Two of the 7 bills introduced by the House Small Business Committee address fraud in the Paycheck Protection and Economic Impact Disaster Loan programs.
Both bills would set a 10-year statute of limitations for fraud-related prosecutions. HR 7352 is for the PPP and HR 7334 is for the EIDLs. The PPP bill includes all types of PPP fraud and the EIDL bill includes EIDL advances and targeted EIDL advances.
House Small Business Committee Promotes PPP Loan and EIDL Loan Fraud Accounts
The ten-year timeframe reflects the established ten-year timeframe for prosecutions related to bank fraud.
The dollar amount for fraud for the PPP and EIDL programs combined is estimated at $80 billion, or about 10% of the programs.
To report fraud, call the SBA’s Office of the Investigator General at 800-767-0385. Reports are confidential.
California PPP and EIDL Loan Fraud Case
An eight-person California crime ring was able to secure more than $18 million in Covid relief funds, and received a total of 150 loans from the PPP and EIDL programs.
Three members of the criminal gang were convicted in June 2021, then fled and were imprisoned in Montenegro (Europe) at the end of February 2022.
Richard Ayvazyan, 43, who authorities say was the group’s leader, had been sentenced to 17 years in prison. His wife, Marietta Terabelian, 37, received 6 years. After their convictions and convictions, the two cut their anklets and fled, leaving their three children behind.
They used the Covid relief funds to buy luxury homes, diamonds and gold coins.
“The SBA, when sending that money, basically said to people, apply and sign, and tell us you’re really entitled to the money,” Justice Department Inspector General Michael Horowitz said in an interview on NBC’s Nightly News. “What didn’t happen was even minimal checks to make sure the money got to the right people at the right time.”
Horowitz said fraudsters took money away from deserving applicants. He went on to say that because of the way those programs were structured, the programs “invited fraudsters.”
Ways Fraudsters Worked
Fraudsters most often increased the number of employees with the PPL program. As one of the requirements of the PPP, a loan could be waived if the applicant later returned the workforce to the full compliment of employees. The money could also be used for labor costs. In cases of fraud, although employees were real people, they were never employed by the company.
To date, the PPL has spent more than $800 billion, securing more than 21 million loans.
At the EIDL, documents contain false information about the extent of damage and the value of the damaged equipment. In some cases, companies were founded on paper, but did not exist. The SBA’s Investigator General has already identified $78.1 billion in fraudulent EIDL applications and awards.
What About SBA Lenders?
Both the PPP and EIDL programs allow small business owners to apply through SBA-approved lenders. The final decision rests with the SBA. In the case of fraud, the lending banks are off the hook.
Language regarding the programs and lenders for the SBA says lenders “will be held harmless for non-compliance with program criteria by borrowers.”
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