Co-Founders of PPP Borrower Service Provider Charged in COVID-19 Fraud Scheme
The Department of Justice has filed an indictment charging Nathan Reis, 45, and Stephanie Hockridge, 41, the founders of Blueacorn, with orchestrating a fraudulent scheme to obtain millions in COVID-19 relief funds through the Paycheck Protection Program (PPP). The lawsuit, filed in the Northern District of Texas, accuses a married couple of making false loan applications and collecting illegal fees from borrowers.
Alleged Fraudulent Practices
According to court documents, Reis and Hockridge, who used to live in Arizona and now live in Puerto Rico, allegedly fabricated documents, including payroll records, tax documents, and bank statements, to obtain loans for their PPPs and businesses.
Blueacorn, which they co-founded in April 2020, aims to help small businesses and individuals in obtaining PPP loans. However, prosecutors allege that Reis and Hockridge abused their roles by recruiting accomplices and training borrowers to submit fraudulent loan applications.
The lawsuit also alleges that the two charged borrowers illegal fees based on a percentage of the proceeds. To facilitate their operations, they have entered into Lender Service Provider Agreements (LSPAs) with two lenders, allowing Blueacorn to collect and review PPP applications and receive a percentage of the SBA funds paid to the lenders.
VIPPP Program and Fraudulent Loan Applications
The couple is said to have expanded their operations with a personal service called “VIPPP,” which offers borrowers personalized assistance with loan applications. Prosecutors allege that Hockridge and others in the scheme directed applicants to falsify documents, enabling them to receive loans they were not entitled to.
In order to increase the volume of loans and associated disbursements, Reis, Hockridge, and their associates allegedly submitted applications containing materially false information, benefiting from both borrower payments and a larger share of SBA borrower funds.
Charges and Possible Penalties
Reis and Hockridge face one count of conspiracy to defraud and four counts of fraud. Each charge carries a maximum sentence of 20 years in prison if convicted.
Ongoing investigation and prosecution
The investigation is being led by the FBI, IRS Criminal Investigation, the Special Inspector General for Pandemic Recovery (SIGPR), the Office of the Inspector General of the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau, and the Small Business Administration. Office of the Inspector General.
Principal Deputy Assistant Attorney General Nicole M. Argentieri of the DOJ’s Criminal Division highlighted the importance of holding people accountable for exploiting pandemic programs.
The case is being prosecuted by Acting Assistant Chief Philip Trout of the Criminal Division’s Fraud Section, Trial Attorneys Elizabeth Carr and Ryan McLaren of the Money Laundering and Asset Recovery Section (MLARS), and Assistant US Attorney Matthew Weybrecht of the Northern District of Texas.
PPP Fraud Enforcement Background
Since the enactment of the CARES Act, the DOJ’s Fraud Division has prosecuted more than 200 defendants in more than 130 cases involving PPP fraud, obtaining more than $78 million in cash and assets, including luxury goods and real estate purchased with stolen money. .
In May 2021, the Attorney General launched the COVID-19 Fraud Enforcement Task Force to enhance efforts to combat fraud related to the pandemic. The task force coordinates investigations across government agencies and works to prevent fraud through improved oversight of aid programs.
