Application for abuse of PPP and other COVID-19 relief funds

The new US bailout law[1] (ARPA) as enacted earlier this month provides $ 1.9 trillion in economic stimulus, complementing last year’s Aid, Relief and Economic Security Act (CARES ) against coronaviruses.[2] and its allocation of $ 2.2 trillion, both undertaken in response to the economic impact of the COVID-19 pandemic in the United States. Together, the programs provide billions of dollars in government funds for direct payments and grants to businesses, perhaps most notably through the Paycheck Protection Program (PPP). As of March 21, 2021, over $ 718 billion in PPP loans have been approved,[3] and ARPA allocated an additional $ 7 billion for the PPP as well as $ 28.6 billion for new Restaurant Revitalization Fund grants.

While PPP provides for loan forgiveness, forgiveness requires certification[4] by the borrower regarding the use of funds “to retain workers and maintain the payroll” which would subject borrowers to possible application of the False Claims Act (FCA) and / or criminal enforcement[5] for potentially fraudulent or false statements. Likewise, the initial PPP loan application[6] and ask for forgiveness[7] include certifications as to eligibility and use, and the recently adopted Restaurant Revitalization Grants under ARPA also require certification,[8] although applications for the latter are not yet available. In each case, such a certification language triggers potential civil and / or criminal liability in the event of misuse.

The FCA[9] “Imposes significant penalties on those who defraud the government.” “[10] It has been described as “one of the most important tools [the government has] to combat healthcare fraud, grant fraud, financial fraud, procurement fraud and many other types of taxpayer fraud. “[11] In fiscal 2020, the Justice Department recovered more than $ 2.2 billion in civil cases involving fraud and false allegations against the government.[12] Under the Biden administration, it is expected that FCA enforcement will continue to remain a key priority. Specifically, the application of pandemic-related fraud, including patterns involving “misrepresentation regarding eligibility, misuse of program funds, and false certifications relating to loan cancellation” will be of concern. particular importance.[13] The FCA “will undoubtedly play an important role in the years to come as the government grapples with the consequences of this pandemic.”[14]

The government has and will continue to use criminal law enforcement in cases involving a clear intention to commit fraud. The Department of Justice, including its 93 U.S. prosecutors, and other federal law enforcement agencies including the FBI, the HHS Office of Inspector General, the IRS Criminal Investigations Division, the US Postal Service Postal Inspection Service, and the FDIC Office of Inspector General, are involved in these efforts, and many have established coronavirus fraud task forces. As a recent lawsuit – a $ 24 million fraud scheme involving PPP loans – demonstrated, “[t]he Department of Justice is committed to protecting the PPP against fraud and deception.[15] In another example, on March 8, 2021, “a Florida couple pleaded guilty to participating in a scheme to file four fraudulent loan claims for over $ 1.1 million in damages. [PPP] and Economic Disaster Loans (EIDL) guaranteed by the Small Business Administration ”under the CARES Act.[16] In the claims submitted, the defendants falsely stated that they employed several employees in various companies, when in reality there were none.

In many cases, the driving will not be so clear. The government, in an effort to prevent fraud, may question legitimate loan applications and launch an FCA investigation. For example, the standard is much lower than the proof beyond a reasonable doubt required to prove a criminal fraud offense. To establish liability under the FAA, the government does not need to demonstrate that an individual or business knew that the information submitted was false.[17] Instead, the government need only establish that the person or company acted “in willful ignorance of the truth or falsehood of the information,” or “in reckless disregard of the truth. or false information, and no evidence of specific intent to defraud. is required.”[18] Even if the behavior was unintentional (for example, falling below the required threshold of employees after submitting a PPP loan application from a business), it is important to be attentive and proactive.

[5] See 18 USC § 287 (submitting false statements to government); 18 USC § 1001 (misrepresentation); 18 USC § 1341 (mail fraud); 18 USC § 1343 (wire fraud); 18 USC § 1344 (bank fraud). The maximum potential penalties could include a jail term of up to 30 years and a fine of $ 1,000,000.

[9] See in general 31 USC § 3729 et seq.

[10] Universal health services. vs. United States ex rel. Escobar, 136 S. Ct. 1989, 1995 (2016).

[18] Identifier.; see also 31 USC § 3729 (b) (1).

© 2021 Dinsmore & Shohl LLP. All rights reserved.Revue nationale de droit, volume XI, number 85

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