COVID Feature: Back 2 Back 

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Russian hacker hacking the server in the dark

Austin Hsu of Issaquah, Washington is one of the latest fraudsters to take advantage of the pandemic. He has been charged with fraudulently seeking over $1.1 million in COVID-19 relief loans. He applied for loans through the Economic Injury Disaster Loan (EIDL) program and the Paycheck Protection Program (PPP), which are both guaranteed by the Coronavirus Aid, Relief and Economic Security (CARES) Act.

The CARES Act was enacted in March with the intent of providing financial assistance to Americans who were severely impacted by the coronavirus pandemic. Over $349 billion in forgivable loans were authorized to be distributed through the Small Business Administration (SBA). (Fraudsters look at that as a huge pot of free money.) 

The charges against Hsu allege that he submitted nine fraudulent disaster loan applications on behalf of five different companies he owned and controlled. Hsu owned and operated Blackrock Services P.S., better known as “Back 2 Health Bellevue” (Back 2 Health), and was able to receive EIDL and PPP loans for this business. (Hsu submitted ‘back 2 back’ applications so he could receive as much money as possible.)  

Hsu applied for additional PPP and EIDL loans for other companies he owned and operated, using the names of Back 2 Health employees. The complaint against him also states that he submitted fictitious federal tax filings along with his applications. (Fraudsters always seem to think that fabricating financials out of thin air is a good idea.)

PPP loans are intended to aide small business with job retention by using the funds for payroll costs, mortgages, rent, and utilities. While the loans have a maturity of two years and an interest rate of one percent, the interest and principal can be forgiven if the funds from the loans are used within a set period of time for payroll expenses.

EIDL loans are broader in terms of how the funds can be applied. EIDL loans can be used to cover a range of operating expenses, including health care benefits, rent, utilities, and fixed debt payments. If a business received both PPP and EIDL loans, they cannot use the funds for the same purpose. (In this case, Hsu used both loans for the singular purpose of making himself richer.)  

Hsu is also accused of creating false and misleading statements about his companies’ business operations. (Shocking that a fraudster would blatantly lie, isn’t it?) In one of his applications, Hsu claimed that his business, Blueline Capital LLC (Blueline), had been operating since 2017 and had nine employees with a payroll of over $1.5 million annually as of January 2020. Hsu had not actually incorporated Blueline until June 2020 with the intent of applying for PPP and EIDL loans. Also, Blueline had no business operations or employees. (His list of employees should have been listed as ‘me, myself and I’.) 

The criminal complaint against Hsu is merely an allegation. He is presumed innocent until proven guilty beyond a reasonable doubt in a court of law. Anyone with information about fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form. 

Today’s Fraud of the Day comes from a Department of Justice press release, “Washington man charged with COVID-relief fraud,” published on October 27, 2020.

SEATTLE – A Washington State man was charged in a criminal complaint unsealed today for fraudulently seeking over $1.1 million in COVID-19 relief guaranteed by the Small Business Administration (SBA) through the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief and Economic Security (CARES) Act.

Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division, U.S. Attorney Brian T. Moran of the U.S. Attorney’s Office for the Western District of Washington, Inspector General J. Russell George of the Treasury Inspector General for Tax Administration, Inspector General Gail S. Ennis of the Social Security Administration, Inspector General Hannibal “Mike” Ware of the SBA, and Special Agent in Charge Cardell Morant of U.S. Immigration and Customs Enforcement’s Homeland Security Investigation, made the announcement.

 

 

 

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.