Paycheck Protection Program Fraud Cases

Posted on 23 January 2023 by IRIS FMP

The Paycheck Protection Program (PPP) was a Senate relief fund to help small businesses with forgivable loans during the COVID-19 pandemic. Since 2020, there have been steadily increasing numbers of cases of loan fraud being heard in trials. Read on to discover exactly what the Paycheck Protection Program involved, and the companies being convicted of PPP fraud.

What is a Paycheck Protection Program (PPP) Loan?

The Paycheck Protection Program, or PPP loan, was a loan created by U.S. Congress to assist businesses to keep their workforce employed through the COVID-19 pandemic. This type of business loan was established under Donald Trump’s federal government in 2020. The PPP loan was designed to help cover various elements such as payroll, utilities or rent for businesses struggling during the challenges of the pandemic.

Why Was the PPP Loan Given?

In March 2020 at the beginning of the COVID-19 pandemic, U.S. Congress passed the Coronavirus Aid, Relief, and Economic Security, or the CARES Act. The CARES Act was created to provide emergency financial help to American business owners, including the self-employed, sole proprietors and non-profits, struggling with the impact of COVID-19.

As part of the CARES Act, the Paycheck Protection Program was created, a loan designed to help businesses help their workforce to remain employed during COVID-19. This loan would provide funding for businesses that qualified, which would cover payroll costs or other needs such as utility bills or rent.

How did the Paycheck Protection Program Work?

Providing small businesses with funds of up to 8 weeks of payroll to help them stay afloat during the challenges the COVID-19 pandemic brought, the Paycheck Protection Program was eligible for:

  • Small businesses with under 500 employees or one that meets the size standards set by the SBA
  • Sole proprietors
  • Independent contractors
  • Self-employed
  • Nonprofit organizations
  • Veterans’ organization
  • Tribal business

The loan was designed to offer support to those eligible to cover payroll elements such as salary and continued benefits, and could also be used to pay interest on mortgages, rent and utilities where applicable.

PPP Fraud Cases – What Happened?

Whilst this loan aimed to provide much-needed assistance and support through a uniquely challenging time for businesses all over the globe, this form of support was unfortunately abused by many. Since 2020, there have been countless cases of PPP fraud and COVID-19 fraud, and this number is only continuing to grow as we enter 2023.

So much so that in September 2022, the US Department of Justice (DOJ), set up the COVID-19 Fraud Enforcement Task Force to combat COVID-19 fraud, including cases of Paycheck Protection Program fraud. At the time of release, the DOJ’s press release cited charging nearly 600 defendants, with crimes involving $600 million across 56 federal districts. These numbers are likely to rise as more cases are brought forward.

Here are just some examples of PPP fraud and the cost of being non-compliant:

Palo Alto Bakery

La Baguette, LLC, a company which runs a bakery in Palo Alto, paid a total of $530,000 to settle allegations that they received a duplicate PPP loan in 2020 and then received forgiveness for the duplicate loan.

Florida Blimp Executive

Florida Blimp company executive, Patrick Parker Walsh, was sentenced to 66 months in a federal prison according to the U.S. Attorney’s Office, for multiple counts of money laundering in connection with COVID-19 relief schemes. Walsh submitted 16 fraudulent applications for the Paycheck Protection Program under multiple businesses.

Fintech Companies

Two fintech companies, Womply and Blueacorn, were found guilty through the Small Business Administration (SBA) of PPP fraud. Womply fraudulently received $2 billion in PPP relief, and Blueacorn received $1 billion.

COVID-19 Fraud Across the Globe

city during night

The Paycheck Protection Program is not the only relief scheme offered during the pandemic to be abused by businesses.

The UK government were also a target of COVID-19 loan fraud, with schemes such as the Bounceback loan also designed to help struggling businesses to cope with the impact of COVID-19. An estimated £15.6bn was lost from fraud and error losses for the UK.

An organized group of six French and Israeli criminals in France were convicted for benefit fraud, owing a reported €12 million to the French state. The group fraudulently obtained benefits through the COVID-19 unemployment benefit scheme offered by the French government.

Recovering from Fraudulent COVID Loans

Many countries are recovering not only from the impact of COVID-19 itself, but the abuse of relief loans lent during that time. This is an issue impacting organizations globally and highlights the continued importance of full compliance when it comes to all areas of business, particularly payroll.

This can be particularly challenging for businesses operating globally, navigating the different laws and regulations of each country. This was a challenge exacerbated by the pandemic, presenting a fairly unique situation to many organizations. But no matter the circumstances, payroll needs to be compliant, whether you’re a small business or multi-national organization.

Why Global Payroll Compliance is so Important

In cases of geopolitical unrest, the risk of future pandemics or even major environmental disasters, the support of a global expert should be heavily considered to help navigate these challenges when operating globally.

International payroll providers, like IRIS FMP, can assist with ensuring your payroll function is up to date with the challenges of modern business. From varying languages, currency, benefits and unique laws in challenging times such as COVID-19, ensuring full compliance through fast-changing times is vital.

Can you afford not to be prepared? Stay Fully Compliant with IRIS FMP

The cost of non-compliance can be paramount. Don’t run the risk. Make sure your payroll is fully compliant no matter the challenges your business may face. Discover how we can help today.