The federal Paycheck Protection Program (PPP) was set up under the CARES Act (Coronavirus Aid, Relief, and Economic Security Act). It was designed to stimulate the economy by providing funding through the Small Business Administration to companies that qualified. As of the middle of last year, the program has issued more than 11 million forgivable loans totaling around $800 billion.
The United States Department of Justice now says that that many of the loans were obtained fraudulently. And a study published in December 2021 concludes that as much as 15% of the loans had at least one indication of potential fraud. Whether that “indication” turns out to be true or not, the DOJ has been targeting those it claims have abused the PPP loan process. Here are a couple of examples of the types of charges that the Feds have leveled thus far against PPP recipients:
- Fictitious Tax Records. As part of the PPP application process, potential borrowers are required to submit certain tax information. One woman has been charged with fraudulently obtaining a loan of over $250,000. The DOJ alleges that she claimed a significant payroll that was non-existent. They further allege that she did this by submitting false tax records in support of the loan application.
- Falsification of Income and Expenses. A tax preparer has been charged with submitting allegedly false income and expense information on behalf of numerous borrowers resulting in loans of almost $1 million.
To date, over 500 people have been charged with offenses relating to the loans. In addition, the Feds say that certain of the “fintech” lenders (primarily digital lenders) failed adequately to police the loan applications submitted by their customers. That claim has been disputed by the lenders in question.
The range of charges against individuals alleged to have defrauded the SBA includes bank fraud, mail fraud, money laundering, and wire fraud, among others. While some cases have been resolved, most are still pending.
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