$7M in PPP Loans Went to Fake Businesses Mostly Registered As Farms Across US: Study

Hundreds of fake businesses across the country reportedly cashed in on more than $7 million through Paycheck Protection Program (PPP) loans, with faux farming operations being one of the most common registrations.

An investigative report from ProPublica this week shows bogus businesses with names like "Ritter Wheat Club" and "Deely Nuts" obtained the $20,833 maximum amount available for sole proprietorships. In New Jersey, the address listed in PPP loan filings for a fake cattle ranch, "Beefy King," is actually the home address for Long Beach Township Mayor Joe Mancini. Numerous business owners brought complaints to the publication after they received loans through the Kabbage online lending platform, which prompted the ProPublica investigation.

Information from ProPublica indicates that Beefy King got a loan of $20,567, but the loan status is listed as not disclosed, meaning no further information was available as to where the money went.

In total, ProPublica published a report Monday which showed 378 small loans totaling more than $7 million were pulled in by fake businesses in 28 states.

"There's no farming here: We're a sandbar, for Christ's sake," the Long Beach Township mayor told ProPublica by phone. Mancini added that he has three dogs at his home, but no cows at the so-called home of the "Beefy King" business.

According to a report from the Ashbury Park Press, Mancini, said scammers used his address, and he did not receive any PPP money nor he did not apply for the loan.

The PPP loan was created through the March 2020 CARES Act as a lifeline for businesses struggling through the coronavirus pandemic. The cash injection and potentially forgivable loans were intended to keep employees on payroll rather than being laid off amid widespread lockdown restrictions. The Small Business Administration estimated in January that the agency approved loans for 55,000 potentially ineligible businesses, but ProPublica's report is the first to detail dozens of such frauds.

The January SBA report also found that 43,000 small businesses obtained more money than their reported payrolls would have justified. In the report, the ProPublica authors said they believed that even a slight bit of up-front due diligence by the SBA in investigating the tens of thousands of small business applicants could have exposed the fraudulent establishments.

"Pushing this through financial institutions created some pretty bad incentives," said Naftali Harris, the CEO of Sentilink, which helps lenders detect potential identity theft. "This is definitely a case where companies that decided they wanted to be more careful in terms of giving out loans were penalized for doing so."

Federal investigators said they are actively pursuing whether Kabbage and other lenders, including Bank of America, had "miscalculated" hundreds of loans for fake businesses.

In New Jersey alone, several seemingly struggling farm businesses with names like "Tomato Cramber" and "Seaweed Bleiman" were all found out not to exist at all. Despite this, they each received more than $12,000 in PPP loans during the pandemic.

Newsweek reached out to the SBA and the Treasury Department Monday morning for any additional remarks about the fraudulent business filings, but had not heard back prior to publication.

small businesses
Small businesses are ditching hopes of getting PPP loans and are integrating sales and marketing processes to revive operations. Irina/stock.adobe.com