An Ounce of Prevention: Preparing for CARES Act Fraud Investigations

Early on, the government made clear its commitment to rooting out fraudsters attempting to pilfer PPP funds. In late April, Treasury Secretary Steven Mnuchin said the SBA would conduct a full audit of PPP loans over $2 million prior to forgiveness and that borrowers may face criminal liability if they make false loan certifications. Based on loan data released by the SBA and Treasury Department (as of June 30), a modest number of the 4.9 million PPP loans fall above the $2 million mark — approximately 294,000, or 0.6%. But the value of these loans is significant — over $10 billion — and underscores the importance of government monitoring and enforcement.

The government appears to be fulfilling its commitment to rooting out PPP fraud, even when the amount at issue falls below the $2 million threshold. On July 13, the Department of Justice announced charges against the owner of a Washington, DC-based residential construction contracting firm for allegedly submitting a fraudulent tax return and bogus Social Security numbers for fake independent contractors when applying for a $400,000 PPP loan. Similar cases have been brought against business owners in other parts of the country, including Georgia ($2 million loan), Florida ($22,000 loan) and Texas ($1.1 million loan). Notably, the SBA's Office of Inspector General worked closely with DOJ on these prosecutions, showing close coordination between the agencies for PPP-related fraud.