COVID Feature: No Relief After All

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Top view of calculator, pen, eyeglasses and out of focus U.S IRS 1040 form

Being federally charged with wire and bank fraud is no small feat. Baoke Zhang of Issaquah, Wash., stands accused of creating fictional payroll expenses so he could seek loans through the Coronavirus Aid, Relief and Economic Security (CARES) Act.

Government Investigators say Zhang tried to take advantage of a program intended to help suffering Americans through their most difficult times. They claim he went beyond faking payroll expenses for a legitimate business by creating fictional information technology companies. (The feds are pretty good at spotting this type of fraud.)

These loans through the Small Business Administration are guaranteed and highly sought-after by small business owners. As a software engineer, Zhang was in a position with knowledge as to how IT companies operate. He allegedly took this knowledge, created fraudulent federal documents, and applied for $1.5 million in forgivable loans.

This COVID-19 relief fraud was extensive. Zhang crafted fraudulent documents depicting federal tax withholdings for 20 employees for a limited liability company and federal tax withholdings for a sole proprietorship for 25 employees, investigators say. He also is accused of trying to pass off a recently assigned Employer Identification Number as having been assigned two years prior. (Apparently, there was a misconception that the IRS is bad at math.)  

Luckily, there are systems in place that are meant to vigilantly detect fraudulent requests from those who would wish to abuse the system. This scheme was detected using these systems and no payments were issued. (Looks like Zhang will be trading a big pay day for his big day in court.)  A few of the signs that indicated there was fraudulent behavior were payroll data inconsistencies with the alleged scope of the business, incomplete records, and contradictory timelines.

Today’s Fraud of the Day comes from an article, “Issaquah man charged with fraudulently seeking over $1 million in COVID-19 relief,” published by the Issaquah Reporter.

An Issaquah software engineer is charged with seeking more than $1 million in loans from the Coronavirus Aid, Relief and Economic Security (CARES) Act.

The 35 year old, Baoke Zhang, has been charged with wire fraud and bank fraud in a federal criminal complaint, after seeking forgivable loans guaranteed by the Small Business Administration (SBA) by asking for loans from multiple banks by claiming fake payroll expenses from information technology companies he fictionalized.

Zhang allegedly provided fraudulent documents to two different lenders in support of applications for loans guaranteed by the SBA for COVID-19 relief through the Paycheck Protection Program. In total, Zhang sought forgivable loans in the amount of $1.5 million.

 

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.