Ohio senator introduces bill to protect businesses from identity theft

Lawmakers have been fighting identity theft for years — making tweak after tweak to protect citizens’ identities. But now they’re opening up a new front: business identity theft. Sen. Michael Rulli, R-Salem, has introduced a measure that would create safeguards to protect business owners and empower state officials to pursue fraudsters.

What business identity theft looks like

Last week, Rulli unveiled the proposal alongside Secretary of State Frank LaRose and president of the Ohio Chamber Steve Stivers. Although business identity theft might not be the sort that immediately springs to mind, they argued it happens more often than you think.

“While all types of identity theft can be devastating,” Stivers argued, “business identity theft can harm business owners, employees, investors, shareholders, and even customers. The consequences can be staggering.”

Rulli described a friend in Youngstown dealing with bogus hardware store accounts.

“Somebody had manipulated his company and had created a separate company that was a subsidiary of his and opened up charge accounts,” Rulli explained. “These were really small accounts. They went to Lowe’s, and they got an account for $10,000. They went to the local lumberyard and got a credit line for $5,000.”

Rulli, who’s family has run a grocery store for more than a century, added that he’s had to deal with the issue himself. He described months of legal wrangling after a distant relative attempted to set up an unapproved subsidiary corporation.

“These people aren’t going into banks and taking out loans for millions of dollars,” he said. “They’re going underneath the radar and they’re killing businesses with thousands of small cuts.”

Scope of the problem

Beyond anecdotes, however, they couldn’t definitively quantify the problem in Ohio or the U.S. more broadly.

“It’s got to be in the millions. I haven’t quantified it,” LaRose said. “But it’s also hard to quantify because in the case that Rulli talked about the financial costs maybe one thing but the time the the heartache and the frustrating hours that he spent away from growing his business is part of the concern as well.”

They pointed to reports from Dun & Broadstreet referencing sharp increases in incidents. But those reports cite percentages — not the underlying number of cases. Coincidentally, Dun & Broadstreet, which operates as a kind of credit rating agency for businesses, just so happens to offer services to protect businesses from fraud.

That’s not to say business identity theft isn’t happening. Dun & Broadstreet’s eye-popping percentages are largely tied to pandemic-era fraud. The Small Business Administration itself reported in August of 2021 that more than a million identity theft complaints tied to the Economic Injury Disaster Loan and Paycheck Protection programs.

Still, those figures shrink dramatically when it comes to enforcement.

“OIG’s EIDL and PPP oversight and investigative work resulted in 307 indictments, 205 arrests, and 69 convictions related to PPP or EIDL by August 2021,” the report reads.

What the bill does about it

Rulli’s proposal operates primarily through the Secretary of State, who’s responsible for business filings in Ohio. Secretary LaRose explained one of the most important changes is that it streamlines the complaint process.

“If you contact our office and say somebody has changed the statutory agent of my company or somebody has tried to change the name of my business, we don’t have a very good answer  for you,” he said. “Right now, the answer is you’ve got to go get a court order, and we’ll change it back.”

The measure would also crack down on deceptive mailers, eliminate P.O. boxes for business filings, and restrict business reinstatement. That last change stems from a scheme in which a person identified defunct businesses with unclaimed funds.

As LaRose described it, he would “reinstate those businesses in his own name, and then go back and claim the unclaimed funds that had been left in the name of that business.”

Under Rulli’s proposal, businesses could only be re-instated within two years of their cancellation.

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This story was republished from the Ohio Capital Journal under a Creative Commons license.