RIGHT SPEAK: Current Enforcement Efforts in the Battle Against COVID-19 Loan Program Fraud; Legislators Urge Community to Share Opinions On $70M in COVID Relief Funds, and other C-Virus related stories

Current Enforcement Efforts in the Battle Against COVID-19 Loan Program Fraud

Introduction

The COVID-19 pandemic caused unprecedented impacts around the world including stay-at-home orders, curfews, quarantines, and economic uncertainty. Businesses across the United States were forced to close their doors, limit hours of operations, and manage unpredictable financial losses. In an attempt to mitigate the impact of COVID-19, then-President Donald Trump signed the CARES Act into law in March 2020. The CARES Act intended to provide emergency assistance to individuals and businesses affected by the COVID-19 pandemic and included programs designed to quickly provide funds to individuals and businesses. [1]

While COVID-19 itself may no longer be headlining the news cycle, the investigation of potentially fraudulent activity related to COVID-19 funds as described herein continues to be a top priority for government enforcement agencies. With billions of dollars in potential fraudulent disbursements, various government agencies have implemented targeted programs and task forces to identify potential fraud and hold those responsible accountable. As of April 2024, the US Department of Justice had already seized over $1.4 billion in funds that were determined to have been fraudulently obtained.

In this article, we examine the establishment of COVID-19 Loan Programs, indicators of fraud related to the loan programs , the continuing investigation and prosecution of loan fraud cases, recent enforcement actions, recommendations for strengthening internal controls, and how to prepare for a potential audit in relation to a COVID-19 loan probe. This information is intended to help those involved in COVID-19 Loan Program fraud investigations.

Background of COVID-19 Loan Programs

As provided for in the CARES Act, the Small Business Administration (“SBA”) quickly implemented the Paycheck Protection Program (“PPP”) in April 2020, which made available fully guaranteed loans to small businesses, individuals, and nonprofit organizations affected by COVID-19. These loans were eligible for forgiveness if at least 60% of funds were spent on payroll costs, with certain limitations, and the remaining spent on eligible expenses such as rent, utilities, and other operating costs. The overarching goal was to help businesses keep their workforce employed during the pandemic and provide quick liquid funds to help mitigate financial losses. [2] PPP loans were offered in two rounds: between April and August of 2020 and between January and May of 2021. [3]

The SBA also offered the COVID-19 specific Economic Injury Disaster Loans (“EIDL”) from March 2020 to December 2021 to provide funding – specifically working capital to meet ordinary and necessary operating expenses – to help small businesses and other entities recover from the economic impacts of the COVID-19 pandemic. [4] The EIDL program was not a new program by the SBA, but instead the program was modified to support businesses impacted financially by COVID-19. Unlike PPP loans, EIDL funds were not eligible for forgiveness. However, these loans were offered with low interest rates and long-loan terms making them economically appealing to businesses. Additionally, the payments were deferred for the first two years, providing businesses with much needed flexibility during the pandemic. [5]

Given COVID-19’s immediate impact on the US and its economy and the view to quickly provide funds to businesses, the SBA recommended financial institutions prioritize speed over due diligence and provided assurance to lenders that they would be held “harmless” if they relied on the information applicants submitted to them. [6] This time-sensitivity in approving COVID-19 relief funds led the US government to waive most of its standard verification protocols required of lenders handling applications. Thus, banks and other financial institutions primarily relied upon self-certifications of applicants to make eligibility and approval decisions.

However, the government still required lenders to establish Bank Secrecy Act (“BSA”) anti-money laundering systems to conduct internal audits and flag suspicious customers. [7] Large, established banks mainly had pre-existing BSA compliance programs in place. Conversely, new entrants trying to handle high volumes of PPP loans in order to cash in on government processing fees had to implement new systems and generally did not have pre-existing BSA compliance programs in place. [8]

With little time to prepare and a powerful incentive to participate, many banks and other financial institutions were perfect targets for fraudsters looking to take advantage of a rushed and fragmented process. --->READ MORE HERE

Legislators urge community to share opinions on $70M in COVID relief funds

Jackson County, Missouri, community members and organizations will get to share their views on how $70 million in COVID relief funds should be spent.

Jackson County Legislator Manuel Abarca IV has announced that community members and local organizations are invited to share their views about the American Rescue Plan funds during a public hearing at 3 p.m. on Monday, Nov. 4.

Legislator Abarca noted that the hearing, which is expected to be held during the County Legislature’s regular session, is meant to provide a platform for community members to speak on the allocation of the $70 million intended to provide relief and support to those affected by the COVID-19 pandemic.

Abarca emphasized the importance of community involvement in the decision-making process. Legislator Sean Smith also said he is frustrated and ready for change.

Meanwhile, Legislator Donna Peyton highlighted the urgency of a collaborative effort to ensure funds benefit as many Jackson County residents and businesses as possible.

“This $70 million in grant funds can do so much for so many, and it is incumbent on all of us to work collaboratively to expedite this process so that our community can receive the help as Congress,” Legislator Peyton said. --->READ MORE HERE