The Paycheck Protection Program (PPP) was introduced by the federal government as part of the CARES Act in 2020 to help businesses keep their workforce employed during the COVID-19 pandemic. Despite its good intentions, the program has been susceptible to fraud, with Massachusetts seeing its fair share of cases. PPP fraud undermines the efficacy of aid intended for struggling businesses and carries serious legal consequences. Here we explore the nature of PPP fraud in Massachusetts, its impact, and the legal repercussions.
The Nature of PPP Fraud
PPP fraud typically involves businesses or individuals falsifying information to receive funding they are not entitled to. In Massachusetts, as in other states, this has included overstating the number of employees, inflating payroll costs, or misrepresenting the necessity of the funds for business continuity. Some more egregious cases have involved creating fake businesses to apply for multiple loans.
Common Types of PPP Fraud in Massachusetts:
- Multiple Applications: Businesses or individuals applying for multiple loans under different business names or EINs without disclosing previous loans.
- Inflated Payrolls: Overstating payroll expenses to receive higher loan amounts.
- Misuse of Funds: Using the PPP loan for unauthorized purposes, such as personal expenses rather than payroll, rent, utilities, and interest on mortgages.
Legal Ramifications
The legal consequences of PPP fraud are severe. The U.S. Department of Justice (DOJ) actively pursues cases of fraud related to pandemic assistance, and Massachusetts has been a focal point for several investigations. Charges can include bank fraud, wire fraud, and conspiracy to commit fraud, among others.
Consequences of Conviction:
- Repayment: Immediate repayment of the fraudulently obtained funds.
- Fines: Significant fines, potentially amounting to double the fraudulently obtained sum or more.
- Imprisonment: Sentences can range from a few years to over 20 years in prison, depending on the severity of the fraud and the amount involved.
- Permanent Record: A felony conviction can have long-lasting effects on an individual’s ability to obtain future credit, run a business, or gain employment.
Massachusetts PPP Fraud Cases
Below are some notable cases from Massachusetts where individuals or businesses were charged with or convicted of PPP loan fraud:
- Aiden Davidson (Ashland, MA)
- Amount: Approximately $13 million in fraudulent loan applications.
- Details: Davidson allegedly submitted numerous fraudulent PPP loan applications for businesses that had no actual payroll expenses.
- Elijah Majak Buoi (Winchester, MA)
- Amount: $2 million in fraudulent PPP loans.
- Details: Buoi was charged with submitting fraudulent PPP loan applications for his company, Sosuda Tech LLC, using false employee and expense information.
- David Adler Staveley and David Andrew Butziger
- Amount: Over $500,000 in fraudulent loan applications.
- Details: They conspired to file fraudulent loan applications claiming to have dozens of employees earning wages at four different business entities when, in fact, there were no employees working for any of the businesses.
- David Levant (Boston, MA)
- Amount: Approximately $2.5 million in fraudulent PPP loans.
- Details: Levant submitted fraudulent applications for multiple businesses, claiming substantial payroll expenses where there were none.
- John Wilson (Lynnfield, MA)
- Amount: Approximately $660,000 in fraudulent PPP loans.
- Details: Wilson, already facing charges in the college admissions scandal, was further accused of fraudulently seeking PPP loans for his consulting company.
- Dana McIntyre (Vermont, formerly of Massachusetts)
- Amount: Over $660,000 in fraudulent PPP loans.
- Details: McIntyre inflated employee numbers and payroll expenses for his pizzeria to obtain the loan, then used the funds to buy an alpaca farm in Vermont.
- Evelyn Exantus (Mattapan, MA)
- Amount: Approximately $1.5 million in fraudulent PPP loans.
- Details: Exantus was involved in a scheme where fraudulent loan applications were submitted on behalf of several companies.
- Daniel Pinedo-Velapatino (Nantucket, MA)
- Amount: $660,000 in fraudulent PPP loans.
- Details: He fraudulently applied for PPP loans for a fictitious business, claiming significant payroll expenses.
- Manuel Joseph Jr. (Springfield, MA)
- Amount: Over $100,000 in fraudulent PPP loans.
- Details: Submitted false information about business operations and payroll expenses to secure PPP funding.
- Michael Bischoff (Boston, MA)
- Amount: Over $1.2 million in fraudulent PPP loans.
- Details: Bischoff submitted fraudulent applications for multiple businesses, inflating payroll figures to receive higher loans.
These cases highlight the vigilance of federal and state agencies in investigating and prosecuting fraud related to the emergency funds allocated for pandemic relief. Each case serves as a cautionary tale about the serious legal repercussions of fraudulent activities related to government aid programs.
Prevention and Detection
Preventative measures are crucial to mitigate PPP fraud. Both potential applicants and lending institutions must ensure the accuracy of the information submitted and received. Financial institutions in Massachusetts have been advised to enhance their verification processes, especially for new clients or large loan amounts.
Role of a Massachusetts Criminal Lawyer
Facing allegations of PPP fraud necessitates the expertise of a seasoned Massachusetts criminal lawyer. Legal representation is critical, as the nuances of federal fraud charges can be complex and the stakes are incredibly high. A qualified lawyer can:
- Assess the Case: Determine the validity of the charges and the appropriateness of the alleged fraudulent activity.
- Develop a Defense Strategy: Construct a robust defense based on inaccuracies in the charges, lack of intent to commit fraud, or other mitigating factors.
- Negotiate with Prosecutors: Work to reduce penalties or seek alternative resolutions.
- Represent in Court: Provide representation in federal court, where PPP fraud cases are adjudicated.
Conclusion
PPP fraud in Massachusetts carries significant legal consequences and can result in stringent penalties, including hefty fines and imprisonment. It not only harms the government’s efforts to aid struggling businesses but also jeopardizes the economic recovery process. If you are involved in or accused of PPP fraud, consulting with a Massachusetts criminal lawyer is crucial to navigate the complexities of your case and to safeguard your future.
References
- U.S. Department of Justice. "Justice Department’s PPP Fraud Enforcement." Accessed 2021. DOJ PPP Fraud
- CARES Act, Pub. L. No. 116-136, 134 Stat. 281 (2020). CARES Act Legislation
- U.S. Small Business Administration. "Paycheck Protection Program." Accessed 2021. SBA PPP
