Kabbage lending platform issued PPP loans worth $ 7 million to fake beneficiaries: report
About 378 Paycheck Protection Program small business loans totaling $ 7 million were made to bogus entities, the majority of which were masquerading as farms, according to one. new report from ProPublica.
ProPublica claims the loans were disbursed through a fintech lending platform launched in 2009 called Kabbage, which processed nearly 300,000 paycheck protection program loans before the first round of funds ran out in August. 2020, just behind Bank of America.
CONNECTICUT TO PAY UNEMPLOYED RESIDENTS $ 1,000 TO FIND JOBS AS BUSINESSES FIGHT TO HIRE WORKERS
Atlanta-based company said in august that his P3 loan average was $ 23,546, with 50% of all loans below $ 12,775. In addition, Kabbage said that over 75% of all approved applications and over 90% of self-employed applications were processed without human intervention or manual review.
Some of the fake names that got loans through Kabbage include supposed New Jersey sites, “Ritter Wheat Club,” which claims to be a wheat farm in Barnegat, and “Deely Nuts,” which claims to be a beach nut farm. Haven. The entities would each have received $ 20,833, the maximum amount available for sole proprietorships. Meanwhile, “Tomato Cramber” in Brielle received $ 12,739 from the PPP program, while a company called “Seaweed Bleiman” in Manahawkin received $ 19,957, and a falsely registered cattle farm called “Beefy King”. in PPP records under Long Beach Township address Mayor Joe Mancini received $ 20,567.
Other bogus companies were using the addresses of individuals who had legitimately applied for PPP loans, such as Hartington, Nebraska, anesthesiologist Bruce Reifenrath, who received a loan for his practice in Yankton, South Dakota, and the Chairman of the Bank of Hartington, J. Scott Schrempp. Their addresses were used to secure loans for a fake potato farm and a fake strawberry farm, which received $ 20,254 and $ 19,829, respectively. Schrempp told ProPublica he noticed the bogus loan and reported it to the SBA.
NY RESTAURANT OWNER FORCED TO CLOSE ALL LOCATIONS DUE TO SHORTAGE OF WORKERS
The inspector general of the ASB valued in January, the agency approved about 55,000 loans totaling about $ 7 billion that went to potentially ineligible businesses.
The report notes that lenders have approved more than $ 402 million in PPP loans to around 5,000 potentially ineligible businesses. About 2,900 of the 5,000 approved loan recipients had registered their taxpayer identification number after the enactment of the CARES Act. The agency said several borrowers of the 5,000 identified loans had since been arrested or were under active investigation.
At the same time, more than 43,000 PPP loans totaling $ 11.7 billion exceeded the maximum loan amount per employee by about $ 3.7 billion.
“Our analysis showed that over 6,000 additional loans initially exceeded the maximum loan amount per employee,” the inspector general’s office said. “Lenders have reduced or canceled approximately $ 1.7 billion in these loans due to potentially flawed initial approval amounts.”
GET FOX BUSINESS ON THE ROAD BY CLICKING HERE
Shortly after the loan application period for the first round of the PPP ended on August 8, American Express ad that he had made a deal to acquire Kabbage.
However, an American Express spokesperson told FOX Business that the transaction does not include the company that manages Kabbage Inc.’s PPP loan portfolio. Instead, the PPP loans are managed under a new entity. separate company known as K Servicing, which has no bank affiliation.
|AXP||AMERICAN EXPRESS CO.||158.36||-0.30||-0.19%|
Reuters reported earlier this month, the U.S. Department of Justice launched an investigation into Kabbage and other fintech executives to find out whether companies miscalculated the amount of aid borrowers were entitled to under the scheme. PPP program due to “confusion over how to account for payroll taxes”, citing sources familiar with the subject.
CLICK HERE TO LEARN MORE ABOUT FOX BUSINESS
The DOJ has appointed Kabbage at least twice in cases of fraudulent PPP requests, including a case involving two loans worth $ 1.8 million to companies that submitted false information, and another involving a company that had inflated its payroll figures and submitted a similar request to US Bank, which informed authorities.
Kabbage too faces an August lawsuit from South Carolina accounting firm Ratliff CPA, who alleges that the company refused to pay company agents who helped process PPP loan applications. the SBA notes that lenders processing PPP loans would receive a commission of 5% on loans of $ 350,000 and less, 3% for loans over $ 350,000 and less than $ 2 million, and 1% for loans of $ 350,000 and less. ‘at least USD 2 million, although they are prohibited from recovering costs directly from PPP applicants.
Furthermore counterclaim was filed by JPMorgan Chase against Kabbage and a Florida woman, Loyota Clark, after Clark received more than $ 1 million in PPP loans from three companies. Clark had JPMorgan continued after the bank froze its accounts when it discovered that its businesses were not incorporated by the February 15, 2020 deadline for the PPP program. According to ProPublica, Kabbage said in a response that he had not yet completed his investigation into the incident.
Representatives from K Servicing, the Small Business Administration and the Department of Justice did not immediately return FOX Business’s requests for comment on the ProPublica report.