Some people see COVID-19 loans as avenue to defraud the system
A Toronto Uber UBER-N -0.67% decrease driver had his bank accounts frozen after the bank became concerned that he inappropriately received more than $4.5-million in COVID-19 aid, according to a recent Ontario court case that sheds light on how unprecedented emergency-relief programs designed to offer businesses a lifeline during the height of the pandemic were abused by some recipients.
Justice Michael Penny of the Ontario Superior Court of Justice ruled that Bank of Nova Scotia BNS-T -2.17% decrease was right to freeze Rabih George Barake’s accounts, saying that Mr. Barake accessed the government loans by means of fraudulent misrepresentation.
The case of fraud is one of the few to reach Canadian courts about federal COVID programs for business. These include the Highly Affected Sectors Credit Availability Program (HASCAP) and the Canada Emergency Business Account (CEBA). Money from improperly accessed loans has been left largely unrecovered, even as federal auditors have aggressively pursued repayment from pandemic-related aid given to individuals through programs such as the Canada Emergency Response Benefit (CERB).
In a December report, Auditor-General Karen Hogan said billions of dollars in ineligible COVID benefits are at risk of going uncollected because the federal government is doing a poor job of identifying who should pay back money in aid programs. But her report did not look at COVID loan programs for businesses.
Mr. Barake, who was primarily employed as an Uber driver, received a total of $4.58-million in HASCAP and CEBA loans, according to the Ontario court ruling. He had previously dissolved most of the 16 businesses for which he requested COVID loans. But he resurrected them, including domain names and websites, shortly before applying for and receiving the loans between March and November, 2021.
On Jan. 24 and Jan. 25, 2022, Scotiabank froze 13 of Mr. Barake’s accounts, according to the court ruling. In March, 2022, Scotia Capital, the investment arm of the bank, froze Mr. Barake’s investment accounts, valued at $1.3-million at the time.
In June, 2022, Mr. Barake sued the bank for damages of $80-million for the losses he suffered from his frozen accounts.
On June 6, Judge Penny ruled in favour of Scotiabank’s counterclaim, saying that Mr. Barake’s applications for both the HASCAP and CEBA loans were fraudulent.
Judge Penny ordered Mr. Barake to pay back the more than $4.5-million he received from the bank (plus interests and costs), along with punitive damages of $1.5-million.
Mr. Barake and lawyers who represented him did not respond to requests for comment.
This article was reported by Globe and Mail
