The Paycheck Protection Program (PPP) initially authorized up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. All loan terms were established to be the same for everyone. The loan amounts will be forgiven as long as: The loan proceeds are used to cover payroll costs, rent, utility costs, and most mortgage interest over the 8 weeks after the loan is made; and employee and compensation levels are maintained.
It did not take long for fraudsters to take advantage of the PPP because of their greed for money. Generally, the PPP was to benefit employers for an 8-week period. It appears that shortcomings in the implementation allowed some unscrupulous individuals to take advantage of the program. Individuals that lack integrity applied for and received PPP loans in violation of the SBA and U.S. Treasury rules.
Recently, several prosecutions have been in the national news. According to court documents unsealed Tuesday in the U.S. District Court in Texarkana, Texas, Samuel Yates has been charged for allegedly seeking more than $5 million in forgivable loans backed by the Small Business Administration under the CARES Act by claiming to have a business with more than 400 employees. Yates allegedly made two fraudulent applications to two different lenders for emergency Covid-19 relief loans through the Paycheck Protection Program (PPP). Being a creative person, Yates used a random name generator on the internet to come up with a list of purported employees.
NFL receiver Josh Bellamy has been charged and arrested for allegedly participating in a multi-million dollar Paycheck Protection Program loan fraud scheme. Bellamy allegedly received a loan of $1,246,565 for his company Drip Entertainment LLC. He then allegedly used the loan to buy more than $100,000 on luxury goods from Dior, Gucci, and various jewelers. Bellamy allegedly spent over $62,000 of the loan proceeds at the Seminole Hard Rock Hotel and Casino. It is also alleged that Bellamy attempted to secure PPP loans for his family members and “associates.”
Two New England men were charged in the U. S. District Court with fraudulently applying for a loan from the SBA PPP program. The men allegedly applied for more than $500,000 in assistance. David Staveley of Massachusetts, and David Butziger of Rhode Island, allegedly claimed to have dozens of employees earning wages at four different restaurants when, in fact, no employees were working for any of the businesses. An investigation determined that two of the restaurants were not open for business prior to the start of the COVID-19 pandemic, at the time the loan applications were submitted, or at any time thereafter.
According to court documents unsealed in U.S. District Court in Beaumont, Texas, Shashank Ria allegedly made two fraudulent claims to two different lenders seeking loans guaranteed by the SBA for COVID-19 relief through the PPP. In the application submitted to the first lender, Rai allegedly sought $10 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of $4 million. In the second application, Rai allegedly sought approximately $3 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of approximately $1.2 million.
These alleged Federal crimes are prosecuted by common charges of wire fraud, bank fraud, conspiracy to commit wire fraud and bank fraud, and false statements to a financial institution and the SBA.
All these instances of fraud were perpetrated by individuals attempting to take advantage of the well-meaning program designed to help American society during the pandemic and economic stress. The program will be repeated in 2021. The rules need to be better explained, and more documentary evidence needs to be presented during the application process.
Sage Investigations, LLC has forensic accountants and staff that can help trace the use of the PPP loan proceeds to allow their clients to establish that they have met the requirements of the SBA and U.S. Treasury and help the client deliver evidence of the proper expenditure of the PPP proceeds in accordance with the SBA guidelines.
If you or your client want to avoid the potential perils of not handling SBA PPP funds properly, especially if the case continues beyond your involvement, consider recommending a licensed private investigator / forensic accountant and expert witness by contacting Chief Investigator Edmond Martin of Sage Investigations, LLC at 512-659-3179, or email firstname.lastname@example.org. We will pay a referral fee, so let our 26 years as an IRS Special Agent and 19 years as a private investigator and forensic accountant benefit you and your clients. Click to read about our team and their CVs.