On September 13, 2022, the Department of Justice announced a significant landmark settlement. This case is the first-ever False Claims Act decision to be settled with a lender involved in the Paycheck Protection Program. The intersection of these two government programs signifies the federal government’s crackdown on fraud involving small businesses and loans given during the initial stages of the COVID-19 pandemic. This is likely the first of many settlements to be seen relating to PPP loan fraud moving forward.
Understanding PPP Loan Fraud and the CARES Act
The Paycheck Protection Program (PPP) was a significant portion of the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in the early stages of the COVID-19 crisis. This federal program was created to help stabilize the economy and keep money coming in for businesses that were shuttered during the first wave of lockdowns.
Unfortunately, the program may have been well-intentioned, but it was also notoriously easy to take advantage of. While the full extent of the looting is still being understood, experts estimate that anywhere from $76 billion to $100 billion may have been given out in fraudulent loans. If these numbers are correct (and some say they may be conservative), then around 10 percent of the total funds earmarked for the program were simply stolen during the initial rollout of the PPP. The PPP program was particularly targeted as loans were eligible for extensive loan forgiveness, making…