DHS Says COVID Relief Loan Fraud Is Widespread, And One Of The Biggest Cases In The Country Is In Chicago Area
CHICAGO (CBS) -- Who can forget now-suspended Markham police Officer Kenneth Muldrow, who received money through a COVID relief loan and denied even owning the company?
After CBS 2 exposed over 1,000 ghost businesses in Markham that received Paycheck Protection Program loans intended for small businesses struggling during the pandemic, viewers raised concerns over your tax dollars.
On Wednesday night, CBS 2's Jermont Terry revealed an even bigger COVID fraud scheme – which is being investigated by the U.S. Department of Homeland Security.
That department is busy now. It seems that some people were under the assumption that the COVID relief loans were simply free money for anyone.
The feds let us in Wednesday on how they are cracking down on those who stole from the government, and also giving us insight on one of the largest COVID fraud schemes in the country – operating in Chicago.
When COVID hit, people masked up, and businesses locked up. And the federal government opened up its wallet through COVID relief loans.
Crooks jumped at the opportunity.
First, CBS 2 found businesses in south suburban Markham that did not exist – but people still got the money. Now, it has all grown bigger.
"It's a huge problem," said Department of Homeland Security Special Agent Jeff Strauss.
We have heard from dozens of people since we exposed rampant PPP loan fraud in Markham - many with tips about other questionable small business owners they wanted us to check out.
Take Kelvin Dortch Jr. A quick entry into the PPP loan database reveals he received two loans for $20,000 each. His application claims he operates two barbershops from a house in Dolton.
His name caught our eye because we had just heard it from the CBS 2 Morning Insiders, who had been on the trail of a serial mail thief in the northwest suburbs.
Postal police arrested Kelvin Dortch Jr. in September after they placed a tracking device inside some mailboxes in Park Ridge. They picked up Dortch at – you guessed it – that very same house in Dolton where records reveal his PPP loan checks were sent.
So who is really keeping watch over your tax dollars intended for pandemic relief?
"Obviously, the fraud is wide-reaching," Strauss said. "It's touched every community."
We now know the Department of Homeland Security is zeroing in on the deception. Strauss, of the DHS Chicago Division, admits it is rampant.
"This isn't free money," Strauss said. "These funds are from the taxpayers; from your neighbors; from your coworkers."
Strauss said it is not just PPP loans. The federal government also allocated more than $200 billion in another type of loan to help small business owners – the Economic Injury Disaster Loan, or EIDL.
That program is a favorite for fraudsters. Tens of millions of dollars have been ripped off directly from taxpayers.
Strauss sat down with Terry to reveal the details of the biggest case in the country right now – happening in the Chicago area.
"Uncovered more than 300 false applications," he said.
Each EIDL applicant gets $150,000. The quick math shows that a total of $45 million has been up for grabs.
Of course, some of those applications were denied. But a good portion have been paid in full.
Terry: "Where do we believe the money is going?"
Strauss: "A large portion of the criminal proceeds has left the United States."
That means all that money intended to revive the economy never made it to Main Street – or any street in our communities.
"We're looking at what we term as a transnational criminal organization," Strauss said.
That is a fancy way of saying the crooks don't live anywhere in the United States.
"It was very easy for these organizations to take advantage of the U.S. government," Strauss said.
Let's break down how EIDL fraud works.
A criminal ringleader first comes up with a fake business, then recruits others to use their real names to take out loans as business owners.
"People would go in and they'd be told, 'We'll give you a couple thousand dollars - all you have to do is sign this form for us,'" Strauss said.
And when the money shows up, the recruited loan applicant keeps a few thousand dollars, but the rest flows right back to the ringleader of the criminal organization.
"It's extremely frustrating to see this money going to people that didn't deserve it," Strauss said. "And then it's just gone. It didn't stay in our country. It didn't help our citizens. It didn't help the impacted communities. It's just gone."
Homeland Security started investigating in the summer of 2020.
More than a year and a half later, the Chicago case alone is expected to net two dozen arrests.
"This one case here in Chicagoland is one of the largest cases of this type in the country," Strauss said.
Across the U.S., the feds have successfully charged, indicted, and convicted some in more than 400 cases centering around people filing fraudulent COVID relief loans.
One of those people was Ryan Whittley, from south suburban South Holland. Court records show he falsified payroll information, falsified IRS forms, and listed fake employees for his company – ML Exotic Customs – to get a payout of $797,275.
In all, the feds say Whittley and his fellow defendants stole $11 million, then tried to transfer the cash to other accounts "in an effort to conceal and disguise the ownership."
Still, Special Agent Strauss says the Chicago case tops them all.
"It's now probably being used to further those transnational criminal organizations," he said. "That could include terrorism, human trafficking, narcotics trafficking."
And that is only one case Strauss could even talk about. Many more are under investigation, and still under wraps.
Terry: "That one person who might say: 'I didn't realize that I was a part of this magnitude of fraud. I'm the little man on your investigation. Shouldn't you give me the pat on the wrist?'"
Strauss: "Whether it was a few thousand dollars or hundreds of thousands of dollars, the outcome is the same. You defrauded the United States government, and we will find you.
If you suspect someone of committing fraud through COVID relief loans, call the tipline to the Department of Homeland Security at (866) 347-2423 or to go this website.
DHS realizes it will take years to catch everyone who stole from taxpayers. But Terry is told no fish is to small or big to go after.