PPP Fraud: Big Numbers, Bigger Numbers to Go
We remember the onset of the pandemic all too well. Not only were the health concerns and consequences for the United States real and profound, but measures to protect the health of the population risked extreme economic consequences. Congress acted swiftly to prevent the worst consequences, appropriating $2.2 trillion within weeks through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Through supplements, this number ultimately ballooned to over $5 trillion.
One critical component of these bills was the Paycheck Protection Program (PPP). PPP guaranteed government funds for the private sector to issue forgivable loans to qualifying small businesses they could use to continue operating. But many wrongdoers abused this program, obtaining or inflating loans for their own personal gain.
The numbers involved are jaw-dropping and show how much work is left to do.
An Ocean of Money
The Pandemic Response Accountability Committee (PRAC), a multi-agency group overseeing all pandemic relief programs, reported that by October 2022, PPP provided over $793 billion in loans to 11.5 million businesses. On top of that, the government forgave the interest for many of those loans, and servicing fees were paid to the banks that processed the applications and disbursed the loans.
In other words, the government worked through private financial institutions with reduced due diligence to disburse an amount of money equal to nearly 84% of Medicare’s annual budget to businesses all over the country in a matter of weeks. Unsurprisingly, this attracted fraudsters.
A Tsunami of Fraud
In June 2023, the SBA Office of Inspector General published a white paper analyzing pandemic fraud. Based on past investigations, data analytics, and review of a selected list of eleven “fraud indicators,” the OIG estimated that 8%, or $64 billion, of total disbursed PPP funds were fraudulently obtained.
Other pandemic relief programs represent an even more extreme data set. As Fraud by the Numbers explained last year, government estimates say that $236 billion fraudulently obtained from the Economic Injury Disaster Loan (EIDL) and enhanced unemployment insurance programs.
A Comparative Thimble of Accountability and Recovery
Using the False Claims Act and FIRREA, the government and whistleblowers have resolved cases covering over $186 million in PPP fraud.[1] These settlements have been as small as $18,673 and as big as $120 million. Bankruptcies likely bring the $186 million figure down when measuring the return of real dollars to the government.
The government’s efforts through criminal prosecution have had broader reach. In June 2023, SBA OIG estimated that $509 million had been ordered to be returned as restitution from criminal cases. Court records indicate those numbers have only continued to rise, potentially upwards of $1 billion. Again, how much of that money was actually returned is unclear.
But in the context of total projected fraud like $64 billion in the PPP program, there is a lot more work for government and whistleblowers to do to hold wrongdoers accountable.
Six-ish Years To Go
Under the six-year statute of limitations for the False Claims Act (and many relevant criminal laws), liability for yet-to-be-discovered PPP fraud would expire in 2026 or 2027. Thankfully Congress, seeing how much work is left to do, gave the government and whistleblowers more time to keep tracking fraudsters down and holding them accountable. Last year, the statute of limitations for PPP and EIDL fraud under the False Claims Act was extended to 10 years.[2]
This means that PPP and EIDL fraud can now be reported by whistleblowers until 2030 (for first-round loans) or 2031 (for second-round loans).
Nearly $1.2 billion (between criminal and FCA) down, $62.8 billion to go. Let’s get to work.
Max Rodriguez is the Principal and Founder of The Law Office of Max Rodriguez
[1] This does not include cases still under seal, which may represent many millions or more of additional fraud.
[2] P.L. 117-165, 136 Stat. 1363, and P.L. 117-166, 136 Stat. 1365.
