This Real Identity Theft Stories blog series is dedicated to sharing real-world stories of identity fraud and theft — and just how devastating these crimes can be on organizations, individuals, and families. This post focuses on how a group of Florida conspirators used stolen IDs from children and prison inmates to create shell companies and fraudulently applied for — and received — more than $3 million in federal loans during the COVID-19 pandemic.
Small Businesses Financially Devastated by the COVID-19 Shutdown
Their names spoke of American ambition and entrepreneurial spirit: Skyline Development & Construction, LLC, Tech Savvy Holding Corp., Carter Landscaping Services, Inc., and Debs Housekeeping Services Inc. Each was a private service business that appeared to have been swept up in the economic devastation that followed the COVID-19 outbreak in the U.S., along with so many other companies.
In April and May 2020, each company applied for emergency financial assistance that was authorized under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that Congress passed into law in March 2020. CARES, through its Paycheck Protection Program (PPP), extended up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses. Skyline applied for $60,000 in PPP funds; Tech Savvy sought $1,413,157; Carter Landscaping asked for $1,707,120; and Debs Housekeeping, coincidentally, requested the same dollar amount as Tech Savvy, $1,413,157 million. Within several weeks, each company received wired funds at their same FDIC-insured Texas bank.
The businesses, all based in Florida, had something else in common: they eventually were traced back to two individuals, Jean Flouridor and Hasan Brown. Flouridor and Brown, along with a number of co-conspirators, were alleged to have been involved in a scheme hatched in 2017 to use 700 synthetic identities (as well as stolen identities) to create bank accounts and shell companies. According to court documents, each corporation was registered to an individual owner who had a Social Security number (SSN) that appeared legitimate, but ultimately were traced to mailing addresses of homes occupied by Flouridor and Brown. The ring had made fraudulent payments from the accounts registered to these synthetic identities to other accounts registered in their real names.
In several cases, the stolen SSNs were those of children and inmates currently serving time in jail. This was a clever strategy, as neither children nor prison inmates usually have the reason, occasion, or wherewithal to check their credit reports.
Following an intense federal investigation, prosecutors charged the two serial “entrePPPreneurs” with bank fraud conspiracy for allegedly using synthetic identities to commit crimes, including defrauding banks and stealing more than $3 million from COVID-19 relief programs.
What is Synthetic Identity Theft?
Synthetic identity theft happens when a criminal combines someone’s real Personally Identifiable Information (PII) with fake details to create an entirely new identity. For example, a Social Security number could be combined with a fake name and address to open credit cards or bank accounts, apply for jobs, obtain health insurance, or, in this case, set up a phony company.
The information being used is largely fake, so it can be nearly impossible to catch the perpetrators of synthetic identity theft. It also takes longer for victims to detect the damage being done because it won’t show up in traditional credit reports or alerts. Children are a prime target for fraudsters because they can take advantage of a kid’s SSN for years before the victim realizes they’ve been compromised. The Dark Web, or “black market” of the internet, has become a breeding ground for the buying and selling of PII that leads to synthetic identity theft. It’s browsed anonymously so hackers, cybercriminals, and identity thieves conduct their business in the shadows — making it even harder to trace.
Americans have lost more than $157 million to fraud related to the coronavirus through October 8, 2020. More than 220,000 reports of fraud were submitted to the Federal Trade Commission, covering schemes that sought to exploit federal stimulus payments, unemployment, and other government benefits.
Any identity thief can buy a legitimate (stolen) SSN, add a different name, birthdate, address, and phone number to start a fraudulent credit file. It probably only took the Florida fraudsters a month to open a bank account for each of their 700+ victims, apply for business loans or credit cards, and use the synthetic identity to apply for credit, seemingly to fund their business operations. Then, when the COVID-19 PPP opportunity came along, with its simplified and decentralized loan application process, they thought they already had a trail of transactions to mask their fraudulent intentions. In fact, one of the ways the prosecutors in this case were able to catch them was that the ring created phony quarterly payroll reports in May 2020, all time-stamped on the same exact day, proving their businesses were suspect.
What Can You Do to Protect Your Family?
Patient criminals may sit on the identities they have stolen for some period of time before “going live” and, in this PPP bank fraud example, “going big.” In this case, in which Flouridor and Brown targeted the PII of children and prison inmates, they were able to fool banks into thinking the borrowing activity came from new accounts that generally fly under the radar of regulators and law enforcement officers. That’s probably why the Florida ring was able to exploit so many victims for three years before they were caught.
Here are four steps that you can take to protect you and your family against losses from child identity theft:
- Understand where your and your child’s PII is stored, particularly at schools, dentists, and medical offices; verify that their records are secure.
- Know how any PII you provide on school forms will be used and with whom it will be shared. Verify that these forms are updated and that it is indeed necessary to even provide PII about your child.
- Ask about the school’s directory information policy and what information about your child is included. You have the choice to opt out.
- Consider a Credit Freeze for yourself and your children, available from all three major credit bureaus, making it more difficult for a fraudster to open new accounts.
If you are concerned about safeguarding your family against child identity theft, IdentityForce offers ChildWatch as an additional service available with any adult IdentityForce membership. And, for organizations that offer IdentityForce identity protection as a benefit to their employees, ChildWatch is free.