In response to the COVID-19 pandemic, the Federal government launched several programs delivering financial assistance to struggling people and businesses. For example, under the Coronavirus Aid, Relief, and Economic Security Act, or “CARES Act,” the Government created the Payroll Protection Program (PPP), which allocated $350 billion in forgivable loans for small businesses’ payroll, mortgage, rent, and utility payments. Other programs included the Small Business Association’s Economic Injury Disaster Loan (EIDL) program, which provided similar financial assistance to small businesses, and the Department of Labor’s extension of unemployment benefits. As of April 2022, the Federal government had spent nearly $3.63 trillion in combatting the COVID-19 pandemic.
Given the pandemic’s urgency and direct economic impact, the Federal government made it easy to seek benefits through an online application process. For example, once an applicant applied for a PPP loan, the Small Business Administration (“SBA”) had to decide whether to approve the loan within ten days. Given the high volume of applications, the SBA had to act quickly, opening the door to fraud. The Federal government estimates that fraud related to the PPP is as high as $80 billion because of this fast-tracked process and inadequate vetting procedures.
In May 2021, the government received its first guilty plea in a Cares Act fraud prosecution. The defendant, David Staveley, and his co-conspirator, David Butziger, filed four fraudulent PPP loan applications claiming that they owned small businesses, needed to pay employees, and requested over $500,000 in Federal funds when there were no such businesses. Staveley received a 56-month prison sentence after pleading guilty to Conspiracy to Commit Bank Fraud, while Butziger received a three-year supervised release sentence for a similar charge.
Similarly, Ganell Tubbs fraudulently received $2 million in PPP funds, which she used to purchase high-end merchandise at Apple, Michael Kors, Nike, and other merchants. Tubbs pled guilty last March to Bank Fraud and received a 41-month prison sentence.
Amanda Gloria pled guilty in April 2022 for her involvement in a scheme defrauding the PPP of over $43.8 million in COVID-19 relief loans. As part of the scheme, Gloria submitted 153 fraudulent applications and fraudulently obtained $32.5 million, which she used to purchase two cars and pay personal expenses. She awaits sentencing.
In light of these abuses, the Federal government is actively working to prosecute COVID-19 fraud by launching a new COVID-19 Fraud Enforcement Unit, which works with local law enforcement agencies to bring civil and criminal charges against wrongdoers. The Department has charged 500 defendants in 340 cases alleging losses exceeding $700 million. Additionally, the Federal government hired an additional 120 attorneys to focus solely on COVID-19 fraud cases. Deeming this “the largest fraud in U.S. history,” the Federal government is highly focused on bringing these cases.
Given the prominence of COVID-19 fraud cases in the news and on the minds of federal prosecutors, undoubtedly, the government is eager and ready to bring these types of cases. Moreover, with the threat of possible imprisonment and financial penalties, hiring legal counsel is crucial.