The Department of Justice Criminal Division announced Sept. 10 that it has charged more than 50 people who allegedly committed fraud to obtain funds from the Paycheck Protection Plan (PPP).
The PPP program is authorized by the CARES Act, which is a federal law enacted on March 29, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. The CARES Act initially authorized up to $349 billion in forgivable PPP loans to small businesses for job retention and certain other expenses, and in April 2020, Congress authorized over $300 billion in additional PPP funding,
In partnership with the Criminal Division, the Eastern District of Texas has played a lead role in pursuing CARES Act fraud and has declared COVID-related fraud a top priority.
“When thieves and fraudsters steal CARES Act funding, they steal from all of us – the corner store, the dry cleaner, and the local grocer. These are not simple or easy cases to investigate and charge. They involve piecing together often-complex financial, payroll, and tax records for individuals and companies. This makes it all the more remarkable that the men and women of the Department of Justice have been able to bring so many cases so quickly — against over 50 defendants in a matter of months — and is a testament to the hard work and dedication of federal prosecutors and agents and our partners across the U.S. government.”
The Eastern District of Texas has charged three individuals with violations related to the improper use of PPP funds. In each case, the individuals fraudulently claimed their businesses had suffered catastrophic losses due to the COVID-19 pandemic and requested assistance in the form of forgivable small business loans through the PPP. In May, Shashank Rai and Samuel Yates were each charged in separate cases with violations of wire fraud, mail fraud, and making false statements to a bank and to the SBA in order to unlawfully obtain millions of dollars in PPP loans. In June, Fahad Shah was indicted and charged with three counts of wire fraud, one count of making a false statement to a bank, and four counts of money laundering. It is alleged that Shah illegally obtained millions of dollars, which he used to purchase multiple Tesla automobiles, to play the stock market, and for personal expenses. When conduct like the kind alleged in these cases occurs, it depletes the pool of available funds for businesses with legitimate needs, such as payroll for workers. According to some reports, as many as 80% of loan applicants were turned away due to funds not being available.
In addition to PPP cases, the Eastern District of Texas has also indicted James Mwanza, as well as Dalton Brewer and Emilee Fenton, for identity theft in connection with CARES Act Economic Impact Payments (EIPs). These defendants allegedly used the names, birth dates, and Social Security Numbers of unknowing persons in order to illegally obtain EIP funds. An estimated $300 billion of the CARES Act total was allocated for EIPs. Under the CARES Act, qualifying individuals may receive up to $1,200 in EIPs per adult, up to $2,400 for married couples filing jointly, and $500 per child under 17 years old. Individuals with income exceeding $99,000 or joint filers whose income exceeds $198,000 do not qualify for any payment.
These cases are tremendously important for many reasons, and the speed with which these cases have been investigated and prosecuted is unparalleled. The Department’s efforts began early in the implementation of the CARES Act, as prosecutors and agencies moved quickly to establish law enforcement partnerships, obtain critical data and evidence, and take concrete and affirmative steps to identify CARES Act fraud. This cooperation, in turn, produced immediate results. The Eastern District of Texas partnered with the Criminal Division to bring the very first PPP-related fraud cases within two months of the loan program’s launch
Public awareness and cooperation amongst agencies is critical to fight against COVID-related fraud. In July, U.S. Attorney Stephen J. Cox wrote an opinion editorial, which was published in the Texas Lawyer, pledging to remain vigilant in pursuing those individuals seeking to steal CARES Act assistance from those who truly need it and who it is intended to benefit. As part of that pledge, in August, the Eastern District of Texas entered into a Memorandum of Understanding (MOU) with the Office of the Special Inspector General for Pandemic Recovery (SIGPR) providing for the designation of Assistant U.S. Attorneys in the Eastern District of Texas to assist with SIGPR-related investigations and prosecutions. EDTX plans to work with SIGPR, as well as DOJ’s Criminal Division and our other law enforcement partners to focus on coordinated criminal rings that have engaged in the systematic, organized looting of PPP funds.
Another key component of the Department’s ability to bring these cases so quickly has been the use of public-private partnerships to maximize its awareness and visibility of suspicious conduct and the collection of critical evidence. Many financial institutions have been strong partners in assisting the Department in detecting and investigating potentially fraudulent activity and safeguarding taxpayer dollars by freezing funds and accounts. In the coming weeks, EDTX plans to build partnerships with Texas banks to further our ability to uncover and combat suspected fraud.
Anyone with information about allegations of attempted fraud involving COVID-19, can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form at https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.