The COVID-19 epidemic has resulted in relief payments to millions of people across the United States to alleviate the economic downturn associated with the pandemic. It has also sparked fraud investigations over the alleged misuse of relief funds.
This month, federal investigators charged a 32-year-old Texas man with bank fraud, wire fraud, and making false statements.
Samuel Yates of Maud, Texas is accused in the U.S. Eastern District of Texas of seeking millions of dollars in loans from funds intended for people affected by the pandemic.
He is accused in a federal criminal complaint of trying to obtain $5 million in forgivable Small Business Administration loans, according to prosecutors. They also accuse him of submitting forged tax documents.
U.S. Attorney Joseph D. Brown of the Eastern District of Texas said people try to take advantage whenever the government hands out large sums of money.
“Any time the government provides large amounts of money to the public there are people who will try to cheat the system,” he said. Brown said the U.S. Department of Justice is prioritizing these white-collar crime investigations.
Documents filed in U.S. District Court claim Yates used an internet random name generator to compile a list of fictitious employees. Media reports suggested federal investigators even searched the suspect’s trash as part of the investigation.
He is accused of filing applications with two lenders. An initial application sought $5 million in Paycheck Protection Program loans, the feds allege. Yates is accused of claiming that he had a business employing more than 400 people along with a monthly payroll of $2 million.
Yates allegedly claimed more than 100 employees and received a loan for more than $500,000 in an application to a second lender.
The CARES Act passed into law in March as the coronavirus shutdown began. The Paycheck Protection Program allowed qualified small businesses to receive loans at a low interest for up to two years. The money must be used to pay business-related expenses such as payroll costs, rent, utilities, and interest on mortgages.
The program came under fire. The Justice Department has urged financial institutions to immediately report all suspicious applications or suspected fraud under the program.
According to Forbes, the PPP made $659 billion available to small businesses hit hard by the pandemic. Many of the loans were forgivable. However, federal prosecutors are now cracking down on people who abused the program and bringing fraud prosecutions.
On May 5, two suspects from Massachusetts and one from Rhode Island were charged with conspiracy to commit bank fraud. They allegedly applied for a PPP loan of over $540,000. Prosecutors said they claimed they employed dozens of workers when no employees worked for the enterprise.
Some states point to an upsurge in unemployment fraud during the pandemic as imposters seek to take advantage of elevated payments from the federal government.
The Washington State Employment Security Department issued a news release on May 18 warning of a “dramatic rise” in unemployment imposter fraud in early May as it continues to deal with the strains of the coronavirus pandemic.
“This is happening because bad actors have acquired people’s personal information through other data breaches outside of the agency,” Employment Security Department Commissioner Suzi LeVine said in the press release. “Criminals then use this information to fraudulently apply for unemployment benefits in someone else’s name.”
Our Dallas-based white-collar crime attorneys represent many people who are accused of fraud. Although there are well-documented cases of people taking advantage of the pandemic, this is a confusing time for many claimants and people are unwittingly getting into trouble with the law. If you have been charged with fraud or a similar crime, please call us at (214) 720-9552.