Her problems with the Chicago Housing Authority started when someone on Facebook offered to help her get money from the federal Paycheck Protection Program, a 45-year-old North Side woman says.
Later, after the PPP loans she got had been flagged as suspicious, she told an investigator that her self-appointed broker filled out the applications that got the woman forgivable loans for $21,000 in 2020 and for the same amount in 2021.
In return for getting her money that was meant to help businesses hit hard by the coronavirus pandemic, the woman, who didn’t have her own business, said she kicked back some of that money to the broker.
She ended up getting in trouble over the loans. But the broker escaped any penalty, reflecting a common pattern among loans that appear to have helped fuel fraud in the COVID-19 relief program overseen by the federal Small Business Administration, the Chicago Sun-Times has found based on interviews, court records and other government documents.
In 2022, the CHA accused the woman of defrauding the program. The housing agency revoked her rent-subsidy voucher, which paid for an apartment where she and her sons were living.
According to court records, she admitted she wasn’t eligible for the loans and said her deal with the person who prepared the applications for her was to split the $42,000 in proceeds.
But, fighting in court to hold onto the housing voucher she’d been getting since 2014, the woman argued that she was an “unwilling victim” who made “unintentional mistakes” and thought the loan money was a “grant” that didn’t need to be reported to the CHA and wasn’t related to her housing, according to court records. She didn’t name the broker.
A Cook County judge upheld the revocation of her voucher. In late May, though, the Illinois Appellate Court ordered the CHA to reinstate the government housing subsidy, saying there was insufficient proof she scammed the Paycheck Protection Program, which experts say has lost hundreds of billions of dollars nationwide to fraud.
More than 8,800 people who have CHA vouchers or live in public housing in Chicago obtained more than 10,000 PPP loans totaling more than $190 million, and authorities suspect that much of that was tied to fraud. People living in 5,361 CHA-related households will have to explain whether their loans were legitimate, according to Kathryn Richards, the inspector general for the agency.
As of last August, about 40 people had their vouchers revoked by CHA as a result of the still-ongoing investigation. Richards says she couldn’t provide updated information about the number of CHA revocations to date.
“Our goal is to maintain the integrity of the program,” she says. “And, when people see their neighbors breaking the rules, it decreases morale and the trust in the program. And that’s why we pursued this.”
As with the woman who got the $42,000 in PPP loans, many others later were found to have paid kickbacks to unofficial brokers after they filled out their applications in 2020 and 2021, according to court records and government reports.
The firings of a dozen workers from the Illinois Department of Human Services offer another window into the ways such loans-for-kickbacks worked. The Illinois Office of Executive Inspector General investigated about $275,000 in PPP loans those workers collectively received. Two of the workers were fired last year, and 10 more were booted this year on the recommendation of Executive Inspector General Susan Haling, a former federal prosecutor in Chicago.
“This was not free money for the taking,” the state inspector general’s office says in memos laying out its investigations of the 12 employees, all mental health technicians.
Ten of those workers admitted in interviews with investigators that someone else had filled out PPP loan applications for them. And half of the workers admitted paying a broker a kickback — a total of about $22,000 among them — to sign up for their loans, which, on average, were for about $20,000 apiece.
Most of their loans were forgiven, meaning they didn’t have to be repaid. That’s what happened in the Paycheck Protection Program when people who said they owned businesses attested that they’d used the money for expenditures to keep their companies afloat and keep employees on the payroll during the pandemic.
The state workers all claimed to be “sole proprietors” of businesses.
Only three of the workers gave investigators the name of the person who arranged the loans for them.
On their PPP applications, many of the fired state human services employees claimed to be operating what turned out to be bogus businesses such as beauty salons, according to the state inspector general’s office, which passed along its findings to prosecutors to consider possible criminal charges.
One of the fired employees, who worked at Ludeman Developmental Center in Park Forest, admitted she inflated her 2019 income so she could get a PPP loan. On her application, she said she’d taken in about $122,000 that year. In an interview with investigators, though, she said that she “wouldn’t be at Ludeman wiping people’s behinds” if she actually made that much money with a side business. The woman said she paid a tax preparer a $4,000 kickback to arrange a $20,832 PPP loan for her in 2021.
Because they haven’t been charged with any crimes, the Sun-Times isn’t naming the fired state Department of Human Services workers or the woman whose CHA voucher initially was revoked.
While those people and others in similar circumstances faced investigations and other consequences for their suspicious loans, the brokers who filled out the loan applications and got kickbacks in such cases appear mostly to have avoided any punishment.
In the CHA and state of Illinois cases, that’s largely because most of the PPP recipients wouldn’t give investigators the names of the people who helped them obtain the money.
And the brokers weren’t the focus of the investigations into PPP fraud by employees and clients of the government agencies involved.
Across the country, there seem to be few cases in which people who arranged fraudulent PPP loans for others have been charged with any crime, based on prosecutors’ public statements and news accounts.
But one case in which charges were filed might offer a sense of the scope of the fraud that investigators believe the program has faced. Three California tax preparers — Thang Ngoc Rudin, his brother Quin Rudin and their colleague Seir Havana — ended up in prison for causing $44 million in losses to the federal government. They were convicted of arranging millions of dollars of fraudulent PPP loans in exchange for 30% kickbacks and also of filing false tax returns for nine professional athletes, who weren’t charged with a crime or named.
