Chicanos Por La Causa lending program faces investigation as part of COVID-19 loan fraud scandal

The Small Business Administration is investigating an Arizona company called Blueacorn founded by a former television newscaster and her husband.
The Small Business Administration is investigating an Arizona company called Blueacorn founded by a former television newscaster and her husband.

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The U.S. Small Business Administration is investigating the lending arm of one of Arizona's most notable charitable organizations, Chicanos Por La Causa, as well as a fintech company called Blueacorn that was implicated in a recent congressional report that detailed billions in fraudulent pandemic loans.

The recent report from the House Select Subcommittee on the Coronavirus Crisis, chaired by Rep. James Clyburn, D-S.C., recommends several tech and lending companies face investigation for fraud involving Paycheck Protection Program loans.

Much of the report is dedicated to Phoenix-based Blueacorn PPP, which was co-founded in 2020 by former Channel 15 (KNXV-TV) newscaster Stephanie Hockridge Reis and her husband, Nate Reis. Hockridge Reis left the station in 2018.

On Wednesday, the SBA said it was investigating the allegations made in the report, including those dealing with Blueacorn and Prestamos, the financial institution owned by the nonprofit Chicanos Por La Causa that worked with Blueacorn for the PPP program.

“The House Select Subcommittee report details serious problems of fraud and self-dealing by lenders and by companies who were paid fees by lenders to help PPP funds reach small business owners," the SBA said in a statement in which it announced Blueacorn is suspended from working with the agency "in any capacity."

Prestamos was the No. 3 lender for the PPP program by dollar value of loans, with about $7.7 billion issued in 2021, coming in behind JP Morgan Chase Bank and Bank of America, according to the House report, which highlights how the bank dramatically increased its business through the federal small business loan program.

House panel: Ariz. company co-founded by newscaster made millions on fraudulent PPP loans

CPLC President and CEO David Adame is on the transition team for Gov.-elect Katie Hobbs.

Prestamos provided a written response to the allegations Wednesday, stating it followed rules to prevent fraud.

"In fact, our own compliance program resulted in denials of 57% of initial PPP loan applications received by Prestamos," the lender said. "Prestamos supports any effort to identify and correct fraud and to enhance controls, and we have been working with the SBA to strengthen the role of non-profit, community-based lenders in reaching those in need.”

It also said its average loan was $15,000.

“Prestamos played an important role in supporting small businesses throughout the COVID-19 pandemic," the lender said.

Report: Blueacorn received $700M from Prestamos

It's unclear whether Blueacorn is still providing services. While its website remains active, the office number listed is incorrect.

Blueacorn received over $700 million in fees from Prestamos for underwriting and other PPP facilitation services, according to the House report.

Blueacorn provided fraud prevention, eligibility verification, customer support, and other services for Prestamos and another lender, Capital Plus of Texas. Both lenders told investigators Blueacorn was in charge of fraud prevention and ensuring applicants were eligible for the loans. Blueacorn received over $1 billion in taxpayer dollars from Prestamos and Capital Plus combined, according to the House report.

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"The SBA will be investigating appropriate action against their management, owners, and successor companies," the administration said.

The SBA also said it will investigate another fintech company called Womply, as well as several other lenders.

Other lenders under investigation include Benworth Capital, Celtic Bank, Customers Bank, Cross River Bank, Fountainhead Commercial Capital and Harvest Bank. None are based in Arizona.

What the House report alleges

The House report alleges the companies intentionally approved high-dollar loans ahead of those meant to assist small mom-and-pop businesses and directed workers to ignore signs when applications appeared fraudulent.

Clyburn urged the U.S. Department of Justice to investigate the companies for potential fraud charges.

"The Select Subcommittee’s report on PPP fraud facilitated by fintech companies detailed unscrupulous, unethical, and possibly unlawful actions by individuals and corporate entities, most egregiously Blueacorn and Womply, as well as structural deficiencies in program administration that left the PPP vulnerable to the fraudulent activity we uncovered," Clyburn said in a statement after the SBA action Wednesday.

"The actions announced by the SBA today are a good first step to hold wrongdoers accountable and assess what further action may be warranted to ensure accountability and to prevent these problems from recurring in the future.”

The Blueacorn owners collected a profit of about $300 million after processing several billion dollars in loans, according to the House report, which included correspondence from the company owners to the investigators.

Reach reporter Ryan Randazzo at or 602-444-4331. Follow him on Twitter @UtilityReporter.

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This article originally appeared on Arizona Republic: CPLC's Prestamos faces COVID-19 PPP loan fraud investigation from SBA