PPP fraud

Raise your hand if you saw this coming:

Two businessmen have been charged in the District of Rhode Island with allegedly filing bank loan applications fraudulently seeking more than a half-million dollars in forgivable loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

David A. Staveley, aka Kurt D. Sanborn, 52, of Andover, Massachusetts, and David Butziger, 51, of Warwick, Rhode Island, are charged with conspiring to seek forgivable loans guaranteed by the SBA, claiming to have dozens of employees earning wages at four different business entities when, in fact, there were no employees working for any of the businesses.

This probably won’t be the last DOJ press release we’ll see of this kind. But given all the confusion around the Paycheck Protection Program, I have to imagine that anyone accused of fraud could plead the “This is a complex law that was hastily passed and virtually no one fully understands it” defense. That is definitely not legal advice, but other business owners that aren’t using aliases and have real employees have concerns about running afoul of the law, too:

Take Jodi Burns, the owner of Blazing Fresh Donuts in Guilford, Conn. Ms. Burns could use the loan she got — an amount under $50,000 — to hire back her eight employees, but she would be paying most of them to stay home, since the bakery is open only 12 hours a week these days. She would prefer to hold on to the cash beyond eight weeks; her hope is that it becomes a low-interest loan she can use for payroll and rent when her shop is open longer.

Ms. Burns doesn’t know whether she can do that. She has called her local S.B.A. office, small-business advisory organizations, a law firm and her lender to ask for guidance, but no one has given her any assurances. Moreover, having signed documents requiring her to use the funds for purposes allowed under the paycheck program’s rules, Ms. Burns is nervous about misusing them.

“I don’t accidentally want to commit bank fraud,” she said.

I can’t think of a scenario much worse than a small business borrowing money—partially under the premise that it could be free—spending it, learning that they misspent it, and then winding up being charged with fraud. In that same article, a CEO of a community bank said that he believes that PPP loans are meant to be used for working capital, but the SBA and Treasury Department haven’t confirmed that. And maybe I’m wrong, but now doesn’t seem like the best time to be keeping small business owners in suspense?

Anyway, if you got money under the pretense that you were going to use it to pay dozens of employees’ wages, but there were, in fact, no employees, that sounds like pretty straight forward fraud. But we’ll see! As I’ve said before, things are pretty weird right now, so I imagine defense strategies will follow suit.

The future of, ugh, work

Recently, we talked about how everyone’s sick of WFH and ready to get back to the office. And yes, someday, maybe, many of us will be working in an office again. But that’s about the extent of the good news, I’m afraid. The future office doesn’t sound much fun. Face masks, daily health checks, and tracking our social distancing will be the routine:

RXR, the real-estate company, is testing new systems on its own employees. “We are using ourselves as the guinea pigs,” RXR’s Chief Executive Scott Rechler said.

The company is aiming to have its social-distancing app ready at the end of the month. Workers’ movements are tracked through their smartphones—you get a higher score the more time in the office you are farther than 6 feet from another person. An individual would see his or her own score, and the employer would see aggregate data on how employees are complying with social distancing as a whole.

I’m really looking forward to the unintended consequences from this that will spill over into performance reviews:

Bob: I feel great about the work I did these last six months.

Bob’s Manager: That’s nice, Bob. Unfortunately, there are some areas where we’d like to see some improvement.

Bob: Oh, okay… What kind of areas?

Bob’s Manager: For starters, your social distancing score is well below the company average. Only employees with scores above the average are eligible for compensation adjustments.

Bob: …

Bob’s Manager: I’ve also observed your mask not covering your nose on a few occasions. We’re going to have to put you on a performance improvement plan.

But never mind the new circle of hell that may be added to performance reviews. As eager as people are to get back to the office, they’re eager to get back to the office as they remember it. You know, the office where people would be high-fiving, crowding into conference rooms, and coming to work sick. None of that is going to be tolerated anymore. No, we may be returning to offices of yore:

Inside the office, [Howard Cao, the chief executive of Form & Fiction, a start-up incubator in San Francisco] is looking to create physical space or barriers between employees who sit together at long tables. “It may be as simple as a mini-divider between people,” he said.

Like a cubicle?

Yes, he conceded, though it’s not a nice word for him. “I’ve always been very anti-cubicle,” he said.

Only these cubicles might be made of transparent plexiglass. So essentially, office dwellers will be working in fishbowls. I think we can all agree that this is the worst possible outcome. 

COVID news you can use

This section features programs, assistance, and other coronavirus-related information from the past week. It is not meant to be a comprehensive list, so if you see something that we should include here, let us know, or check out our newly launched COVID-19 Small Business Relief Finder.

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Caleb Newquist Caleb is Editor-at-Large at Gusto. In 2009, he became the founding editor of Going Concern, the one-of-a-kind voice on the accounting profession, serving in the role for 9 years. Prior to Going Concern, Caleb worked as a CPA for nearly 6 years in New York and Denver. He lives in Denver with his wife, two daughters, and two cats.
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