COVID Feature: Thriving on Vulnerability

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Hacking and criminal concept.A hacker in a secret hiding place is neon light.

Fraudsters thrive on vulnerability, especially when a nation is going through a pandemic. (It’s just part of a fraudster’s nature to look for new opportunities and victims to exploit.) Darrell Baker of Detroit, Mich., pleaded guilty to bank fraud and money laundering charges for his role in a $590,000 coronavirus fraud scheme.

Baker admitted to attempting to defraud a Pennsylvania bank by fraudulently applying for loans meant for those impacted by COVID-19 pandemic. Baker applied for a Paycheck Protection Program (PPP) loan through Customers Bank in Pennsylvania. 

PPP loans were approved by Congress through the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March. These loans were meant to aid small businesses who have been unequivocally impacted by the coronavirus pandemic. (Not be a cash cow for a criminal.)

PPP loans are forgivable under the conditions that the funds are used for retaining employees, paying a mortgage or rent, or other ongoing business expenses. (Fraudsters have undoubtedly had a heyday targeting this lending program for their own financial gain.)

The loan Baker applied for was for his company “Motorcity Solar Energy, Inc.” Baker fraudulently claimed in his application that his business had 68 employees and needed funds to supplement the $2.8 million the business made in wages and tips in 2019. (The only thing Baker wanted to supplement was his own disposable income.)  

The Small Business Administration and the FBI subsequently conducted an investigation which led them to discover that the company was not operational and had no employees or ongoing business expenses. Baker lied on his application and subsequently illegally obtained $590,000 in loans. (Lying to the federal government never ends in your favor.)

Baker withdrew $172,000 of the funds out of his account before the bank detected the fraud and froze the remainder. Using four cashier checks he was able to purchase two Cadillac Escalades, a Dodge Charger, and a Hummer. (Not exactly related to the PPP requirements of meeting payroll, paying the mortgage or covering ongoing expenses.)

As part of Baker’s plea agreement, he will be forced to repay the $173,484.40 he withdrew from his bank account. He must also forfeit the vehicles he purchased with the funds. (Seems like the bare minimum considering he was never entitled to any of it in the first place.) Baker is scheduled to be sentenced in January 2021 and could be subject to time in prison.

If you suspect you are a victim of COVID-19 fraud or believe someone of committing fraud, contact the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or submit a NCDF Web Complaint Form.

Today’s Fraud of the Day comes from an article, “Detroit man pleads guilty in $590,000 coronavirus fraud scheme,” published by Detroit Free Press on September 12, 2020.

A Detroit man has pleaded guilty for his role in weaving a $590,000 coronavirus fraud scheme, according to a release from the Department of Justice.

Darrell Baker, 56, pleaded guilty to counts of bank fraud and money laundering Friday after intentionally attempting to defraud a Pennsylvania bank under the guise of a loan under the Payroll Protection Program, which was established to help small businesses weather the pandemic.

 

 

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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.