Enacted on March 29, 2020, the CARES Act provided up to $349 billion in forgivable loans to small businesses through the Paycheck Protection Program (PPP). On April 21, 2020, Congress authorized an additional $310 billion through the same program. Unfortunately, where there is money (in this case government assistance), there is the opportunity for bad actors to commit fraud. Several individuals in New England and Texas have already been charged with fraudulently seeking aid by claiming fake employees in their loan applications. In some cases, the sought-after aid exceeded the $10 million limit to the relief loans guaranteed by the Small Business Administration (SBA). Authorities also arrested a Beverly Hills film producer who had allegedly used PPP funds to pay his personal credit cards. Even more egregiously, the companies for which the producer had sought loans had no actual ongoing operations!
These charges illustrate how important it is for lenders to remain scrupulous in their lending practices to ensure that financial assistance makes its way to intended recipients, in this case small businesses in need, rather than to opportunists seeking ill-gotten gains in times of national distress.
For more information on how the pandemic has brought will out the fraudsters, click on the links below.
Texas man charged with allegedly seeking $5 million in SBA coronavirus loans
Yates allegedly claimed to have 400 employees and used a random name generator on the internet to come up with a list of purported employees.