March 5, 2021
Fraud Friday – Less than 0.1% of PPP Funds Went to Fraudsters
Federal officials say PPP fraudsters spent millions of dollars on extravagant shopping sprees using taxpayer-provided money. To date, authorities have seized two Lamborghini Huracan sports cars, a Rolex Presidential watch, a 5.73-carat diamond ring, a diamond bracelet, two Tesla cars, a Tuscan-style mansion, a 26-foot Pavati Wake Boat, a 33-foot Cruiser yacht, two Rolls-Royces, a Lamborghini Urus luxury SUV, a Kia Stinger, a Ford F-350 pickup truck, at least three Bentleys, and an assortment of other pricey vehicles and boats. However, the prevalence of fraud in the program may be lower than you think.
According to the most recent data published by the Department of Justice, just $341 million (or 0.06% of PPP loan funds that were disbursed in 2020) has been linked to a pending PPP fraud lawsuit. As of January, the Department of Justice was in the process of prosecuting around 140 defendants for PPP fraud in 79 lawsuits.
Law enforcement has indicated that the defendants facing PPP fraud charges span the socio-economic spectrum, including men and women of many different races and ethnic backgrounds. People facing charges include Hollywood producers, reality TV stars, NFL players, recording artists, attorneys, and doctors.
To obtain the funds, the PPP fraudsters often made up fake employees to qualify for loans, forged IRS payroll returns and bank statements, or stole the identity of real business owners and employees. Some defendants even got involved in PPP fraud rings. So far, law enforcement has discovered 7 fraud rings, the largest of which was run by the recording artist, Diamond Blue Smith, who managed to obtain $24 million before the operation was discovered.
Luckily, many of the defendants were not very good at hiding their fraud. Federal investigators have been able to catch a significant number of cases by cross-referencing real IRS filings or checking loans that were flagged for errors.
In a Special Report issued in January, the SBA OIG indicated that they will be continuing to investigate how “potentially ineligible businesses” have received PPP loans and will be making additional recommendations to improve PPP oversight and prevent future instances of PPP fraud.
Department of Justice
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