Regardless of whether or not small business owners believe they did anything wrong, they should understand what is happening.
From April 2020 to December 2021 over $1.2 Trillion was delivered to small businesses in the
form of the Payroll Production Program and Economic Injury Disaster Loans. While many small business owners benefitted from PPP and EIDL, many small business owners provided information to banks and the SBA which were inaccurate and in many cases, purposely fraudulent. This article reviews current oversight efforts and actions by the Department of Justice for those who submitted inaccurate or fraudulent information to get funded. We highlight several cases where small business owners committed fraud.
We also have updated our previous rankings of the Top 15 Frontline Zeroes of The Pandemic and added some new Dishonorable Mentions.
By Thomas Tramaglini, Managing Director at BRP Onesta
About Thomas Tramaglini
Many small business owners benefitted from COVID Relief programs in 2020 and 2021. Specifically, over a $1.2 Trillion dollars were provided to small businesses through programs like the Payroll Production Program and the Economic Injury Disaster Loan. Yet, since the onset of these programs, the government has been going after small business owners who abused these programs. Either by submitting inaccurate and in some cases fraudulent documents or by misusing the funds small business owners, one by one the government is going after small businesses.
Does the government really referee COVID Relief Programs for small businesses?
The answer is YES.
Fraud was apparently so prevalent that President Biden announced in the State of the Union Address on March 1 an increase scrutiny of both how small business owners secured and used both Payroll Production Program and the Economic Injury Disaster Loan funding.
Government Agencies Cross-Checking Data: Three ways that the government is finding PPP and EIDL fraud
- There is discrepancy between the business’ taxes and what the business put on their EIDL/PPP application
- Does the IRS have the 940/941 forms that were submitted with PPP applications?
- Were funds used appropriately? That is, were funds used for payroll expenses (or allowable expenses) or were the funds used to buy cars, jewelry, or even to pay lifetime alimony?
How bad was the Fraud? BAD
For some time now, news outlets have been describing how some small business owners defrauded the federal government. Some watchdog groups have been suggesting that PPP and EIDL fraud or misuse was terrible. I wrote about this previously in an article and said:The purpose of this article not to describe how inherent the fraud was but from what some watchdogs are showing, it was bad. However, Yahoo Finance writer Dani Romero’s post on March 4 was pretty telling:
“Data from Accountable.US, a watchdog group, found that individuals with no employees, and making over six-figures annually – but received $20,833 in PPP funding, which was the maximum by the legislation.
Separately, a new paper published by the National Bureau of Economic Research reveals that was used accordingly. Of the $510 billion of PPP loans distributed in 2020, $115 billion to $175 billion went toward supporting jobs that would have otherwise have been lost, while about $335 billion to $395 billion ended up with business owners and corporate stakeholders, the paper found.”
New cases still coming every day
The government continues to go after cases where fraud has been found. And they are not
always going after the big fish. Some examples have been made of small business owners who received as little as $10K in funding (click here to read).
A local case was just settled in New Jersey close to where BRP Onesta is located. As reported in CentralJersey.com, Jordan Larkins of Edison, NJ admitted to a host of crimes associated with PPP and EIDL programs. “According to documents filed in this case and statements made in court, from May through July 2020, Larkins submitted three fraudulent PPP loan applications to three different lenders and 11 EIDL applications to SBA on behalf of numerous purported businesses. On his 14 fraudulent PPP and EIDL applications, Larkins made false representations to the participating lenders and the SBA, including fake federal tax return documentation for his purported businesses and fake bank statements, according to the statement. He also fabricated the identities of certain individuals listed as applicants and the corresponding driver’s licenses of those purported applicants.
Based on Larkins’ misrepresentations, he obtained approximately $1.6 million in PPP and EIDL funds. Larkins then misused the funds by making a series of cash withdrawals, transferring funds to foreign banks, and for various other personal expenses, according to the statement.” (DOJ Press Release Here)
Will the DOJ come after you? Three things that small business owners can do to ensure they are ready for an audit or investigation.
- Small business owners should review their loan application and forgiveness application to make sure that the proper loan amounts were applied for, received, and forgiven.
- Some small business owners used a service or someone to apply on their behalf for their funding. Those who did this should know who did the application, what documents they provided, as well as have contact information for an auditor to contact.
- Maintain a list with back-up of all expenditures which were made using the Pandemic Relief Funds.
Re-Ranking Our Top 15 Zeroes of the Pandemic
In December 2021, we ranked the Top 15 “Zeroes of the Pandemic” which were who we thought were the most interesting of those either charged or convicted of PPP or EIDL fraud. Since then we have updated our list.
We also have added a list of dishonorable mentions as well.
1) ($14M) Apocalypse Bella (https://www.justice.gov/usao-sdny/pr/two-texas-men-and-one-oregon-man-charged-fraud-scheme-obtain-over-14-million-covid)
2) ($11.1M) Amanda Christian (https://www.justice.gov/opa/pr/twenty-two-charged-connection-more-11-million-paycheck-protection-program-fraud-scheme)
3) Charles Petty ($11.1M) (https://www.justice.gov/opa/pr/twenty-two-charged-connection-more-11-million-paycheck-protection-program-fraud-scheme)
4) ($11.1) Charmine Redding (https://www.justice.gov/opa/pr/twenty-two-charged-connection-more-11-million-paycheck-protection-program-fraud-scheme)
5) (8.884M) Benjamin Tifekchian (https://www.justice.gov/usao-or/pr/portland-man-pleads-guilty-bank-fraud-after-stealing-covid-relief-funds)
6) ($7.6M) Jacob Carter, Quadri Salahuddin, Anwar Salahuddin, Christal Ransom (https://www.justice.gov/usao-sdny/pr/four-defendants-charged-76-million-covid-19-fraud-scheme)
7) ($7.2M) Don Cisternino (https://www.justice.gov/usao-mdfl/pr/seminole-county-man-charged-covid-relief-fraud)
8) ($6M) Christopher Lick (https://www.justice.gov/usao-ndms/pr/starkville-man-charged-more-6-million-covid-relief-fraud-false-statements-and-money)
9) ($5.8M) Julio Enrique Lugo (https://www.justice.gov/usao-mdfl/pr/davenport-couple-charged-58-million-covid-relief-fraud)
10) (4.5M) Christina Burden (https://www.justice.gov/usao-ndca/pr/oakland-woman-charged-million-dollar-scheme-defraud-pandemic-relief-programs-struggling)
11) ($3.899M) Brittany Shearod (https://www.justice.gov/usao-ndga/pr/22-people-charged-connection-multi-million-dollar-paycheck-protection-program-fraud)
12) ($3.899M) Darius McCants (https://www.justice.gov/usao-ndga/pr/22-people-charged-connection-multi-million-dollar-paycheck-protection-program-fraud)
13) ($3.8M) Gregory Blotnick (https://www.justice.gov/usao-nj/pr/new-york-and-florida-resident-charged-38-million-paycheck-protection-program-fraud-scheme)
14) ($3M) Anuli Okeke (https://www.justice.gov/usao-edny/pr/two-former-employees-new-york-branch-major-bank-and-accountant-charged-cares-act-loan)
15) ($2.2M) Abdreq Aaron Lloyd, Russell Schort (https://www.justice.gov/usao-or/pr/two-oregon-men-face-federal-charges-pocketing-millions-covid-relief-fraud-scheme)
($1.9M ) John Jhong (https://www.justice.gov/usao-nj/pr/sussex-county-man-charged-19-million-paycheck-protection-program-fraud-scheme)
($1.6M) Alicia Ayers, Andrea Ayers, Traci Proctor (https://www.justice.gov/usao-sdny/pr/three-defendants-charged-16-million-covid-19-fraud-scheme)
($1.6M) James Kyle Bell (https://www.justice.gov/usao-dc/pr/nevada-man-pleads-guilty-election-fundraising-scam-and-cheating-taxpayers-out-paycheck)
($600K) Marc Mason (https://www.justice.gov/usao-ndga/pr/22-people-charged-connection-multi-million-dollar-paycheck-protection-program-fraud)
There are other people or groups of people who have been accused or convicted (some for more greedy amounts than below and can be found here:https://tinyurl.com/2d5rm823.
Source: Arnold & Porter, 2021 https://www.arnoldporter.com/en/general/cares-act-fraud-tracker
*Disclaimer to reader – We believe that every person is entitled to due process and until convicted of any crime, anyone accused should be innocent until proven guilty. All contents in this article, including names and claims were confirmed in by research through the United States Department of Justice or the State the person is accused from.
Dr. Thomas Tramaglini is the Managing Director for BRP Onesta, a company that supports small businesses. By offering a host of important and affordable services that small business owners tend to not have time to do themselves, the team at BRP Onesta can help small businesses grow infinitely. Although located in on the famous Jersey shore, BRP Onesta serves clients in all 50 states, Puerto Rico, Mexico and Canada.