The effects of the COVID-19 pandemic have caused financial hardship for millions of small businesses across America. To support these struggling businesses, Congress passed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. This legislation, designed to provide immediate help to small businesses, individuals, and healthcare workers, includes a Paycheck Protection Program (PPP) to provide almost $650 billion in loans to small businesses.
Unfortunately, as with any large scale relief program, some people are taking this opportunity to scam the federal government and seek financial gain from people’s hardship during this difficult time. This is why the Department of Justice is working to identify and prosecute people engaging in PPP fraud.
What is PPP (Paycheck Protection Program) Fraud?
In order to receive PPP support, businesses must provide proof of their eligibility and need for PPP funds. PPP fraud occurs when individuals or businesses make false representations to take money they are not eligible for, or use funds for the wrong reasons.
Examples of PPP fraud include:
- Using a false or stolen identity to obtain PPP funds
- Knowingly providing false information to apply for PPP funds
- Submitting an application for a business that does not exist
- Misusing PPP funds for luxury items, personal expenses, bonuses for executives, or other non-approved purposes
So far, there have already been multiple criminal investigations by the Department of Justice into people trying to illegally profit from the pandemic through PPP fraud. The first civil settlement for PPP fraud allegations happened in January, when SlideBelts Inc. paid $100k in damages, in addition to paying back their PPP funds of $350k, after admitting to making false statements in order to be approved for COVID-19 relief.
It is important to note that unintentional and technical errors are not the focus of the Department of Justice’s efforts. Companies who seek assistance in good faith and make honest mistakes in the submission process will not be penalized, as they do not want to discourage small businesses from seeking the help they need.
PPP Fraud and the False Claims Act
Individuals or businesses that engage in PPP fraud are in violation of the False Claims Act, which concerns attempts to defraud the federal government. Under this Act, individuals are encouraged to report fraud by their employer, and protected against retaliation from making a claim. Whistleblowers will play an important role in stopping PPP fraud by speaking out against these scams, and may be financially rewarded for doing so. Before filing a qui tam action under the False Claims Act, it is important to contact an experienced attorney to help you understand your rights and options.
How Do I Report PPP Fraud?
PPP fraud takes money away from eligible small businesses that need it the most. The Department of Justice has instituted a ‘see something, say something’ policy to help identify this type of fraud. If you have direct personal knowledge of any form of PPP fraud and want to learn more about your rights under the False Claims Act, contact us today. The attorneys at McOmber McOmber & Luber, P.C. have experience in helping employees report false and fraudulent claims for payment to the government and recovering a portion of those funds for their clients in the process. It is important that you not disclose your knowledge of the alleged fraud to anyone but your counsel so as to not jeopardize your ability to recover monies under the False Claims Act.