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 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. The SBA disputes those findings, but its own inspector general has estimated that at least 70,000 loans are potentially fraudulent. It Got a PPP Loan. 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. A picture from that stay shows Pape and Jung celebrating over sparkling wine. Jungs attorney declined to comment, and Papes attorney did not respond to a request for comment. DC Circuit to Disputes Ancillary to Patent Matters: You Cant Sit Consumer Fraud PFAS Cases Continue To Rise. The SBA Employee would and did use her access to the SBAs computer systems and her access to EIDLs to manipulate the status of EIDLs to trigger the system to extend funding for EIDLs submitted for the benefit for Joel Micah Greenberg, the indictment alleges. However, this data accounts for only a quarter of all loans made through the program. Ryan Summers Anti-Corruption, Kevin M. Toomey "It Ain't Over 'Til It's Over" - Use Of A PTO Introduces Trademark Decisions and Proceedings Search Tool, FDA Issues Draft Guidance on Labeling of Plant-Based Milk Alternatives, Government Wins $43 Million Verdict in False Claims Act Case, BETO Will Host March 23 Listening Session on Next Billion-Ton Report. The program began issuing loans again in January 2021, and some businesses are eligible for a second loan. Small Business Administration management flagged loans for at least one of 35 reasons, such as the recipient was created after the cutoff date of February 15, 2020, or the recipients owner had a criminal record, potentially rendering the recipient ineligible. 107 of the cases, accused individuals allegedly falsified payroll documentation to justify either getting a loan or getting a bigger loan than they were eligible for; 93 of the cases, accused individuals allegedly created fake tax documents used for verifying details in loan applications; 41 of the cases, accused individuals allegedly created bogus companies to get loans; 28 of the cases, accused individuals allegedly used defunct companies to get loans; 20 of the cases, accused individuals used stolen identities or aliases while applying for loans; 12 of the cases, accused individuals allegedly falsified ownership of existing legitimate businesses; 28 of the cases, accused individuals also obtained Economic Injury Disaster loans (some of these individuals have been accused of fraudulently obtaining these loans. If you were to default, the lender would have the right to recover what is owed through the sale of the collateral, which could include your primary residence, business assets, or even your car. To support his loan applications, Kindambu claimed that Papillon Holdings had $150,000 in monthly payroll expenses and that Papillon Air had over $850,000 in monthly payroll expenses. The three Economic Injury Disaster loans Greenberg obtained should have triggered red flags galore. Blackout in Puerto Rico: Examining the federal response to the humanitarian and economic crises in Puerto Rico. These bipartisan bills, signed into law in August 2022, establish a 10-year statute of limitations for all forms of PPP loan fraud and all COVID EIDL loan fraud. They determined that a lot of the folks that they have as subjects of their investigations in HHS OIG [for Medicare and Medicaid fraud], were also committing PPP and EIDL fraud, Grossman said. National Law Review, Volume XI, Number 91, Public Services, Infrastructure, Transportation, The Benefits of Donating Cryptocurrency and Digital Assets. 1) Promptly identify PPP loans that have not been fully disbursed and follow-up with the lenders to stop $280 million in potential improper loan disbursements. Grossman told POGO, we expect a lot more civil enforcement.. 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. Thats more than 10 times the fraud recoveries five years after the 2009 stimulus became law. The scandal is whats legal, not whats illegal.. He added though that hes not optimistic that grants directed to help restaurants will be included in the next round of federal stimulus so getting more PPP loans would be the best alternative. You may change your cookie settings at any time. 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. Even if the debt is cleared, the loans can end up wreaking havoc on individuals and businesses credit scores. For instance, in a review for the Pandemic Response Accountability Committee, the nonprofit MITRE Corporation examined a sample of 500 records for Paycheck Protection Program loans above $150,000. More due diligence on the part of lenders or the Small Business Administration could have prevented at least some instances of fraud. The DOJ is targeting individuals and businesses in PPP loan fraud investigations, and it is targeting those who received loans of all sizes. 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. Seven Charged in Fraud Ring (South Carolina - September 10) . Six Charged, Five Plead Guilty in PPP Loan Fraud Scheme In January 2021, the DOJ filed charges against six individuals who are accused of submitting fraudulent PPP loan applications that resulted in a total of approximately $3 million being disbursed under the PPP. Both Christopher and Erin Mazzei pleaded not guilty and are scheduled for trial on August 9, 2022. If Congress amends the underutilized Program Fraud Civil Remedies Act, efforts by inspectors general to fight fraud in pandemic related spending would be enhanced, according to Horowitzs testimony. Theres a lot of red flags that they look at in the data to help us determine if its something we need to look at deeper.. As further evidence of the DOJs continued focus on PPP loan fraud, the agency recently published a vacancy posting for Trial Attorneys who will be devoted to prosecuting cases under the CARES Act, including fraud under the PPP. The scale of lending means the potential amount of Economic Injury Disaster loan fraud is staggering. As EPA continues to move toward identifying PFAS as Hazardous Is an OSHA Workplace Violence Standard for the Healthcare Industry on Yellen Calls on World Bank to Take Decisive Action on Climate Change, To Volunteer or Not: The Role of Community Association Board Members. 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. The fraudulent applications resulted in a total of $975,582 in SBA-backed funds being loaned under the PPP. 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.. (In late March, the Justice Department told Congress that it had charged $446.8 million in losses related to PPP. Some of these cases may still be under seal and charges are routinely being unsealed.) provided fully guaranteed SBA loans for certain eligible small businesses, individuals, and . Sah, who pleaded guilty on March 24, used the funds to buy a Bentley convertible and multiple homes, among other things. During the programs first round, the Small Business Administration issued 5.2 million loans between April and August 2020. Business groups have been lobbying to get Congress to quickly pass legislation to reverse the IRS guidance, he said. An internal analysis last fall by the Small Business Administration identified over 2 million approved PPP loan guarantees worth some $189 billion that were potentially not in compliance with the law, though it may turn out that many of those loans were not fraudulent. Free Speech Shines Bright, Illuminates Patent Owners Right to Allege California Supreme Court to Address Rounding of Employee Time. These investigations have varied widely in both their scope and the specific allegations targeted. Aqeel and others in the scheme allegedly used loan funds to pay individuals they claimed were employees but were actually fake employees, according to a court filing. The Department of Justice (DOJ) has been actively pursuing these cases. Greenbergs insider was a loan officer who began working for the agency in May 2020. Dirty Steel-Toe Boots, Episode 16: Investigations and the OSH Acts DOE Issues FOA for Carbon Capture Large-Scale Pilots and Carbon A Forward Look at IRAs Sweeping Impact on the EV Sector [PODCAST]. 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. 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. Acknowledging PPP loan applicants' compliance burdens (and the limited information that was initially made available to applicants), the U.S. Small Business Administration ( SBA) offered a grace period within which companies could return improperly obtained PPP loans without penalty. It soon became apparent that the Economic Injury Disaster Loan programs setup also made it particularly susceptible to fraud. Nick Schwellenbach is a Senior Investigator at POGO. Some investigations begin with complaints received through the watchdogs hotline, and others come from referrals by federal agencies or state and local law enforcement. Locking Tik Tok? In certified submissions to the federal government, the familys ministry claimed a substantial operation with 486 employees, a monthly payroll of over $2.76 million, and revenue exceeding $51 million in 2019. Both programs lacked basic anti-fraud safeguards and the Small Business Administration exercised insufficient oversight, according to the agencys watchdog, the Government Accountability Office, and congressional committees that have investigated the programs. Partner 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.. But, he added, the CARES Act removed that control, calling it a pivotal change.. Both the outgoing Trump administration and the Biden administration appear to have learned lessons from the fraud that occurred in 2020. NLRB Places New Limitations on Confidentiality and Non-Disparagement Settlement Will Benefit Many Aging-Out Children in the Green Card SEC Commissioner Discusses Reform to Regulation D, Massachusetts AG Settles Enforcement Action Against Auto Lender. Use our searchable database to see who in Michigan received funds. The addresses listed for the two companies, according to SBA loan data, also do not match the addresses in the states corporation recordsyet another sign of potential fraud. For instance, in one larger case, the Justice Department has charged 19 individuals to date. 7352 and H.R. Under the False Claims Act (FCA) as well as the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), either the government or whistleblowers with non-public information can initiate civil enforcement actions. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor. He allegedly sought to obtain a total of more than $1.5 million in Paycheck Protection Program loans, at least $937,000 of which he successfully obtained. 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. Applicants fraudulently obtained at least $16 million, per the Justice Department. 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. Sign up now to get our FREE breaking news coverage delivered right to your inbox. Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. In November, U.S. District Court Judge James Boasberg agreed, saying there was significant public interest in shedding light on who got the Paycheck Protection Program loans. 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. Its Here The New National Cybersecurity Strategy. The PPP / Cares Act that was put in place to help business affected by Covid-19. About 72% of the loans under $150,000 went to businesses that said the loans saved 25 or fewer jobs. 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. But even with an allegedly corrupt insider, a loan system with adequate checks should have prevented Greenbergs loans from being approved. You can search the SBA's entire PPP loan data below. * Tracker contributor Aidan Mulry is not admitted to the practice of law. 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. Seven of the approved loans were processed by Cross River Bank, a top Paycheck Protection Program lender that closely allied itself with financial technology firms. POGO was unable to reach Edwards before publication. Another round of PPP funds is needed because with the resurgence of COVID-19, businesses are seeing revenue fall again. The number of potentially questionable loans approved through these programs is vast, as will be the task of determining how many of those loans were fraudulent or otherwise improper. The Small Business Administration distributed 5.8 million advance grants worth $20 billion last year (despite the name, these are not loans that have to be repaid). According to an indictment, Sah submitted at least 15 fraudulent applications on behalf of at least 10 companies. project, POGO has been examining equitable access to government loans, grants, and contracts. 2) Strengthen SBA controls to ensure that loans to ineligible recipients are not forgiven. The inspector general offices workload has increased significantly, Grossman said. Previously, the SBA announced $15 billion in loans worth more than $150,000 had. Banks and other lenders have been filing a huge number of suspicious activity reports to the Treasury Departments Financial Crimes Enforcement Network (better known as FinCEN) related to the Paycheck Protection Program and the Economic Injury Disaster Loan program. 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. HERE IT IS: The Czars HUGE Breakdown of the FCC NPRM is NOW Telehealth Update: DEA Issues Long-Awaited Proposed Rule on CFPB Provides Guidance on Auto Finance Data Pilot, Two Maui Men Sentenced for Racially Motivated Attack on White Man, US Executive Branch Update March 3, 2023, EPA Holds Third and Final TSCA Engineering Initiative Webinar. 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. the SBA and Treasury Secretary Steven Mnuchin started accepting loan recipients applications just a week later on April 3, 2020. In 111 instances, the zip code in the Small Business Administrations data did not match the state provided. Dr. Nick Oberheiden focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation. As of late March, the department has obtained 48 convictions. The Economic Injury Disaster Loan program is longstanding, and until recently the Small Business Administration limited these loans to $150,000 (last month it raised the cap to $500,000). Denlinger said that the federal government also should move to undo a new IRS determination that will likely mean that businesses that took out PPP loans could get an unpleasant surprise when they do their taxes. John Finnerty is based in Harrisburg and covers state government and politics. Qui tam complaints are filed under seal An interactive timeline examines President Trumps use of executive orders to restrict access to the U.S. According to the Justice Department, Didier Kindambu obtained two loans by creating fraudulent payroll documentation for each business.. Loans; Make a payment to SBA; COVID-19 relief options; 7(a) loans; 504 loans; Microloans; Lender Match; Investment capital; Disaster assistance; Physical damage loans; Mitigation assistance; Economic Injury Disaster Loans; Military reservist loan; . More than half of that amount$246 millionactually went to accused fraudsters. 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. Given the DOJs efforts to target PPP loan recipients as well as the substantial risks of criminal prosecution in these cases, what do PPP loan recipients need to know? Alleged Bribes to an SBA Insider On March 30, the Justice Department unveiled new charges against Joel Greenberg, a former Florida tax collector. PPP loan fraud investigations can have outcomes ranging from no liability to prosecution for multiple federal criminal offenses. 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. And this is not the only case. According to the House Select Subcommittee on the Coronavirus Crisis, the SBA Office of Inspector General has received nearly 750,000 referrals of suspected identity theft related to the program over the last year. NLR does not answer legal questions nor will we refer you to an attorney or other professional if you request such information from us. Nick Schwellenbach Part 1 training plans. But the government could have implemented these safeguards from the beginning, which may have prevented significant levels of apparent fraud in the program. Instead, the DOJ undertook to prosecute any and all cases of apparent PPP loan fraud. They often involve obtaining and then piecing together often-complex financial, payroll, and tax records for individuals and companies, and sifting through other evidence. Rabbitt noted the unparalleled speed with which these cases have been investigated and prosecuted.. Specialized Freight (except Used Goods) Trucking, Local, Offices of All Other Miscellaneous Health Practitioners, Offices of Physicians (except Mental Health Specialists), Plumbing, Heating, and Air-Conditioning Contractors, Outpatient Mental Health and Substance Abuse Centers, Other Activities Related to Credit Intermediation, Nursing Care Facilities (Skilled Nursing Facilities), Internet Publishing and Broadcasting and Web Search Portals, Other Support Activities for Air Transportation, All Other Professional, Scientific, and Technical Services, Other Aircraft Parts and Auxiliary Equipment Manufacturing, Dry, Condensed, and Evaporated Dairy Product Manufacturing. The National Law Review is a free to use, no-log in database of legal and business articles. Joshua Edwards, the supposed vice president of ASLAN International Ministry, is accused of submitting fake payroll, tax, and financial documentation in support of the loan application. In July, banks filed nearly seven times the average number of suspicious activity reports. The oversight failures of the last year have become increasingly clear, eventually leading to changes. Since last October, when POGO published a report examining trends in Paycheck Protection Program loan fraud at the programs six-month mark, several eye-popping cases of alleged fraud have emerged. There are many potential cases the Justice Department may not prosecute. 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. In addition to making false statements about the companys employees and payroll, the defendant also allegedly submitted falsified federal tax documents and payroll records to three different PPP lenders. According to court records, Amir Aqeel and several others in the Houston area allegedly created fake tax and payroll documentation in exchange for large kickbacks for referring others into the scheme that involved 12 corporate entities. Lenders can be liable under the FCA for knowingly certifying ineligible borrowers for PPP loans, including by failing to employ sufficient anti-money laundering protocols, according to a memo from the Cleary Gottlieb law firm. SBA reveals full list of recipients of PPP loans. According to the MITRE Corporation, a mismatched zip code or insufficient award description doesnt seem particularly egregious. Between May and October 2020, financial institutions filed more than 21,000 and 20,000 suspicious activity reports (SAR) related to PPP and EIDL, respectively, according to the Government Accountability Office. 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. Normally, our agents work a contract or procurement fraud case those can take several years to investigate, Grossman said. The Act originally authorized up to $349 billion in forgivable loans to small businesses through the Paycheck Protection Program (PPP), and Congress later authorized $321 billion in additional PPP funding. Justice and Commerce Departments Announce Creation of Disruptive United States Department of Justice (DOJ), Biden Executive Order 14091 Strengthens Equity for Federal Agencies. Financial Services, Matthew Bemis