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Federal Prosecutors Waste No Time in Tackling PPP Fraud

Posted by Rob Melchiorre | Sep 22, 2020 | 0 Comments

This year's pandemic has taken a toll on all of us. If you are a business owner, chances are you have felt that hit in a very specific way as business slowed down due to lock-downs and social distancing. To help with the loss of revenue, the federal Coronavirus Aid Relief and Security (CARES) Act created the Paycheck Protection Program (PPP). Through the PPP, the government is able to provide loans to small business owners to help curb the financial loss. However, some business owners have taken it upon themselves to abuse PPP loans. Early cases are showing us just how quickly the justice department is moving to prosecute those accused of PPP loan fraud. 

What is the CARES Act and PPP? 

The CARES Act was created to help Americans who are suffering from the economic downfall caused by COVID-19. Through the PPP program, the CARES Act can provide business loans to small business owners. However, the PPP loans are meant to help cover payroll and other business-related expenses only. The PPP loans are not meant for personal use at all. Most loans were funded back in the spring of this year, and we have already seen 15 cases in which individuals have committed loan fraud with this program. 

Why are Federal Prosecutors Reacting Quickly?

As with any loan program, the government anticipates that there will be some who try to take advantage of the system. Traditionally, loan fraud has been viewed as a white collar crime. With cases like these, federal agents tend to take the necessary time to investigate and make sure the suspected criminals really are guilty of wrongdoing. With PPP loan fraud, the process seems to be much faster. Because the loans are new as of this year, and the end of the pandemic is unknown, there is a sense of urgency surrounding the effort to correct these wrongs. To deter others from doing the same in the future, the government is working hard and fast to make an example of those who have already messed up on a major scale. Where it usually takes months to officially charge someone with loan fraud, it has merely taken weeks to charge those with PPP loan fraud. The Department of Justice has to firmly make an example out of these 15 individuals because there are billions of dollars at stake with this program. Also, there are still small business owners who may file for these loans in the future. To continue supporting these businesses, there has to be funds left in the program and that cannot happen if people are able to continuously get away with abusing the program. To aid in this effort, whistleblowers are being valued more than ever. In fact, whistleblowing has never been easier thanks to the 24/7 Cyber Complaint Center. 

What Kind of Cases Have They Already Seen?

Most of these cases include some sort of bank fraud, wire fraud, or false statements made to an official institution. Soon after the PPP was created, two businessmen in Rhode Island applied for a loan amounting to $543,881. It only took days for them to be charged with conspiracy to make false claims and bank fraud. Their swift arrests were meant to serve as warnings to others contemplating the same behavior. In May, a California film producer was charged with bank fraud, wire fraud, and making false statements to bank institutions. He got a PPP loan for $1.7 million and then used those funds for personal reasons like personal credit card debt. As the cases continue to come to light, a variety of loan amounts will be investigated. For situations similar to this, the statute of limitations may be up to 10 years. 

What To Do If You're Concerned with PPP Compliance

If you are a small business owner, you should take the time to truly understand PPP compliance before you consider taking out such a loan. If your small business is already struggling, or has been struggling since the spring, you should contact a trusted attorney at Keller Melchiorre & Walsh. Let us walk you through PPP compliance so that you can thoroughly weigh your options before you make a move. Federal prosecutors are expected to scrutinize PPP loans even more in the future than what they are doing now. While you can research this information on your own, the lawyers at Keller Melchiorre & Walsh have already done the research for you. Additionally, we have the experience you need to anticipate your legal needs during this complicated time. If you have already received a subpoena concerning your loan, call us today to get the counsel you need before making a response to the subpoena. Remember, you have the right to prepare yourself before making any moves.

About the Author

Rob Melchiorre

Mr. Melchiorre is an aggressive, diligent, and passionate attorney. His impressive track record and commitment to legal excellence have led him to honors such as inclusion on the Super Lawyers® Rising Stars list. Prior to founding Keller, Melchiorre & Walsh, PLLC, Mr. Melchiorre was a partner i...

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