PPP Fraud
New waves of arrests are making headlines across the nation for "PPP Fraud" as scammers have figured out new ways to use the COVID-19 to their benefit. In June of 2020, the Department of Justice warned the public about such scams. You can read more here: https://www.justice.gov/coronavirus/combattingfraud
But back to the PPP fraud - what is it and how is it happening? The PPP or Payroll Protection Program rolled out early on in the pandemic through the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) and ended on August 8, 2020. The program was intended to provide financial assistance to small businesses with the main goal of supporting employee retention - keep Americans employed and small businesses above water. As such, relief amounts were based upon average payroll costs. The loans were eligible for forgiveness if, during the requisite period, employee retention criteria were met and funds used for payroll, business mortgage payments or rent, and utilities.
How about fancy boats, new homes, and jewelry? Do those qualify? During what was supposed to be a time a financial turmoil and unpredictability, luxury sales rose. Was it just that people, and particularly small business owners, couldn't vacation and, thus, had extra cash with little to do? In some circumstances, yes. However, in others, no.
Here in Florida a recording artist and Pennsylvania towing company owner were charged by the United States Department of Justice for their role in a scheme to file fraudulent PPP loan applications seeking more than 24 million dollars in PPP money. The Florida man even allegedly utilized his PPP funds to purchase a Ferrari. Ultimately, they were charged with wire fraud, bank fraud, and conspiracy to commit wire and bank fraud and the Ferrari was seized.
So how did they allegedly do it? The government contends they falsified their PPP loan application documents. You can read more about this story here: https://www.justice.gov/opa/pr/florida-recording-artist-and-pennsylvania-man-charged-role-24-million-covid-relief-fraud Keep in mind a federal criminal complaint is merely an accusation. A defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
What kind of falsification? Well, a Dade City man allegedly falsely claimed he had a local scrap metal business with 69 employees any monthly payroll in excess of $760,000.00 - 9 million dollars annually. He managed to secure 1.9 million in PPP money and used it to purchase luxury vehicles including a 2020 Mercedes in excess of 100k. In reality, the United States Department of Justice contends he had no employees at all and, thus, no wages. He was charged with bank fraud and illegal money transactions and now faces up to 40 years in federal prison if convicted. You can read more about this story here: https://www.justice.gov/usao-mdfl/pr/dade-city-man-charged-covid-relief-fraud Keep in mind a federal criminal complaint is merely an accusation. A defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
But this isn't just a Florida problem. A reality TV star in Georgia was charged with bank fraud for submitting a PPP loan application for his business claiming that he had 107 employees and an average monthly payroll of over 1.4 million dollars seeking a loan in excess of 3.7 million dollars. The Department of Justice contends that within days of receiving his PPP funds, the TV star allegedly used more than $1.5 million to purchase $85,000 in jewelry, including a Rolex Presidential watch, a diamond bracelet, a 5.73 carat diamond ring for himself, and $40,000 for child support. You can read more about this story here: https://www.justice.gov/opa/pr/reality-tv-personality-charged-bank-fraud Keep in mind a federal criminal complaint is merely an accusation. A defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Even here in Fort Myers, a local contractor was charged with making a false statement to a lending institution and is facing a maximum of 30 years in federal prison if convicted. The complaint filed by the United States Attorney's Office contends that within days of receiving PPP funds, the Fort Myers man used a portion of the funds to purchase a 2020 40-foot catamaran boat for approximately $689,417, which he registered in his name. The charges against him are being investigated by the United States Secret Service. You can read more about this story here: https://www.justice.gov/usao-mdfl/pr/fort-myers-business-owner-arrested-and-charged-covid-relief-fraud Keep in mind a federal criminal complaint is merely an accusation. A defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Clearly, due to the economic hardship so many small business owners were facing due to the pandemic, the emphasis was on funding these loans and, because it was a new program, the procedure for implementing safeguards to verify eligibility either broke down or was relatively non-existent. It seems the Department of Justice and specifically the United States Attorney's Office and other cooperating agencies will have their hands full prosecuting these fraudsters and doing asset forfeitures to claw back these luxury purchases in the months and likely years to come.
“At a time when small businesses are struggling for survival, we cannot tolerate anyone driven by personal greed, who misdirects federal emergency assistance earmarked for keeping businesses afloat,” said Special Agent in Charge Chris Hacker of the FBI’s Atlanta Field Office. “The FBI and our federal partners remain vigilant during this Coronavirus pandemic to make sure funds provided by programs like PPP are used as intended.”
Should you find yourself in fear of facing criminal prosecution contact an attorney today.