Business and Finance
Source : (remove) : Local 12 WKRC Cincinnati
RSS • JSON • XML • CSV
Business and Finance
Source : (remove) : Local 12 WKRC Cincinnati
RSS • JSON • XML • CSV

Minnesota COVID-Era Lending Programs Rocked by Allegations of Millions in Fraud

65
  Copy link into your clipboard //business-finance.news-articles.net/content/202 .. -rocked-by-allegations-of-millions-in-fraud.html
  Print publication without navigation Published in Business and Finance on by Local 12 WKRC Cincinnati
  • 🞛 This publication is a summary or evaluation of another publication
  • 🞛 This publication contains editorial commentary or bias from the source

Millions in Question: Potential Fraud Rocks Minnesota’s COVID-Era Lending Programs

Minnesota is grappling with allegations of widespread fraud within the state's lending programs designed to support small businesses and non-profits struggling during the COVID-19 pandemic. An investigation by the Minnesota Department of Commerce, spurred by a whistleblower report, has uncovered a complex web of potentially fraudulent applications totaling upwards of $50 million – and possibly much more. The situation is prompting calls for further scrutiny, potential criminal charges, and a deeper examination of oversight processes within state government.

The core of the controversy revolves around two primary programs: the Minnesota Supplemental Financial Assistance Program (MSFA) and the COVID-19 Equity Rapid Response Fund (CERRF). Both were established in 2020 to provide crucial financial aid as businesses faced closures, layoffs, and economic uncertainty due to the pandemic. The MSFA was intended for small businesses impacted by government restrictions, while CERRF specifically targeted minority-owned businesses and those facing disproportionate hardship.

According to the Department of Commerce’s investigation, a significant portion of these funds appears to have been diverted through a network of interconnected individuals and businesses. The initial whistleblower report flagged irregularities in a large number of applications, raising red flags about their legitimacy. The investigation focused on identifying patterns suggesting that some applicants were not genuinely eligible for the aid they received.

How the Scheme Allegedly Worked:

The alleged fraud appears to have involved several key components. Firstly, individuals – now identified as central figures in the scheme – purportedly coached businesses and non-profits on how to manipulate financial records to inflate their reported losses and qualify for larger grants. These "consultants" allegedly provided templates for fabricated documents, including profit and loss statements and balance sheets. Secondly, many of these applicants were connected through a common thread: they utilized the same accounting firm, Henle & Associates, based in Minneapolis. While Henle & Associates is cooperating with investigators (as reported by Minnesota Public Radio), their involvement highlights a potential systemic vulnerability where an accounting firm could be complicit – knowingly or unknowingly – in facilitating fraudulent applications.

The Department of Commerce’s report indicates that these consultants received fees for their services, effectively acting as middlemen who profited from the fraudulent claims. They allegedly incentivized applicants to submit inflated requests, knowing they were likely to be approved. Furthermore, some businesses appear to have been created specifically to apply for and receive funds from these programs – “shell companies” designed solely for this purpose.

The Scale of Potential Losses:

While initial estimates placed potential fraud around $50 million, the Department of Commerce has since indicated that the actual amount could be significantly higher. The investigation is ongoing, and auditors are still working to trace the flow of funds and identify all individuals involved. The complexity of the transactions – often involving multiple layers of businesses and shell companies – is making the process challenging and time-consuming.

Key Figures & Legal Action:

Several individuals have been identified as key players in the alleged scheme, including David Ewald Sr., who reportedly ran a consulting firm that coached applicants on how to apply for the grants. Ewald has not yet been charged with any crimes but is under investigation. His son, David Ewald Jr., also appears to be involved and is facing scrutiny. The Department of Commerce has filed lawsuits against several individuals and businesses implicated in the fraud, seeking to recover the misappropriated funds. These suits allege violations of state law related to fraudulent practices and theft by deception.

Oversight Concerns & Future Prevention:

This scandal has raised serious questions about the oversight mechanisms in place for these lending programs. Critics argue that the initial application process lacked sufficient verification measures, making it relatively easy for fraudulent applicants to slip through the cracks. The speed with which funds were disbursed – a necessary response to the urgent economic crisis – may have also contributed to the laxity of controls.

Minnesota Governor Tim Walz has pledged to cooperate fully with the investigation and has expressed his commitment to holding those responsible accountable. The Department of Commerce is currently reviewing its processes for administering grant programs, exploring ways to strengthen verification procedures and implement more rigorous oversight measures. Legislators are also calling for increased scrutiny and potentially independent audits of state lending programs to prevent similar incidents from occurring in the future.

The Ongoing Investigation:

As of now, investigations are ongoing at both the state and federal levels. The FBI is reportedly assisting with the investigation, indicating that the scale and complexity of the alleged fraud may warrant federal prosecution. Recovering the misappropriated funds will be a lengthy and complex process, requiring extensive legal action and potentially years of litigation.

The Minnesota COVID-era lending program fraud case serves as a stark reminder of the vulnerabilities inherent in large-scale emergency relief programs and underscores the critical importance of robust oversight and accountability to ensure that taxpayer dollars are used responsibly and effectively. The fallout from this scandal is likely to continue for some time, impacting not only those directly involved but also the reputation of Minnesota’s government and its ability to respond to future crises.

Sources:


Read the Full Local 12 WKRC Cincinnati Article at:
[ https://local12.com/news/nation-world/potential-fraud-in-minnesota-covid-era-lending-programs ]