But my fears had less to do with the tragedy at the World Trade Center and more to do with the fact that, after 10 years of rampant prescription opioid abuse, my business was failing. I was searching desperately for an out. Meanwhile, the television and radio were blaring with ads for 9/11 FEMA loans administered by the U.S. Small Business Administration.
So, on an especially bad day, I lied.
I said I had an office near ground zero. I received the SBA loan I requested, and immediately paid down the personal credit cards I had run up while waiting for the SBA money. Even so, the loan did little to stop my spiral into drug addiction, mental health issues, marital problems and magical thinking.
In 2002, I resigned my law license and started on the road to recovery. But it all caught up with me about 20 months later, when I was arrested for the misrepresentations on my loan application. I served almost 14 months at a Federal prison for wire fraud and money laundering.
My objective in writing this piece is to offer some insight on what business owners should consider before they take out disaster loans. Certainly, the majority of people requesting these loans are honest and upstanding entrepreneurs who have immense need for the aid, and will use the funds properly. I am very glad there is help for them. That said, history has shown us again and again that when people are in dire need, they’re more prone to make impulsive, ill-advised decisions. My hope is that sharing my experience will help others avoid the consequences I faced. Here are seven takeaways.
1. Desperate people do desperate things.
There were thousands of fraud prosecutions after 9/11, Hurricane Katrina, Superstorm Sandy, and so on. Why? Whether because of overwhelming business issues, poor personal judgment, or just plain bad luck, people were wounded, desperate and willing to do anything, anything, to stop the bleeding. But if the wound is too deep, a Band-aid is not sufficient.
Practice point: In any situation, behaving desperately is unlikely to save your business.
2. Beware of the belief that rules are suspended in times of emergency.
The government is advertising that huge amounts of money are available to save our businesses. I recently sat in on a webinar run by a very reputable business consulting group that recommended that attendees get their SBA disaster loan applications in immediately, regardless of the facts or the actual needs of their business — they said we could always modify our applications prior to taking the money. State unemployment websites are actually giving instructions, in writing, on how to mislead and circumvent the system in order to get approved. Don’t take the bait! If you default two years from now, this “good-meaning advice” won’t matter to prosecutors.
Practice point: Be truthful at all times.
3. Beware of magical thinking.
This is a tough one because entrepreneurs are inherently optimistic. We believe that things will always be better tomorrow than they are today. It drives us, makes us successful, informs our risk-taking. But in times of trauma, that voice can be an entrepreneur’s worst enemy. Does this sound familiar? We have learned the hard way that there is no shortcut, and yet we desperately want there to be one right now.
Practice point: Instead of immediately reaching for a bailout or other quick fix, develop a good solid business plan. Maybe a disaster loan will fit into this plan; maybe it won’t.
4. This paradigm shift will affect all small to mid-size businesses.
We are in the midst of a massive reordering that has already had a huge effect on small and mid-sized businesses. Business owners are being called to closely examine if our business models are still viable, or if we must pivot to new ways of doing things. Example: the Swiss watch industry completely missed the shift to digital watches. Have we waited too long to have a robust online presence? Are our products or services even needed anymore? Have we been holding on by a thread for years, unwilling or unable to look at the hard facts?
Practice point: Get real, now. Don’t borrow money to save a business that can’t be saved.
5. Be cautious when borrowing from the government.
As is the case with any loan, the devil is in the details. The terms and covenants in the loan documents dictate what you can or can’t do with the money once you get it. You can only use the funds for the purposes you stated in your application — that is, to pay operating expenses of the business to keep it afloat until it starts bringing in sufficient revenue again. You (and your spouse) will probably have sign for the loan personally, and will probably have to pledge all available collateral, including a second (or third) mortgage on your house. If you maxed out your personal credit cards while anticipating your disaster relief funding, you can’t use the money to pay off your cards.
Practice point: Read the terms and covenants of the loan closely. Whatever the loan terms say to do, do, and whatever they say don’t do, don’t do. No exceptions.
6. We can’t save our businesses and our lifestyles at the same time.
Here’s the big trap. We have mortgages, car payments, school tuitions, and other personal expenses that have to be paid, and soon. But simply put, SBA loans are meant to save your business, not your lifestyle. Discuss all your options with advisors and friends you trust — ones that will tell you the truth! It’s like going to the doctor. Your diagnosis will only be as accurate as the history you provide. These are trying times, with a triage system designed to be more expeditious than thorough.
Practice point: There is no such thing as a free lunch. Borrowing money comes with responsibility and accountability.
7. Get acquainted with acceptance.
I hope we are all great entrepreneurs who can figure out ways to make our businesses survive and flourish. But let’s face it. Some of our businesses will not make it, even with the infusion of government funds. What should we do? We can pare down, embrace change and do things differently as we start a new chapter. Never forget that there will always be opportunity to start again, and to live a fuller, more abundant life.
Jeff Grant is on a mission. After a hiatus from practicing law, he is once again in private practice and is committed to using his legal expertise and life experience to benefit others.
Jeff provides a broad range of legal services in a highly attentive, personalized manner. These include private general counsel, white collar crisis management, strategy and team building, services to family-owned and closely-held businesses, and support to special situation and pro bono clients. He practices in New York and on authorized Federal matters, and works with local co-counsel and criminal defense counsel to represent clients throughout country.
For more than 20 years, Jeff served as managing attorney of a 20+ employee law firm headquartered in New York City and then Westchester County, New York. The firm’s practice areas included representing family-owned and closely-held businesses and their owners, business and real estate transactions, trusts and estates, and litigation.
Jeff is admitted to practice law in the State of New York, and in the Federal District Courts for the Southern District of New York and the Eastern District of New York. He is a member of the American Bar Association, the New York State Bar Association, the New York City Bar Association, and the National Association of Criminal Defense Lawyers.
The Philadelphia Inquirer: Steal Money from the Feds? First, Meet Jeff Grant, an Ex-Con who Committed Loan Fraud, by Erin Arvedlund: Link to article here.
Hannah Smolinski YouTube: Thinking About PPP Fraud?: Hannah Interviews Jeff Grant About Going to Prison for SBA Loan Fraud. Link to article and YouTube video here.
Fraud Stories Podcast with Mark Lurie: SBA/PPP Loan Fraud with Guest: Jeff Grant. Link to podcast here.
Forbes: As Law Enforcement Pursues SBA Loan Fraud, Jeff Grant Talks Redemption, by Kelly Phillips Erb. Link to article here.
Taxgirl Podcast: Jeff Grant talks Desperation and Loans in a Time of Crisis with Kelly Phillips Erb on Her Podcast. Link to article and podcast here.
Business Talk with Jim Campbell: Jeff Grant Talks with Jim About Going to Prison for SBA Loan Fraud and What to Know When Taking Coronavirus Relief Money, Biz Talk Radio Network, Broadcast from 1490 AM WGCH Greenwich, CT. Listen on YouTube here.
Babz Rawls Ivy Show: Babz Rawls Ivy & Jeff Grant Talk SBA / PPP Loan Fraud and 7 Things to Know Before You Take Coronavirus Relief Money, WNHH 103.5 FM New Haven. Watch on YouTube here.
Also: White Collar Week with Jeff Grant, Podcast Ep. 09: Small Business Edition, with Guest Kelly Phillips Erb. Link here.
Also, White Collar Week with Jeff Grant, Podcast Ep. 21: All Things SBA, PPP & EIDL, with Guest Hannah Smolinski. Link here.
Bill Livolsi is a Member of our White Collar Support Group that meets online on Zoom on Monday evenings. Bill has been a member of our ministry and support group since 2014. – Jeff
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I had the privilege of being topic leader at our May 16, 2020 White Collar Support Group meeting. This is text of that presentation:
We have a normal desire to solve our problems. And for my Fellow Travelers, once you add into the mix the anxiety, stress and the feelings of helplessness that accompany a criminal prosecution, the desire to repair the damage can be overwhelming, often to our detriment.
In many occupations being a take charge individual is how you advance your career. When issues arose, you dove in and you solved them. That’s how you proved your value to the organization, to your clients, to yourself.
My dad was a problem solver. Professionally he worked his way up from the mailroom, going to Wharton (undergrad) at night to be an international VP in the pharmaceutical business. My family, his friends, and his professional colleagues, looked to him for advice and solutions. I look to him still, even though he has been gone almost 13 years. He is the best man I have ever known. All I wanted, as an adult, was to be like my Father.
My willingness to take on the problems and challenges no one else wanted was very beneficial for my career too. I worked my way up the ladder to a CFO position by the latter part of the 1990’s. And as many of you know, this is where most of the problems, and difficult issues, organizations face end up. I was pretty good (and pretty lucky) at getting things right. It felt good to be the ‘go-to’ guy for my Company.
Unfortunately, there was a huge downside. My ‘fix it’ mentality also dominated my personal life and that didn’t work out so well.
“The skills that served you well in the advancement of your career aren’t necessarily the ones that will serve you now.” – Jeff Grant
In 2015 I was sentenced to 24 months incarceration after pleading guilty, in 2014, to one count of wire fraud and one count of conspiracy. I had been added as a defendant on a superseding indictment earlier that year. Many years prior, in 2007, I made the disastrous decision to inject myself into my spouse’s legal mess.
She and I met in early 2002 and became a couple a few months later. She was a private money manager. We married and had children. Our early years together were wonderful. I also invested significantly in the funds she managed, as did my family.
In 2004 we relocated to Oklahoma. At about the same time I left my CFO position in New York. I believed my finances and investments were in great shape, so I decided to retire early and spend time raising our two youngest children.
Life had other plans.
By 2006, things started to crumble. It started with strange calls to our home from one of her investors. Then, others starting showing up unannounced at our home. I had no idea why this was happening, and I was given several different explanations. There were civil lawsuits from investors including a court ordered freeze on her personal & business accounts.
Things were getting progressively worse into 2007. By late that year I was at my wits end. I was getting calls from family wanting an explanation. Instead of telling them the truth, that I didn’t know for sure what was going on and handing it off, I stayed in the middle. I passed along the information I was given. I assumed the information was accurate.
“An accurate understanding of reality is the essential foundation for any good outcome”. – Ray Dalio.
She let me know she secured another investor. This new investment would cover most of the redemptions that were due. This fact alone should have set off my alarm bells. It didn’t.
The on-going civil suits made it impossible for her to receive these funds, so I volunteered. I used my personal accounts to receive the investment on her behalf and to issue the pending redemptions.
There it was. Game Over. I just didn’t know it for another 6 years.
I have no doubt that you’re saying to yourself, how could you have been so stupid? Your actions were the textbook definition of a Ponzi scheme. What made you think this would solve your problem? Why didn’t you just walk away?
Good questions all.
I have done a lot of reading, research and reflection trying to get a better understanding of what was driving my decisions back then. There was overwhelming evidence that something was wrong, yet I was unmoved, even increasing my commitment. The passage of time brought clarity, and I understand why my decisions were so horrendously stupid and self-destructive.
Greed. My priorities were horribly misplaced. Money and the acquisition of things took on an unhealthy importance.
I Didn’t Grasp The Real Problem. The investment funds in question were nothing more than a Ponzi scheme (#1). The account freezes brought it all to a head.
Sunk Cost. By 2007 I had invested 5 years in this relationship, and we had two children. I had vowed that this time around I would be a better husband, and a better father. Deep down I had to have realized that I did not know the full story, but I convinced myself that things would get better. They didn’t.
There’s more.
“The more invested we become in a decision, the more likely we are to rationalize or justify that decision, even if mounting evidence demonstrates it was the wrong one.”
“Escalation of commitment can happen in any aspect of our life. Think about the times when you over-invested in a failing project, stuck around in a miserable job, or when you’ve poured your heart and soul into a personal relationship that clearly wasn’t working.”
“Escalation is where people make errors because of their ego and their emotions. It’s not just a cold calculation of the loss of money or time. It’s the pain of threats to our sense of self. We’re afraid to admit a mistake and end up justifying a decision to ourselves.” (#2)
How did escalation manifest itself in my situation?
Ego.
My career experience convinced me I could solve this problem. I was supremely overconfident.
Emotional Commitment.
My family could be directly affected if this problem were not successfully resolved. I felt responsible to fix what was broken, but I was ashamed, and afraid, to talk with them.
I would have been less emotionally attached to the outcome, and certainly could not have gotten directly involved, had the main actor been a stranger.
I believed the survival of my marriage was dependent upon a successful outcome.
I also believed, erroneously, that the future of my family relationships hinged me fixing this.
Isolation.
I disregarded the concerns of family and friends when they reached out to me.
I ignored the important relationships that had been my reality checks in the past.
By sequestering myself away from family and friends I had no one in whom I could confide and seek advice.
Did these emotional elements drive my decisions? Absolutely and unequivocally, yes. And it is clear to me these factors influenced my decisions far more than the money involved.
It wasn’t until I found my White Collar Support Group, and also served time in prison with other men like me, that I learned that emotional factors such as the ones I encountered are very common indeed. At one time or another almost all of us fell into the same trap, pouring more and more resources and ourselves into a bad decision, even when all the evidence was shouting ‘STOP’.
There are decades of research showing that the most powerful forces in our decision-making aren’t economic — they’re emotional. Had I done nothing in 2007, just sat there and let everything come crashing down, it’s almost a certainty I would not have ended up in prison.
It’s some consolation knowing that I’m not alone in the chronicles of disastrous decisions, and perhaps the only way for us to learn is by dealing with the consequences that follow them. I am hopeful that by sharing this I can help others avoid a similar fate.
Decision Making 101
Is this really a problem?
Breathe. There are very few problems in life that require immediate action.
You likely don’t know as much about a situation as you think. Question what you think you know about any particular situation. There are things you know you don’t know (known unknowns), but there are things you don’t know you don’t know (unknown unknowns).
Issues sometimes resolve themselves. Not suggesting you should put your head in the sand but recognize some issues self-correct.
Why is this a problem? What is your desired outcome?
Identify the right problem.
Clearly define it and clearly define your goal(s).
What is driving your urge/desire to fix/take control? Are you emotionally attached to the issue, or the outcome? It’s never wise to make a decision that is rooted emotions.
What is the cause of the problem?
Were events precipitated by your actions, or by the actions of others?
Is this a problem you can realistically solve?
If you didn’t cause the problem, it might be hard for you to resolve it without cooperation from others.
You cannot control how others will perceive or react to your involvement.
Do you need additional information or additional resources?
Identify possible solutions. What could be:
The easiest solution?
The quickest solution?
The best temporary solution?
The best long-term solution?
Set realistic parameters for success and failure so you know if/when to continue or abandon your effort.
For example, what are the values and principles you don’t want to abandon or compromise?
Vet your thinking with a knowledgeable and absolutely objective friend, colleague or mentor. Someone who will give you their unvarnished opinion. “An accurate understanding of reality is the essential foundation for any good outcome”.
Bill Livolsi is a Life Coach supporting the white collar justice community and a volunteer with Progressive Prison Ministries. He helps men and women facing prosecution for white collar and non-violent crimes navigate their journey – including rebuilding their lives after prison. He was prosecuted for a white collar crime and spent 13 months in Federal prison. Bill can be reached at whitecollarcoaching.com.
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Review of the discovery documents with my defense attorney.
Save the Date: White Collar Support Group — 300th Meeting Online on Zoom. Monday, March 14, 2022, 7 pm ET, 6 pm CT, 5 pm MT, 4 pm PT. Open to directly justice impacted only. Referrals welcome.
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Dear Fellow Travelers,
Progressive Prison Ministries and St. Joseph’s Mission Church invite you to join our Confidential Online White Collar Support Group. We hold our group meetings on Monday evenings, 7 pm ET. 6 pm CT, 5 pm MT, 4 pm PT.
We are doing something truly groundbreaking! This is the world’s first Confidential Online White Collar Support Group. As this support group is run by ordained clergy as part of a program of pastoral care and confession, we expect and believe it falls under clergy privilege laws.
We are a community of individuals, families and groups with white collar justice issues who have a desire to take responsibility for our actions and the wreckage we caused, make amends, and move forward in new way of life centered on hope, care, compassion, tolerance and empathy. Our experience shows us that many of us are suffering in silence with shame, remorse, and deep regret. Many of us have been stigmatized by our own families, friends and communities, and the business community. Our goal is to learn and evolve into a new spiritual way of life and to reach out in service to others. This is an important thing we are doing!
Over 400 Fellow Travelers have participated in our support group meetings from Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Texas, Utah, Vermont, Virginia, Washington and Wisconsin — and Canada, South America, Europe and the Caribbean. All have agreed this has been a valuable, important experience in which everyone feels less alone, and gratified in the opportunity to talk about things in a safe space only we could understand.
We have formed agreements as to confidentiality, anonymity and civility, and have a basic agenda for each meeting:
1. Welcome 2. Serenity Prayer: “God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.” 3. Short Member Introductions, if we have new member(s) 4. Announcements & Resource Sharing 5. Guest Speaker and/or Lead on Topic 6. Member Sharing 7. Closing
Login Instructions and Link are sent out weekly. We have set up an account with Zoom for our group, and you can log in via video on a computer, tablet or smart phone that is equipped with a camera, or audio only via phone. Please use headphones if you can so that we can minimize feedback and background noise. Each meeting will have a different meeting number to best provide confidentiality.
For Newcomers, I (or the night’s host) will be online fifteen minutes before the scheduled start of the meeting. Zoom works wonderfully, however, it might take a little time to get comfortable with on your end if you’ve never been on this platform.
Thank you for referring other justice-impacted people and families: info@prisonist.org. Fellow Traveler volunteers handle information requests and intakes with empathy and compassion.
Press & media inquiries: press@grantlaw.com. A Fellow Traveler volunteer who is a public relations professional handles these inquiries.
If you have suggestions for other Fellow Travelers to join this group, please contact us to discuss. Our goal is to be inclusive.
IMPORTANT!: If you are currently on supervised release, probation or parole, it is important that you first discuss this with your P.O. To assist in this regard, information about our ministry is available on prisonist.org.
Please feel free to contact us if you would like to join in our next meeting, or with any questions you might have regarding this group, its meetings, or anything else whatsoever.
Craig Stanland is a Member of our White Collar Support Group that meets online on Zoom on Monday evenings.
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There are seemingly countless ways to experience freedom. There are nuances and layers, and I’m fascinated by all of them.
That’s because freedom is one of my core values. A couple of years ago, that core value and my commitment to it was challenged.
I was fortunate to land a job after prison. That’s not an easy thing to do.
I worked the front desk at a gym, making $12 an hour. There were plenty of nights I’d skip dinner because I didn’t have enough money to take the subway to work and eat.
A far cry from my six-figure salary, plus commission, expense account, and car allowance.
Over time I became friends with many of the members, and we spoke in great detail about life and work, and of course, working out.
One of my friends learned about my corporate background; they knew what I was capable of in a corporate sales setting. I generated 21M in sales in my best year. I was consistently in the top 3 in the country.
And I hated it. There was no fulfillment; there was no joy. When asked if I liked my job, I replied the same every time,
“I don’t like my job, but I like what it affords me.”
The facade it provided, the cars, the watches, the extravagant dinners, multiple homes.
I was always chasing, and I was never satisfied. Deep down, I wanted to innovate, create my own company, write a book, and deliver a TED talk.
But I was too damn afraid to give up everything and create the life I wanted to create.
The gym didn’t pay a lot, but it provided the freedom to create the life I wanted.
That’s when I faced one of my most significant tests:
My new friend offered me a job back in the corporate world that would generate 350K/year.
I looked at my non-existent bank account, my skinny frame, and my rumbling stomach.
I thought about the watches I could buy and the new BMW I would lease. A new apartment in a cool neighborhood in NYC.
I spent my paycheck before I even got the offer letter.
What the hell was I doing? What was I thinking? Hadn’t I learned? What do I genuinely want to do?
Write. Speak. Utilize my experience in service to others. To have the freedom to create, innovate and carve my own path.
I turned the job down.
Because I was done chasing, I was done living in scarcity. I was done doing things that didn’t make me feel good.
I knew my definition of freedom, and I made my decision from the center of that definition.
It was singlehandedly one of the most empowering moments of my life.
When we live in alignment with our core values, we generate an energy that will not be denied. It flows from our very being and ripples out to every aspect of our lives.
We seize agency by the horns, and we, nobody else, are responsible for our lives.
All the distractions, all the BS, all the noise falls by the wayside when we know what we value and operate from the center of that.
Our decisions, and in turn our lives, become crystal clear.
I wrote this book from my heart, and I gave it everything I had.
My dream, my goal for this book is that it helps one person—the one person who feels right now how I once felt.
I’d be honored if you checked it out.
After hitting rock bottom, Craig Stanland was forced to make a choice: give up or rebuild. He thought he had “it all” until he lost sight of what’s truly important and made the worst decision of his life, losing everything along the way, including his own self-worth. Through the painful, terrifying process of starting over, Craig ultimately discovered that when you have nothing, anything is possible.
Today, Craig is an author, speaker, and Reinvention Architect. He specializes in working with people whose lives have fallen apart, helping them reinvent themselves by showing them how to rebuild their self-worth and create the extraordinary lives they’ve always wanted.
Bill Livolsi is a Member of our White Collar Support Group that meets online on Zoom on Monday evenings.
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When Is The ‘Right’ Time?
Anyone who has been involved with the criminal justice system asks these questions:
What’s the right time to tell my family? What is the right time to tell my employer? What’s the right time to tell my friends and colleagues? What’s the right time in a social setting? Is there ever a right time? How do I tell anyone?
I have come to believe that these conversations need to happen, sooner rather than later. The topic needs to be broached, otherwise it’s a sack of bricks we silently carry everywhere we go. And it gets heavier and heavier with the passage of time.
Keeping secrets is corrosive, but these are hard conversations to have.
We are reluctant to have the difficult conversations surrounding our criminal justice issues. We’re afraid of rejection, we’re afraid of judgment and we’re afraid of being ostracized. All pretty normal fears.
Anyone who knows me knows that I believe in disclosing our situation to our employer, or prospective employer, sooner rather than later. I feel that keeping it a secret is in the long run counter-productive to our employment prospects. When they find out, and they will find out, having kept it hidden only reinforces the notion that we are, among other things, untrustworthy.
What about the numerous other situations we’ll encounter in our lives? Let me share a story from this past week at work.
I was paired for a day-long task with another one of my coworkers. We had never worked together before. The task at hand gave us ample opportunity to have a conversation while we were working.
As we were comparing our relative experience with our employer they told me how grateful they were to have this job because it was so difficult to find work as they were on federal probation.
BOOM, there it was!
Here I was thinking of ways I was going to broach the topic with them (at some yet to be determined ‘right time’) and they got there first. I felt good that they were comfortable sharing this part of their life with me. Then I felt a sense of relief as I shared my situation. As we continued our conversation throughout the afternoon we found that we had so much in common irrespective of the differences in our convictions. It was a really good day.
I’ve been thinking about this experience and here are some thoughts I’ve come away with.
Prior to that moment did I have any inkling they had a felony conviction? No! And the same is true for them about me, they had no idea. Did we have large F’s stamped on our foreheads? Obviously not. Yet we both were silently keeping the same secret, until we weren’t.
It felt very good to be able to talk openly about our experience free of judgment and not having to hide something so impactful in our lives.
Too often I forget that there are hundreds of thousands of men and women in our society carrying around the same guilt, shame and fear of judgement that I am. They are the checkout person at the grocery store, they cut my hair, they’re my plumber, they’re my electrician, they are the men and women I work with.
I am very mindful of the fact that not every experience that I will have, or you will have, is going to be pleasant. I have had plenty of unpleasant ones in the past. Sometimes my worst fears will be realized; I will be judged, or rejected.
So, is there ever a right time? And with whom do I share? I don’t really know for sure, but I do know this much – the more I hold it inside, the more energy I expend keeping my secret, my sense of isolation will never truly end.
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Bill Livolsi is a Life Coach supporting the white collar justice community and a volunteer with Progressive Prison Ministries. He helps men and women facing prosecution for white collar and non-violent crimes navigate their journey – including rebuilding their lives after prison. He was prosecuted for a white collar crime and spent 13 months in Federal prison. Bill can be reached at whitecollarcoaching.com.
Bill Livolsi is a Member of our White Collar Support Group that meets online on Zoom on Monday evenings.
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Spending an extended period of time alone can be a good thing. In my case, the forced solitude of federal prison provided me an opportunity to confront the many personal issues I had neglected for years.
FCI El Reno was to be my ‘home’ for 20 months. I self-surrendered in late March 2019. Not surprisingly, I didn’t want to be there, but there was nothing to be done about that. I was at the Camp. It was not a physically threatening environment but I didn’t press my luck. That said, prison was an extremely difficult experience. For me, and for many of the men I served time with, the worst aspect of our prison sentence was the isolation from children, family and close friends (those who remained).
I think about my time at El Reno almost daily. I’m very grateful it’s behind me. Yet strangely, there are things I miss, namely the unspoken bond that forms between those who share a common hardship. I was in the company of other men struggling with issues similar to my own. We shared these burdens with each other within our small group.
My first month at ‘The El Reno Resort and Spa’ (it was none of those things) flew by. There was so much to get accustomed to and to learn. It was as if I was dropped into a strange world where the language, customs and culture I knew no longer applied. Every day brought something new.
By the time summer came, I was pretty well acclimated and I found myself in the middle of a very real identity crisis. I was at one of the lowest points I had ever been. I felt trapped in my own head, and was trapped behind bars. My days were consumed with existential questions: How did I get here? Why did I get here? Who am I, really? Do I have any redeeming value to my children, my family, to anyone?
An unspoken fear of many who are incarcerated is that ‘people and events’ will conspire and you will never be allowed to leave. The prison rumor mill (inmate.com) was full of these tales. Such fears are silly and irrational to those looking in from the outside, but when you’re inside they feel very real. When I finally understood the truth, that my incarceration was not indefinite, and it would come to an end by December 2020, I began working though the issues and choices that brought me to that place. Slowly I began rebuilding my self-esteem, my self-worth, who I was, and who I will be.
Wayne Dyer said “When you change the way you look at things, the things you look at change.” As my rebuilding process unfolded I began to pay close attention to the good in my life and in the small things that previously went unnoticed. I found gratitude, a sense of normalcy and a little peace of mind.
Across highway 66 from the prison there is a huge wind farm. For a time I barely gave it a second look but it became an unending source of fascination for me. There are hundreds of turbines as far as the eye can see. The blades on all the turbines move in unison. Hundreds of blades moving together like gigantic swiss watches, keeping perfect time. When I focused on it, as I often did, I was mesmerized. I also realized that the direction of the turbines depends upon which way the wind is blowing (common sense, I know). Their directional movements were a mystery to me. One minute they were facing north, 10 minutes later they were facing west. So cool. And each structure is built in near perfect alignment with each other, one behind the next, and the next and the next, like a giant chess board. And depending on the time of day and the weather conditions, the visual effects could be stunning. When a storm would move in from the west or the north, which they often did, I would watch the structures slowly disappear, one by one by one, into the heavy cloud cover. It seemed like each day brought me a new revelation.
El Reno also has its own municipal airport, which isn’t unusual for Oklahoma. All sorts of planes would fly in and out. Small, single prop planes were the most frequent. They are a useful tool oil companies use for visual inspections of pipelines and drilling sites. These planes, and others, are easy to identify by sight but what I found fun was listening to the different engine sounds. High pitch or low, high revs/low revs, prop or jet. Sometimes I would sit on one of the outside benches, or lay on the warm cement of the abandoned tennis court, eyes closed, as the sound of the engine would soothe whatever was on my mind. Occasionally a certain engine sound would remind me of the many times I was on the beach in Sea Isle City, New Jersey and I would visualize a bi-plane flying by with it’s banner tow. All that was missing was the sound of the sea gulls and the waves, which my imagination gladly supplied.
Some mornings, if the breeze was just right, I knew they were cooking bacon behind the fence at the medium security facility. I love bacon. It wasn’t served to us lowly Campers. It made me think of home.
I learned to identify certain people’s footfalls on the walking track, sight unseen.
I enjoyed watching the feral cats hunting in the nearby field.
The smell of diesel fumes would let me know the back-up generators were running.
I knew it was noon when the town would test it’s tornado sirens.
I could tell by smell if there was a nearby brush fire (and the Camp fire crew would soon be called out).
And at all times of the day I would catch a whiff of burning tobacco coming from behind the out-buildings near the walking track.
I became strangely attached to these small things. They were all part of my ‘new normal’ existence.
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Lately I have been thinking about the things that bring joy and gratitude to my life right now. There is the most obvious – being home. Now I am able to be truly present for my children, grandchildren, and family. There is more: helping fellow travelers during their CJ journey, a job that helps to support our household, receiving a phone call, cooking, food shopping, fabric softener (if you’ve been to prison you’ll understand), or watching my garden grow.
In the years I was dealing with my prosecution and the run up to prison I often lost sight, perhaps understandably, of what I should be grateful for. My prison journey gave me the chance to find peace and gratitude in small things, in a very strange place. Perhaps I could have learned this lesson without going to prison, but I’ll never know for sure. Regardless, I have a deep sense of gratitude that I am able to recognize them and enjoy them now.
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Bill Livolsi is a Life Coach supporting the white collar justice community and a volunteer with Progressive Prison Ministries. He helps men and women facing prosecution for white collar and non-violent crimes navigate their journey – including rebuilding their lives after prison. He was prosecuted for a white collar crime and spent 13 months in Federal prison. Bill can be reached at whitecollarcoaching.com.
Fellow Travelers Mike Neubig and Jeff Grant are featured in this article, and are members of of our White Collar Support Group that meets online on Zoom on Monday evenings.
Pour yourself a cup of coffee, because this is quite a read.
Who’s more despicable: a thief who robs a 7-11 at gunpoint, or Elizabeth Holmes, the former billionaire (on paper) accused of perpetrating a massive fraud with her blood-testing company, Theranos?
It may be easier for the armed robber to be forgiven than Holmes. He wasn’t born and raised in an environment of privilege. She had everything.
There are several programs helping “blue-collar” ex-felons find jobs and start life over after prison, but there are no such programs for white-collar ex-cons. (“White collar” traditionally describes a nonviolent crime involving financial fraud.)
“You had your chance and you blew it,” says Mike Neubig, a former CEO convicted of lying to investors. He’s struggled to find steady work, and he realizes that most people couldn’t care less. He says their message is, “We don’t have sympathy,” but he asks, “How long do you want us punished?”
Even in a tight labor market, where accountants in particular are in high demand, few companies will take a risk on someone who’s broken trust in the past.
There are tens of thousands of highly skilled men and women who’ve done their time and need to go back to work. They’re testing different interview strategies. Some succeed, some don’t, and now some of these former inmates are leaning on each other. “White-collar guys are smart,” one told me.
Meet three men who explain what they did wrong, what’s next, and what you need to know if you ever end up in prison.
THE HIGH-PROFILE AUDITOR CAUGHT IN AN FBI STING
I was surprised several months ago when Scott London reached out to me on LinkedIn with a nice message about an online forum I moderated. Surprised, because the last time we saw each other was in 2013, when I was chasing Scott around a federal courthouse in downtown Los Angeles after he was arrested by the FBI.
But Scott London is a nice guy.
A nice guy who broke the law.
Scott was a senior partner in the Los Angeles office of auditing giant KMPG. He gave a friend, Brian Shaw, insider information on a couple of companies, and Shaw used that information to trade shares and make about $1.6 million.
“I gave him a series of tips over 10, 12 months,” Scott admits. He says he crossed the line from legal to illegal slowly, after listening for months as Shaw explained how his business was struggling. Scott says he had no idea that Shaw would use the information to make such huge gains. “I thought he was going to trade and make $10,000, $20,000.”
Still, “The facts were that I gave him that information,” and in exchange, Scott received money and gifts worth between $50,000–$70,000.
But the suspiciously timed trades netting a whopping $1.6 million got the attention of law enforcement.
The FBI contacted Brian Shaw, and he agreed to set up his friend in a sting, meeting Scott in a parking lot and passing him an envelope filled with $5,000 (money provided by the FBI). This gave the feds the evidence they needed to bring a case.
When federal agents showed up at Scott London’s door, they pulled out the photo of him taking the cash. “I did it,” he told them on the spot, admitting everything.
When we met again recently for this newsletter, Scott told me that when he first went to prison, he was sent to the same facility housing Brian Shaw. He says prison officials were concerned about having both of these ex-friends in the same place, so Scott was immediately put in the SHU (pronounced “shoe”), the Special Housing Unit, aka solitary confinement.
Nobody told Scott why he was going to solitary or how long he’d stay. “It was the worst period of time in my life.” He had no access to a phone for a week, and he spent 23 hours a day in a small cell. “There are people screaming in there.”
He was there for 30 days.
Then he was moved to the general prison population at a federal facility in Lompoc, California, where he spent most of his days doing landscape maintenance at Vandenberg Air Force Base.
“There’s a feeling I used to have daily: ‘How could I be so stupid and do something like this?’,” he tells me. Fortunately, Scott’s family survived on savings and his wife’s income.
Shortly after his release from prison, he reached out to a friend who ran a tech company. “I said, ‘I don’t care what I do.’” The CEO took a chance on him, even though hiring a high-profile ex-felon caused some “awkward conversations” at the company.
Within a few months, Scott was promoted to Chief Operating Officer.
He realizes that his success after prison is very unusual. Scott thinks the main reason he was able to bounce back is because he never denied the charges. Not to the FBI. Not to his friends.
“I had more people advising me, ‘Deny, deny, deny, there’s no evidence.’” But Scott thinks being honest saved his career. “That builds credibility amongst the community you live in.” It’s something he talks about in ethics training for aspiring accountants.
Still, he knows he’ll never again be a top manager at a top accounting firm.
“I don’t think there’s any way that anybody who committed a white-collar crime can go back to the industry they were in,” he says.
THE EDUCATION CEO“I wouldn’t trade it. It’s created the person I am now.”
Mike Neubig used to worry that a potential employer would find out about his criminal record. Now he writes about it openly on a blog.
Mike was the youngest of five children in a poor household. “I felt invisible.” He was also the first to go to college, where a professor was impressed with his writing. “Nobody ever told me I was smart before.” That sparked an interest in education: “I wanted to give back and try to impact the type of kids that I was, that were kind of invisible.”
He ended up becoming a teacher and eventually got involved in restructuring education. He wrote a book, created his own business — Capture Educational Consulting Services — and raised $3.9 million in startup funds from investors.
Then things went south.
He lied to investors about how well the company was doing.
“I think that investors make the assumption that you are ready to handle sudden success, hundreds of thousands of dollars,” he says.
His board fired him.
Then one day two years later when he was home alone, the doorbell rang.
“I peeked out and I thought I saw the sleeve of a policeman’s uniform,” Mike recalls. “I’d never had anything besides a speeding ticket in my lifetime, and my heart started pounding.”
He went to open the garage door to see if anyone was in the back. “There was a bunch of police cars out there, and they came underneath the garage door and said they had a warrant for my arrest and to put my hands behind my back, and I was just in shock.”
Soon everyone heard the news. His wife’s prayer group found out. So did the parents of the football team he helped coach. “People looked at me like I had the plague.”
Unlike Scott London, Mike Neubig has struggled to find a job. His story is more common. As soon as an employer does a background check, it’s all over. Google “Mike Neubig” and see what pops up.
Every time he lands an interview, he tries to figure out when to reveal his past. Sometimes he mentions it right off the top; sometimes during a second interview (but only halfway through, “so that you can finish the interview with reminding them how great you are”); sometimes he waits until after he receives a conditional offer of employment.
None of it’s worked out, even when he’s been told he’s the perfect candidate. Mike has been fired from two jobs after managers discovered his record, and he’s had three offer letters revoked. “Once they know, they don’t want anything to do with me,” he says. “How do you build trust again?”
Even entry-level custodial jobs may be off-limits. “Can you trust the white-collar ex-felon late at night alone in an office?”
THE $140,000 JOB
Here’s one particularly painful example. Mike says he landed a job in San Francisco after his indictment but before his conviction. It was a great job, paying $140,000, and somehow he passed the background check (obviously no one Googled him). He started working, and then he flew to New York for a week of training.
Two days in, his boss calls a meeting. “I start to show him my computer and all the things I’ve done, and I look up, and the lady from HR is on the screen.” The boss revealed they’d learned about his indictment and demanded he immediately hand over the computer. “The lady on the screen says, ‘Tell us a little bit about what happened,’” he says, “but they had already taken my computer.” (I reached out to the company and the boss, but I never got a reply.)
Mike is no longer running from his record. “It’s all over my LinkedIn page.” He thinks it’s important to be public about his past and to share what he’s learned. “As my therapist said, ‘You have to rebuild your whole identity at age 50.’”
He’s even started to get a little work. Newsflash: Just last week, Mike landed a contract to be a marketing director. The company knows his background and hired him anyway. “It’s really brought me self-esteem I haven’t had in a long time.”
Despite everything, he says the experience made him a better man. And his wife and daughters stuck with him.
“It was awful, but I wouldn’t trade it. It’s created the person I am now.”
THE LAWYER TURNED PREACHER “I tried to kill myself that night…”
Jeff Grant was a very successful lawyer in New York who became addicted to prescription opioids after rupturing his Achilles’ tendon. He started stealing money from clients. Then to save his business after 9/11, he applied for a Small Business Administration loan, falsely claiming his office was a block from Ground Zero. “It was a stupid, crazy thing to do.”
He received $247,000.
In July of 2002, when it became clear he’d committed fraud, he surrendered his law license. “I tried to kill myself that night with an overdose of prescription opioids.”
Friends came to the rescue and drove him to rehab. Jeff became sober. Then, nearly two years later, “I got a call from two federal agents to tell me that there was a warrant out for my arrest in connection with the misrepresentations I made on the 9/11 loan.”
He turned himself in and pled guilty. “All I wanted to do was accept responsibility and pay my debt and move forward.”
In 2006 he went to prison for over a year.
Jeff was sent to a correctional institute in Pennsylvania, where he says there were “five stockbrokers, two former doctors and one former lawyer — that was me — and about 1,500 drug dealers.” (More on lessons he learned in prison below… wow!)
When Jeff got out of prison, his life was a mess. “I didn’t have a job. My family was in disarray.” He was still in recovery, though, and went to court-managed drug and alcohol counseling several times a week. A counselor advised him to begin re-establishing his reputation by doing volunteer work. That led to some paid positions.
In 2009 he decided to go to seminary, even though he’d been raised Jewish. He received a Master of Divinity degree from Union Theological Seminary and started working in churches.
He started Progressive Prison Ministries in 2014 to specifically provide emotional and spiritual support to white-collar criminals and their families. The group holds virtual meetings every Monday night, and everyone from ex-cons to people awaiting trial call in. “We give them hope and some guidance on how to move forward,” Jeff explains. While the program is “spiritually oriented,” it is non-denominational. “We serve people of all faiths or no faith whatsoever.”
The group includes former CEOs, captains of industry, a former local sheriff and a discredited ex-district attorney. Many of them share their stories on Jeff’s podcast, White Collar Week.
“This is hard work, Jane. This is like therapy on steroids.”
Time for their advice…
HOW TO SURVIVE PRISON
— If you’re going to prison, memorize important phone numbers or have them mailed to you inside. Nobody remembers phone numbers anymore.
— Tell visitors not to handle any cash ahead of a visit, because there may be drug residue on it.
“The single most important thing to know about going to prison is to show respect and be able to receive respect,” says Jeff Grant, who adds that respect is mostly demonstrated by “keeping your mouth shut.” People who ask a lot of questions are suspected of being rats.
Prison has a lot of rules which are not intuitive at first. “It’s like being on a plane and landing in Manchuria,” he says. “You can get off the plane, but you don’t speak the language, you don’t know the customs, you don’t know the culture, you don’t have the money.”“You don’t want to know how he acquired it.”
For example, on his third day in prison, Jeff went over to a weight stack to bench press. It was very early in the morning, and nobody was working out.
“Somebody came up to me and said, ‘Are you planning on using that equipment?’ And I said, ‘Yeah.’” The guy told Jeff, “When you’re done, come talk to me.” Jeff said he was so freaked out, he did one bench press before going back to talk to the guy, who suggested Jeff talk to his “cellie,” his cellmate.
When Jeff asked his “cellie” what the deal was, the cellmate told Jeff the man who spoke to him “owns” the weight equipment during that part of the day. “You don’t want to know how he acquired it,” the cellmate told him. “If you want to use that equipment during that time of day, you’ve got to pay him for it.”
Jeff asked why the guy didn’t just tell him that. “He doesn’t know you,” his cellmate said. “He doesn’t know if you’re a rat.” White-collar inmates are generally older and often white, as is Jeff, and that can make other inmates suspect them of being prison plants.
Jeff began to walk the track around the prison yard, 10 miles a day. “After about three months, a ‘shot caller’ came up,” he says, referring to the head of a gang. “He said to me, ‘I hear you can be trusted.’” Jeff knew by now not to speak. “So I just nodded my head, and he said, ‘All right, then.’”
The next day other inmates suddenly started talking to Jeff, the former lawyer, and asking for legal advice. He ended up helping many of them with divorces and bankruptcies.“You can’t trust anybody.”
Scott London paid a consultant a few hundred dollars to get advice before starting his prison sentence. “Turns out [the advice] was mostly wrong.”
Here’s what he learned on his own about prison.
“You can’t trust anybody, you can’t trust what people tell you, you have to look out for yourself.” Scott says there will be inmates who want to get you in trouble. At the same time, “Don’t treat people poorly.”
He says the first couple of weeks were a process of learning the rules, such as, “This thing is only for coffee. Don’t wash your hands in that sink.”
Then came the occasional challenges, “where somebody is exerting their influence.” Scott says you can react in one of three ways:
Cowering — “From that time on, they would kind of own you throughout your stay.”
Defiant — “You just go over the top and try and be aggressive with them.”
Something in-between — “Hold your ground and say, ‘I’m sorry, I didn’t mean any disrespect. I’m here to do my thing, you’re here doing your thing.’”
Scott chose the last strategy. “In the end, I made some reasonable friends there that I spent most of my time with.” Finding such people helped the time go by. “If you were just trying to be a loner, and you isolate yourself, it’s going to be very, very difficult to get through.”
AND AFTER PRISON?
There are “Fair Chance Employers” who are willing to hire someone with a criminal record to reduce recidivism rates, but Mike Neubig says they focus on blue-collar ex-felons, not people like him.
In California, the 2018 Fair Chance Act bans employers from doing a criminal background check until a conditional offer has been made. The offer can only be rescinded after “considering the nature and gravity of the criminal history, the time that has passed since the conviction, and the nature of the job you are seeking.”
It doesn’t take much to convince a company to rescind an offer to someone who previously committed fraud.
So Mike says he’s found value in volunteering with the youth ministry at his church, and with Jeff Grant’s Progressive Prison Ministries. “Find a support group,” he says. “Don’t be afraid to admit what you did… otherwise the shame will just kill you. It still does at times.”“Think about the people in your life.”
Scott London says white-collar ex-cons need to leverage the skills they have and reinvent themselves in a career different from the one they had.
He also has two pieces advice for staying out of trouble in the first place. First, don’t make critical work decisions when you’re vulnerable. “You might be going through a divorce, you might have financial issues.” This could put you in the wrong frame of mind to make moral and ethical choices.
Second, “If you are about to go over the line… think about the people in your life.” Those people will suffer greatly. “My son came home from school one day, and there was a news truck sitting outside, and he had no idea what was going on.” If Scott had that image in his mind before he broke the law, he says he wouldn’t have broken the law.“We have a right to a second life.”
Jeff Grant has done what seemed impossible and won back his law license. Even some of his old clients from 20 years ago have come back.
This gives him hope.
“We’re now hopefully being regarded not so much as castoffs anymore,” he says, “but more as people who’ve gone through some difficult challenges, albeit mostly by our own hand, and who have a right to recover, have a right to a second life.”
Jane Wells would love to hear what you think. Please feel free to email jane@janewells.com.
We’ve never before reprinted a Department of Justice press release. This one is worth reprinting in full. – Jeff
Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Friday, March 26, 2021
Historic level of enforcement action during national health emergency continues
The Department of Justice announced an update today on criminal and civil enforcement efforts to combat COVID-19 related fraud, including schemes targeting the Paycheck Protection Program (PPP), Economic Injury Disaster Loan (EIDL) program and Unemployment Insurance (UI) programs.
As of today, the Department of Justice has publicly charged 474 defendants with criminal offenses based on fraud schemes connected to the COVID-19 pandemic. These cases involve attempts to obtain over $569 million from the U.S. government and unsuspecting individuals through fraud and have been brought in 56 federal districts around the country. These cases reflect a degree of reach, coordination, and expertise that is critical for enforcement efforts against COVID-19 related fraud to have a meaningful impact and is also emblematic of the Justice Department’s response to criminal wrongdoing.
“The Department of Justice has led an historic enforcement initiative to detect and disrupt COVID-19 related fraud schemes,” said Attorney General Merrick B. Garland. “The impact of the department’s work to date sends a clear and unmistakable message to those who would exploit a national emergency to steal taxpayer-funded resources from vulnerable individuals and small businesses. We are committed to protecting the American people and the integrity of the critical lifelines provided for them by Congress, and we will continue to respond to this challenge.”
“To anyone thinking of using the global pandemic as an opportunity to scam and steal from hardworking Americans, my advice is simple – don’t,” said Acting Assistant Attorney General Nicholas L. McQuaid of the Justice Department’s Criminal Division. “No matter where you are or who you are, we will find you and prosecute you to the fullest extent of the law.”
“We will not allow American citizens or the critical benefits programs that have been created to assist them to be preyed upon by those seeking to take advantage of this national emergency,” said Acting Assistant Attorney General Brian M. Boynton of the Justice Department’s Civil Division. “We are proud to work with our law enforcement partners to hold wrongdoers accountable and to safeguard taxpayer funds.”
In March 2020, Congress passed a $2.2 trillion economic relief bill known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. Anticipating the need to protect the integrity of these taxpayer funds and to otherwise protect Americans from fraud related to the COVID-19 pandemic, the Department of Justice immediately stood up multiple efforts dedicated to identifying, investigating, and prosecuting such fraud. Leveraging data analysis capabilities and partnerships developed through its vast experience combatting economic crime and fraud on government programs, the Justice Department’s response to COVID-19 related fraud serves as a model for proactive, high-impact white-collar enforcement, and demonstrates our agility in responding to new and emerging threats. This rapid and nationwide response enabled the Justice Department to quickly ensure accountability for wrongdoing amid a national crisis and sent a forceful message of deterrence during an ongoing crisis. The multifaceted and multi-district approach to enforcement during this national health emergency continues and is expected to yield numerous additional criminal and civil enforcement actions in the coming months.
On criminal matters, the Justice Department’s efforts to combat COVID-19 related fraud schemes have proceeded on numerous fronts, including:
Paycheck Protection Program (PPP) fraud: Prominent among the department’s efforts have been cases brought by the Criminal Division’s Fraud Section involving at least 120 defendants charged with PPP fraud. The cases involve a range of conduct, from individual business owners who have inflated their payroll expenses to obtain larger loans than they otherwise would have qualified for, to serial fraudsters who revived dormant corporations and purchased shell companies with no actual operations to apply for multiple loans falsely stating they had significant payroll, to organized criminal networks submitting identical loan applications and supporting documents under the names of different companies. Most charged defendants have misappropriated loan proceeds for prohibited purposes, such as the purchase of houses, cars, jewelry, and other luxury items. In one case, U.S. v. Dinesh Sah, in the Northern District of Texas, the defendant applied for 15 different PPP loans to eight different lenders, using 11 different companies, seeking a total of $24.8 million. The defendant obtained approximately $17.3 million and used the proceeds to purchase multiple homes, jewelry, and luxury vehicles. In another case, U.S. v. Richard Ayvazyan, et al., in the Central District of California, eight defendants applied for 142 PPP and EIDL loans seeking over $21 million using stolen and fictitious identities and sham companies, and laundered the proceeds through a web of bank accounts to purchase real estate, securities, and jewelry.
Economic Injury Disaster Loans (EIDL) fraud: The department has also focused on fraud against the EIDL program, which was designed to provide loans to small businesses, agricultural and non-profit entities. Fraudsters have targeted the program by applying for EIDL advances and loans on behalf of ineligible newly-created, shell, or non-existent businesses, and diverting the funds for illegal purposes. The department has responded, primarily through the efforts of the U.S. Attorney’s Office for the District of Colorado and their partners at the U.S. Secret Service, acting swiftly to seize loan proceeds from fraudulent applications, with $580 million seized to date and seizures ongoing. The EIDL Fraud Task Force in Colorado, comprised of personnel from five federal law enforcement agencies and federal prosecutors, is investigating a broad swath of allegedly fraudulently loans and their applicants. It is working to identify individual wrongdoers and networks of fraudsters appropriate for prosecution.
Unemployment Insurance (UI) fraud: Due to the COVID-19 pandemic, more than $860 billion in federal funds has been appropriated for UI benefits through September 2021. Early investigation and analysis indicate that international organized criminal groups have targeted these funds by using stolen identities to file for UI benefits. Domestic fraudsters, ranging from identity thieves to prison inmates, have also committed UI fraud. In response, the department established the National Unemployment Insurance Fraud Task Force, a prosecutor-led multi-agency task force with representatives from more than eight different federal law enforcement agencies. Additionally, the department is hiring Assistant U.S. Attorneys in multiple U.S. Attorney’s Offices whose focus will be UI fraud prosecutions. Since the start of the pandemic, over 140 defendants have been charged and arrested for federal offenses related to UI fraud. In one case, U.S. v. Leelynn Danielle Chytka, in the Western District of Virginia, a defendant recently pleaded guilty for her role in a scheme that successfully stole more than $499,000 in UI benefits using the identities of individuals ineligible for UI, including a number of prisoners.
Through the department’s International Computer Hacking and Intellectual Property (ICHIP) program, ICHIP advisors have provided assistance and case-based mentoring to foreign counterparts around the globe to help detect, investigate and prosecute fraud related to the pandemic. The ICHIPs have helped counterparts combat cyber-enabled crime (e.g., online fraud) and intellectual property crime, including fraudulent and mislabeled COVID-19 treatments and sales of counterfeit pharmaceuticals. ICHIPs conducted webinars for foreign prosecutors and law enforcement in Asia, Africa, Europe, and South America on how to take down fraudulent COVID-19 websites. These webinars addressed methods for finding the registrar for a particular domain and requesting a voluntary takedown as well as the U.S. legal processes necessary for obtaining a court order that would bind a U.S. registrar. This has resulted in the take down of multiple online COVID-19 scams and significant seizures of counterfeit medicines and medical supplies such as masks, gloves, hand sanitizers and other illicit goods.
The department has also brought actions to combat coronavirus-related fraud schemes targeting American consumers. With scammers around the world attempting to sell fake and unlawful cures, treatments, and personal protective equipment, the department has brought dozens of civil and criminal enforcement actions to safeguard Americans’ health and economic security. The department has prosecuted or secured civil injunctions against dozens of defendants who sold products — including industrial bleach, ozone gas, vitamin supplements, and colloidal silver ointments — using false or unapproved claims about the products’ abilities to prevent or treat COVID-19 infections. The department has also worked to shutter hundreds of fraudulent websites that were facilitating consumer scams, and it has taken scores of actions to disrupt financial networks supporting such scams. The department is also coordinating with numerous agency partners to prevent and deter vaccine-related fraud.
The department is also using numerous civil tools to address fraud in connection with CARES Act programs. For example, in the Eastern District of California, the department obtained the first civil settlement for fraud involving the Paycheck Protection Program, resolving civil claims under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and the False Claims Act (FCA) against an internet retail company and its president and chief executive officer arising from false statements to federally insured banks to influence those banks to approve, and the SBA to guarantee, a PPP loan. FIRREA allows the government to impose civil penalties for violations of enumerated federal criminal statutes, including those that affect federally-insured financial institutions. The FCA is the government’s primary civil tool to redress false claims for federal funds and property involving a multitude of government operations and functions. The FCA permits private citizens with knowledge of fraud against the government to bring a lawsuit on behalf of the United States and to share in any recovery. Such whistleblower complaints have been on the rise as unscrupulous actors take advantage of vulnerabilities created by the COVID-19 pandemic and the new government programs disbursing federal relief, and whistleblower cases will continue to be an essential source of new leads to help root out the misuse and abuse of taxpayer funds.
Indictments and other criminal charges referenced above are merely allegations, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
The unprecedented pace and tempo of these efforts is made possible only through the diligent work of a wide range of Justice Department partners, including the Criminal Division’s Fraud Section and Money Laundering and Asset Recovery Section, the Civil Division’s Commercial Litigation Branch (Fraud Section) and Consumer Protection Branch, U.S. Attorneys’ Offices throughout the country, and law enforcement partners from the FBI, Department of Labor Office of Inspector General, U.S. Secret Service, IRS-Criminal Investigation, Defense Criminal Investigative Service, Homeland Security Investigations, U.S. Postal Inspection Service, the Offices of Inspectors General from the Small Business Administration, Department of Homeland Security, Social Security Administration, Federal Deposit Insurance Corporation, Department of Health and Human Services, Department of Veterans Affairs, Federal Housing Finance Agency and Federal Reserve Board, Food and Drug Administration’s Office of Criminal Investigations, Treasury Inspector General for Tax Administration, Financial Crimes Enforcement Network, Special Inspector General for Pandemic Relief, Pandemic Response Accountability Committee, OCDETF Fusion Center and OCDETF’s International Organized Crime Intelligence and Operations Center.
To report a COVID-19-related fraud scheme or suspicious activity, contact the National Center for Disaster Fraud (NCDF) by calling the NCDF Hotline at 1-866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
Mike Kimelman is a member of our White Collar Support Group that meets online on Zoom on Monday even Whittemoreings. We will celebrate our 250th weekly meeting on Monday, March 29, 2021, 7 pm ET, 4 pm PT; all Fellow Travelers are invited.
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Whether struggling with the most difficult crucible many of us will ever face before going inside, or coming home and facing the intense personal and financial difficulties of re-entry, Jeff has been a staunch ally and informational godsend for hundreds if not thousands of men and women over the past decade. He has created a caring, open fellowship to help serve others going through the same trials and tribulations that many like myself had to face alone and afraid many years ago when Jeff’s mission hadn’t yet come into existence.
Congratulations on 250 and here’s to another decade of hope, love, optimism and support! – Michael Kimelman, New York
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White Collar Week Podcast: An Evening with Our White Collar Support Group. The support group meeting on this podcast is different than most, because all of the 16 group members appearing have agreed to share their names, faces and very personal stories in an effort to reach out to individuals and families suffering in silence. All on the podcast are post-sentencing or back from prison. Watch on YouTube, Listen on Spotify, Apple Podcasts and SoundCloud,link here.
