What You Need To Know About Paycheck Protection Program Fraud


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The COVID-19 pandemic has changed the way we live and has taken over headlines around the world. Fortunately, the government has stepped up to help American individuals and businesses make it through this unprecedented time. Washington’s response to the crisis has been significant and swift – perhaps too fast for significant fiscal oversight. And that leaves the door open for fraud. Greedy fraudsters know how to take advantage of a crisis, even when so many people are dying. That means that it may be up to whistleblowers to help level the playing field against these criminals.

Small Business Relief Under The CARES Act

The Paycheck Protection Program (PPP) is just one part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. It provides support for small businesses that have been affected economically by the coronavirus. The PPP targets businesses with 500 or fewer employees, covering payroll costs and benefits for eight weeks. The financial aid can also be used for rent, utilities, and mortgages.  

The funds are provided in the form of a loan, from small business lenders. If the funds are used properly, according to the rules of the PPP, the debt will be forgiven.

How Is Paycheck Protection Program Fraud Perpetrated?

Small businesses can commit fraud related to the CARES Act in various ways. The most common is by padding or increasing numbers to get a bigger loan, knowing that if they adhere to the requirements set by the government, then the loan will become a grant and they will not have to pay back the money. Additionally, fraud can arise from:

  • Small businesses that provide false information on CARES loan applications (number of employees, payroll information, etc.)
  • Small businesses that use COVID-19 funds for unauthorized purposes, like stock buy-backs
  • Small businesses that do not disclose their affiliation with larger businesses
  • Small businesses that falsely certify that COVID-19 funds will be used for payroll, mortgage, rent, or utilities

The government is working quickly to distribute funds to businesses to help mitigate the economic effects of COVID-19. While its goal is to help support small businesses, the PPP is also a magnet for potential fraud. This fraud makes it more difficult to fight COVID-19, delays efficient and appropriate responses, and wastes taxpayer money. Whistleblowers can play a vital role in defending against these crimes.

What Is The Role Of Whistleblowers Related To The PPP?

Because of the massive amount of CARES Act funds that are being provided for small businesses and the speed in which it is happening, there just aren’t enough resources for oversight of the PPP. That means that the government will have to rely on whistleblowers to identify and report fraud they observe in applications or use of the funding.

In small businesses, the individuals who are most likely to be in a position to discover fraud are the company’s bookkeepers, office managers, or outside accountants. When someone blows the whistle on a business that has committed fraud in applying for or spending COVID-19 relief funds, they might be eligible to collect a financial reward by means of the False Claims Act, which also protects whistleblowers from retaliation.

Reporting CARES Act Fraud Under the False Claims Act

The False Claims Act (FCA) makes it illegal to make false or fraudulent claims for federal funds, like those related to the PPP and CARES Act overall. If an individual or employee identifies a violation of the FCA, they can file a civil qui tam action (an action on the government's behalf) to alert the government and to help recover the funds that were obtained fraudulently. Additionally, the individual may be eligible to receive a financial reward for reporting the fraud. Most importantly for employees who blow the whistle, the FCA has a protection provision that prohibits retaliation against whistleblowers.

Know What You’re Getting Into As A Whistleblower

While many employees discover fraud in their workplaces, choosing to report it can be a difficult decision. If you are in this situation, you may feel that blowing the whistle on your employer is a moral obligation, the only right thing to do. However, there are considerations that you need to think about before making such a claim, as it might have repercussions. To better understand where you stand in a whistleblower claim and what your protections are, it’s important to contact an experienced whistleblower attorney.

At Ross Feller Casey, we are currently investigating potential fraud cases that are related to the CARES Act, including the PPP. We are committed to helping whistleblowers do the right thing and to receive protection and compensation for their efforts. If you believe you have witnessed fraudulent activity related to the CARES Act, we can help guide you through making a claim.

The attorneys at Ross Feller Casey are experienced with whistleblower cases falling under the False Claims Act and other whistleblower programs. We can provide the legal support you need for your case. Contact our offices for a free case evaluation before you take any other action. You won’t have any upfront fees, as all our whistleblower cases are handled on a contingency basis.

About the Author

Brian J. McCormick, Jr. is among the leading mass tort and whistleblower lawyers in the nation.

Brian McCormick, Jr.

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