Department of Justice, FBI, And SEC Bringing Charges in Conjunction with Pandemic Loan Program
The Department of Justice has not only taken an aggressive approach to what they consider to be violations of the Defense Production Act and hoarding, selling, and price-gouging of personal protective equipment, but also loans taken out from the SBA paycheck protection program as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES), which are intended to help businesses with fewer than 500 employees cover payroll during the pandemic. Just within a little over one week, the Department brought fraud charges–while the FBI made arrests–in four separate cases.
As a result, businesses and financial institutions that have sought or plan to seek loans under the CARES Act in conjunction with COVID-19 should not only carefully and thoroughly document how they use the funds in order to survive any scrutiny that could potentially come from the government, but also consider consulting with defense counsel regarding their general accounting practices and reporting when it comes to these loans, especially if any questions are received from the SEC or Department of Justice.
The Investigations & Charges
The individuals arrested in conjunction with these charges were charged with conspiracy to commit bank fraud and conspiring to make false statements to influence the SBA administration, as well as aggravated identity theft and bank fraud in some cases. The Department claims that the suspects fraudulently claimed to have a number of employees on their payrolls at several different business locations, but actually did not operate before the pandemic, or have salaried workers. In these cases, the State Departments of Revenue informed the (federal) IRS as to which records employee wages were paid in 2020, and agents reportedly directly questioned several reported workers. The Department also conducted the arrests even though, according to reports, investigators detected the alleged fraud before anyone actually received any funding.
Are Federal Agencies Now Seeking To Charge Even The Innocent Businesses With White Collar Crimes?
As a result of the cases, Treasury Secretary Munchin has announced that every company that receives more than $2 million under the program will be audited, and any that received funds but were unqualified to, while failing to return them, could face criminal liability. However, what is of particular concern is that there have also been a number of circumstances in which applicants have tried to comply with the ambiguous and vague requirements of the CARES Act, but have been genuinely confused as to what those are. As a result, there are now additional concerns that activities taken by the federal government indicate that it is interested in more than just obvious instances of alleged fraud. For example, the SEC recently reached out to a number of entities the received these funds seeking general information as to their need and use of the funds, and the Department of Justice has also sent subpoenas to big banks, making it appear as though there is now a large scale investigation into all use of the funds.
Contact White Collar Criminal Defense Attorney Phillip J. Murphy to Ensure You Are Protected
If you have any questions or concerns related to potential legal violations in conjunction with COVID-19, or simply want to ensure that your company is in compliance with the CARES Act and any and all federal fraud laws so as to avoid any potential criminal liability, contact experienced New York criminal defense attorney Phillip J. Murphy today for a free consultation.