In April 2020, CG attorneys wrote about the increased risk of government scrutiny for recipients of the CARES Act Paycheck Protection Program (PPP), which initially provided over $349 billion in forgivable PPP loans to small businesses. As Congress authorized hundreds of billions in additional funds, recipient compliance and the government’s enforcement efforts have come to the forefront. 

In May 2020, CG attorneys discussed the first federal prosecution for PPP loan fraud.  Then in September 2020, CG attorneys wrote about Acting Assistant Attorney General Brian Rabbitt’s remarks about the PPP.  In his remarks, Rabbitt stated that then Attorney General Bill Bar instructed the U.S. Department of Justice (DOJ) to focus on pandemic-related fraud, including fraud schemes related to the PPP.  Rabbitt also noted that the DOJ set up a “team dedicated to PPP fraud, began investigating immediately, and brought our first cases within months of the PPP being announced.”

On January 12, 2021, the DOJ announced the first civil settlement to resolve allegations related to PPP loan fraud.  According to the press release, an internet retail company, SlideBelts Inc., and its owner, Brigham Taylor, admitted to falsely stating to federally insured banks that SlideBelts was not in bankruptcy to obtain a PPP loan for $350,000.  SlideBelts and Taylor also admitted that the false statements caused false claims to be made to the Small Business Administration (SBA) in connection with the PPP.  The admitted acts were alleged violations of the False Claims Act (FCA), according to the press release.  The acts were also alleged violations of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), which “allows the government to impose civil penalties for violations of enumerated federal criminal statutes, including those that affect federally-insured financial institutions.”  Taylor and SlideBelts returned the $350,000 in PPP funds received and agreed to pay $100,000 in damages and penalties to resolve the allegations.

There are no indications the government’s enforcement efforts will decline, and recipients of PPP funds should ensure compliance with the program.  The government will continue its inter-agency collaborations, which CG attorneys have discussed, to identify and investigate potential fraud. “The Department of Justice and our partners at the SBA will use all tools at our disposal, including civil fraud statutes, to aggressively pursue those who exploit federal programs intended to help those in need during this national emergency,” warned U.S. Attorney McGregor W. Scott. 

The attorneys at Chilivis Grubman represent clients of all types and sizes in connection with government investigations, including fraud investigations and prosecutions.  If you need assistance with such a matter, please contact us today.