Arizona-based Blueacorn Interviewed in Congressional P3 Loan Fraud Investigation
SCOTTSDALE, AZ – A valley company, which has helped concert workers and moms and dads get federal loans to stay in business during the pandemic, is now at the center of a Congressional investigation into whether loans were made to fraudulent or ineligible applicants.
Blueacorn was founded in Scottsdale and has helped process more than $ 12 billion in paycheck protection program loans, according to the company.
Now, the House selection subcommittee on the coronavirus crisis is asking business executives how much they’ve earned and what they’ve done to try to prevent the waste, fraud and possible abuse of it. taxpayer money.
Blueacorn’s ads flooded social media earlier this year.
“Most of the self-employed and 1099 entrepreneurs didn’t know they could actually qualify for a 100 percent collateralized PPP loan,” an ad said.
The Fin Tech company posted a YouTube video showing how people can complete an online questionnaire and how their application assistant would automatically complete the PPP loan application. PPP loans were designed to help small businesses stay open during the pandemic.
Blueacorn sent the documents through one of the two partners, Prestamos CDFI or Capital Plus Financial, which are lenders approved to work with the Federal Small Business Administration.
Blueacorn has helped process loans for around 820,000 small business owners, which generated $ 12.65 billion in P3s loans, according to a company spokesperson this week.
According to one estimate, Blueacorn received $ 1 billion in fees for processing PPP loans. The figure was cited in the letter sent by the Congressional subcommittee to the company last month, but Blueacorn officials have not confirmed that estimate.
Subcommittee Chairman Jim Clybourn sent the November 22 letter to Blueacorn demanding documents and responses on several topics, including
- How the company’s automated systems detected fraud or money laundering
- How many requests were escalated for human review as well as how many were rejected during this process
- How many employees were dedicated to fraud compliance and what was their budget
- Blueacorn’s total revenue from PPP loans
- Total remuneration of the management team
Representative Clybourn has given Blueacorn until December 6 to submit responses and documents. Although neither the subcommittee nor the company has confirmed whether any documents or responses have been submitted to date, a spokesperson for Blueacorn said the company is cooperating with the congressional investigation.
Clybourn sent the letter to Blueacorn after professors at the University of Texas published an article titled “Have FinTech Lenders Facilitated PPP Fraud?”
The UT team analyzed data from the SBA, reporting that around 30% of PPP loans through Blueacorn lenders were suspect, using multiple indicators of fraud. Blueacorn takes issue with the methodology of the UT report.
ABC15 investigators called and messaged local Blueacorn founders, including former ABC15 presenter Stephanie Hockridge Reis and entrepreneur husband Nate Reis.
When reached by phone, Hockridge declined to discuss the business. Hockridge worked for ABC15 from 2011 to 2018. In a Facebook post, Hockridge wrote that she co-founded Blueacorn in 2020.
A spokesperson for the company said Hockridge and Reis no longer had an active role of responsibility in the company. Blueacorn declined to name who currently owns a financial stake in the company.
Current CEO Barry Calhoun was hired in March at the height of the candidacy frenzy.
A company spokesperson released this statement about the subcommittee’s investigation:
Blueacorn was founded in April 2020 with the goal of simplifying and automating the PPP loan application process for workers who were overlooked by our traditional banking system. We are extremely proud that we were able to help approximately 800,000 business owners apply for and get the funds they needed to survive the pandemic. We are also incredibly proud of the work we have undertaken to dramatically reduce fraud in the PPP program. As we review increasing volumes of loan applications, we have learned, adapted and improved our fraud detection capabilities and protocols. Along the way, we partnered with the SBA and other authorities to ensure the integrity of the PPP while providing a traditionally neglected population with access to the funds they needed and deserved.
ABC15 also contacted the two lenders Blueacorn worked with on PPP loans.
Capital Plus Financial issued a statement in response to questions from ABC15:
Capital Plus Financial and Blue Acorn have aligned themselves with the mission of serving underserved people. We appreciate the work Blue Acorn has done for the CDFI industry and appreciate what we have done together to pull off an unprecedented number of fraudulent loans, in an effort to provide access to those who are legally qualified and meet all the rigorous criteria. in place to get a PPP loan.
Phoenix-based Prestamos CDFI declined to comment.
The Small Business Administration, which administered PPP loans nationwide, told ABC15 in a statement:
The SBA takes fraud seriously and, as such, all applicants are required to provide certification of their eligibility when applying. False declaration of eligibility is illegal and, if necessary, these cases are referred to the Office of the Inspector General. The Office of the Inspector General and the agency’s federal partners work diligently to resolve incidents of fraud. The SBA encourages anyone who suspects fraud or misuse of aid programs to visit: sba.gov/fraud.
The SBA confirms that Blueacorn was not a lender and did not receive any fees directly from the agency.