A preliminary inquiry into loans granted under the Paycheck Protection Program (PPP) has revealed early signs of fraud among businesses seeking coronavirus relief funds, according to Bloomberg.
The head of the DOJ's criminal division, Assistant AG Brian Benczkowski, said prosecutors have contacted up to 20 of the largest loan processors as well as the Small Business Administration, which oversees the program, in order to police how the funds have been distributed.
The review has already turned up several red flags in the data prosecutors have examined over the past week, Benczkowski said Thursday in a telephone interview.
“Whenever there’s a trillion dollars out on the street that quickly, the fraudsters are going to come out of the woodwork in an attempt to get access to that money,” Benczkowski said.
"There are unfortunately businesses that are sending in loan applications for large amounts of money that are overstating their payroll costs, overstating the number of employees they’ve had, overstating the nature of their business." -Bloomberg (via WaPo)
The DOJ has modeled their policing efforts after that used by the healthcare fraud strike force, which has used data analytics for over a decade to detect criminal activities within federal programs, including Medicare.
That said, examples of outright fraud or companies bending the rules have yet to publicly emerge, while loosely-drafted guidelines allowed banks wide discretion when issuing the loans. If borrowers didn't outright lie on applications, it may be difficult to accuse companies of abuse.
The DOJ inquiries have asked for borrower information and whether banks observed anything suspicious with loan applications or the loan process. According to the report, clients - not banks, have been the focus of the probe.
There will be several federal watchdogs looking after the program, including the Government Accountability Office, a yet-to-be-formed congressional panel, and an inspector general awaiting Senate confirmation. The DOJ, meanwhile, can conduct their own investigations into the program in conjunction with other overseers.