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As COVID-19 raged in the spring of 2021, the federal government sent $1.4 million of pandemic relief checks to a single address a few blocks north of Garfield Park.

Most of the 69 applications for the federal Paycheck Protection Program loans asked for about $20,000 each. That meant they had claimed to previously have had at least $100,000 in yearly revenue.

Many of these “sole proprietors” said they were barbers, beauty salon owners and providers of “personal care services,” though state records show that not a single one of them was licensed to practice those professions in Illinois.

Beyond the income claims and the fact that the loans went to people unlicensed in their stated professions, something else was unusual about them: The address on all those loan applications was for Breakthrough Men’s Center, a West Side shelter for men without permanent homes. 

Most of those PPP loans ended up being forgiven, meaning they didn’t need to be repaid.

Clusters of loans going to a single address, as these did, raise red flags that should have triggered scrutiny by the lenders that approved them, experts say. But they say many lenders — particularly “fintechs” — were turning a blind eye to signs of fraud because they had a financial incentive not to spot it: They were getting reimbursed by the government for each loan.

PPP loans were intended to help people cover income losses prompted by the pandemic. But, three years since the pandemic began, there’s growing evidence that there was widespread fraud in the $800 billion program, including:

• At least hundreds of Chicago and Cook County public employees, possibly more, are suspected of getting PPP checks after claiming to have phony side jobs.
• Clusters of people with addresses in homeless shelters and transitional housing received checks to cover at least $100,000 in annual income for pandemic losses claimed for seemingly fictitious businesses.
• Criminals cashed in on the bonanza, too. Sources say Chicago gang members got checks to buy guns, believed to have been a contributing factor in the city’s explosion of violence during the pandemic.

The fintech — financial technology — lenders were responsible for approving most of those shady loans, according to experts and government records. Such lenders face less stringent regulation than traditional banks do.

“I think there is a very good case to be made that some of these fintech lenders either knew or should have known that they were being exploited,” says Samuel Kruger, an assistant finance professor at the University of Texas at Austin. “Probably Congress and the [Small Business Administration], which supervised the program, should have been more aware and thoughtful about this upfront.”

In 2021, Kruger and his colleagues did a study that found Cook County had a “suspicious loan rate” of 35.5{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}, compared with rates of 9.4{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} in Los Angeles County and 8.9{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} in New York County. 

Some of the study’s discoveries about Chicago were shocking, Kruger says. The researchers found that Cross River, a fintech identified by Congress as having slipshod underwriting, gave more than 930 loans to people who said they operated single-person “miscellaneous crop farming” businesses — in the city of Chicago. Many of the addresses were for apartments.

Kruger says traditional banks, which typically have relationships with customers they lend to, are thus less likely to be duped by phony applications.

Some lenders, which cumulatively reaped billions of dollars in revenue for participating in the program, have said the federal Small Business Administration should be held responsible for phony loans. The chief executive officer of Celtic Bank wrote in an internal email that “the industry should push hard to make sure the SBA accepts the fraud risk,” according to a congressional report in December. In a promotion, an executive for fintech Blueacorn described PPP loans as “$100 billion dollars of free money,” directing applicants to the company’s website to “find out in less than 30 seconds” whether they qualified for a PPP loan, the report said.

On Dec. 8, the SBA suspended Blueacorn from working with the agency and opened an investigation into Celtic Bank and other lenders.

In Chicago, ongoing PPP fraud investigations are focusing on employees of the Chicago Public Schools, the police and fire departments, the Cook County clerk of court’s office, the chief judge’s office and other county agencies.

In a recent report, Will Fletcher, who heads the CPS Office of Inspector General, said he’d found evidence that full-time school employees engaged in PPP fraud. His office — which initially matched 900 names and addresses of CPS employees to a list of loan recipients — so far has told the Board of Education that four employees have been found to have committed fraud.

Two of those employees have resigned, one was fired, and the case of a fourth has been referred for termination, according to CPS spokeswoman Sylvia Barragan, who says all have been listed as ineligible for rehire at CPS.

According to Fletcher’s report: “Many more PPP investigations are nearing completion. The OIG is engaged in discussions with state and federal law enforcement regarding the OIG’s PPP matters.”

A Chicago Sun-Times examination of PPP loan records found that homeless shelters’ addresses were used by dozens of people to obtain loans from fintechs.

At least 69 sole-proprietor applications listed their business address as 402 N. St. Louis Ave., home of Breakthrough Men’s Center, blocks north of Garfield Park on the West Side. Breakthrough “provides mail services for a variety of individuals who are experiencing homelessness,” an agency spokeswoman says.

Alexandra Cesario, Breakthrough’s chief development officer, calls the Sun-Times’ findings “very concerning” and says, “We are looking into how our address may have been used or misappropriated to submit these alleged fraudulent applications.”

Another 36 loan recipients listed the address of a Salvation Army center at 825 N. Christiana Ave. in Humboldt Park.

One recipient who used the Salvation Army address claimed he was a crop farmer. A dozen other people said they operated barber shops or beauty salons, though they didn’t have licenses to operate such businesses. Almost all got loans of about $20,000, the maximum based on a yearly income of at least $100,000.

The center itself never applied for a PPP loan, according to Brian Duewel, its communications director.

“Residents do not keep their mailing privileges following discharge,” Duewel says. “However, there’s no way to tell if someone uses our address after they move out. If mail comes in after a resident moves out, we do give them a courtesy call to let them know that we have received mail addressed to them.”

Duewel says the Salvation Army planned to contact federal officials regarding the names the Sun-Times identified as getting a PPP loan using the facility’s address.

Thirty-three more PPP applications gave their address as 5816 W. Division St. — the Westside Health Authority, which provides mental health services and transitional housing for people getting out of prison.

“Some of the clients that are homeless — some of their case managers accept mail for them at that location,” says Morris Reed, Westside’s chief executive officer. “I guess they were vulnerable to this kind of stuff.” 

The Sun-Times found evidence criminals were able to exploit the PPP program, too.

Charles Liggins, Kenneth Roberson and Tacarlos Offerd applied for loans in 2020, according to court records. All have been charged by federal authorities in the Aug. 4, 2020, Gold Coast killing of rapper FBG Duck.

According to a federal affidavit, during a phone call with an inmate in the Cook County Jail on June 19, 2020, Roberson explained how to apply for a phony PPP loan. 

“I’m telling them I’m doing agriculture,” Roberson said. “They can’t do s— about it.” 

Roberson wasn’t employed and didn’t own an agriculture business, according to the affidavit. 

In another pending case, Brandon Miller, a South Sider who’s a soldier at Fort Campbell, Kentucky, is charged with participating in a ring to defraud PPP in 2021.

In one email exchange, a woman who’s accused of being part of that scheme said she knew a man who made $300,000 from phony PPP loans used to start a construction business and start flipping houses. That woman eventually got a $20,832 loan, according to prosecutors.

Miller is among a dozen people also charged in a pending gun-running conspiracy case. Federal prosecutors say he led an operation that shipped at least 90 guns from Kentucky and Tennessee to a Gangster Disciples faction in Chicago.

The head of a violence prevention group in Chicago says PPP fraud has contributed to a proliferation of guns during the pandemic and likely has contributed to the huge rise in shootings during 2020 and 2021.

“I heard over and over that people were buying guns with PPP,” says the person, who spoke on the condition of not being identified by name.

A federal agent, who also spoke on the condition of anonymity, says he’s seen evidence of PPP fraud in gun and drug raids he’s conducted. “It’s the fraud Olympics — the World Series of fraud,” the agent says.

Nationally, PPP fraud was so pervasive that it overwhelms the capacity of the Justice Department and law enforcement agencies to prosecute it, Kruger says.

“The DOJ is putting substantial resources against pandemic fraud, but I wouldn’t be surprised if they could never go after anything other than the tip of the iceberg on this,” he says.

Last year’s congressional report on PPP fraud said federal prosecutors have filed more than 1,000 cases of PPP fraud involving more than $1.5 billion in losses to taxpayers and that fraud in the program is estimated to be in the hundreds of billions of dollars.

In their 2021 study, the University of Texas researchers concluded that:

• A lack of rigorous verification of information on PPP applications seems to have led to “substantial losses to taxpayers.”
• That fintech lending, “though quite successful at adapting to new environments and quickly disbursing funds, needs to improve due diligence practices.”
• That “PPP saved relatively few jobs at an extremely high cost.”
• And that “many lenders either encouraged such loans, turned a blind eye to them or had extremely lax oversight procedures.”

Kruger says the Sun-Times’ findings about clusters of loans going to the same addresses is likely to also be true elsewhere around the country.

“The picture that you’re painting suggests culpability not only for the people who got those loans but also for a lack of oversight for not seeing these patterns earlier,” he says.

Contributing: Tom Schuba