In separate press releases on January 28, 2021, the U.S. Department of Justice (“DOJ”) announced charges against seven individuals involved in two schemes to fraudulently obtain COVID-19 relief funds provided by the CARES Act. Under the CARES Act, emergency financial assistance was provided to businesses and individuals under various programs, such as the Paycheck Protection Program (“PPP”) loans and Provider Relief Funds. The PPP allows some businesses to receive loans the government may forgive if specific requirements are met. The press releases involved PPP loan schemes totaling approximately $5 million.
Scheme to Obtain $3 million in PPP Loans
The DOJ charged Rodericque Thompson, Micah K. Baisden, Travis C. Crosby, Keith A. Maloney Jr., Tabronx W. Smith, and Thomas D. Wilson with conspiracy to commit bank fraud, money laundering, and making false statements to a financial institution. The six defendants obtained approximately $1.5 million in PPP loans, but were part of a larger scheme that altogether fraudulently obtained $3 million.
According to the press release, Mr. Thompson recruited the five co-conspirators to apply for PPP loans on behalf of their five respective business. Each business allegedly provided false statements on loan applications, with which Mr. Thompson allegedly assisted in prearing in exchange for a percentage of the PPP loans. Aside from the indictiment of Mr. Thompson and his five co-conspirators, five other individuals pled guilty in connection with the same scheme.
Scheme to Obtain Nearly $2 million PPP Loans
The DOJ charged Jorge Abramovs with five counts of bank fraud, five counts of money laundering, and one count of making false statements to a bank. The DOJ alleges that Mr. Abramovs obtained PPP loans from seven lenders valuing nearly $2 million. Mr. Abramovs allegedly submitted multiple PPP loan applications containing false information in the name of three businesses. The indictment alleges that Mr. Abramovs used the PPP funds for extravagant purchases, such as high-end vehicles, real estate, and paying his home mortgage.
The scheme was investigated by the FBI and the Small-Business Administration and prosecuted by the DOJ Criminal Division’s Fraud Section of the U.S. Attorney’s Office. According to the press release, “in the nine months since the PPP began, Fraud Section attorneys have prosecuted more than 100 defendants in more than 70 criminal cases … seized more than $60 million in cash proceeds derived from fraudulently obtained PPP funds, as well as numerous real estate properties and luxury items purchased with such proceeds.”
As these cases show, the federal government is cracking down on alleged fraud related to CARES Act funds, and in particular the receipt and use PPP loans. Stringent documentation of PPP loan applications and the use of PPP funds will go a long way in defending against any such government interest in your business. The attorneys at Chilivis Grubman represent both individuals and businesses in connection with government investigations and white-collar criminal prosecutions. If you need assistance with such a matter, please contact us today.