In the United States, we’ve become an epicenter for COVID-19. The result is many small businesses are hurting to retain customers and employees in the wake of the pandemic. For this reason, Congress passed the Economic Security (CARES) Act.
The CARES Act was designed to tackle economic issues, providing coronavirus aid on many fronts. It established a distribution of stimulus checks for American families, new pathways to create jobs, assistance for state and local coronavirus management and a small business loan program called Paycheck Protection Program, the focus of this article.
However, long before the CARES Act was an American imperative, the False Claims Act came to be in 1863. The terms of this piece of legislation were created to prevent businesses and individuals from making intentionally false or misleading claims against public services, like Medicare. Fraud cases that occur due to the PPP may fall under this federal law established to prevent them.
When you see fraud happening within your organization, it takes courage to become a whistleblower. That’s why Qui Tam lawsuits help whistleblowers get a portion of funds recovered by federal prosecutors that would otherwise go to the federal government. If you have witnessed the misuse of PPP funds or intentionally misleading applications that received said funds, you may have a whistleblower lawsuit on your hands.
Here’s everything you need to know about being a PPP loan whistleblower:
Paycheck Protection Program & The False Claims Act
The CARES Act created the Paycheck Protection Program (PPP) amid the COVID-19 pandemic.
Simply put, with coronavirus ravaging small businesses, Congress knew something needed to be done to offer relief. In times like these, of intense pressure, that some of the most enduring legislation is enacted.
For example, the False Claims Act (FCA) of 1863, which established liability in defrauding the government, was created to prevent the union military suppliers from fraudulently charging the U.S. Army during times of desperation in the Civil War. However, this piece of legislation has since been interpreted and applied to many cases where individuals or business owners attempted to make false claims against federal government programs, like the PPP, which establishes coronavirus aid.
While everyone is hurting over coronavirus, it’s not justifiable to take money that could otherwise help small business owners when you don’t meet the minimum qualifications to do so.
In recent news, University of Southern California (USC) is one vast institution to receive heat for accepting and keeping $20 million in PPP funds. The University contends it has a smaller endowment than other universities that received funds and therefore will be keeping the money, even though many other universities that received PPP money opted to return it amid outcry from small business owners whose applications were denied, or who are still waiting to receive PPP funds.
The result of this revelation that large corporations are absorbing millions of dollars in money that could be going to small business owners has sparked interest in misuse of PPP funds and the potential for fraudulent cases.
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What Is The Paycheck Protection Program (PPP)?
The Small Business Administration (SBA), with help from the U.S. Treasury Department is responsible for overseeing the PPP, which mandates terms for receiving a PPP loan and loan forgiveness. These include top-line qualifications like:
- Small business owners can receive loans that cover 8 weeks of payroll costs and interest on mortgage, utilities and other essential payments.
- Loan payments are deferred for 6 months.
- Small business owners do not have to put up collateral to receive loan money.
- Loans that are issued by the federal government and used appropriately to support payroll for 8 weeks are fully forgiven.
That said, loan forgiveness is based on keeping current employees or rehiring employees quickly at their normal rates once the loan has been received. During the application process, small business owners are asked to disclose things like number of employees and payroll costs in order for SBA to establish qualification and financial need.
Hiring A PPP Whistleblower Attorney
Before making a whistleblower claim, it’s important to consult with an experienced PPP loan attorney to ensure you know what’s justified under the law, and what’s not. For instance, using PPP loans to pay back-pay owed to employees at the start of the 8-week loan period is an acceptable use of funds, but lying about the number of employees that require back-pay is not.
In FCA fraud cases, a whistleblower might encounter someone exaggerating the number of employees retained or payroll costs the loan extends to on the PPP loan application. In these instances, it makes sense to involve the Department of Justice (DOJ) by filing a lawsuit. Whistleblower cases may be rare, but they are important to preserving the integrity of small business and ensuring equitable distribution of government funds.
When you work with Florin|Roebig, you partner with attorneys that have experience with whistleblower lawsuits. We understand the importance of attorney-client relationships in ensuring whistleblower protection and that’s why we always offer confidential consultation. If you’re a whistleblower who knows about small business fraud against PPP and is thinking of becoming a qui tam relator on behalf of the federal government, don’t leave your legal needs in the hands of federal prosecutors, you need your own attorney who keeps your protection and interests in mind.
PPP Whistleblower: Whistleblower Claims
The PPP helped more than 5 million small businesses stay afloat during the darkest times of COVID-19 pandemic, paying out billions of dollars in claims. As of July 2020, the program ended with more than $130 billion in the pot that would be used to help businesses until August 2020. It may seem like a lot, but with a finite program like PPP, every dollar counts for businesses that need it.
That’s why whistleblower claims help ensure the right people are receiving PPP funds. As of August, the U.S. Department of Justice filed 39 fraud claims against businesses who are alleged using the money illegally or outside of the scope of their application and terms of agreement.
The U.S. Small Business Administration relies on whistleblower law when implementing the Paycheck Protection Program during a time of COVID-19 crisis. While 39 claims have been filed, it’s an unfortunate reality that likely many more exist, because in times of financial uncertainty it’s more likely business owners will try to exploit the system.
And exploit it they do. An article by SmallBizTrends says the items recovered by DOJ officials have been numerous and, in some cases, down right unbelievable. “Feds have seized a 2020 Lamborghini Huracan sports car, a Rolex Presidential watch, a 5.73-carat diamond ring, and a diamond bracelet — all purchased with PPP loan money. Other loot includes a Tesla, a 26-foot Pavati Wake Boat, a 33-foot Cruiser yacht, two Rolls-Royces, a Lamborghini Urus, a Kia Stinger, and a Ford F-350 pickup truck.”
In addition to luxury items, federal agents are also recovering large sums of money from personal accounts and freezing liquid assets.
The Office of the Inspector General is responsible for investigating inquiries into PPP fraud as a non-biased third party between SBA and business owners. The office is savvy at investigating fraud, which should make business owners think twice before committing PPP funds to anything other than payroll expenses or other eligible expenses.
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Contact A PPP Loan Fraud Lawyer
If you think you’ve witnessed fraud and are in need of legal advice, don’t wait, reach out to a lawyer for a confidential and free consultation. Fraud cases involving small business owners receiving government loans and incentives go against the False Claims Act and can be prosecuted by the DOJ.
As a whistleblower, you may be entitled to some or all of the money that federal prosecutors recover for the federal government via Qui Tam writ. Business owners who receive forgiven PPP funds are required to use those funds to meet minimum qualifications regarding payroll expenses and other essential costs, but if you’ve witnessed the misuse of funds or inaccurate application for funds you may have a whistleblower lawsuit.
The law firm of Florin|Roebig is experienced at protecting whistleblowers and protecting your rights in a fraud case. If you need a PPP loan fraud lawyer, we are here to answer your questions. Call to schedule a free consultation today.