Updated: Mar 5
By Anna Dover
SBA reports over 40,000 PPP fraud calls to its whistleblower hotline.
Along with our fellow False Claims Act brethren, we at Bracker & Marcus LLC have been on high alert for COVID-19-related fraud since the inception of various governmental programs. And sure enough, we have been inundated with calls from potential whistleblowers.
We’re not the only ones; according to the New York Times, the Small Business Administration’s (SBA) fraud hotline – which received fewer than 800 calls last year – has already received more than 42,000 COVID-19-related reports. According to the same report, the Department of Justice has already filed 41 criminal complaints alleging $62 million in Paycheck Protection Program (PPP) fraud, with new charges being brought every day.
As the pandemic continues to present new opportunities for fraud, we thought it would be important to review: (1) the various Coronavirus relief programs; (2) examples of government enforcement actions; and (3) Coronavirus oversight issues.
COVID-19-Related Government Assistance Programs and Entities
Nearly $3 trillion in taxpayer funds has been distributed to assist businesses, deliver COVID-19-related health care, and provide aid to unemployed workers under the following:
Coronavirus Aid, Relief and Economic Security Act (CARES Act)
Paycheck Protection Program (PPP)
Healthcare Enhancement Act
Keeping American Workers Paid and Employed Act
Families First Coronavirus Response Act
The CARES Act and related legislation not only provided relief to individuals but also provided targeted relief to different government sectors. One of the most discussed of these areas of relief is the $521 billion that went to nearly 4.9 million small businesses to help them meet basic expenses and keep employees on the payroll.
The CARES Act addresses COVID-19-related relief fund fraud with the establishment of new offices and committees. These include the Office of the Special Inspector General for Pandemic Recovery (SIGPR), the Congressional Oversight Commission (COC), and the Pandemic Response Accountability Committee (PRAC).
Government Enforcement Actions Related to COVID-19
Although most whistleblower cases filed under the False Claims Act will presumably be under seal at the time of this writing, a review of Government enforcement actions related to COVID-19 is instructive:
A Georgia man was arrested for violating the Anti-Kickback Statute (“AKS”) by agreeing to receive financial kickbacks on a per-test basis for COVID-19 tests. The tests were bundled with more expensive tests.
A Georgia woman was arrested for violating the AKS by “receiving kickbacks in exchange for referring Medicare beneficiaries for expensive genetic screening tests and COVID-19 tests.”
An Arizona man was charged with health care fraud and money laundering for allegedly billing for services that were medically unnecessary, as well as billing for services provided in the names of physicians who had no role in the assessment. The man had used his company’s social media presence to offer free COVID-19 testing if patients also completed the company’s assessment, which he then used for the billing scheme.
A Texas man was charged with wire fraud, bank fraud, and making false statements for allegedly seeking millions of dollars in forgivable loans from the SBA based on fictitious payroll expenses. He allegedly falsely claimed that he had 250 employees earning wages, when in fact he had no employees working for the purported business.
Oversight Problems Related to Coronavirus Relief Programs
Despite the Government’s efforts to combat COVID-19-related fraud, a myriad of frauds continue unabated. Just this week, the House Select Subcommittee on the Coronavirus Crisis found that $1 billion in PPP relief went to companies that “double-dipped” by receiving multiple PPP loans in violation of program rules.
Nearly all of these loans (65 of the 10,586 loans identified) would have escaped scrutiny under the current oversight rules, which only require audits for loans over $2 million. As a result, the Subcommittee warned that the current oversight plan was “plainly insufficient” and that “fraudsters are well aware of this limited audit plan and limited program oversight.”
“More Than 600 Loans Totaling Over $96 Million Went to Companies Excluded From Doing Business With the Government. Staff identified 613 PPP loans, amounting to $96.3 million, provided to borrowers that are ineligible to receive PPP funds because they have been debarred or suspended from doing business with the federal government.
More Than 350 Loans Worth $195 Million Went to Government Contractors With Significant Performance and Integrity Issues. Staff found that SBA approved 353 PPP loans, amounting to approximately $195 million, to government contractors previously flagged by the federal government for performance or integrity issues.”
A tremendous amount of fraud is expected with the PPP loan forgiveness program, which requires that 60% of the funds be spent on payroll in order to be forgiven.
Fight Fraud with Bracker & Marcus LLC
So, how can a concerned citizen help ferret out this burgeoning COVID-19-related fraud? As the New York Subway saying goes: “If you see something, say something.” As always, our door is open to whistleblowers. We offer free consultations and want to hear about fraud of all kinds, including those related to COVID-19.
And if your employer applied for PPP funds and is driving a new Lamborghini, definitely give us a call.
For more on COVID-19:
If you believe you have a whistleblower case and need to find a whistleblower lawyer, you can search the TAFEF membership directory, more than 400 experienced attorneys.