By: Naomi Adkins and Tony Mastando
Pandemic Relief Efforts and Fraud
As the world faced the unprecedented challenges of the COVID-19 pandemic, the U.S. government swiftly enacted financial aid programs to stabilize the economy. These programs, crucial to safeguarding businesses and individuals, unfortunately also opened doors for fraudsters. Recognizing this, the Department of Justice (DOJ) has been increasingly vigilant in identifying and prosecuting those who misuse these relief efforts, with the False Claims Act playing a pivotal role in encouraging whistleblowers to come forward.
The Paycheck Protection Program (PPP) was a significant component of the CARES Act, providing $934 billion in support to businesses. However, reports of misuse led the DOJ to investigate a wide range of fraud cases, from large corporations misusing multi-million-dollar loans to individuals using funds for personal expenses.
What Does PPP Fraud Look Like? These cases involve a range of misconduct, from individual business owners who have inflated their payroll expenses to obtain larger loans than they otherwise would have qualified for, to serial fraudsters who revived dormant corporations and purchased shell companies with no actual operations to apply for multiple loans falsely stating they had significant payroll, to fraudsters submitting identical loan applications and supporting documents under the names of different companies. Most of these defendants misused loan proceeds for prohibited purposes, such as the purchase of houses, cars, jewelry, and other luxury items.
Examples of these investigations include:
The Case of the Georgia Mayoral Candidate: In once instance of PPP misuse, a former mayoral candidate in Georgia was charged for fraudulently obtaining over $323,000. The DOJ’s investigation revealed that the candidate submitted a fraudulent loan application on behalf of a nonprofit organization, falsely claiming to have paid wages to 54 employees. In reality, the nonprofit had not paid any wages in the preceding year. Allegedly, these PPP funds were diverted to cover personal expenses, including the installation of a swimming pool.
South Florida Tax Preparer’s Fraudulent Applications: A South Florida tax preparer was charged for submitting approximately 118 fraudulent PPP loan applications. The DOJ’s investigation found that the preparer falsified income and expenses on the applications and submitted counterfeit tax documents. This extensive fraud resulted in the approval of $975,582 in loans.
PPP Fraud in Nevada: In another significant case, a man from Nevada was charged with submitting multiple fraudulent PPP loan applications, obtaining nearly $2 million from various lenders. The DOJ’s investigation uncovered that he applied for loans under three different businesses, falsely claiming numerous employees and wages.
These investigations underscore the DOJ’s commitment to protecting the integrity of the PPP and ensuring that relief funds are used as intended. When a whistleblower uncovers and reports these scams, he or she can be eligible for a reward of up to 30% of the money recovered by the government.
In addition to perusing the vast number of PPP Loan Faud cases, in a nationwide enforcement action, the DOJ charged 371 defendants with offenses involving over $836 million in COVID-19 fraud. Further, 474 defendants have been charged with crimes connected to pandemic-related fraud, involving attempts to obtain over $569 million through fraudulent means. For example:
Unnecessary Testing: In October of 2023, a California women pled guilty to fraudulently submitting claims for unnecessary respiratory pathogen panel tests during the COVID-19 pandemic to both government and private insurance programs. This case is part of a broader effort by the DOJ to address pandemic-related fraud, including a recent crackdown involving over 300 defendants in a $359 million dollar scheme.
These cases, along many others distributed across various federal districts, demonstrate the DOJ’s extensive efforts, as Nicholas McQuaid from the Justice Department’s Criminal Division states:
“To anyone thinking of using the global pandemic as an opportunity to scam and steal from hardworking Americans, my advice is simple – don’t, no matter where you are or who you are, we will find you and prosecute you to the fullest extent of the law.”
Our Firm’s Commitment to Justice
Whistleblowers are legally protected from retaliation, such as being fired or suffering other consequences for reporting fraud. As the DOJ continues its crackdown on pandemic fraud, our law firm is dedicated to assisting those with information about such activities. If you have knowledge of PPP or COVID-19 related fraud, we encourage you to contact us. Your involvement is crucial in ensuring that pandemic relief funds serve their intended purpose, and you may be eligible for a significant reward under the False Claims Act for your contribution.