Illegally obtaining COVID-19 relief funds is being called “the greatest fraud of our generation.”
One of the front liners in investigating COVID-19 fraud is U.S. Attorney William Ihlenfeld for the Northern District of West Virginia .
Randy Yohe spoke with the federal prosecutor about the extent of this crime against taxpayers, and how the public can help fight back.
This story has been lightly edited for clarity.
Yohe: The thumbnail definition of COVID-19 fraud is the illegal use of federal relief funds distributed during the pandemic. What are the particulars of this crime?
Ihlenfeld: COVID fraud comes in a variety of different ways. We look at it from the perspective of Paycheck Protection Program loans that were filed fraudulently. We look at it from the perspective of people who were collecting supplemental unemployment insurance illegally and through other types of fraud related to the pandemic.
A tremendous amount of money was pushed out by the Congress during that time period, and many people took advantage of it. It’s the greatest fraud of our generation. I will tell you, Randy, our greatest focus has been on the PPP loans, because there were over 16,000 of them issued in the Northern District of West Virginia. We’ve identified a large amount of fraud and we are pursuing those matters either through criminal action or civil action. And sometimes there’s a combination. In addition, we’re working closely with Workforce West Virginia to identify those who took advantage of the unemployment insurance that was being pushed out and collected benefits to which they were not entitled.
Yohe: What’s a PPP loan?
Ihlenfeld: So the PPP loan, which stands for Paycheck Protection Program, was rolled out by Congress. The purpose was to help businesses stay open, but allow their employees to stay at home. The idea was to keep people from spreading the virus.
The PPP loans allowed businesses to pay for payroll, to pay for their mortgage interest, if they had a mortgage on their business, to pay their rent and to pay their utilities. Funding also went to to protect their workers who might need the personal protective equipment and other certain operational expenses. There were billions in these loans that were pushed out to allow businesses to keep their folks at home, but not have to shut down their business during the pandemic or or prior to the pandemic concluding.
If the monies were not used for the intended purposes that I just referenced, then there’s a good chance that there was fraud. And we’ve seen many instances where people received these PPP loans, but didn’t use the money for one of the permissible purposes. For example, someone might have purchased a new automobile for their own personal use instead of using the money for its intended purpose. Then we’ve also had a number of cases where individuals misrepresented the size of their payroll or the number of their employees in order to get a larger loan than what they were really entitled to.
Yohe: James Nolte of Bridgeport was recently sentenced to prison for COVID-19 fraud. Can you briefly go through his case?
Ihlenfeld: Mr. Nolte was sentenced recently to 21 months in federal prison and ordered to pay back over $680,000 in restitution. He is a nurse practitioner from Bridgeport, West Virginia who took advantage of the system. He applied for PPP loans for businesses that he created. Not only did he create the businesses, he created a false payroll. He listed employees relatives of his, including his 10-year-old stepson, and he listed that his 10-year-old stepson was being paid $100,000 a year. He also listed his deceased father as an employee of one of his businesses and indicated that his deceased father was receiving a six figure salary as well. We obtained an indictment. He pled guilty to that indictment. And now he’s headed off to federal prison, and he’ll have to reimburse the federal government for the money that he stole.
Yohe: I understand that your team is sifting through thousands of relief loans. What are you looking for when you’re looking for COVID-19 fraud?
Ihlenfeld: We hired a COVID fraud analyst. That’s all she does is look at these loans. She does have other people on the team that assist her. Our COVID fraud analyst and the rest of the team are looking for a number of things to identify fraudulent loans. And a lot of these are publicly available data points.
For example, we’re looking to see if this business was actually registered. We’re checking with the Secretary of State’s website to see if it is actually a real business, we’re looking to see how many employees they listed on their application and to see if that number of employees is consistent with what a business of that type would typically have.
If somebody claims that they’re running a barber shop, which might have a few employees typically, but they listed their barber shop has 25 employees, well, then that’s a red flag for us. Obviously, we’re looking to see where they list their primary address for the business. Then we go and check and see if there’s actually a business at that location. We’re also looking to see if these businesses have the appropriate licenses.
If somebody claims to be running a daycare, we check and see if they actually were licensed to run a daycare. And if they didn’t have the appropriate licensure, then that’s an indication that perhaps the business was fraudulent. And then finally, we’ll look to see if the person applying had a recent felony conviction, which can prohibit applying for these loans, or if they’ve recently filed for bankruptcy, which is also another prohibiting factor in applying for one of these loans. There’s a few more factors. I don’t want to give away all of our secrets. But those are some of the things that we’re looking for when we’re reviewing all of these loans.
Yohe: Do you think there’s a lot more of these problematic loans out there?
Ihlenfeld: I do. Fortunately, Congress extended the statute of limitations for the bringing of these cases to 10 years. So, we have a lot of time to look at this. But I do believe there’s more. We’re identifying suspicious loans every week. Just because it’s suspicious, though, doesn’t mean it’s criminal, or that we’re going to take any particular action, but it’s something that we’re going to do a deep dive on. But every week, we identify loans like that.
We also receive tips from the public, and those are very helpful. The example I mentioned before, where someone might have purchased a new car with the loan instead of using it for its intended purpose. Sometimes people brag, and they’ll tell their neighbor that they got a new Ford F-150 with COVID money. And sometimes those neighbors don’t like to see that, and they will send us an anonymous letter, and they’ll let us know what they’ve seen and draw our attention to something that we weren’t previously aware of. We greatly appreciate any input that the public has, in regard to potential covid fraud.
Ihlenfeld asks anyone aware of COVID-19 fraud to report it via email to wvfraud@fbi.gov, by telephone to 304-234-0100, or via regular mail to the U.S. Attorney, P.O. Box 591, Wheeling, WV 26003.
