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Paycheck Protection Program Fraud Committed by Government Employees
posted on 10/3/23

When the United States initiated the Paycheck Protection Program (PPP), business owners struggling during the pandemic were given some financial relief. The PPP was meant to help COVID-19-affected businesses pay their employees during the pandemic. Many businesses were partially or completely shut down, and PPP money allowed them to take care of their employees and ensure that the businesses would have a ready workforce when the lockdowns ended.

“There Is Free Money Available in the U.S.”

A report from the Illinois Office of the Executive Inspector General (OEIG) found widespread PPP fraud. The report said that the Small Business Administration (SBA) moved so quickly to disburse funds that it “weakened or removed the controls necessary to prevent fraudsters from easily gaining access to these programs.” The OEIG further said that people from all around the world were awakened because  “The allure of ‘easy money’ in this pay and chase environment attracted an overwhelming number of fraudsters to the programs.”

Fake Entities

Government funds were secured when individuals set up fake businesses using online filing and Employer Identification Number (EIN) platforms. Then, false payroll records could be manufactured, and one would be able to apply for PPP funds.

Illinois PPP Abuse

The OEIG unearthed illegal PPP loans that were obtained by Illinois Department of Human Services (IDHS) employees. An agency spokesperson said that almost 30 IDHS employees were in some stage of disciplinary processes related to applying inappropriately for PPP loans. 

As you can see, anyone at the time was susceptible to temptation. So, if you also made a mistake by submitting a fraudulent application for PPP funds, you certainly would not be alone.

PPP Loans Were Meant for Businesses

State employees could legitimately own a business on the side that would have been legitimately eligible for PPP money, but the majority of the investigated Illinois state employees at IDHS falsified records to obtain PPP funds. State employment policies do require that employees disclose all sources of income, and some employees did not file the proper forms or just lied about other income.  Others filed paperwork for quarterlies early in the pandemic, and then in order to qualify for PPP, they filed amended forms on corporate extensions.  This is a red flag for IRS computers, and since data is forever, it is only a matter of time before IRS computers flag these individuals and they get a visit from the IRS criminal enforcement branch.  

Federal Law

Merely submitting a fraudulent PPP loan application and/or a fraudulent certification could violate 18 U.S.C. § 1349  and could lead to a charge of attempt. The U.S. Department of Justice defines an attempt as “a substantial step that strongly corroborates the criminal purpose of the actor.” 

OEIG Does Not Prosecute

The investigative agency–the OEIG–does not enforce criminal law but instead investigates state employees for ethics violations and then recommends actions that range from retraining to termination. And even though the OEIG cannot charge any employees with a specific crime, it can certainly contact law enforcement agencies if a crime has occurred.  The United States Attorney does and will prosecute referrals from OEIG and other agencies for fraud.  

You Can Find Yourself in a Difficult Situation

The pandemic and subsequent lockdowns were a harrowing time for many people. Jobs were in jeopardy, and businesses were forced to close. Many people were worried about becoming ill with COVID-19 and, maybe worse, facing foreclosure or eviction. 

During this dire time, the potential of securing available money to help ease the financial stress of the pandemic could have altered anyone’s thinking who was struggling. Here, individuals would be vulnerable to using the system so that they could get much-needed government funds. As a result, it is easy to see how one could resort to falsely applying for relief under these unprecedented circumstances. 

If, like many others, you may have made a questionable decision in applying for government funds, or if you think you may have committed a crime, don’t wait for government agents to come knocking at your door. Contact the compassionate, understanding, and experienced criminal attorneys at Glasgow & Olsson. When you need an attorney, experience matters. Contact them today and learn how their knowledge can help you resolve your issues.