April 15, 2022
Fraud Friday – Before Committing Fraud: Advice From a Former SBA Fraudster
“In the months after 9/11, I was frantic. But my fears had less to do with the tragedy at the World Trade Center and more to do with the fact that, after 10 years of rampant prescription opioid abuse, my business was failing. I was searching desperately for an out. Meanwhile, the television and radio were blaring with ads for 9/11 FEMA loans administered by the U.S. Small Business Administration. So, on an especially bad day, I lied. I said I had an office near ground zero. I received the SBA loan I requested, and immediately paid down the personal credit cards I had run up while waiting for the SBA money. Even so, the loan did little to stop my spiral into drug addiction, mental health issues, marital problems, and magical thinking,” writes Jeff Grant.
Jeff Grant had a law firm throughout the nineties, and he accumulated debt leading up to 2001. To relieve him from his financial burdens, he saw an opportunity in the 9/11 SBA disaster relief loans. He obtained $247,000, but in 2004, the IRS arrested him for the misrepresentations on his loan application. Grant went to jail for 14 months after pleading guilty to wire fraud and money laundering. Seeing a similar opportunity to commit fraud arising from the pandemic disaster loans, Jeff warns borrowers not to make the same mistakes.
- A disaster loan, or any loan, will not always cure the problem. Some businesses cannot be saved, and acting rashly will not fix the situation.
- There is a belief that in times of crisis, rules are not enforced to the same degree, but it is best practice to always be truthful when applying for a loan. Misleading statements on a loan application can be prosecuted to the same extent as blatant fraud.
- Developing or readjusting your business plan can reveal whether obtaining a disaster loan is a necessity. Disaster loans are not “quick fixes”.
- Your business must still be viable or shift to a model that is more suitable for the current business landscape. A loan will not keep an outdated business model afloat for long.
- Always understand the terms of the loan, and the loan must be executed for the purpose stated in the loan application. Spending the proceeds on anything that is not outlined in the loan documents is fraudulent.
- SBA loans are intended to save your business and not your lifestyle.
- Before making an “ill-advised” decision you will regret, accept that some businesses do not make it. Government disaster funds do not change that fact.