DOJ investigating 'several hundred' small business loan fraud cases

Federal law enforcement officials have identified nearly 500 individuals suspected of committing coronavirus-related loan fraud and have opened “several hundred” investigations, the Justice Department said Thursday.

It’s still unclear how many people bilked the Paycheck Protection Program, which offered government-backed, forgivable loans to small businesses, but acting Assistant Attorney General Brian Rabbitt said, “we do believe it’s significant.”

“While it’s difficult to put concrete numbers on it, I do think that there will be plenty of work for us to do in the months going forward,” said Rabbitt, who works for the DOJ’s Criminal Division.

New details on potentially fraudulent applications for the loan program, which is credited with saving millions of jobs, show how the rush of aid during the early pandemic emergency has led to what prosecutors, Democratic lawmakers and taxpayer advocates fear could be widespread abuse.

FBI Deputy Assistant Director John Jimenez said officials were looking at “individuals we believe that fraudulently requested or received hundreds of millions of dollars” in funds that were meant for business owners to weather the economic blow of the pandemic during the wave of shutdowns.

The alleged fraud represents only a tiny fraction of the $525 billion in PPP loans that were given out to 5.2 million applicants in the program.

Still, it has stirred outrage because some of the money was used to pay for personal extravagances such as Rolex watches, luxury cars, Vegas gambling trips and nights on the town at strip clubs.

“I can’t help but be disgusted,” said James Lee, deputy chief of the Internal Revenue Service’s Criminal Investigation unit.

“You cannot hide from these paper and digital trails that you’re leaving behind for us to follow,” he said in a warning to fraudsters.

Rabbitt said the fraud update was prompted by prosecutors reaching a “key milestone” of bringing charges against more than 50 individuals. The figure was 57 as of Thursday afternoon.

POLITICO reported earlier this week on more than 40 prosecutions already filed by the DOJ mostly involving PPP fraud, as well as a different coronavirus-related disaster loan program run by the Small Business Administration.

In total, the cases reviewed described attempts to divert more than $170 million.

Besides more details on the number of cases, Rabbitt announced a change in the DOJ’s strategy: It will concentrate on prosecuting “coordinated criminal rings that have engaged in systematic, organized conduct to loot the PPP.”

“We will be focusing these types of cases going forward,” Rabbitt said. He said most fraud cases fell into two major types — larger-scale criminal rings, and “individuals or small groups acting on their own.”


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