The coronavirus pandemic continues to significantly affect people, businesses, and societies around the world. Millions of people across the United States have suffered financial and economic hardship from the lockdowns and other federal and state governments’ restrictions.
That is why the US Congress passed the CARES Act with bipartisan support on March 27, 2020. This $2 trillion economic relief package offers help to the American people dealing with the public health and economic effects of COVID-19.
The Act authorized $349 billion in forgivable loans to small businesses via the Payroll Protection Program (PPP). Congress also later approved $321 billion in additional funding for the program.
Unfortunately, the hundreds of billions of dollars in economic relief have been abused by some criminals who have engaged in various types of CARES Act Fraud. Below is more information about this problem.
What Is CARES Act Fraud?
While the CARES Act has helped hundreds of thousands of people and businesses, fraud is commonplace.
CARES Act fraud cases filed by the Department of Justice generally are in two categories:
- Individuals or groups who filed false PPP loan applications about having businesses that needed financial help. In many cases, they used millions of taxpayer funds to purchase luxury goods, houses, and even go gambling in Las Vegas.
- Organized crime rings who file fraudulent PPP loan applications. For example, the DOJ recently charged a group of criminals in Ohio and Florida for filing phony applications for $25 million PPP funding.
CARES Act Fraud Laws
The CARES Act does not contain criminal enforcement provisions. However, when pursuing these fraud cases, the Department of Justice is using preexisting federal criminal statutes that have been in the federal criminal code for decades. Many of the accused are being charged with the following crimes related to their CARES Act fraud:
- Aggravated identity theft
- Bank fraud
- Making false statements to the Small Business Administration
- Making false statements to an FDIC-insured bank
- Making false statements to federal agents
- Wire fraud
- Tax evasion
Note that businesses who defraud the Payroll Protection Program and other provisions of the CARES Act can be charged under the False Claims Act. The DOJ may pursue criminal and civil cases under the CARES Act in the same way it does for Medicare and Medicaid cases.
CARES Act Fraud Examples
Most federal enforcement of CARES Act crimes involves bank fraud, wire fraud, and false statement charges. Some of the most recent examples of these crimes are:
- A movie executive in California was charged with making false statements on PPP loan applications, asking for $1.7 million. He allegedly used the funds to pay for unauthorized expenses, such as paying off credit cards.
- A man in Massachusetts was charged with fraud for submitting fake tax documents and payroll documents with four applications asking for $13 million.
- A Chinese national in New York applied for $20 million in PPP loans using forged records and false claims that he had several hundred employees when he was the only one.
- A man in Michigan was charged for getting a $600,000 loan for a non-existent business and used it for personal expenses.
- A man in Virginia was indicted for making false statements about his criminal past in his PP loan application. He illegally obtained $190,000.
- Two men in New Jersey were charged with filing fraudulent loan applications seeking $500,000 in PPP money.
CARES Act Fraud Punishments
Stiff penalties can be meted out for CARES Act fraud. For example, bank fraud and wire fraud convictions can result in fines of $1 million and 30 years in prison on each count. For loan application fraud, similar penalties are possible. Tax evasion can be punished with five years in prison and a $100,000 fine per count.
Under the False Claims Act for civil crimes, penalties may include treble damages and a fine of $23,300 per false claim.
CARES Act Fraud In The News
Below are some of the recent CARES Act fraud cases that have made the news:
- 4 Accused of CARES Act Fraud in Phoenix: Four people from across the country and two from Phoenix were charged with filing fake PPP loan applications. The four were hit with federal conspiracy, money laundering, and wire fraud charges. They illegally applied for 15 PPP loans totaling $3.5 million.
- Phony Ministry Engages in CARES Act Fraud: A family running a fake nonprofit in Florida is accused of illegally obtaining $8.4 million in PPP loans and trying to escape to Canada before they were caught. The family also allegedly attempted to buy a $3 million home before Secret Service agents seized the money.
- Walmart Employee Sentenced to Two Years for CARES Act Fraud: A Walmart project manager was sentenced to two years in federal prison to obtain $8 million in PPP loans. From Tulsa, Benjamin Hayward was charged with one count of bank fraud and four counts of making false statements to a financial institution.
- North Carolina Restaurant Owner and Son Charged With $1.7 Million PPP Fraud: A man and his son in Waxhaw, North Carolina, face federal charges for wire fraud and bank fraud after attempting to obtain $1.7 million in CARES Act funds.
- Georgia Creates New Task Force to Fight CARES Act Fraud: A new statewide agency was created in Georgia recently to combat CARE Act fraud. It also has been tasked with fighting unemployment insurance fraud related to the CARES Act and the pandemic.
- Florida Woman Charged With Using Fraudulent Information to Obtain PPP Funds: A woman from Sarasota County, Florida, was charged with attempting to obtain a fraudulent CARES Act loan for at least $7,000 for past rent due.
- Five Arrested In Florida for CARES Act Fraud: Five people were charged with CARES Act fraud-related crimes by attempting to file fraudulent PPP loan applications for amounts from $4,000 to $70,000.
- Combatting CARES Act Fraud. Accessed at https://www.law.com/texaslawyer/2020/07/07/combating-cares-act-fraud-ensuring-economic-relief-for-americans-through-law-enforcement-efforts/?slreturn=20201118161457
- The CARES Act Overview. Accessed at https://home.treasury.gov/policy-issues/cares#