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Small businesses frequent targets of pandemic loan scams

By Andy Peters, The Atlanta Journal-Constitution on

Published in Business News

Kara Kapczynski could tell something wasn't right.

The Vinings School of Art — which she started in 2006 to offer painting, drawing and music classes — had received a federal pandemic relief loan in May.

So, when an Atlanta-based employee with the Small Business Administration called Kapczynski on Nov. 17 to verify information for another loan, alarm bells went off, she said.

"At first, I thought he was trying to scam me," she said.

As it happens, a fraudster had submitted an application for a $71,000 COVID-19 relief loan in the name of the Vinings School of Art.

Fraud — whether it's someone posing as a business owner or a real company misusing funds — has been a persistent problem with the $525 billion Paycheck Protection Program (PPP).

 

With the coronavirus pandemic exacting a heavy toll on the economy, the Trump administration prioritized speed over safeguards as the program was being set up, critics say. The forgivable loans were meant to encourage small businesses to keep employees by providing money to pay them.

Through October, at least $113 million in loans had been fraudulently obtained from the PPP, according to the Project on Government Oversight, a nonpartisan watchdog group.

The program has few built-in ways to stop fraud, said Page Pate, an Atlanta attorney who has represented both people accused of PPP loan fraud and whistleblowers in PPP cases.

"The government felt that it was more important to put some gas in the tank and put money out in the community quickly," Pate said. "They knew that there was going to be a certain amount of fraud" because the program was launched so fast.

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