The United States Department of Justice (DOJ) recently announced the arrest of a Texas man accused of fraudulently obtaining over $1.6 million from the Paycheck Protection Program (PPP) loans and using the loans for improper expenses. The prosecution states the entrepreneur used the funds not to help keep his business afloat during these uncertain times, but instead to purchase luxury vehicles and fund trips to a local strip club. If the government can provide enough evidence to substantiate these claims, the accused could face serious penalties.
The entrepreneur’s situation is an example of the types of cases the government will likely pursue in these matters. It involves large amounts of money, over $1.5 million, and false statements. In this case, the government claims to have the following evidence to support the charges:
- False statements. As noted above, the prosecution has stated the accused made false statements to receive the PPP loans. Specifically, they state the entrepreneur claimed to have “numerous employees” and had “significant payroll expenses.” In actuality, the government states the entrepreneur does not have employees as stated and cannot produce evidence to support the claims of payroll expenses.
- Misuse of funds. The Coronavirus Aid, Relief and Economic Security (CARES) Act provides funds, with stipulations. The recipient cannot use the money cannot however they wish. Instead, the recipient must use PPP funds for qualifying expenses like payroll and rent.
This case highlights the importance of keeping good records. Physician groups and other medical professionals that apply for this and similar programs need to have records to support the claims. A failure to do so can make it very difficult to build a defense if the application is challenged.