EUGENE, Ore. — Federal prosecutors have charged 50-year-old Andrew Lloyd of Lebanon, OR and 38-year-old Russell Schort of Myrtle Creek, OR with bank fraud, wire fraud and money laundering this week.
Prosecutors say the pair applied for and received three different Paycheck Protection Program (PPP) loans from April 7 to May 8 worth more than $2.2 million dollars.
Schort was arrested on Jan. 6 and Lloyd was arrested on Jan. 7. Both have appeared in federal court on the charges.
A criminal complaint filed in federal court states that on April 7, Lloyd applied for a Paycheck Protection Program (PPP) loan for a business called Albany Home Care Services and received a loan for $642,507.
The complaint says Lloyd said the company listed the names of 56 employees and the amount paid to each employee.
The same paperwork says on April 14, Lloyd applied for a loan through Keystone Pacific Management and received a PPP loan for $979,100 and had the same list of employees in the same order plus 8 more.
On May 8, Schort, doing business as Schort Lee Construction received a PPP loan for $610,552. The complaint says it listed the exact same 56 employees and the total amount of earnings as the Albany Home Care Services loan application.
The Project of Government Oversight has been tracking close to 80 other cases across the nation of suspected fraud cases. Senior Investigator Nick Schwellenbach says each one of the applications should have been red flagged.
"Clearly those red flags didn't go off and if they did they weren't heeded. This is something that should've stopped before they got at least the second and third loan, but it didn't happen." Schwellenbach said.
On March 27, President Trump approved the CARES Act, and less than a week later payments were being distributed to help businesses survive during the beginning of the pandemic.
In an October report, the agency’s inspector general found the government had approved billions of dollars in potentially fraudulent loans after the "SBA ‘lowered the guardrails’ or relaxed internal controls, which significantly increased the risk of program fraud."
"The PPP has relied largely on what's called self-certification where loan applicants self certify that they're eligible to get this money," Schwellenbach said. "They did this because they wanted to move the money quickly and they didn't want to bog the process down by checking whether or not you said who you said you were. Whether or not you actually had a business, whether or not you had a payroll."
The Project on Government Oversight has been tracking close to 80 cases across the United States, four of them from Oregon. Schwellenbach said more than $200 million in fraudulent money has been obtained nationwide.
"Every dollar, especially when you're talking about hundreds of millions and billions potentially lost to fraud, that's money that's not going to genuine small businesses that need the cash," He said.
There is a second round of PPP loans approved during the most recent COVID-19 relief act signed by President Trump, which granted additional funding for the Paycheck Protection Program. Schwellenbach said he hopes the government has learned from the first time.
"You can make it harder for fraudsters to get the money, but then you might also cut out a lot of people who need the money. It's a tough balance to strike, but I do think, I hope they've learned some lessons."
Lloyd and Schort were arrested and charged this week, but a spokesperson for the U.S. Attorneys office said they wouldn't seek to keep the two in jail.