exchange Commission, the SEC’s Chief Investigator. He now teaches full time in Salisbury’s Fraud and Forensic Accounting Certificate Program, and leads a boutique law firm with an expertise in fraud examination and forensic consulting.
About the guest:
Hannibal “Mike” Ware was sworn in as Inspector General on May 24, 2018, following his confirmation by the U.S. Senate. He is responsible for independent oversight of SBA’s programs and operations, which normally encompass more than $100 billion in guaranteed loans and nearly $100 billion in Federal contracting dollars. As a result of SBA’s role in the nation’s pandemic response, he is providing oversight of over a trillion dollars of lending authority aimed at stabilizing the nation’s economy and providing vital capital to the nation’s small businesses. (source: U.S. SBA)