Blueacorn founders, who helped more than 3,200 Long Island firms, face PPP fraud charges

The founders of a financial technology firm that helped lenders make pandemic relief loans to thousands of small businesses across the country — including more than 3,200 on Long Island — have been accused of ripping off the loan program and showing others how to do the same, federal prosecutors alleged. 

Blueacorn founders Nathan Reis and his wife, Stephanie Hockridge, were charged with one count of conspiracy to commit wire fraud and four counts of wire fraud in a 15-page indictment unsealed in federal court in Fort Worth, Texas. If convicted, they face up to 20 years in prison on each count.

Reis, 45, and Hockridge, 41, both pleaded not guilty to the charges last week and were released on bond. Their attorneys did not respond to requests for comment.

The couple started Phoenix-based Blueacorn at the height of the COVID-19 pandemic in April 2020, saying they wanted to “democratize access to loan relief.”

The company helped two lenders — Capital Plus Financial community development financial institution and Prestamos community development financial institution — collect and review applications for Paycheck Protection Program loans. The applications then were submitted for approval to the U.S. Small Business Administration, which oversaw the PPP.

Together, Bedford, Texas-based Capital Plus and Phoenix-based Prestamos made 3,211 PPP loans on Long Island totaling $46 million, or less than 1% of the regional total of $10.5 billion, according to a Newsday analysis of SBA data. 

Prestamos representatives didn't respond to requests for comment.

Capital Plus “is dismayed by the allegations” against Reis and Hockridge, said Andy Boian, the lender’s spokesperson. The company focuses on lending to businesses that are owned by members of minority groups or are in low- and moderate-income communities.

“We acted in good faith to support these underserved communities," Boian told Newsday. "We expected the same from those with whom we worked."

Case highlights weak PPP oversight, mismanagement

The government-guaranteed PPP loans, established in spring 2020, were forgivable and meant to help employers survive the worst years of COVID-19. 

Reis and Hockridge, a former television journalist, allegedly lied on PPP applications for other businesses they operated to inflate loan amounts. The indictment states the couple also helped PPP applicants to do the same and received kickbacks from them.

Loan amounts, which ranged from $18,200 to $145,000, were based on the number of employees and payroll size because the money was meant to prevent layoffs and rehire those laid off  because of the pandemic.

According to the indictment, larger loans resulted in bigger kickbacks to Blueacorn from borrowers and higher fees paid by the SBA to the company and the lenders for processing the applications. 

“In order to obtain a greater volume of kickbacks from borrowers and fees from the SBA, Reis, Hockridge and their co-conspirators submitted PPP loan applications that they knew contained materially false information,” such as false income tax returns and payroll records, the indictment states.

The couple lived in Arizona while operating Blueacorn but have since moved to Puerto Rico. They also sold their ownership stake in the company, according to the indictment.

The new owners of Blueacorn didn’t respond to a request for comment.

In December 2022, SBA Administrator Isabel Casillas Guzman ended the agency’s relationship with Blueacorn after a congressional investigation into PPP fraud. She also said SBA would investigate Capital Plus and Prestamos.

Blueacorn collected more than $1 billion in loan processing fees paid with government money, the House Select Subcommittee on the Coronavirus Crisis found in 2022, Newsday has reported.

Matt Coleman, a SBA regional communications director from 2018 to 2022 and national PPP spokesperson, said the Biden administration’s "mismanagement of the Paycheck Protection Program and limited oversight of lenders, including with lender service providers [such as Blueacorn] … increased fraud and financial loss risk.”

Coleman, citing a Nov. 13 report by the SBA’s Office of Inspector General, said "PPP loans made with  lender service providers under Biden-Harris had a 'higher likelihood of being fraudulent.' " He added, "the Blueacorn issue highlights this failure."

By James T. Madore

james.madore@newsday.comJamesTMadore

James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.