As thousands of long-term care operators and other businesses fought to retain employees and stay afloat over the past year, hundreds of others were working to defraud U.S. relief programs to the tune of $569 million.
Efforts to bilk the government for unwarranted assistance through the Paycheck Protection, Economic Injury Disaster Loan and Unemployment Insurance programs have led to almost 500 criminal and civil charges, the Department of Justice announced Friday.
The Criminal Division’s Fraud Section has filed charges against at least 120 defendants charged with PPP fraud. In some cases, legitimate business owners inflated their payroll expenses to obtain loans in amounts higher than what they actually were qualified to receive. In others, the Justice Department accused “serial fraudsters” of reviving dormant corporations and purchasing shell companies without actual operations to apply for multiple loans, and they also alleged that organized criminal networks submitted identical loan applications and supporting documents under the names of different companies.
Most charged defendants spent loan proceeds on houses, cars, jewelry and other luxury items.
In March 2020, Congress passed a $2.2 trillion economic relief bill known as the Coronavirus Aid, Relief, and Economic Security, or CARES, Act to provide emergency financial assistance business and individuals.
Many senior living and skilled nursing operators with fewer than 500 employees were eligible for some $349 billion in paycheck protection loan guarantees. The Small Business Administration reported earlier this month that more than 10,000 nursing facilities snagged loans approaching $6 billion, with an average of $550,701 But others, including new facilities or those under new ownership, found themselves shut out.
The forgivable PPP loans could be used to cover payroll costs, interest on mortgages, rent and utilities. EIDL proceeds could be used for working capital and normal operating expenses, such as continuation of healthcare benefits and fixed-debt payments.
The Justice Department has been investigating white collar fraud cases aggressively since the CARES Act passed.
In U.S. v. Dinesh Sah, in the Northern District of Texas, for example, the defendant applied for 15 different PPP loans to eight different lenders, using 11 different companies, seeking a total of $24.8 million. Sah obtained about $17.3 million before being charged.
In another case, U.S. v. Richard Ayvazyan, eight defendants applied for 142 PPP and EIDL loans seeking more than $21 million using stolen and fictitious identities and sham companies, and they laundered the proceeds through a web of bank accounts to purchase real estate, securities and jewelry.
“The impact of the department’s work to date sends a clear and unmistakable message to those who would exploit a national emergency to steal taxpayer-funded resources from vulnerable individuals and small businesses,” U.S. Attorney General Merrick B. Garland said in a statement. “We are committed to protecting the American people and the integrity of the critical lifelines provided for them by Congress, and we will continue to respond to this challenge.”
