Hunting Down PPP Loan Fraudsters: DOJ is Recovering Millions

PPP Loan Fraud Cases Increasing Alternative Finance News

PPP Loan Fraud Cases Increasing

A crisis like the COVID-19 pandemic brings out the best and the worst in humanity. On one hand, there are heart-warming stories of people delivering meals to neighbors in quarantine or pizza to medical staff hard at work saving lives. And then there is the other hand: companies and individuals lying to the government to steal money under the “Paycheck Protection Program” in these PPP loan fraud cases.

The PPP was a $525 billion lifeline tossed to small businesses in March by the Federal Government as COVID19 began shutting businesses down. Qualified companies with fewer than 500 employees could obtain loans to continue to pay their employees and keep the lights on. The Small Business Administration ran the program and announced it would forgive the loans if all employee retention criteria were met and the funds were used for eligible expenses.

Magnet for Fraudsters?

The program was flooded by bad actors from the start. More than 50 public companies and CMOs, which have access to capital through conventional means, received PPP funds. A few big chains, like Shake Shack and Sweetgreen, were guilted into returning their loans after the first round of PPP money quickly ran dry.

Borrowers were not alone in violating the terms of the programs. Banks like JPMorgan, Wells Fargo (which are already paying the feds billions in fines for bilking customers) and Bank of America were revealed to be violating the “first come, first served,” provision of the program. How? Handing out money to favorite customers.

PPP formally stopped taking applications on August 8, but the Department of Justice is still going after the fraudsters. Last week the DOJ announced it had charged 57 people with trying to steal more than $175 million from the program. The Justice Department’s criminal division has recovered or frozen more than $30 million in fraudulently obtained assets, and it is working to seize additional funds and liquidate assets purchased with PPP funds.

Putting it in perspective, the program provided more than five million loans so the handful of fraudulent ones is small. DOJ officials claim that oversight and red tape was lower with PPP funding than usual government programs because the intention was to quickly help the small business owners. Of course, that is cold comfort if your company was turned down because the money ran out.

PPP Loan Fraud Cases Increasing Alternative Finance NewsIndeed, many small businesses, especially minority-owned firms, continue to struggle, and representatives in Congress on both sides of the aisle are campaigning to renew the program. While the DOJ remains on the hunt, here are some of the more colorful ppp loan fraud cases fraudsters nabbed by the feds:

  • Reality TV Personality (Georgia – May 13)

“Love & Hip Hop: Atlanta” star Maurice Fayne was indicted on fraud charges over a
$3,725,500 PPP loan application for his company, Flame Trucking. Fayne allegedly
claimed he had 107 employees and submitted forged bank statements. It’s alleged he then
blew the money on a Rolex Presidential watch, a 5.73 carat diamond ring and other
jewelry. He also allegedly used the money to pay $50,000 for restitution in a previous
fraud case, $40,000 in back child support, $139,000 to lease a Rolls Royce Wraith — and
$230,000 to associates who helped him run a Ponzi scheme. When arrested, he had
almost $80,000 in cash at his home and $9,400 in his pocket, authorities claim.

  • Manhattan Businessman (New York – May 21)

Muge Ma, a/k/a “Hummer Mars,” a Chinese national residing in Manhattan, was arrested
on charges of trying to obtain over $20 million in PPP and EIDL money. Ma is alleged to
have falsely represented to the SBA and five financial institutions that his companies had
hundreds of employees when he was the only employee. He also allegedly was involved
in a scheme claiming to represent the New York State Government in procuring COVID-19 test kits.

  • Wendy’s Franchisee (California– July 8)

The CEO of a large Wendy’s franchisee diverted $1 million in PPP loans to buy a new
house. Andrew Levy, the CEO of the Starboard Group, which operates 101 Wendy’s
locations, instructed former employee Sandi Adler to list some of his personal employees
as corporate employees to pull off the scheme, Adler filed a whistleblower suit against her ex-boss.

Watch this PPP loan fraud cases video:

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