First coronavirus stimulus fraud charges filed against two men seeking $500K in PPP loans

Experts suspect many more instances of fraud could be occurring.

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The Department of Justice announced charges against two men Tuesday for allegedly attempting to defraud a federal coronavirus stimulus program – the first charges of their kind in the nation.

The pair were charged in the District of Rhode Island for filing fraudulent applications under the Small Business Administration’s Paycheck Protection Program, seeking $500,000.

According to the Justice Department, the men conspired to seek the forgivable loans, claiming to have dozens of employees earning wages at four different businesses – when there were allegedly no employees working at any of those businesses nor were two those businesses operating before the start of the COVID-19 pandemic. The third business was not owned by either of the men.

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“Tens of millions of Americans have lost their jobs and have had their lives thrown into chaos because of the coronavirus pandemic,” U.S. Attorney Aaron L. Weisman for the District of Rhode Island said in a statement. “It is unconscionable that anyone would attempt to steal from a program intended to help hard working Americans continue to be paid so they can feed their families and pay some of their bills.”

The scheme was allegedly discussed via email, where there was allegedly discussion about creating supporting documentation.

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Unfortunately, there could be many more instances of fraudsters seeking funding through the program.

Howard Dvorkin, chairman of Florida-based Debt.com, told FOX Business he suspects the program will be riddled with fraud, which he noted was “sad” considering many businesses that actually need the assistance may not get it.

One example of potential fraud Dvorkin foresees potentially occurring is a person who may have fired all of his or her staff and applied for a loan, with no intention of rehiring workers, and then files for bankruptcy protection.

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PPP is a federal aid program created under the CARES Act designed to incentivize small business owners to keep their employees on staff despite the difficult financial conditions that have resulted from the coronavirus crisis. Applicants can receive up to $10 million, which can be forgiven in certain cases. At least 75 percent of the money must be put toward payroll costs – the other portion can be used for mortgage interest, utilities and rent.

After an initial $350 billion worth of funding ran out, Congress reached a deal to replenish the program with another $310 billion.

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