Investigations Still Ongoing of State Employee PPP Fraud
As we have previously covered, there has been a lot of attention on those who fraudulently received government loans from the federal government meant to keep businesses afloat during the early days of the Covid-19 pandemic, particularly of government employees. Late last year a state watchdog organization identified at least $7.2 million in fraudulent claims by Illinois state employees through fraudulent PPP loans. One of the reasons the watchdog organization is able to track state employee fraud through PPP loans is because state employees are required to seek permission from supervisors and disclose any secondary employment. Given that those loans were only available for businesses and not individuals, a simple cross reference can easily uncover any seemingly past abuses by state employees who did not disclose those businesses prior to any applications with the federal government. It is believed that fraud was rampant in the PPP loan program, with some estimating that at least $200 billion of the $814 billion loans to have been fraudulently obtained. During the height of the pandemic, the Small Business Administration which administered the loans, was reportedly receiving millions of calls through its fraud hotline, many of which went unanswered. As a result, Illinois lawmakers have taken measures to extend the deadlines for any criminal investigations into alleged abuse of that eras programs. “The vulnerabilities that led to the issues with PPP fraud weren’t really attributable to things at the state level. I would say that the issues had far more to do with the unaccountable nature of the program itself,” said State Rep. Mike Kelly who cosponsored a 2023 bill that allows criminal charges for up to five years after authorities discover any Covid-19 related fraud. Either way there has always been a lengthy statute of limitations for federal criminal offenses related to PPP loans, such as those prosecuted as bank fraud.
Charges Announced Against Trio of Loan Brokers in Alleged Kickback Schemes
Federal charges were unveiled against three Chicagoland area individuals who are accused of assisting others in fraudulently obtaining PPP loans through allegedly preparing the loan documents and receiving a kickback fee from the recipients once the loan was granted and the funds dispersed. Amanda Heller of Frankfort, Sarah Stokes of Crestwood and James Townsend of Midlothian are accused of filing applications for dozens of loans and typically receiving kickbacks of $5,000 to $10,000 between April 2020 and May 2021 after submitting the applications for companies with information about the occupation, income and other information that they would completely fabricate. The unsealed indictment did not disclose how many people they helped obtain loans or for the exact amount their alleged schemes totaled, but it revealed that an informant told prosecutors that Heller had previously obtained a fraudulent PPP loan for $38,846, for which he allegedly gave her back $10,000 in kickbacks for arranging the loan. The FBI claims that Heller tried to keep the amounts low to try and avoid suspicion, allegedly telling the informant that she wouldn’t arrange fraudulent loans for more than $40,000. Most criminal prosecutions have not typically targeted recipients themselves, unless the amounts have been significant or the proceeds were used for extravagant and obvious purchases like ultra-luxury vehicles, and have otherwise focused on anyone who illegally brokered false PPP loans such as a highly publicized case out of California in which three tax preparers were accused of receiving a 30% kickback on approximately $40 million in fraudulent loans they applied for on behalf of others. As new government focuses on waste and cutting unnecessary resources, this case could signal a renewed focus on federal prosecutions targeted abuses that effect the same. Anyone who believes they may have been involved in fraud connected to a Covid-19 relief program should contact an experienced criminal defense attorney to understand your risk and protect your liberty and interests.
