Illustrative PPP Fraud Cases

Recently our firm addressed “Why is PPP Fraud So Prevalent?” which can be found here. To recap, the Paycheck Protection Program, aka PPP, emerged as a response from Congress to the Coronavirus pandemic. Created to help people and businesses in financial straits, the program has been widely abused by those making fraudulent claims.

Specifically, PPP fraud can be identified in three ways. One, an individual or company applies for a PPP loan based on fraudulent misrepresentations, or, utilizes the funds in an appropriate manner, but then misrepresents the use on the backend. Two, an aggregator (someone who helps the individual or business apply for a PPP loan in exchange for a fee) assists with the submission of a fraudulent loan. Three, a bank fraudulently approves PPP loans, earning significant fees in the process.

The Department of Justice is aggressively investigating all types of PPP fraud. In the recent State of the Union address, the President announced a chief prosecutor will be named to pursue pandemic-related fraud, including fraudulent PPP loan applications.

The three types of fraud, as noted above, are best illustrated by the following cases:

Individual’s PPP Fraud

Robert Benlevi of California submitted 27 loan applications to four banks on behalf of eight entities solely owned by Benlevi for a total of $27 million. Despite none of the companies having any payroll expenses, Benlevi submitted that payroll expense for each company was over $400,000 a month. To back up his claims, he also had to fabricate and submit fraudulent IRS documents. The trial is presently scheduled for March 22.
Of $30 million requested in loan applications, a California couple received $13 million in PPP funds by stating that 18 businesses were in operation and needed funds to retain workers by paying salaries and payroll taxes when that was not the case. To date they have been indicted but not convicted.

Aggregator Schemes

Twenty-two individuals charged in a plan conducted by a Georgia man to obtain over $11 million in fraudulent loans. Many of the defendants submitted similar applications for loans of $800,000 for businesses of approximately 60 employees. Accomplished by submitting fraudulent IRS forms 941s.
Fifteen individuals charged in a single conspiracy; the four aggregators conspired with others to submit over 80 fraudulent loan applications for over $35 million. Defendants obtained roughly half the requested sum and tried to perpetuate the scheme by writing checks to fake employees.
Two Florida men engaged in a nationwide scheme for over $30 million. After successfully obtaining fraudulent loans for one of the men’s companies, the two recruited other applicants to submit loans on behalf of — and took a 25 percent cut of — the 70 plus applications they were able to submit.

Lender Fraud

MBE Capital accrued over $70 million in fees by obtaining almost one billion dollars in capital for the company to participate as a non-bank lender under the PPP program. The company issued PPP loans to borrowers, but only after making false representations and creating fraudulent documents to obtain the approval. Not content with the $70 million in lender fees, the owner of the company also fraudulently applied for $300,000 in loans for MBE Capital to pay its own payroll expenses!

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