This week brought two new Paycheck Protection Program (“PPP”) fraud indictments.
The first indictment is out of the Southern District of Texas. The case is United States v. Amir Aqeel, et al., Case No, 4:20-cr-583 (S.D. Texas). In Aqeel, seven individuals were charged with filing over 80 fraudulent loan applications worth $16 million. The defendants were charged with conspiracy to commit wire fraud, wire fraud, and money laundering.
According to the Indictment, the defendants falsified their PPP loan applications by faking the number of employees and average monthly payroll. The defendants also used third parties to submit applications and paid kickbacks for that service. The loan proceeds were funneled to family members posing as employees. The defendants used the money to purchase luxury cars and other items.
Interestingly, all the companies the defendants used to perpetrate the fraud were in business prior to the pandemic. The defendants used different banks and kept the loan values relatively low to avoid detection.
Over in Los Angeles, four individuals were charged with PPP fraud in the case of United States v. Richard Ayvazyan, Case No. 20-mj-03857. The charges brought in Ayvazyan were slightly different than those in the Texas case. In Ayvazyan, the defendants were also charged with conspiracy to commit bank fraud and substantive bank fraud counts in addition to conspiracy to commit wire fraud and wire fraud.
In Ayvazyan, the Indictment alleges that the defendants submitted fraudulent information in order to get loans. The loan proceeds were used to purchase residential property, among other things.
It seems the government went to great lengths to investigate the Aqeel and Ayvazyan cases, including executing search warrants and collecting emails. The government is likely using data analytics to identify outliers as it does in health care cases to pick the low hanging fruit.
These prosecutions are just the beginning though. The Small Business Administration (“SBA”) announced in FAQ No. 39 that it will review all PPP loans in excess of $2 million. The SBA is also requiring companies that sought in excess of $2 million to complete a questionnaire with questions geared toward determining whether the loan applications’ certification of economic uncertainty was made in good faith. While not disclosed, the SBA will likely use these questionnaires to continue to identify outliers to investigate.