LEAP unwittingly releases $15K COVID-19 grant to fraudster

At the end of August, Erika Lowe was caught by surprise when a customer congratulated her on receiving a $15,000 grant from Ingham County’s share of federal COVID-19 relief dollars.

“At first I thought he was pulling my leg,” she said in an interview from a chair in her East Side Barbershop space on Michigan Avenue. “Until he pulled it up on the web and showed me.”

There it was on the Lansing Economic Area Partnership website — a $15,000 grant awarded to her business approximately two weeks before she saw the press release. She had not seen the cash, let alone applied for that particular form of COVID-19 relief cash. Something was wrong.

“I was baffled,” Lowe said, noting that she called LEAP to learn that the money had been transferred to a man’s account — even more baffling because it’s a women-owned barbershop.

In an interview last week, LEAP CEO Bob Trezise acknowledged that the East Side Barbershop, as well as Lowe, had been victims of identity theft, and that LEAP had been the victim of fraud. 

LEAP was tasked this year by the Ingham County Board of Commissioners to oversee $11 million in COVID-19 relief funding that was released under the federal American Rescue Plan passed in March. The money was appropriated by the county to LEAP to fund small businesses — particularly those owned by women and minorities — who had been hammered by over 18 months of uncertainty in the market and health restrictions because of the COVID-19 pandemic.

LEAP officials immediately started the process to recall the $15,000 bank transfer, but it wasn’t until late November that the agency learned the banks had been unsuccessful in retrieving the cash. The fraudster, for the time being, had gotten away with the crime, Trezise explained.

With the banks unable to refund the fraudulently released cash, Trezise said that LEAP and county commissioners have a key decision to make: Do they pursue criminal prosecution of the fraudsters who took the check or do they write off the cash as the cost of doing business?

County commissioners told City Pulse on Friday that they were unaware of the fraud. Chairman Bryan Crenshaw said he would support a criminal investigation and prosecution, but that decision would be up to the entire commission, acting on advice from legal counsel. 

“I wish we had been informed sooner,” Commissioner Ryan Sebolt told City Pulse last week.

Trezise said commissioners were informed of the incident in a monthly report, but it did not include the name of the business and other details associated with the fraudulent payment.

But despite one fraudster illegally gaining access to funds, Trezise said his organization was able to weed out many other fraudulent applications, saving taxpayers and businesses millions of dollars. Trezise said LEAP caught 84 fraudulent applications in the 1,188 that were processed. Of the $8.1 million doled out in 632 grants, this was the only reported fraud, he said.

“I am mad about it,” Trezise added. “I want to be perfect.”

Trezise said the would-be frauds that they detected — as well as this successful fraud — were sophisticated operations that involved identity theft, including social security numbers and business tax identifications. In some instances, the fraudsters also created fake digital footprints that, in turn, created an illusion of them representing legitimate businesses in Greater Lansing. 

When LEAP was called on to unleash millions of local, state and federal cash in a relatively short timeline, it created an open invitation of sorts to fraudsters and people with ill intentions, Trezise said. Lowe also observed: “Holy crap. There’s a lot of fraud nowadays.” And she’s right.

Since the beginning of the pandemic, billions of dollars in federal, state and local assistance have been released to help businesses, buoy unemployment programs and give taxpayers tax-free money to compensate for pandemic-related business shutdowns and interruptions. But along with the flow of new funding programs, there has also been a wave of fraudulent activity.

By March, federal authorities had reportedly charged at least 474 defendants nationwide for attempting to gain fraudulent access to $569 million in funding through the Paycheck Protection Program, Economic Injury Disaster Loans and unauthorized unemployment checks. Trezise said he appreciates that Lowe brought the fraud to LEAP’s attention and is prepared — as long as the county gives the go-ahead — to work with law enforcement to catch the perpetrator.

Lowe has since received a $5,000 grant for her sole proprietorship that she actually applied for. The money arrived in a check, a precautionary move instituted by LEAP after the discovery of the fraud in which the agency has stopped all bank transfers, slowing the delivery of cash to grant winners by days, in order to prevent the type of fraud they were already fighting to undo.

Lowe still has questions about how exactly the fraudster was able to get away with the grant, but she is mostly concerned about the impact that the loss of the money might have on other businesses that are struggling to keep their doors open and their lights on during the latest surge in the pandemic. 

“This is money that could have been given to a different small business in Lansing,” she added.

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