In the first of what could be a flood of fraud findings, Chicago’s inspector general has concluded a worker at the Department of Streets and Sanitation received a federal Payroll Protection Program loan “for a fictitious hair salon business.”
Friday’s quarterly report from Inspector General Deborah Witzburg said the finding was the first of a “large scale” investigation into whether city workers had fraudulently obtained some of the roughly 350,000 federal loans awarded in Chicago that were intended to keep businesses afloat during the pandemic.
This is the first “publishable outcome” of work investigating fraudulent federal pandemic loans paid to city actors, Witzburg said in a release accompanying the report, “an ongoing effort in which we’ve identified more than 1,000 potential subjects.”
The IG’s jurisdiction includes all city employees, elected and appointed officials, and city contractors and vendors. For several months, other local watchdogs — including inspectors general overseeing Cook County, the Chicago Housing Authority and Chicago Public Schools — have been digging into potential fraud or violations of personnel rules around ethics and secondary employment.
“Some of those loans may have been obtained legitimately, but a substantial number of the identified loans have indicators of potential fraud. We continue to investigate these matters and will continue to report publicly on investigative outcomes as appropriate,” Witzburg’s report said.
The report released Friday concluded that a “general laborer” in the city’s Streets and Sanitation department “falsified tax records with fabricated business income information in order to receive the loan.”
That was a violation of city personnel rules against breaking federal laws, the report said. It is the office’s practice not to publicly name accused employees. The report did not name the purported fictitious business nor the loan amount received.
The IG recommended the employee be fired and placed on the city’s do-not-hire list. The department “initiated the disciplinary process in accordance with the city’s personnel rules,” according to the IG’s report.
The Cook County Independent Inspector General’s office also released two reports Friday, which found other instances of federal fraud at the county’s Water Reclamation District and its health system.
Interim Inspector General Steven Cyranoski’s last round of federal loan fraud findings, published in July, resulted in the Metropolitan Water Reclamation District of Greater Chicago creating an “ineligible for rehire” list — where employees who engage in “egregious misconduct” are placed. Such a list is standard for other local governments.