As predicted, the U.S. Department of Justice (DOJ) and other enforcement agencies have acted quickly to bring substantial criminal enforcement actions for fraud against the Paycheck Protection Program (PPP). Acting Assistant Attorney General (AAG) Brian Rabbitt announced recently that the DOJ’s Criminal Division reached the important milestone of criminally charging more than 50 individuals for alleged fraud committed to obtain PPP funds.
Including the charges brought within a few hours of AAG Rabbitt’s remarks, DOJ has actually charged 57 defendants with over $175 million in PPP-related fraud. DOJ's Criminal Division has prosecuted these cases around the country, in 19 different districts. They range from loan requests for just $30,000 to approximately $24 million.
AAG Rabbitt credited DOJ’s Criminal Division and the dedicated fraud unit operating under the leadership of Rob Zink, as well as the use of data analytics, the whole-of-government approach to combatting fraud in the program, and public-private partnerships, with contributing to the recovery of over $30 million so far in fraudulently obtained PPP funds. He ended his remarks with a clear message to fraudsters: “You will be identified. You will be held accountable. You will face the severest of consequences for trying to exploit your fellow Americans’ suffering for your own personal gain.”
AAG Rabbitt’s remarks focused on the unprecedented speed with which the Criminal Division leapt into action, bringing cases within the first month of the PPP’s roll out. DOJ’s Criminal Division has brought several types of criminal cases, including cases against (1) parties who purportedly lied about having legitimate businesses or claimed they needed the funds to finance their businesses but instead spent them extravagantly, and (2) alleged criminal rings engaged in systematic and organized PPP fraud. AAG Rabbitt declared that the latter would be DOJ’s main focus moving forward.
According to the remarks, cases fall into a few categories:
- False representations and misrepresentations made in applications for PPP funds, including the number of employees, average monthly revenue and payroll figures, and applicants’ criminal backgrounds. PPP applicants charged to date also falsified tax records, used dummy payroll and revenue records, and, in some cases, utilized stolen personal information from third parties.
- Misuse of PPP funds, including use of these funds to purchase luxury cars and jewelry.
AAG Rabbitt gave some specific examples of charges that DOJ brought recently. (He cautioned that the allegations are just that until defendants are proven guilty beyond a reasonable doubt.) Those individuals charged include:
- A criminal ring in Miami that attempted to steal $24 million in PPP relief funds;
- Seven individuals, who were part of a criminal ring that attempted to steal and launder hundreds of thousands of PPP dollars;
- Two men in Buffalo, New York, who allegedly tried to steal $7.6 million from the program; and
- Eleven individuals in Cleveland and Miami, including a professional athlete and his business manager, who conspired to attempt to steal $24 million in PPP funds.
While the cases DOJ discussed seem to represent blatant fraud, they demonstrate the focus on enforcement related to PPP funds, as well as other government relief programs. The collaborative effort across governmental agencies to prosecute PPP fraud cases is notable; AAG Rabbit listed the FBI, the Small Business Administration's Office of Inspector General, the Internal Revenue Service, the U.S. Postal Inspection Service, the Offices of Inspectors General from the FDIC and Federal Housing Finance Agency, and the U.S. Attorneys’ Offices in the Northern District of Ohio and Southern District of Florida as critical partners to the Criminal Division as it leads the charge against PPP fraud. Whether civil enforcement will follow this wave of criminal enforcement remains to be seen and is an area we’re closely monitoring.