This March, the Government Accountability Office added the Small Business Administrations emergency loan programs for small businesses to its biennial high-risk list of executive branch programs vulnerable to fraud, waste, abuse, and mismanagement, or that need transformation.. The DOJ is targeting individuals and businesses in PPP loan fraud investigations, and it is targeting those who received loans of all sizes. This table shows the top 5 industries in California by . 46. . The Justice Department has accused numerous defendants of using Paycheck Protection Program loans for unlawful purposes, such as purchasing private planes, sports cars, and taking pricey trips to Las Vegas casinos. Government and federal taxpayers writ large arent the only victims of fraud in the pandemic lending programs. Washington, D.C. 20016-8017, Data project moves to Center for Public Integrity, 1 billion records and counting: The Accountability Project reaches new milestone, Site showcases powerful stories and the reporters behind them. As of late March, the department has obtained 48 convictions. Individuals and companies targeted in PPP loan fraud investigations should engage federal defense counsel promptly, and they should work with their counsel to build sound defense strategies. The case led to criminal charges, including aggravated identify theft, filed in Texas in February. China Again Top Originator of International Patent Cooperation Treaty Non-Willful Failure to File FBAR Under BSA Should Be Penalized on a charged a former mayoral candidate in Georgia, filed charges against a South Florida tax preparer, filed charges against a 23-year-old New York resident, charged a Nevada man with submitting multiple fraudulent loan applications, first civil settlement of a PPP loan fraud case. BREAKING DOWN THE PRIVACY ACT REVIEW REPORT #3: Removal of The Small White House Releases National Cybersecurity Strategy, Illinois High Court Rules Per-Scan Damages Can Be Awarded Under BIPA, Grassley-Wyden Bill Aims to Fix Broken Tax Whistleblower Law, Lessons Learned From 2022s Trade Secret Verdicts, Mass. Notably, while the DOJ is pursuing criminal charges in the substantial majority of its PPP loan fraud cases (including those discussed above), civil charges are a possibility as well. Data is available, but its reliability for the purpose of assessing whether Paycheck Protection Program loans are reaching the underserved communities that Congress wanted prioritized is limited because the demographic data is incomplete. Details on recipients of the Paycheck Protection Program are searchable on The Workshops Accountability Project. Those hired pursuant to the DOJs vacancy posting will focus specifically on, investigating, prosecuting, and deterring fraud in the Small Business Administration's (SBA) COVID-19 disaster relief programs, including the Economic Injury Disaster Loan (EIDL) program and Paycheck Protection Program (PPP).. Grossman said his office has shared data with the Department of Health and Human Services Office of Inspector General, which identified some repeat offenders. (The latest round, which began in January, allowed some applicants to receive a second Paycheck Protection Program loan. Too often those who fraudulently divert tax dollars in amounts below what is typically accepted by prosecutors are not fully held accountable, impacting agency programs and leaving the taxpayer footing the bill, he wrote. Report it to the Small Business Administrations with just a few clicks. But according to the Justice Department, neither company paid anywhere near the purported amounts and had few if any employees. Kindambu pleaded guilty in January. Employers Beware: Non-Disparagement and Confidentiality Covenants in Consultation Paper On Review of Corporate Governance Norms For A High Californias War On The Fast-Food Industry Continues. Financial Services, Matthew Bemis Even if the debt is cleared, the loans can end up wreaking havoc on individuals and businesses credit scores. But it may be far greater than the fraud rate seen in the 2009 American Recovery and Reinvestment Act. Dr. Nick Oberheiden focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation. That situation may arise in cases of apparent fraud involving Economic Injury Disaster loan advance grants of $10,000 or less. While demonstrating lack of intent may be enough to prevent criminal prosecution in some cases, unintentional fraud is still a civil offense under the False Claims Act, FIRREA, and other federal statutes. Nick also directs internal corporate investigations and he leads defense teams in whistleblower actions, corporate defense cases, as well as cases involving national security and elected officials. In addition to helping head off further fraud, conducting robust data analysis could also help the Small Business Administration assess how well its relief programs are reaching small businesses in underserved communities, such as those owned by people of color. One case involved applications for hundreds of allegedly fraudulent Economic Injury Disaster loans and at least a $1.3 million loss to the federal government. Associate But such gaps can create ambiguities that muddy the waters in overseeing spending., Still, much can be done with the data that does exist. The charges pending in these cases include bank fraud, mail fraud, wire fraud, money laundering, and making false statements to financial institutions, among others. The release comes as Congress is debating whether to pass another round of federal stimulus and whether that would mean another round of the Paycheck Protection Program. Mostly clear. The New Americans: How San Diego grapples with educating refugees. The National Law Review is not a law firm nor is www.NatLawReview.com intended to be a referral service for attorneys and/or other professionals. Kimco Staffing Services, Inc. Unlike the previous round of the PPP, loan guaranty approval is now contingent on passing SBA fraud checks, Treasurys Do Not Pay database, and public records, the fact sheet states. For much of 2020, the agency also issued grants of up to $10,000 under the program that do not have to be repaid by eligible recipients. POGO found that 11 of the 15 loans were funded. We have a lot of qui tam cases that have been brought forward, Grossman told POGO, generally referring to False Claims Act complaints filed by private individuals. California has a total of 1,270,615 businesses that received Paycheck Protection Program (PPP) loans from the Small Business Administration. Seven Charged in Fraud Ring (South Carolina - September 10) . Michigan PFAS Challenge Arguments Briefed For The Court. He has defended clients in PPP Loan Fraud cases and COVID-19 investigations. When they believe they have unearthed sufficient evidence to allege the government has been defrauded, these individuals file qui tam lawsuits, Grossman said. In December 2020, an independent auditor informed the SBA that, out of 5.2 million Paycheck Protection Program loans in 2020, the agency made over 2 million approved PPP loan guarantees worth some $189 billion potentially not in compliance with the law. Earlier this year, the DOJ announced the first civil settlement of a PPP loan fraud case. However, this data accounts for only a quarter of all loans made through the program. Banks issued billions of dollars in fraudulently-obtained SBA-backed loans, and the DOJ and the U.S. Department of the Treasury quickly realized that they would need to take an aggressive approach to preventing fraudulent forgiveness requests and recovering as many fraudulent-obtained loans as possible. Congress reversed course when it passed a new law on December 27, which authorized more coronavirus loans. Congress also authorized the Small Business Administrations existing Economic Injury Disaster Loan (EIDL) program to lend in response to the pandemic, and nearly $202 billion in loans through that program have been approved as of April 1. Paycheck Protection Program Loan Recipients on the Department of Treasury's Do Not Pay List, January 11, 2021. . * Tracker contributor Aidan Mulry is not admitted to the practice of law. . If faced with a DOJ investigation alleging PPP fraud, business owners and other individuals must carefully assess their risk and build a defense that is tailored to the specific circumstances and allegations at hand. One case involves Dinesh Sah, a Dallas-area man, who obtained $17.3 million after having sought a $24.8 million loan. 2) Strengthen SBA controls to ensure that loans to ineligible recipients are not forgiven. White House Requires Removal of TikTok App from FDA Withdraws Proposed Rule on General Principles for Food Standards New FAQs Dramatically Expand Scope of California Labor Contractor Today is the Day Dont Miss the Employer Deadline to Report to OSHA, PTO Seeks Comments on Role of Artificial Intelligence in Inventorship. Supreme Court Clarifies the Meaning Salary Basis Under Federal OIRA Calls for Feedback on Recommendations to Encourage More FTCs One-Two Punch on Data Tracking and Health Privacy. Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. So were trying to reverse that. The scale of lending means the potential amount of Economic Injury Disaster loan fraud is staggering. 23-Year-Old Charged with Submitting Fraudulent PPP Loan Applications In February 2021, the DOJ filed charges against a 23-year-old New York resident who is accused of submitting multiple fraudulent PPP loan applications on behalf of a single company. Buried within the court filing are allegations that Greenberg bribed an unnamed Small Business Administration insider to fraudulently obtain nearly $433,000 in Economic Injury Disaster loans. He also opened bank accounts and lines of credit at financial institutions and credit card companies in the names of his elderly victims, according to the Justice Department. Irvine, CA: Irvine, CA. The Supreme Court Grants Petition to Decide Constitutionality of CFPB Understanding Your Law Firms Value Proposition, Spike in Migrants Crossing U.S.-Canada Border Raising Concerns, Bill to Amend the Gramm-Leach-Bliley Act Introduced to Congress, Energy & Sustainability Washington Update March 2023. Officials from the Treasury Department and the Small Business Administration (SBA) have argued the program primarily benefited smaller businesses because a vast majority of the loans more. Investigating Power is a history of breakthrough investigations that revealed news and changed the national narrative on many major topics since the 1950s, from war to health to civil rights. Law enforcement insiders say many more pandemic loan fraud cases will be brought in the months and years ahead. Firm estimates of fraud related to CARES Act spending, including the Paycheck Protection Program and the Economic Injury Disaster Loan program, may not be available until many more cases are brought and more analysis has been conductedpotentially years away. In another case, a Virginia resident obtained over $2.5 million from the Paycheck Protection Program and used the funds to buy not only a luxury car but a private plane. Representative James Clyburn (D-SC), chair of the House Select Subcommittee on the Coronavirus Crisis, said in the March 25 hearing that the Trump administration ignored flags of potential fraud in the Economic Injury Disaster Loan program, and approved loans in batches with little to no vetting and abandoned a rule that required two SBA employees to approve each loan application., The Trump administration ignored flags of potential fraud, While a year has passed since the CARES Act became law and there are more checks now, government watchdogs say the Small Business Administrations oversight of the lending programs is still inadequate. Suspicious activity reports for small business loan fraud continued at levels far higher than normal through the end of 2020, according to POGOs review of federal data. The PPP loans helped struggling independent restaurants, as well as regional chains affiliated with national brand names, said John Longstreet, president and CEO of the Pennsylvania Restaurant and Lodging Association. These are not simple or easy cases to investigate and charge, then-acting Assistant Attorney General Brian Rabbitt said at a press conference last September. In 111 instances, the zip code in the Small Business Administrations data did not match the state provided. 1,270,615 TOTAL PPP LOANS. Allegedly, the family sought, ultimately unsuccessfully, to use the funds to purchase a $3.7 million mansion in Disney Worlds Golden Oak gated community. Congress has launched a formal inquiry into possibly fraudulent Paycheck Protection Program loans provided by internet lenders such as BlueVine and Kabbage. The Trial Attorneys will join the DOJs Market Integrity and Major Frauds (MIMF) Unit, and the vacancy posting has an expected minimum commitment of two years. A total of 30,100 businesses indicated that the loan was saving one job. Kindambu applied for two Paycheck Protection Program loans representing Papillon Holdings, Inc. and Papillon Air, Inc., according to court documents. Evo Transportation & Energy Services, Inc. The nonprofit MITRE Corporation found more than 85% of Paycheck Protection Program loan recipients did not indicate their race or ethnicity in their loan applications, Earlier this year, the Biden administration revamped the Paycheck Protection Program loan application to encourage self-reporting of demographic data and better illustrate the impact the PPP is having across various population segments. But the Small Business Administration acknowledged, as of late March, there is still limited demographic data on PPP borrowers.. There were additional steps that could have been undertaken that would not have significantly slowed downin our view in the oversight communitythe delivery of funds to the public, said Michael Horowitz, the Justice Departments inspector general and chair of the Pandemic Response Accountability Committee, in testimony before Congress on March 25. Another round of PPP funds is needed because with the resurgence of COVID-19, businesses are seeing revenue fall again. The release states that, In exchange for a fee, My Buddy Loans took personal identifying information from victims and promised to file an application for an agricultural grant, which they said was available to those who owned a few acres of land. Instead, the defendants Clifton Pape, 45, and Sally Jung, 58, both of Cleveland, Texas, actually filed fraudulent EIDL applications with the SBA that contained the victims personal identification information.. As part of its own COVID-19 relief spending tracker If convicted, the defendants could face several years in prison and hundreds of thousands of dollars in criminal finesas well as responsibility for repaying the fraudulently-obtained PPP loans. PPP Loan Recipient List By State . Some of these qui tam lawsuits are traditional whistleblower cases, but others involve individuals who are slicing and dicing the data that has been made available about loans, according to Grossman. About 72% of the loans under $150,000 went to businesses that said the loans saved 25 or fewer jobs. The fraudulent applications resulted in a total of $975,582 in SBA-backed funds being loaned under the PPP. U.S. Small Business Administration 409 3rd St, SW. Washington DC 20416 Both laws have provisions allowing whistleblowers to receive a reward for successful recoveries obtained for the U.S. government. Associate Tax Preparer Charged with Submitting 118 Fraudulent PPP Loan Applications Also in March 2021, the DOJ filed charges against a South Florida tax preparer who is accused of submitting approximately 118 fraudulent PPP loan applications, on behalf of himself and his accomplices. According to the DOJ, the tax preparer falsified applicants income and expenses and submitted fraudulent tax forms. A Washington state tech executive was sentenced today in the Western District of Washington to two years in prison for perpetrating a scheme to fraudulently obtain COVID-19 disaster relief loans guaranteed by the Small Business Administration (SBA) through the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP) under Pape and Jung used more than $3600 from the fraud scheme to pay for a stay at a resort in San Antonio, Texas, according to the Justice Department. Loans through that program were directly processed by the Small Business Administration, while in the Paycheck Protection Program, loans were primarily processed by banks and other lenders. Law enforcement assisting in the investigation included the Small Business Administration OIG office, the FBI, FDIC and others. California. If you have questions or concerns and would like to speak with an attorney in confidence, we urge you to call us promptly at 888-680-1745 or . Recent CFPB Actions Focus on Protecting Military Families, New and Updated Guidance on the Scope of the UK Plastic Packaging Tax. There are many potential cases the Justice Department may not prosecute. Later in the summer, following legal pressure, the SBA opted to identify only the largest loan recipients. We also have compiled state-by-state files for download. Its make or break time for many of them, he said. Email notifications are only sent once a day, and only if there are new matching items. The program began issuing loans again in January 2021, and some businesses are eligible for a second loan. As of this month, weve seized over $580 million from over 23,000 fraudulent EIDL loans.. First Amendment: Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances. NIOSH Announces Publication of Article on the Results of 2019 Survey How to Donate Cryptocurrency and Other Digital Assets to Charity. Previously, the SBA announced $15 billion in loans worth more than $150,000 had. Analyzing that data for red flags is a way to identity subsets of loans and grants that warrant closer scrutiny and to help direct scarce investigative resources. Sah submitted falsified tax and payroll documentation in which he claimed to have numerous employees and hundreds of thousands of dollars in payroll expenses, according to a Justice Department press release, but none of the businesses he sought loans for had any employees. Red Flags: The First Year of COVID-19 Loan Fraud Cases, $189 Billion in Questionable Paycheck Protection Program Loans, With over $189 billion in questionable Paycheck Protection Program loans, law enforcement has just scratched the surface, By The Justice Department has brought criminal charges against at least 209 individuals in 119 cases related to Paycheck Protection Program (PPP) fraud since banks and other lenders began processing loan applications on behalf of the Small Business Administration on April 3, 2020. Both the outgoing Trump administration and the Biden administration appear to have learned lessons from the fraud that occurred in 2020. The following data was provided by the SBA & US Treasury Department showing a breakdown of all the name of companies who received PPP loans over $150,000. In July, banks filed nearly seven times the average number of suspicious activity reports. He said that lenders have been extremely cooperative during investigations and their suspicious activity reports have been very useful.. criminally charging someone for stealing $10,000 or less. Can Nonprecedential Decisions Be Relied Upon? EPA Releases Proposed Approach for Considering Cumulative Risks under Revised Colorado Privacy Act Rules Adopted for Review by Colorado AG. According to the DOJ, one of the defendants allegedly helped the others submit fraudulent PPP loans in exchange for receiving a percentage of the loan proceeds. In remarks before the U.S. Chamber of Commerce, an influential business lobbying group, last June before the SBA released partial data identifying Paycheck Protection Program recipients of loans above $150,000, then-Principal Deputy Assistant Attorney General Ethan P. Davis said that with the administrations decision to release that information, some have predicted more qui tams as a result., Davis then said, Let me be clear. The content and links on www.NatLawReview.comare intended for general information purposes only. This March, the Government Accountability Office revealed that 4 months after SBA started using a system to approve Economic Injury Disaster loans in batches, agency officials realized this system contained alerts that should have been reviewed by loan officers, but had not been. Any legal analysis, legislative updates or other content and links should not be construed as legal or professional advice or a substitute for such advice. The Small Business Administration generally defines small businesses as those with 500 employees or fewer. He warned that increased loan volume, loan amounts, and expedited loan processing timeframes may make it more difficult for SBA to identity red flags in loan applications. The inspector general called for the agency to put in place sufficient controls, but the agency did not heed the watchdogs warnings at that time. . Use our searchable database to see who in Michigan received funds. When facing a DOJ investigation, immediate defensive action is necessary. U.S. Small Business Administration 409 3rd St, SW. Washington DC 20416 About the EIDL Loan Search. During the programs first round, the Small Business Administration issued 5.2 million loans between April and August 2020. Using a telemarketing scheme called My Buddy Loans, the telemarketing scheme exploited those seeking assistance during the COVID pandemic, including many who were over the age of 55, according to a Small Business Administration inspector general agent quoted in a Justice Department press release. In April 2016, at the height of the deadliest drug epidemic in U.S. history, Congress effectively stripped the Drug Enforcement Administration of its most potent weapon against large drug companies suspected of spilling prescription narcotics onto the nations streets. HARRISBURG Data released by the Small Business Administration Tuesday reveal which Pennsylvania businesses and groups shared $5 billion in loans of under $150,000, provided through the federal Paycheck Protection Program. You may change your cookie settings at any time. The Associated Press and other news organizations sued to force it to disclose the names of the businesses that received the smaller loan amounts. General Litigation. There is further data we're working on for the loans under $150k however so check back in the future for that. According to the DOJ, the former candidate submitted a fraudulent loan application, including fictitious tax records, on behalf of a nonprofit in which she claimed the organization was paying 54 employees. The figures cover about 3.77 million transactions; ultimately, about 3.7. The DOJ is prosecuting PPP loan recipients who are accused of both intentionally and unintentionally committing fraud under the PPP. On applications for loans for two companies, Greenberg Media Group and DG3 Network, Greenberg allegedly lied about not being under indictment despite having been arrested by federal agents and charged just days earlierwith the indictment a matter of public record. An interactive timeline examines President Trumps use of executive orders to restrict access to the U.S. There was a problem saving your notification. Mr. Aqeel asserts his presumption of innocence and demands the United States prove their allegations beyond a reasonable doubt. Mingledorff also said, The case is in the pretrial phase of litigation. All data in this search comes directly from the publicly available EIDL data on the SBA website. Inaccuracies in the data or missing data can undermine oversight. The SBA now also conducts manual loan reviews for the largest loans in the PPP portfolio and a random sampling of other loans. Underscoring the tension between fraud prevention and disbursing assistance quickly, the added checks to verify information submitted by applicants have somewhat slowed the processing of loan applications. A check of Floridas Division of Corporations database would have revealed the companies had just been reinstated. Winds light and variable. Greenberg is a friend of Florida Republican Matt Gaetz, and both were identified in a recent New York Times report as having allegedly paid women for sex, as well as potentially a 17-year-old girl. Its Here The New National Cybersecurity Strategy. POGO has sought additional data from the Small Business Administration, and to improve data collection. That watchdog office has recommended that the agency use data analysis as a means to detect potentially ineligible and fraudulent applications.. The program provided those loans to 146,000 state businesses, an average of just under $35,000 per business. General Litigation, Maya Kouassi The alleged scam involved submitting false information about the applicants businesses as well as fraudulent tax returns that were identical for each of the defendants companies. That story of corruption inside SBA has been overshadowed by other criminal allegations against Greenberg, notably child sex trafficking charges, and a scandal that might bring down a member of Congress. Whether bad faith was involved is another matter. It's important to note that SBA loans are secured loans that require you to list collateral in the loan agreement. Not all the blame can be placed at the Small Business Administrations feet. And there is a lot of gray area in the Paycheck Protection Program, partly because the Small Business Administrations rules for the program changed repeatedly and were unclear, and because Congress created loose criteria for loan eligibility and allowed applicants to self-certify their information. Brian Grossman, the Small Business Administrations assistant inspector general for investigations, told POGO that as of March 10, 2021, the watchdog office had 91 active Paycheck Protection Program investigations and 121 active Economic Injury Disaster loan investigations. Civil enforcementwhere the evidentiary burden is lower than in criminal casesis another way of holding individuals and companies accountable. An indictment includes text and email messages involving creating tax records for some of the companies. Details on recipients of the Paycheck Protection Program are searchable on The Workshop's Accountability Project.