By M. Jarrad Wright
The U.S. Department of Justice (“DOJ”) has begun to shift its response to the COVID-19 crisis away from price gauging cases to financial crimes – namely attempts to defraud the federal government’s various relief programs, including the Payroll Protection Plan (“PPP”) which was established as part of the larger Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). While the CARES Act and PPP provided billions of dollars of economic stimulus and relief to millions of people throughout the country, the relative speed of the programs and the large amounts of dollars involved made such programs targets for fraudulent claims.
In an attempt to identify such claims, the DOJ recently announced that it is using data analytics technology to help identify and investigate individuals and businesses who have made false statements to defraud the government and/or banks. The DOJ has charged fraud cases in several cases around the country involving PPP fraud. These cases include a Texas man who allegedly sought millions of dollars in PPP loans by certifying that he had a business of 250 employees when allegedly no employees worked for his business. In another case, an Arkansas man was alleged to have sought approximately $8 million in PPP loans from multiple banks by providing fraudulent payroll documentation.
While cases involving millions of dollars are headline grabbing, it should be noted that the DOJ has begun looking into cases involving smaller dollar figures. For example, on June 16, 2020, the DOJ charged an Illinois man for allegedly submitting false and fabricated IRS forms and other documents that allegedly overstated payroll amounts in order to obtain a loan of approximately $441,000. According to the DOJ, a comparison between the IRS forms submitted to the bank for the PPP loan and the actual forms at the IRS showed significant differences.
The PPP loan applications require companies and individual to make a variety of certifications such as certifying need for the loan monies but also require presenting significant documentation. While the Small Business Association stated that loans in amounts of less than $2 million “will be deemed to have made the required certification concerning the necessity of the loan request in good faith,” the government investigators are going to continue to pursue other potential sources of fraud including false documentation.
In the weeks and months ahead, the DOJ is likely to continue to investigate such fraudulent cases and then begin to shift its focus into more complex financial fraud cases and more complex violations of certifications made in the PPP loan process. These cases are likely to arise in a variety of contexts and may arise in a variety of ways including referrals from banks, the SBA, even qui tam relaters under the False Claims Act or through the DOJ’s data analytics. Business involved in such cases will likely be faces charges ranging from bank fraud to wire fraud, as well as significant civil liability exposure.
‘sDiMuroGinsberg has years of experience involving complex criminal and civil litigation. This includes defending people accused of healthcare fraud and pursuing False Claims Act cases. DiMuroGinsberg stands ready to assist whether one is accused or aware of such fraudulent claims.