COVID Feature: No Relief After All

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Top view of calculator, pen, eyeglasses and out of focus U.S IRS 1040 form

Being federally charged with wire and bank fraud is no small feat. Baoke Zhang of Issaquah, Wash., stands accused of creating fictional payroll expenses so he could seek loans through the Coronavirus Aid, Relief and Economic Security (CARES) Act.

Government Investigators say Zhang tried to take advantage of a program intended to help suffering Americans through their most difficult times. They claim he went beyond faking payroll expenses for a legitimate business by creating fictional information technology companies. (The feds are pretty good at spotting this type of fraud.)

These loans through the Small Business Administration are guaranteed and highly sought-after by small business owners. As a software engineer, Zhang was in a position with knowledge as to how IT companies operate. He allegedly took this knowledge, created fraudulent federal documents, and applied for $1.5 million in forgivable loans.

This COVID-19 relief fraud was extensive. Zhang crafted fraudulent documents depicting federal tax withholdings for 20 employees for a limited liability company and federal tax withholdings for a sole proprietorship for 25 employees, investigators say. He also is accused of trying to pass off a recently assigned Employer Identification Number as having been assigned two years prior. (Apparently, there was a misconception that the IRS is bad at math.)  

Luckily, there are systems in place that are meant to vigilantly detect fraudulent requests from those who would wish to abuse the system. This scheme was detected using these systems and no payments were issued. (Looks like Zhang will be trading a big pay day for his big day in court.)  A few of the signs that indicated there was fraudulent behavior were payroll data inconsistencies with the alleged scope of the business, incomplete records, and contradictory timelines.

Today’s Fraud of the Day comes from an article, “Issaquah man charged with fraudulently seeking over $1 million in COVID-19 relief,” published by the Issaquah Reporter.

An Issaquah software engineer is charged with seeking more than $1 million in loans from the Coronavirus Aid, Relief and Economic Security (CARES) Act.

The 35 year old, Baoke Zhang, has been charged with wire fraud and bank fraud in a federal criminal complaint, after seeking forgivable loans guaranteed by the Small Business Administration (SBA) by asking for loans from multiple banks by claiming fake payroll expenses from information technology companies he fictionalized.

Zhang allegedly provided fraudulent documents to two different lenders in support of applications for loans guaranteed by the SBA for COVID-19 relief through the Paycheck Protection Program. In total, Zhang sought forgivable loans in the amount of $1.5 million.

 

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Larry Benson, Senior Director of Strategic Alliances, LexisNexis Risk Solutions - Government

Larry Benson is responsible for developing strategic partnerships and solutions for the government vertical. His expertise focuses on how government programs are defrauded by criminal groups, and the approaches necessary to prevent them from succeeding.

Mr. Benson has 30 years of experience in sales and business development. Before joining LexisNexis® Risk Solutions, he spent 12 years founding and managing two software technology startups. During the 1990s he spent 10 years as a Regional Director helping to grow a New England-based technology company from 300 employees to 7,000. He started his career with Martin Marietta Aerospace working on laser guided weapons and day/night vision systems.

A sought-after speaker and accomplished writer, Mr. Benson is the principal author of “Fraud of the Day,” a website dedicated to educating government officials about how criminals are defrauding government programs. He has co-authored WTF? Where’s the Fraud? How to Unmask and Stop Identity Fraud’s Drain on Our Government, and Data Personified, How Fraud is Changing the Meaning of Identity.

Benson holds a Bachelor of Science in Physics from Albright College, and earned two graduate degrees – a Master of Business Administration from Florida Institute of Technology, and a Master of Science in Engineering from Lehigh University.