Prosecutions for federal fraud cases involving COVID-relief funds, SBA, and Paycheck Protection Program (PPP)

Recently Manhattan federal prosecutors announced the arrests of 17 individuals for allegedly defrauding the federal government’s Small Business Administration (SBA) COVID-relief program called the Paycheck Protection Program. In a nutshell, these individuals are accused of wire fraud for purportedly applying for small business relief funds on behalf of small businesses (or sole proprietorships) that either did not exist or did not generate the revenues described in their loan applications.

For many small businesses, the SBA’s various COVID-relief programs, including the Paycheck Protection Program, were critical in helping those businesses survive the once-in-a-generation economic downturn created by the pandemic. However, the fraudulent abuses of the program have become almost legendary and have recently been the subject of many Congressional inquiries.

The Department of Justice this year launched a task force to prosecute – at the federal level – crimes involving abuse of the COVID relief programs. So, one should expect to see more such prosecutions launched against individuals in the near future.

Wire fraud is a very common federal charge prosecuted under 18 U.S.C. Section 1343. Basically, it makes it a federal felony to commit fraud using the telephone or the internet. So, submitting a false application for COVID relief funds online through the government’s portal would certainly qualify as an act of wire fraud. The penalties for this offense depend primarily on the amount of money defrauded from the victim and the criminal record of the defendant, though other factors can increase the potential penalties as well. These 17 individuals recently charged in Manhattan could all be facing potential jail sentences for their alleged offenses.

The lawyers at The Law Office of Matthew Galluzzo PLLC have successfully defended several individuals accused of federal wire fraud charges. If you have been arrested or charged with such an offense, you should strongly consider contacting them to defend you. It might be possible to argue that yourself did not submit the application, and/or that you relied on someone else’s advice in preparing the application. There could be reasonable disagreement about the nature of the business at issue in the loan application, too. To be sure, these cases are not indefensible.