DOJ Charges Texas Business Owner for Filing Fraudulent PPP Applications

On June 23, 2020, the DOJ charged a Texas business owner with wire fraud, bank fraud and money laundering relating to the filing of fraudulent applications for Paycheck Protection Program ("PPP") loans.

In an indictment filed in the U.S. District Court for the Eastern District of Texas, the DOJ alleged that the defendant submitted applications to two banks seeking PPP funds of $1,753,875 and $1,592,657, respectively, in which he falsely represented the number of his employees and the value of his payroll. One bank denied the application, but the second bank granted the application and provided over $1.5 million to the defendant. Further, the government alleged that the defendant used the PPP funds for improper purposes, such as buying a luxury automobile and making home mortgage payments. In addition to the fraudulent applications, the government also charged the defendant with engaging in unlawful financial transactions with the proceeds.

The government seeks forfeiture of the funds the defendant improperly obtained, or substitute assets equal to the value of the PPP disbursements.

Commentary

The DOJ's Fraud section is filing cases related to PPP loans at a brisk clip. This is the second PPP fraud case the DOJ announced this week. As with its other announcements of charges being filed in PPP cases, the DOJ encourages tipsters to report any COVID-related fraud to its hotline. While the hotline will likely continue to be a fruitful source of new investigations, the more sophisticated schemes will likely be revealed when Fraud section attorneys and analysts conduct data analysis of information that it will surely subpoena from PPP lenders in the coming weeks and months.

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