PHOENIX — A Scottsdale-based company that processed Paycheck Protection Program loan applications during the pandemic failed to screen out applicants with signs of fraud while abusing the program to enrich its owners, according to a congressional subcommittee.
Blueacorn PPP helped process more than $12 billion in PPP loans, according to the company.
The video in the player above is from December 2021 coverage of the initial fraud investigation.
Local Blueacorn founders include former ABC15 anchor Stephanie Hockridge Reis and her entrepreneur husband Nate Reis.
On Thursday, the Select Subcommittee on the Coronavirus Crisis released a staff report detailing the poor performance of many financial technology companies, known as fintechs, in administering the nation’s largest pandemic relief program.
"Even as these companies failed in their administration of the program, they nonetheless accrued massive profits from program administration fees, much of which was pocketed by the companies’ owners and executives," subcommittee Chairman Rep. James E. Clyburn said in a written statement. "On top of the windfall obtained by enabling others to engage in PPP fraud, some of these individuals may have augmented their ill-gotten gains by engaging in PPP fraud themselves."
Blueacorn was one of the fintech companies in the probe.
The report concluded that Blueacorn took only minimal steps to prevent fraud in its facilitation of billions of dollars in PPP loans while abusing the program to enrich its owners.
According to the subcommittee's report:
- Blueacorn received over $1 billion in taxpayer-funded processing fees. It transferred nearly $300 million in profits to its owners while only spending $8.6 million—less than one percent of the fees it received for its PPP work on fraud prevention.
- Blueacorn loan reviewers reported receiving poor training and being pressured to “push through” PPP loans, even if the reviewers doubted the authenticity of the loan’s supporting documents.
- Blueacorn’s owners directed reviewers to prioritize “monster loans [that] will get everyone paid” and created an exclusive category of PPP loans, called “VIPPP” loans. Blueacorn’s owners were dismissive of other loans, writing “delete them,” “who f***ing cares,” and “[w]e’re not the first bank to decline [PPP] borrowers who deserve to be funded… they go elsewhere.”
- According to their former business partners, Blueacorn founders Reis and Hockridge attempted to directly charge some applicants a 10% fee for successfully procuring PPP loans—in violation of SBA rules.
- Blueacorn’s founders arranged PPP loans for themselves through Blueacorn, some of which have signs of potential fraud. In addition to likely taking over $120 million in taxpayer-funded PPP processing fees as personal profit, Mr. Reis and Ms. Hockridge received nearly $300,000 in PPP loans, some of which were facilitated by their own company.
- In one application, Mr. Reis claimed to be an African American and a veteran—both of which appear to be false.
- The owners of Elev8 Advisors—Blueacorn’s primary eligibility verification and compliance consultants—received PPP loans for themselves, their businesses, and their family members through Blueacorn’s lending partners.
The committee forwarded the findings from the 129-page report to the Department of Justice for a possible criminal investigation. It’s also making recommendations to the Small Business Administration on how to improve emergency lending to prevent future fraud.
When reached by phone last December, Hockridge refused to discuss the company. Hockridge worked for ABC15 from 2011 to 2018. In December 2021, a company spokesperson said Hockridge and Reis no longer had an active role of responsibility in the company.
