In the world of fraud, I suppose there must always be “a first.” In this case, we have a tie.
David Staveley of Andover, Massachusetts and David Butziger of Warwick, Rhode Island, were the first to attempt to defraud the Paycheck Protection Program (PPP) under the CARES Act of the Small Business Administration. The duo submitted an application to receive $500,000 for their business. The problem was that they had no business.
According to the Department of Justice:
“The men conspired to seek the forgivable loans, claiming to have dozens of employees earning wages at four different businesses – when there were allegedly no employees working at any of those businesses nor were those two businesses operating before the start of the COVID-19 pandemic. The third business was not owned by either of the men.”
The duo is facing jail sentences stemming from conspiracy and bank fraud. Allegedly, Staveley is also charged with identity theft. This is not their first dance; both men have run afoul of the law in their past.
The pair was caught dead to rights as their scheme was detailed in a series of emails where they openly discussed how they would go about creating false documents.
Experts Warn
Experts are warning that they expect PPP fraud to be rampant in the months ahead. The program was created, of course, to assist small businesses during hard times such as these during the COVID-19 pandemic. A small business may apply for a forgivable loan up to $10 million in order to stay afloat. Obviously, the duo did not care that they were essentially robbing legitimate businesses of being able to provide for their employees.
This case is particularly interesting in that it encompasses all of the classic elements of fraud.
In terms of opportunity, in this time of the COVID-19 virus, the world is in the midst of panic and confusion as to how to react to the illness and how to maintain a sense of keeping the country in operation. Scam artists and fraudsters value times of confusion such as these, where there is scant oversite and a seeming lack of checks and balances. The duo was obviously wrong in this particular case, as someone at the SBA reviewing applications saw something amiss; most probably, fictitious companies created during the pandemic, and several employees who were not in place before the problem shut down so many businesses.
The need in this particular case of PPP fraud was for money. In their minds, it was easy money and investigators are currently hyper-vigilant, knowing that those committing fraud are viewing the billions of dollars as an easy target.
Finally, there is the matter of rationalization. How do scam artists in “these times” rationalize their theft? We need to suspend ethical thought here. We cannot believe that others think the way that we do, or even care about the consequences of their choices. They rationalize, perhaps, that the government has billions to give away and somehow, they are “entitled” to its theft. In the absence of an ethical grounding, the fraudster will see nothing wrong with stealing a half-million dollars – or more such as in PPP Fraud.
This tiny viral particle, spreading around the world, has defined all of us. It is an ethical, not medical test for many of us. In the end, this test will come to define this time in human history. How will we measure up?
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