The Department of Justice (DOJ) has already begun investigating companies who applied for loans under the Paycheck Protection Program (PPP) under the CARES Act. Assistant Attorney General Brian Benczkowski recently announced that the DOJ would file criminal charges against those who provided misleading information to obtain government funds under the CARES Act. Individuals charged will face imprisonment, likely under the conspiracy, false statement, bank fraud, mail fraud and/or wire fraud statutes.
The DOJ has already charged two individuals in the District of Rhode Island for allegedly filing bank loan applications for more than half-million dollars in forgivable loans under the CARES Act. The defendants, Staveley and Butziger, were charged with conspiracy to make false statements to influence the SBA and conspiracy to commit bank fraud. Additionally, Staveley was charged with aggravated identity theft, and Butziger was charged with bank fraud. The complaint alleges that the fraudulent loan requests were to pay employees of businesses that were not operating prior to the start of the COVID-19 pandemic, had no salaried employees, or to pay employees at a business the loan applicant did not own. https://www.justice.gov/usao-ri/pr/two-charged-stimulus-fraud.
While the allegations in this case appear to be egregious, it is important to note that the DOJ has already begun PPP fraud investigations. Notably, this case involved approximately $500,000 and shows that businesses who applied for relatively small amounts of aid are not going to be immune from investigation and criminal charges. Moreover, this case moved quickly because of the egregious nature of the allegations. Cases where the alleged misrepresentations are not so clear cut are coming, but they will take longer to investigate. My May 1, 2020 blog post discusses coronavirus fraud investigations and steps that applicants of funds can take to protect themselves against criminal charges. https://wirskyelawfirm.com/coronavirus-fraud-investigations/. Those who applied for funds should be proactive in protecting themselves because these cases will be a DOJ priority.