Feds look for fraud in $670-billion small business loan program

The Federal Docket

May 12, 2020

As part of the federal government’s efforts to keep the economy going during the COVID-19 pandemic, Congress created a $670 billion emergency loan program for small businesses called the Paycheck Protection Program. The DOJ is now announcing that it will scrutinize businesses that apply for and receive this aid, especially large businesses and those applying for more than $2 million in loans. The loans are being administered through the Small Business Administration.

The Los Angeles Lakers made news in outlets like CNN, Politico, and NPR when it sought and obtained one of these loans. Other large, public companies have come under public and government scrutiny for obtaining these loans.

While the Lakers have committed to returning the money, the government has reportedly noticed signs of fraud in its initial review of loans dispensed through the PPP. Specifically, prosecutors have seen “red flags” including companies making false statements on loan applications. such as overstating their payroll costs, the number of employees they have, or the nature of their business. Such misrepresentations could be charged as wire fraud, theft of government funds, and making false statements, among other charges. Since many of these loans are distributing the money through banks, there may be bank fraud charges involved.

No prosecutions or criminal investigations have been announced yet, but the feds have predicted that “fraudsters will come out of the woodwork” given what looks like a golden opportunity.

Click here to read an article from Bloomberg News on the federal government’s review of the PPP loans.

Tom Church - Tom is a trial and appellate lawyer focusing on criminal defense and civil trials. Tom is the author of "The Federal Docket" and is a contributor to Mercer Law Review's Annual Survey in the areas of federal sentencing guidelines and criminal law. Tom graduated with honors from the University of Georgia Law School where he served as a research assistant to the faculty in the areas of constitutional law and civil rights litigation. Read Tom's reviews on AVVO. Follow Tom on Linkedin.

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