By Philip Hilder
In response to the COVID-19 crisis, the PPP Loan (as part of the CARES Act) was passed in part to protect employees and small business by assisting with two and a half months of payroll and other overhead expenses. The guidelines, while evolving, lay specific parameters to the applying, obtaining, and the return of such funds. Audits of recipients will follow.
Payroll Protection Program Vulnerable to Fraud
Because the PPP Loan was a large sum of money, inundated with applications, and administered in an emergency and hurried manner; it is particularly vulnerable to fraud. Because of this, the SBA OIG has dedicated ample resources to its oversight, increasing the chance of charges being brought to business owners to willingly or unknowingly alike engaged in fraud.
Possible Scenarios for Fraud
There are several ways that a company or business owner can get accused of engaging in fraud related to the PPP Loan. A few of them are:
Inflating payroll numbers to get forgiveness;
Using funds for overhead other than payroll and allowed other overhead;
Loan Stacking; and
Receiving a loan when not eligible.
DOJ has Begun Prosecutions
This week the DOJ arrested two men in New England for illegally trying to borrow thousands of dollars from the Paycheck Protection Program with fictitious employees. The program is brand-new, and the DOJ is already investigating and charging individuals with fraud. This trend will continue for years to come as the COVID-19 crisis levels out and authorities resume normal level investigations.
If you are accused of, think you may be accused of, or work for an entity you know has engaged in fraud, please contact our office.