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Monday, December 09, 2019 {{ new Date().getDay() }}

Agriculture

Congress Probing PPP Loans To Fake Farms

Photo by Joshua Sukoff on Unsplash

Reprinted with permission from ProPublica

A House committee has opened a formal investigation into how several online lenders may have facilitated fraudulent Paycheck Protection Program loans, following reporting by ProPublica and other news outlets.

The House Select Subcommittee on the Coronavirus Crisis probe seeks answers from Kabbage and BlueVine, online lending platforms that processed hundreds of thousands of government-backed loans to small businesses, as well as Celtic Bank and Cross River Bank, which frequently partnered with the web-based lenders.

Although these highly automated lenders helped the Small Business Administration's $800 billion relief program reach small businesses that weren't being served by traditional banks, they also became targets for cheaters.

"I am deeply troubled by recent reports alleging that financial technology (FinTech) lenders and their bank partners failed to adequately screen PPP loan applications for fraud," said subcommittee chair James E. Clyburn, a South Carolina Democrat. "This failure may have led to millions of dollars in FinTech-facilitated PPP loans being made to fraudulent, non-existent, or otherwise ineligible businesses."

The subcommittee's letters to the targets of its investigation cited stories published by Bloomberg, the Miami Herald, the Project on Government Oversight and ProPublica that found fintech companies account for an outsized amount of the fraud that has plagued the PPP from its inception.

Last week, ProPublica revealed that Kabbage processed 378 loans collectively worth $7 million to single-person businesses that don't appear in corporation records of their respective states. The overwhelming majority identified themselves as farms, typically registered to residential addresses with no discernable agricultural activity.

"The illegitimacy of these purported farms — including potato fields in Florida and orange groves in Minnesota — would have been obvious if even the bare minimum of due diligence had been conducted on the loan applications," the subcommittee wrote in its letter to Kabbage, which was acquired by American Express last fall.

The letter demands a long list of documents, including any records of potential fraudulent activity on the platform, documents describing what resources were devoted to fraud detection, and descriptions of how the company recruited PPP applicants and how it incentivized loan reviewers to process more applications.

Those questions mostly implicate Kabbage's conduct before it became part of American Express, which did not acquire Kabbage's loan portfolio or its servicing arm, which are now incorporated into a separate company. The new company, called K Servicing, continued to process new PPP applications as well as close out those from the first round.

Kabbage is also reportedly under investigation by the Department of Justice over how it calculated PPP loan amounts.

A spokesperson for American Express, who had earlier said that Kabbage complied with all required fraud protocols and reported suspicious loans to SBA, referred questions to K Servicing. Spokespeople from K Servicing, BlueVine, Cross River and Celtic Bank did not respond to requests for comment.

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Texas Department of Agriculture Commissioner Sid Miller

Photo by thetexastribune is licensed under CC BY-NC-SA 2.0

Amazingly, the agricultural commissioner of Texas is the one top official in my state willing to take a bold stand against racial discrimination.

Sid Miller is his name, and he proudly went to federal court in April in an effort to stop a new government aid program that he considered discriminatory against a particular disadvantaged group of agriculture producers — namely, his group: White farmers and ranchers!

Yes, Sid asserts that the program — which directs some long-overdue loan relief to Black, Latino, Native American, and other food producers who've been routinely and grossly discriminated against for generations by agricultural lenders — now demands that privileged Whites like him get an equal piece of the money.

So, Sid, a former rodeo performer who owns a Texas ranch, is braying and snorting through his big white cowboy hat that the way to stop racial discrimination is to let White discriminators also get anti-discrimination money from the feds. That's what passes for logic when you're wearing a $1,000 hat like the one Sid struts around in. But, as a real cowboy once told me, "It ain't the hat; it's the head." And right there is Miller's problem — he's got a thousand-dollar hat on a 10-cent head.

However, he's not the actual "thinker" behind this screwball legal claim. That distinction goes to another Miller, one named Stephen. He's a former Donald Trump political operative, an anti-immigrant extremist and a fanatical promoter of White nationalism — one who specializes in frivolous lawsuits. Indeed, Stephen wrote Sid's plaintive legal plea to provide "racial justice" for rich and powerful White ranchers like him, and just days before filing the suit, Stephen set up a political front group called America First Legal to push the case.

You'd think this ridiculous racial bigotry would be laughed out of court, but the case has gone to a hyperpartisan, right-wing judge who has backed such Republican legal ploys in the past. So, yippity-yi-yo, off to another right-wing rodeo we go!

Woody Guthrie had a lot to say about the greed of fat-cat bankers who make crop loans at usurious interest rates to hardscrabble farmers and then foreclose on them when they can't pay off the loans, leaving thousands of farm families homeless. Woody mocked them with a sarcastic anthem to their bottomless avarice, singing, "I'm a jolly banker/ jolly banker am I." He also penned a stinging verse in another song about their thievery: "Some'll rob with a six-gun/ And some with a fountain pen."

But even this populist poet of the people would be astonished by the shameless grabbiness of today's group of powerful agribusiness lenders. At issue is President Biden's administration's excellent effort to provide some amends — at long last — after decades of systemic, scandalous discrimination by bankers against Black and other minority farmers. It is moving to pay off the onerous level of long-term bank debt that has shackled these good farmers and thus give them a fair shot at getting ahead.

"Oh, no!" squawked the American Bankers Association and other groups of ag lenders. Why? After all, they'd be getting back the money they loaned out. Yes, say the fountain pens, but then we would lose the interest payments each of those farmers would have had to send to us over the months ahead. We want American taxpayers to cover the total interest income we would've gotten from gouging Black, Latino, Native American, and other minority farmers. They insist that their profits and the financial interests of their rich investors must take priority over the needs of a bunch of non-White dirt farmers.

Wait, the bankers' greed intensifies! If the government doesn't fully compensate them for their so-called "lost interest income," the ag lenders (backed by Wall Street barons) are openly threatening that they will cut off future loans to farmers and ranchers of color.

So, the jolly bankers' drumbeat of rank discrimination keeps pounding. To help stop it, connect with the National Black Farmers Association.

To find out more about Jim Hightower and read features by other Creators Syndicate writers and cartoonists, visit the Creators webpage at www.creators.com.