Pandemic Relief Fraud- A focus and priority for the Department of Justice
By: Lee K. Goldfarb
Takeaway: Be prepared for the continued aggressive investigation and prosecution of white-collar pandemic relief fraud to continue in 2022 as a new Director has been appointed for the COVID-19 Fraud Enforcement Task Force.
On March 10, 2022 the United States Department of Justice demonstrated its intent to continue its focus on and combat of pandemic-related fraud, by announcing that Associate Deputy Attorney General Kevin Chambers has been appointed as the Director for the Covid-19 Fraud Enforcement Task Force. Director Chambers announced that his plan for the task force is to not only target domestic large-scale criminal organizations but to prioritize overseas actors as well.
As part of this initiative, the 2022 budget seeks to add 120 attorneys across the nation whose focus will be on pandemic relief fraud. The budget also requested $325 million to fund more than 900 agents to support the FBI’s white-collar crime program. Pandemic relief fraud has also attracted the attention and involvement of multiple federal agencies including the IRS, U.S. Postal Service, and Social Security Administration as well as Interpol.
In the last year, the DOJ has seized over $1.2 billion in relief funds which were fraudulently obtained and has charged over 1,000 defendants with related crimes across the country. Deputy Attorney General Lisa O. Monaco has stated that they are currently investigating “more than 1,800 individuals and entities for alleged fraud in connection with more than $6 billion in relief package loans”.
A large focus of the DOJ’s investigative efforts over the past year has been placed specifically on fraud related to Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loans (EIDLs). This has been evidenced by the various indictments, convictions, pleas, and sentencings that have occurred over the last year. Three men in the Middle District of North Carolina were indicted and sentenced for fraudulently seeking over $2.7 million in PPP and EIDLs. These defendants submitted fraudulent PPP loan applications which misrepresented the number of employees and the payroll expenses of their various businesses between May and June of 2020. In conjunction with the fraudulent PPP loan applications, these defendants also submitted false tax and bank records. In their applications for EIDLs, they misrepresented the number of employees, gross revenues and costs of goods sold for each business. The three defendants received different terms of imprisonment, with the lowest being 5 years’ incarceration. Each defendant was ordered to pay $498,657 in restitution.
A grand jury in Houston recently returned a superseding indictment against four individuals for fraudulently obtaining and laundering millions of dollars in forgivable PPP loans. This indictment has led to an additional 15 individuals across two states being charged in this conspiracy. In a separate scheme, seven individuals in California were indicted and sentenced for their involvement in attempts to fraudulently obtain over $20 million in PPP and EIDL Covid-19 relief funds. The ringleader of this group was sentenced to 17 years’ incarceration.
It’s clear that the DOJ is going to continue to focus their efforts on investigating and prosecuting pandemic related fraud given this year’s budget request and the announcement of Kevin Chambers’ appointment. The light in which the DOJ views the seriousness and gravity of these cases was demonstrated when Deputy Attorney General Lisa O. Monaco stated that “these cases demonstrate that these crimes are not victimless… these criminals chose to line their own pockets, at a time when Americans were hurting, when many Americans were dying.” So be prepared for the continued aggressive investigation and prosecution of white-collar pandemic relief fraud to continue in 2022.