DOJ has filed over 50 PPP fraud cases

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WASHINGTON — The Department of Justice has filed more than 50 criminal fraud charges related to the Paycheck Protection Program since banks started issuing PPP loans in April, officials said Thursday.

The program leveraged federal funding for banks to deliver forgivable loans to small businesses hurt by the coronavirus pandemic. The funds were intended to help businesses pay their employees while they had to close down under stay-at-home orders. But the Justice Department cited numerous cases where borrowers applied for loans that were instead used to buy luxury items and launder money.

“In each and every one of these cases, the success of the defendants’ fraudulent loan applications meant there were fewer funds available at that time in the PPP for legitimate businesses that were in genuine need of economic support,” said Brian Rabbit, acting assistant attorney general of the department’s criminal division.

The 57 individuals charged accounted for about $175 million in fraud, the department said during a press conference. The hugely popular $695 billion PPP program was administered by the Small Business Administration in connection with the Treasury Department.

As recently as Wednesday, the Justice Department charged 11 Miami-based individuals in a criminal ring that included a professional athlete and his business and allegedly involved $24 million in fraud.
As recently as Wednesday, the Justice Department charged 11 Miami-based individuals in a criminal ring that included a professional athlete and his business and allegedly involved $24 million in fraud.

As recently as Wednesday, the Justice Department charged 11 Miami-based individuals in a criminal ring that included a professional athlete and his business and allegedly involved $24 million in fraud, said Rabbit.

Among those charged, he said, were "individuals or small groups, acting on their own, who lied about having legitimate businesses who claimed that they needed PPP money for things like paying workers or paying bills, but instead used it to buy splashy luxury items for themselves.”

“As we allege in a number of our charging documents, these defendants use lies to obtain millions of dollars in PPP funds, and then spent those funds, not on their workers, but on things like luxury cars, home renovations, diamond jewelry, even adult entertainment and trips to Las Vegas,” Rabbit said.

Officials said banks assisted in identifying potentially fraudulent loans.

“Many financial institutions and banks such as credit unions and other banks have been strong partners in assisting us in detecting and investigating potentially fraudulent activity in connection with the PPP and other government aid programs and safeguarding taxpayer dollars by spotting fraud and freezing funds or accounts,” Rabbit said.

The Justice Department also expects to file more charges related to PPP fraud in the future, Rabbit said.

“We’re talking about millions of dollars being stolen instead of going to people that are desperately in need,” said James Lee, deputy chief of the Internal Revenue Service. “We’re talking about hundreds of hours agencies are taking to prosecute fraudulent claims, as opposed to spending that time processing legitimate requests.”

The department's announcement came days after an analysis by Democratic staff for the House Select Subcommittee on the Coronavirus Crisis suggesting "a high risk that PPP loans may have been diverted from small businesses truly in need to ineligible businesses or even to criminals.”

Shortly after the loan program launched in the spring, some individuals working with banks to combat misconduct estimated that fraud rates could be as high as 10% to 12%.

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Paycheck Protection Program DoJ Coronavirus SBA Treasury Department IRS Fraud Crime and misconduct
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