While you may likely be incarcerated for a COVID relief fraud conviction, it’s prison time, not jail time, you’ll be facing. The difference between the two types of confinement is substantial. Generally, jail is for people awaiting trial or those sentenced to a period of incarceration of 1 year or less. Conversely, prison is for people convicted of more serious crimes – felonies – which carry lengthy terms of imprisonment.
COVID relief fraud is prosecuted under a range of federal statutes, including, but not limited to:
- Bank fraud,
- Wire fraud,
- Making false statements,
- Engaging in transactions in unlawful proceeds,
- Unauthorized access device fraud, and
- Aggravated identity theft.
These crimes are generally punishable by anywhere from 2 to up to 30 years of imprisonment. Thus, they are considered felony federal crimes.
What Conduct Is Considered COVID Relief Fraud?
COVID relief fraud is any act or scheme designed to defraud the government of funds specifically earmarked to assist individuals, businesses, and other entities economically affected by the COVID pandemic.
In March of 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Securities (CARES) Act. Established and expanded upon under CARES were the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL), providing low-interest rate loans to small businesses, non-profits, and agricultural entities. Funds from these loans are required to be used for business-related costs. With the PPP loan, if a certain percentage of the proceeds is allocated to payroll expenses, the loan may be forgiven.
During the pandemic, the PPP and EIDL were, and continue to be, very attractive financial solutions to those trying to remain afloat at a time of great devastation and uncertainty. Many people submitted legitimate applications for these sources of relief. Unfortunately, a few others applied using false information or engaged in other fraudulent acts to obtain proceeds. Because such conduct is related to funds set aside for COVID-related matters, it is considered COVID relief fraud.
Examples of COVID relief fraud include, but are not limited to:
- PPP fraud: PPP fraud is committed when a person attempts to secure a PPP loan through the use of fraud. There are several ways this can happen:
- Applicants might report higher payroll expenses than they actually have,
- Individuals might create shell corporations that aren’t in operation and seek multiple loans,
- Groups of people might work together to submit the same application using different business names, or
- Recipients might use PPP proceeds for unauthorized purchases.
- EIDL fraud: EIDL fraud can occur when someone applies for a loan under this program yet uses the funds for something other than what’s allowed.
- Unemployment insurance (UI) fraud: In addition to establishing PPP and EIDL loans during the COVID pandemic, the federal government also allocated $860 billion for unemployment insurance benefits, as many people were losing their jobs. Cases of UI fraud might involve someone falsely filing a claim or using another person’s identity to seek benefits.
- Identity theft: Identity theft may be considered a type of COVID relief fraud if the alleged actor stole someone else’s identity to fraudulently apply for a PPP or EIDL loan or unemployment insurance benefits.
Is COVID Relief Fraud Being Investigated?
Because COVID relief fraud deprives individuals and businesses of much-needed financial relief, the government is vigilant about identifying and investigating alleged cases of these offenses. Several committees, groups, and task forces were developed specifically for such activities. Additionally, various law enforcement divisions consisting of highly trained experts often collaborate on these matters.
A few of the organizations handling COVID relief fraud cases include, but are not limited to:
- Pandemic Response Accountability Committee (PRAC): PRAC was established in March of 2020 when the CARES act was enacted. One of the goals of the committee is to detect fraud involving COVID relief funds. To do this, it employs data analytics and risk assessment. It also supports law enforcement agencies in their fraud investigations.
- The Criminal Division’s Fraud Section: The Fraud Section specializes in investigating complex white collar crimes. Since the CARES Act was enacted, the Section has aided in prosecuting hundreds of defendants in a range of COVID relief matters related to fraud, false statements, and money laundering.
- The Enforcement Task Force: Established in May of 2021, the COVID-19 Fraud Enforcement Task Force serves to enhance interagency coordination efforts to identify, investigate, and prosecute COVID relief fraud. It also uses its insight into the enforcement of these types of crimes to assist in increasing fraud prevention for agencies administering financial assistance programs.
In March of 2021, the Southern District of Florida announced that it would be ramping up its efforts to investigate and prosecute those accused of UI, EIDL, or PPP fraud. Earlier this year, it charged 18 federal crime cases related to COVID relief fraud. Since the CARES Act was passed, it charged 38 financial fraud cases. In a press release, Acting Assistant Attorney General Nicholas L. McQuaid of the Justice Department’s Criminal Division said, “No matter where you are or who you are, we will find you and prosecute you to the fullest extent of the law.”
Are People Being Charged with and Convicted of COVID Relief Fraud?
The various agencies and efforts established to combat COVID relief fraud have resulted in several individuals and groups being prosecuted.
Recent examples of COVID relief cases occurring specifically in Florida include the following:
- Ex-NFL player charged: In September of 2020, a former NFL player was accused of fraudulently applying for over $24 million in PPP loans. Allegedly, he got more than $1.2 million for his company but did not use the funds for business-related expenses. Prosecutors allege that he bought luxury goods, spent thousands at a casino, and withdrew over $300,000.
- Florida man purchases sports car: In July of 2020, a Florida man was charged with PPP loan fraud. The prosecution alleged that he claimed on his application that he had millions of dollars of monthly payroll expenses. Allegedly, he submitted false IRS forms to support his claims and helped others file fraudulent PPP applications. He is said to have used the funds to buy a $318,000 sports car and make purchases at luxury retailers in Miami Beach. In May of 2021, he pled guilty to one count of wire fraud and was sentenced to 6 years in prison.
- NFL player charged with identity theft: An NFL player was charged with COVID relief fraud crimes, including unauthorized access device fraud and identity theft. Allegedly, from August of 2020 through September of 2020, he used the Social Security Numbers and personal information of Florida residents to apply for an obtain prepaid UI benefit debit cards from California.
- Florida woman convicted of PPP fraud: In November of 2021, a Florida woman was found guilty of wire fraud and conspiracy to commit bank fraud and wire fraud. Prosecutors alleged that she received an $84,515 PPP loan by submitting an application purporting false payroll figures and accompanied by fraudulent tax and bank records. They also claim that she paid another individual $21,000 for help preparing the false documents. Her accomplice was charged on November 10, 2021, with wire fraud, bank fraud, and conspiracy to commit wire fraud.
How Much Prison Time Can You Get for COVID Relief Fraud?
As mentioned earlier, COVID relief fraud comes in various forms. The penalties that can be imposed upon a conviction are tied to the conduct involved.
Examples of crimes individuals have been charged with and the punishments attached include:
- Bank fraud: Up to 30 years of imprisonment
- Wire fraud: Up to 20 years of imprisonment
- Engaging in transactions in unlawful proceeds: Up to 10 years of imprisonment
- Unauthorized access device fraud: Up to 10 years of imprisonment
- Conspiracy: Up to 5 years of imprisonment
- False statements: Up to 5 years of imprisonment
- Aggravated identity theft: 2 years of imprisonment
The prison terms listed above denote the maximums for each offense. The judge will consider the entirety of the circumstances to determine the sentence.
If you are being investigated for or have been charged with COVID relief fraud in Miami, speak with a defense attorney who handles federal crimes. They can advise you on courses of action and fight for a favorable outcome, such as dropped charges or reduced sentences.
At Hager & Schwartz, P.A., we understand that being charged with a federal crime can be scary. Please know that you have options to challenge the accusations. Our team is here to discuss possible defenses and work diligently to protect your rights and best interests.
Schedule a consultation by calling us at (305) 330-1360 or submitting an online contact form today.