Prosecutions for loan fraud are becoming more common. Many of these fraud cases involved the Economic Injury Disaster Loan (EIDL) program, the EIDL Emergency Advances, and other COVID-19 relief programs guaranteed by the Small Business Administration (SBA). Other forms of disaster relief include the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief and Economic Security (CARES) Act.
The U.S. Secret Service (USSS) is also commencing more actions to seize bank accounts under the civil asset forfeiture provisions of 18 U.S.C. § 981 (a)(1)(C), seeking forfeiture of defendant properties based on violations of 18 U.S.C. § 641 (theft of government property) and 18 U.S.C. § 1343 (wire fraud).
For example, in 2021, JP Morgan Chase Bank identified at least 17,518 accounts that had obtained SBA EIDL funds fraudulently based on the following fraud indicators present in the accounts:
- newly created accounts with abnormal transaction activity (little to no prior financial transactions) or existing accounts with no activity past 24 months prior to SBA deposit;
- large SBA loan amounts or deposits with minimal or no other sources of deposits;
- attempts to quickly move funds out of depository accounts (within 1-2 days);
- inability to positively identify account holders (synthetic or unauthorized accounts);
- limited customer inquiries after funds were frozen; and
- no proper identification was supplied following a customer inquiry after funds were frozen.
Financial institutions and banks have reported suspected incidents of fraudulently submitting PPP and EIDL loan applications through the online SBA website utilizing fabricated employment information and documentation, or stolen individual and corporate personally identifiable information.
The most common forms of fraud in the EIDL program include submitting fraudulent loan applications, using fake, stolen, or synthetic identities, using fake or fictitious businesses, or using fictitious documents. The fake and fictitious documents might include fake identity documents, tax documents, and payroll records.
Other charges include using EIDL and PPP loans for purposes expressly prohibited under the PPP and EIDL program.
USSS seized funds for civil asset forfeiture from many of those accounts through a seizure warrant that caused the funds to be wired from the bank account to the Treasury Forfeiture Fund to be held by the United States Secret Service Asset Forfeiture Branch in Washington, D.C.
For the owners of the accounts who took out the EIDL loan, if they didn’t file a timely claim for court action, they will probably lose the funds. To add insult to injury, those individuals might stil be liable to repay the SBA the full amount borrowed plus interest even when the funds were forfeited.
For innocent people caught up in those allegations, the best way to challenge the seizures involved filing a verified claim for court action to force USSS to give the funds back.
Attorney for EIDL Fraud in Tampa, FL
The first indication that the EIDL loan is being investigated for fraud might come when federal agents including the FBI or U.S. Secret Service seize money from a bank account for forfeiture.
The business owners might learn about the criminal investigation after receiving a visit from a federal agent with a search warrant. The government might seize business capital or funds from bank accounts.
The investigation might involve a subpoena or government order that requires the business owner to gather certain documents. An attorney can help you gather the required information and respond appropriately.
If you are under investigation for PPP or EIDL fraud, then contact an experienced criminal defense attorney.
We understand the ways EIDL fraud crimes are investigated by the FBI, IRS – Criminal Investigation, and SBA – Office of Inspector General. Cases are prosecuted by attorneys in the Criminal Division’s Fraud Section and Assistant U.S. Attorneys.
If you are under investigation for attempted fraud involving the EIDL program, PPP, or other types of COVID-19 related relief, then contact us.
What Happens in EIDL Loan Fraud Investigations?
When the government finds evidence of fraud, federal agents begin an investigation. After securing sufficient evidence, the alleged participants in the schemes might be charged by an indictment with 18 U.S.C. § 641 (theft of government property) and 18 U.S.C. § 1343 (wire fraud). Other federal charges might include bank fraud or aggravated identity theft.
Enacted on March 29, 2020, the CARES Act is a federal law designed to provide emergency financial assistance to millions of Americans suffering from the economic effects caused by the COVID-19 pandemic. The CARES Act authorized funding for the EIDL program that provided economic relief to small businesses experiencing a temporary loss of revenue.
Under the requirements of the program, the proceeds of the EIDL loan must be used to cover working capital and normal operating expenses including fixed debt payments, utilities, rent, and health care benefits.
SBA Report on EIDL Fraud During COVID-19 – In REPORT 20-16, the Office of Inspector General (OIG) Inspector General Hannibal “Mike” Ware issued a report dated July 28, 2020, concerning serious problems with fraud in the Economic Injury Disaster Loan and Advance grant (EIDL) program. During the response to the COVID-19 pandemic and health crisis, suspected fraud in the EIDL program lead to complaints to the hotline and from contacts in the investigative field offices and financial institutions. By July of 2020, nine financial institutions reported more than 185 million in suspected fraudulent transactions, scams, duplicate payments, and payments to ineligible recipients.
PPP and EIDL Disaster Complaint Form – For suspected cases of PPP fraud and EIDL fraud, the public is asked to report complaints to the National Center for Disaster Fraud Hotline at 1-866-720-5721, the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721, or by filling out the Web Complaint Form.
Hotline Complaint with SBA Office of Inspector General – To report misconduct, mismanagement, abuse, fraud, or waste involving SBA programs or employees, the SBA Office of Inspector General set up a hotline. Visit the website to learn more about submitting a complaint, the next steps after submitting a complaint, and whistleblower protection. OIG will no longer accept complaints submitted by email.
Attorney for PPP Fraud Investigations – Federal criminal defense attorneys represent clients during investigations into PPP fraud. The PPP funds were intended for small businesses that needed additional funding for payroll costs, interest on mortgages, rent, and utilities.
This article was last updated on Friday, December 10, 2021.