If you haven’t noticed, PPP loan fraud is becoming more and more common.
The Google search for PPP loan fraud is at an all-time high on Google Trends.
And PPP loan fraud is so out of control that it has actually become a joke over on Twitter.
We’re not sure why people are not taking the government seriously.
Or why they think they can get away with lying about businesses and employees when there are so many ways to easily invalidate their loans such as:
- payroll taxes and
- previously filed business returns
Even more, every dollar given to someone under fraudulent circumstances is one less dollar for an actual business that is actually struggling to keep its doors open, and we’re frankly fed up with it.
But, here we are!
So in this post, we’re going to break down exactly how this scam works by taking a look at a few people who have gotten caught so far.
And we say so far because we think we are going to see a flood of new arrests in the upcoming weeks.
These are the stories of those who went cooh-cooh, not for coco puffs, but for PPP.
PPP Loan Fraud Stories
1. The Pastor
When you think of someone with over 39 cars, only a few people may come to mind. Maybe Mark Zuckerberg?
But, in this case, you won’t believe this, it’s actually a pastor.
That’s right.
Rudolph Brooks Jr, the pastor of Kingdom Tabernacle of Restoration Ministries in Washington DC, was arrested and accused of using PPP money to buy over 39 cars.
And actually, one of which was a Tesla Model 3.
Now, despite having good taste in cars, here is where things took a turn for the worse.
According to the criminal complaint, he also identified himself as the owner of a business called Cars Direct.
It’s a used car business that he used to apply for PPP loan.
Authorities say that Mr. Brooks opened Cars Direct in 2010 but actually shut it down in 2012, which is only 2 years after starting it.
That was until Brooks allegedly brought the business back to life in May of 2020.
And that is merely 2 months AFTER the CARES Act and the Paycheck Protection Program was signed into law on March 27th.
Then, according to authorities, Mr. Brooks applied for 1.5 million dollars in PPP funding for the business Cars Direct and used fraudulent tax forms to support his application.
Once approved, he is accused of transferring the funds to his personal bank account and buying over 30 cars with the awarded PPP funds.
Nice cars… including a Bentley Continental, a Mercedes Benz S-Class, a Tesla Model 3, and two Infiniti Q50s.
Then in August, authorities say Mr. Brooks wired more than $140,000 to a title company for the purchase of a property in Baltimore.
But, Mr. Brooks allegedly couldn’t believe how easy the scam was and decided to test his luck by applying for two additional PPP loans.
Well, on April 2nd, federal authorities arrested Mr. Brooks and seized more than 2 million dollars from 11 different bank accounts.
Authorities claim Brooks fraudulent tax returns showed over 700 thousand in payments and 7 million in unemployment payments to employees of Cars Direct.
And this ultimately led to his arrest as the IRS and State of Maryland investigated his claims.
If Brooks is found guilty, he is facing a maximum of 20 years of imprisonment.
Let’s unpack this.
The Problem: This is the case of someone who allegedly used a dissolved business, fraudulent tax returns, and used PPP funds for non-business activities.
All things you cannot do under PPP guidelines and, if true, a recipe for jail time.
2. Hotels and Louis Vuitton
Facebook’s videos show a hotel room covered in $100 bills and Louis Vuitton bags.
But it wasn’t a clip from the latest Instagram influencer. It was a video allegedly posted by the Florida couple Julio Lugo and Rosenide Venant.
Authorities claim Lugo and Venant applied for 5.8 million dollars in both PPP and EIDL funds…
…by submitting over 70 fraudulent applications for Shell companies created by Lugo, Vennat, and their relatives… all while using their home IP address.
And once they obtained the funds, they allegedly:
- paid off a luxury vehicle,
- used over 13,000 at weight-loss centers,
- used over 62,000 of it to gamble at a casino, and
- 320,000 was withdrawn in cash
Their newfound wealth was then publicized on Facebook with a video showing a hotel room lined with cash and at least $5,000 in Louis Vuitton.
And this is according to the Middle District of Florida Acting U.S. Attorney.
Do you think their short-lived taste of luxury was worth it?
If convicted, Lugo faces up to 45 years, and Venant faces up to 35 years in Federal Prison.
The Problem: This couple used fraudulently obtained PPP and EIDL funds to pad and flaunt a luxury lifestyle.
3. Teamwork and Farms
Next on our list is a South Florida couple who, authorities say, filled their bank accounts with over $800,000 in PPP loans and over 200,000 in Economic Injury Disaster Loans.
It starts with a Florida couple who claimed to be farmers, owners of a beauty supply store, and owners of an auto leasing business.
Latoya Stanley and Johny Philus worked together to allegedly filed four fraudulent loan applications, as well as fraudulent PPP applications.
Authorities say that Stanley filed a PPP loan for her company Dream Gurl Beauty Supply that she said employed 18 people.
Meanwhile, Philus filed for a separate PPP loan for an auto leasing business named Elegance Auto Boutique that employed over 20 people.
But the couple didn’t stop at the Paycheck Protection Program (PPP); the couple set their scheme on the Economic Injury Disaster Loans (EIDL) next.
Stanley is accused of completing an EIDL loan application that reported over $800,000 in revenue and 5 employees for a farm located at her residence,
And, Philus reported $400,000 in income and 10 employees for a farm located at another residence.
In total, Stanley and Philus teamed up to ultimately receive over $1 million in funds from the PPP and EIDL applications they filled.
But, according to the Department of Justice, the farm did not exist and neither did a single employee.
Let’s unpack this.
The Problem: This couple used teamwork, non-existent businesses, and made-up employees to get access to PPP and EIDL funds.
The three stories we just mentioned are just the tip of the iceberg for those being caught, and our hope is that this post will encourage anyone reading not to commit fraud.
So let’s dig a bit deeper into what is PPP loan fraud and what you can do if you know someone is committing fraud.
What is PPP Loan Fraud?
The False Claims Act makes it illegal to apply for SBA loans and PPP loans using false information. This includes the act of:
- making up businesses,
- using previously dissolved businesses,
- misstating your employee count, and
- using awarded money for purposes other than its intended use
Even after a business obtains a PPP loan, it must abide by strict requirements and limits on how businesses can spend the funds.
Common PPP Loan Fraud Triggers
1. Making false statements on your PPP application
2. Applying for multiple PPP loans across multiple lenders, also called “loan stacking”
3. Using awarded PPP funds for unapproved purposes
PPP Fraud Criminal Charges
There are 4 common criminal charges for someone accused of PPP loan fraud.
1. Wire fraud
2. Bank fraud
3. False statements to a financial institution
4. Conspiracy to commit fraud
How To Report a Complaint
There are three ways to report PPP and EIDL Loan Fraud:
1. Submit an online complaint at https://sbax.sba.gov/oigcss/
2. Call the OIG Hotline at (800) 767-0385
3. Submit a complaint by mail to the following address:
Office of Inspector General
409 3rd Street, SW, Suite 7150
Washington, DC 20416
Takeaways
Well, there you have it!
We truly hope this helped someone today. In any case that you want to seek advice for your specific financial situation, our CFO services can help you.
Contact us today at 470-240-1437!