The US Department of Justice recently began charging defendants with bank fraud in connection with Paycheck Protection Program loans as part of its ongoing effort to investigate and prosecute individuals for aid-related crimes related to COVID-19. If the government is able to prove that fraud has occurred, individuals will face the prospect of spending a significant amount of time behind bars, even if the PPP loans are in relatively small amounts.
CARES . Law
The CARES (Coronavirus Aid, Relief, and Economic Security Act), enacted in March 2020 and later reauthorized to create the Second Drawdown Lending Program, is designed to provide emergency financial assistance to those experiencing economic losses and uncertainty as a result of the COVID-19 pandemic. It included $2.8 trillion in economic aid to individuals and businesses and provided access through the Small Business Administration (SBA) to revocable loans to cover payroll and other expenses identified through the Paycheck Protection Program (PPP). It also provided government assistance through the Economic Injury Disaster Loan Program (EIDL) and the Unemployment Insurance Program (UI). However, the CARES Act has also provided an opportunity for people to benefit from government assistance, and all indications point to one of the most extensive criminal investigations in US history as extensive government investigative resources continue to aggressively prosecute fraud and abuse. in these programs.
Bank fraud related to COVID-19
A person commits bank fraud if he intentionally implements, or attempts to carry out, a scheme to defraud a financial institution; or to obtain any money, money, credit, assets, securities or other property owned, under the custodianship or control of a Financial Institution, by means of false or fraudulent claims, representations or promises. If someone is convicted of bank fraud, they can be fined up to $1 million or in prison for up to 30 years, or both.
PPP loan documents are generally submitted to the financial institutions, i.e., banks. If a person submits documents containing any false information as part of his PPP loan application, he may be accused of bank fraud.
Bridget Kim, of Tampa, Florida, recently pleaded guilty to bank fraud for submitting false and fraudulent loan applications and supporting documentation for PPP loans. Kim faces up to 30 years in prison.
According to the plea agreement, between April and May 2021, Keim executed a scheme to defraud a federally insured financial institution (bank) and the SBA. Keim also enlisted family members to give out their personal information in exchange for free “COVID money.” Kim prepared false PPP loan applications and submitted them to the bank on behalf of her relatives in the names of fictitious companies. Kim created email addresses with her relatives’ names and communicated with bank employees by impersonating her relatives to convince loan officers that they were reaching out to actual potential borrowers.
Based on these false statements, the bank approved and financed the PPP loan in the amount of $20,833 in the name of a relative of Kim. Then, Keim transferred $7,500 of the loan proceeds to her personal bank account.
Ongoing aggressive prosecutions of relatively small loans that can lead to harsh prison sentences show that individuals and companies must proceed with caution when dealing with potential COVID-19 aid fraud cases. Any communications with banks that contain inaccurate information, even if it is in email correspondence with the bank, may lead to very serious criminal charges.
Any individual or business owner concerned about compliance with CARES Act or about potential exposure to allegations of fraud related to COVID-19 should immediately consult an attorney and not wait to be contacted by law enforcement. Those who have already received a subpoena or inquiry from any law enforcement agency should immediately consult with an attorney to assess the full potential of civil, civil, and criminal exposure before responding.