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Feds take tough stance on fraud during COVID-19

If the government can support the claim, the accused can face steep financial penalties and prison time.

The federal government released a number of financial programs to help businesses survive the current coronavirus pandemic, most notably the Coronavirus Aid, Relief and Economic Security (CARES) Act. Part of this relief package, the Paycheck Protection Program (PPP) provides small businesses with funds to help cover payroll costs and benefits for employees. The government requires businesses to meet certain standards to qualify and, in some cases, use the funds for specific purposes. If used within the terms, the government states the loans are fully forgivable. Terms that impact the forgivability of the loan include keeping employees on the payroll and using at least 75% of the funds towards payroll.

In addition to facing required repayment, businesses that fail to follow the terms of the PPP or other CARES Act relief package could face allegations of fraud.

What types of charges are officials pursuing during the coronavirus pandemic?

Restauranteurs, health care professionals and small business owners who apply for federal programs are under government scrutiny. The increased focus is in part the result of a report released by the Small Business Administration’s Office of the Inspector General this past July. In that report, the federal agency notes that at least $250 million in taxpayer-subsidized funds were likely fraudulent. The agency further predicted these numbers to increase as the pandemic continues.

Businesses accused of failing to follow the terms of the relief package will likely face an investigation. During this investigation, officials will look for errors on the application for relief as well as how the recipient used the funds. In two recent indictments, the government accused a restauranteur of fraud because he made false claims within the application for funds including errors in the number of qualifying employees and intended use of funds.

How serious are allegations of fraud?

Fraud is considered a white-collar crime. White-collar crimes traditionally do not result in direct injury to others, but instead involve financial crimes. Fraud and identity theft are two common examples. The government has cracked down in recent years, vigorously pursuing allegations of fraudulent activity and fighting for harsh penalties when it can gather enough evidence to support the charges.

Depending on the details, a conviction for fraud can come with financial penalties as well as prison time. Officials with the Justice Department have made public statements about this issue, making it clear that they will “aggressively pursue” charges of fraud against those who are accused of abusing COVID-19 relief funds.

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