Dan O’Donnell investigates how COVID-19 aid scams by organized street gangs are helping to fuel Wisconsin’s crime surge
July 7, 2021
Perspective by Dan O’Donnell
It’s no secret that Milwaukee is, like most major American cities, in the middle of an unprecedented crime wave. What is downright shocking is the level to which the federal government is funding it.
Multiple law enforcement sources indicate that street gangs in Milwaukee are “flush with cash” from unemployment insurance, Paycheck Protection Program (PPP), and Economic Injury Disaster Loan (EIDL) scams that they are now using to purchase “stolen guns on the street and massive amounts of drugs.”
Established through the CARES Act in the early days of the COVID-19 pandemic, PPP allowed small and medium-sized businesses, sole proprietorships, self-employed workers and non-profits obtain low-interest private loans so that they could stay in business and continue to pay their employees.
Similarly, the EIDL provided small businesses and farms with loans so that their operations and employees would be protected through the pandemic. These programs proved so popular that nearly a trillion dollars flowed through the Small Business Administration (SBA) into the program.
They were also magnets for fraud. Since the CARES Act passed last year, federal officials have charged nearly 500 people in COVID relief schemes that netted more than half a billion dollars. Unemployment insurance scams are even more lucrative: International scammers have stolen an estimated $36 billion.
In Milwaukee, organized street gangs have targeted PPP scams in particular.
“The going rate is a person drafting the fraudulent loan gets $5,000 to file a $25,000 PPP loan in your name,” says one source.
Applying for a fraudulent PPP or EIDL loan is simple.
“It’s a huge problem,” says one source. “This program has been abused from day one and it’s produced a crisis in the streets.”
In the first six months of 2021, homicides, shootings, rapes, burglaries, armed robberies, and car thefts in Milwaukee are all up significantly even over the sky-high 2020 numbers. Madison, too, has seen the impact of the nationwide surge in crime over the past year, as its jump in murders from 2019 to 2020 was one of the four highest (along with Milwaukee) in the nation.
“The demand for stolen guns is driving up burglaries and car thefts,” said another source. “The thieves are usually breaking into homes and cars looking for guns to sell.”
There is a huge market for them. As drug use soared during the COVID-19 pandemic, gangs rushed to fill the demand. This has sparked an arms race as competition for territory heated up. Unsurprisingly, this has resulted in a huge increase in murders. Milwaukee set an all-time record for homicides in a year in 2020, topping the 165 murders in 1991 by a full 15 percent.
“It’s absolutely out of control,” said a source who has been in law enforcement for decades. “I’ve never seen it this bad. Never.”
At the heart of it is the influx of cash that COVID scams are bringing in—by some estimates hundreds of thousands of dollars—that gangs are using to purchase drugs and illegal guns.
The FBI has opened multiple investigations into such scams, but law enforcement sources say the damage has already been done. Gangs have enriched themselves while the federal government was asleep at the switch.
“There has been little to no oversight in how these loans and benefits have been administered and that’s led to serious issues here,” said one source.
Another was even blunter: “Essentially, the federal government is funding our rise in crime.”