Federal judges are increasingly ruling out tougher prison sentences for fraud involving paycheck protection programs | Fox Rothschild LLP
The U.S. Department of Justice continues to call for long sentences for those convicted of COVID-19-related fraud. Recently, courts have reached a settlement with prosecutors and have increased prison terms for those convicted of paycheck protection fraud. These prison sentences send a clear message to any person or company that has benefited from government aid that not only should they expect increased scrutiny, but that if the government is able to prove the fraud they face serious prison sentences .
The CARES law
The Coronavirus Aid, Relief and Economic Security Act (CARES), enacted in March 2020 and later reauthorized to create a loan program for the second drawing, was intended to help those suffering economic loss and uncertainty as a result of the COVID pandemic suffer emergency financial aid. 19 pandemic. It included $ 2.8 trillion in economic aid to individuals and businesses, and provided through the Small Business Administration (SBA) access to forgivable loans to cover payroll and other specific expenses through the Paycheck Protection Program (PPP). It also provided government support through the Economic Injury Disaster Loan (EIDL) program and the Unemployment Insurance Program (UI). However, the CARES Act also gave people an opportunity to avail of government assistance, and all signs point to one of the largest white-collar crime investigations in US history as the government’s extensive investigative resources remain aggressive against fraud and abuse proceed in these programs.
COVID-19-related law enforcement and penalties
As discussed in our previous warning, “Paycheck Protection Convictions Lead to Harsh Federal Prison Sentences,” the Department of Justice began investigating and prosecuting pandemic fraud immediately after the CARES bill was passed. Many cases have now been fully litigated and the accused have been convicted. Judgments seem to be getting tougher lately. Two examples of the recent long federal sentences are:
A Texas man was sentenced to over nine years in prison for fraudulently receiving and laundering proceeds from more than $ 1.6 million in paycheck protection loans. He was convicted of wire fraud and money laundering. He pleaded guilty to submitting fraudulent PPP loan applications to two different lenders on behalf of three companies. The defendant has incorrectly reported the number of employees and labor costs on each of the PPP loan applications and has produced fraudulent tax records for the companies.
Three members of a San Fernando Valley family have been sentenced to up to seventeen (17) years in federal prison for fraudulently receiving more than $ 20 million in Paycheck Protection Program and Economic Injury Disaster Loan COVID-19 Aid . All three were found guilty of bank fraud and wire transfer fraud conspiracies, eleven wire transfer fraud cases, eight bank fraud cases and one money laundering conspiracy. Two family members were also convicted of aggravated identity theft.
These federal judges’ rulings show that individuals and businesses need to exercise caution when dealing with potential fraud problems related to COVID-19 crimes. Any attempt to correct any previous potential errors in seeking and receiving government assistance should be made with legal counsel. Smaller acts could mean the difference between simply paying back money or spending years in prison.
Any individual or business owner who has concerns about compliance with the CARES Act or potential exposure to COVID-19 related fraud allegations should seek legal assistance immediately and not wait for law enforcement agencies to contact them. Those who have already received a subpoena or investigation from a law enforcement agency should immediately consult an attorney to assess the full potential for civil and criminal detection before reacting.