Justice charges 57 in alleged theft of $175 million in coronavirus relief funds

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WASHINGTON – The Justice Department so far has charged 57 people in the alleged theft of $175 million in taxpayer-backed coronavirus pandemic loans, officials said at a Thursday news conference, part of a months-long effort to stamp out profiteering as the federal government continues to spend giant sums of money to stimulate the economy.

The Paycheck Protection Program, a taxpayer-subsidized loan program that is regulated by the Small Business Administration and implemented by banks and financial technology companies, has been a fraud concern from the moment it was rolled out in early April. Funds were disbursed with relatively little vetting, and businesses were allowed to self-certify their own eligibility.

“The PPP program represented critical help at a critical time,” acting assistant attorney general Brian Rabbitt told reporters on Thursday. “Unfortunately, the crisis brings out not only those that try to help others, but those who try to take advantage of the crisis for personal gain.”

Those charged include individuals who allegedly received money on behalf of fake companies; legitimate business owners accused of spending the funds on luxury items for themselves rather than on employees’ paychecks; people who allegedly knew they weren’t eligible but applied anyway; businesses that double-dipped in a program meant to provide one loan per business; doctors accused of stealing from patients; and elaborate fraud rings accused of trying to steal tens of millions of dollars.

The $175 million that fraudsters have attempted to steal has entailed a known loss of $80 million to the government, officials said. The Justice Department was able to recover $30 million.

Officials said the total amount of fraud is unclear at this point, and more charges are expected over the coming months and years. SBA-approved banks have processed well over $500 billion in PPP loans, suggesting that the total amount of fraud could be much higher.

“Anytime the government makes a large amount of money available to the public, the opportunities for fraud are unfortunately clear. We began investigating almost immediately, and we brought our first cases within months of the first loans being made,” Rabbitt said.

A separate SBA-administered pandemic loan program, called Economic Injury Disaster Loans, also has been a magnet for fraud. An inspector general’s report released in late July concluded that the program was vulnerable to “pervasive” fraud as the government rushed to spend money when the economic crisis was at its worst. Numerous investigations are ongoing for both loan programs.