Fraud rings targeting coronavirus-linked unemployment assistance programs.

57 people arrested in attempted thefts from small business program

WASHINGTON >> The Justice Department said Thursday it had charged 57 people with trying to steal more than $175 million from the Paycheck Protection Program to help small businesses during the coronavirus pandemic as questions swirled about how its funds were disbursed.

Some cases involved “individuals or small groups, acting on their own, who lied about having legitimate businesses or who claimed that they needed PPP money for things like paying workers or paying bills, but instead used it to buy splashy luxury items for themselves,” Brian C. Rabbitt, the acting head of the department’s criminal division, said at a news conference.

In other cases, coordinated criminal rings stole large sums of money from the loan program, Rabbitt said.

“We will be focusing on these types of cases going forward,” he said.

The federal government offered emergency loans to small businesses through the Paycheck Protection Program as part of the Coronavirus Aid, Relief and Economic Security Act enacted in March to stave off a wave of catastrophic job losses as the pandemic took hold in the United States and businesses were forced to close. The loans could be forgiven if the funds were used to cover payroll and certain other expenses.

Rabbitt said that the 57 cases charged by the criminal division ranged from loan requests for $30,000 to about $24 million, and that cases had been brought across the U.S. Federal prosecutors had also brought separate fraud cases related to the coronavirus relief programs, he said, but he did not mention how many.

The department and other law enforcement agencies this week arrested suspects accused of trying to steal $24 million in funds from the program as part of a criminal ring. On Thursday morning, the Justice Department unsealed charges against seven people accused of participating in a separate criminal ring that worked to steal

and launder hundreds of thousands of dollars from the lending program; it arrested two men in Buffalo, New York, accused of trying to steal $7.6 million.

When applications for the program closed last month, 5.2 million loans had been made totaling more than $525 billion.

But even as the program was being finalized, Justice Department officials prepared for a wave of fraudulent activity, particularly because the loans would be distributed as quickly as possible and with less scrutiny than other traditional business loans.

The department announced its first fraud case in May, just weeks after the emergency lending program began.

Not long after the Paycheck Protection Program

had disbursed its first tranche of loans, myriad problems emerged, partly because officials had struggled to define what constituted a small business for its purposes.

Some large, publicly traded companies took the loans, as did contentious borrowers like small financial firms that manage money for the country’s riches families; Washington lobbying firms; Kanye West’s company, Yeezy; and President Donald Trump’s longtime personal lawyer Marc E. Kasowitz. While their loans were not fraudulent, lawmakers and smallbusiness advocates argued that the money had been diverted from businesses in need to enrich wealthy people and companies.

Much of the federal coronavirus aid was also distributed through banks, which were criticized for favoring their existing customers.

JPMorgan Chase, which

distributed more than $29 billion in Paycheck Protection Program loans, the most by any lender, recently acknowledged in a memo to employees that some employees and customers had misused federal aid money that had been intended to provide coronavirus relief.

“We are doing all we can to identify those instances and cooperate with law enforcement where appropriate,” the bank’s leaders said in the memo.

Sen. Marco Rubio, RFla., asked Jamie Dimon, the chief executive of JPMorgan, for more information about the allegations that bank employees and customers had abused the Paycheck Protection Program and the Economic Injury Disaster Loan program, another component of the CARES Act.

“Allegations that employees of financial institutions have exploited either the PPP or EIDL programs

for their own gain must be investigated fully,” Rubio wrote in a letter to Dimon.

Law enforcement officials said it would take a long time to find and prosecute people who defrauded the government. The Small Business Administration’s fraud hotline has received at least 42,000 reports about coronavirus-linked graft, far more than the 800 calls it fielded last year.

The Justice Department is working with banks, the Small Business Administration, the Treasury Department, the Postal Service, the IRS and others to gather and analyze data from the loan applications for red flags.

The Justice Department’s criminal division has recovered or frozen more than $30 million in fraudulently obtained assets, and it is working to seize additional funds and liquidate assets purchased with Paycheck Protection Program funds.