The government is continuing to investigate individuals who submitted fraudulent applications for funds under the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Eastern District of Texas recently charged Samuel Yates (Yates) with wire fraud, bank fraud, making false statements to a financial institution, and making false statements to the SBA.
According to the Department of Justice (DOJ) press release, Yates allegedly sought millions of dollars in forgivable loans guaranteed by the SBA from two different banks by claiming to have over 400 employees earning wages when, in fact, no employees worked for his purported business. In the application submitted to the first lender, Yates allegedly sought $5 million in PPP loan proceeds by fraudulently claiming to have 400 employees with an average monthly payroll of $2 million. In the second application, Yates claimed to employ over 100 individuals and was able to obtain a loan for over $500,000. With each application, Yates submitted a list of employees that he obtained from a publicly available random name generator on the internet and false tax documents. https://www.justice.gov/opa/pr/texas-man-charged-5-million-covid-relief-fraud.
While this case appears to be another example of egregious conduct to fraudulently obtain funds under the PPP, not surprisingly, the DOJ is already prioritizing these investigations. Cases where alleged misrepresentations are not so clear cut are coming, but they will take longer to investigate before charges can be filed.
Those who applied for PPP funds should be proactive in protecting themselves from criminal charges or lesser government scrutiny. On May 22, 2020 the Small Business Administration (SBA) issued two interim final rules providing guidance regarding the PPP loan forgiveness and the SBA’s process for reviewing PPP loans. https://home.treasury.gov/system/files/136/PPP-IFR-Loan-Forgiveness.pdf and https://home.treasury.gov/system/files/136/PPP-IFR-SBA-Loan-Review-Procedures-and-Related-Borrower-and-Lender-Responsibilities.pdf. Individuals who obtained funds under the PPP should consult these documents to ensure that they are compliant. My May 1, 2020 blog post also discusses coronavirus fraud investigations and steps that applicants can take to protect themselves against criminal charges. https://wirskyelawfirm.com/coronavirus-fraud-investigations/.