PPP Fraud
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A Middlesex County, New Jersey, man was sentenced to 33 months in prison for his role in fraudulently obtaining over $2.1 million in federal Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loans (EIDL).
PPP
The PPP was an SBA-backed loan that helped businesses keep employees working during the pandemic.
There were two draws available, depending on timing and the criteria. The loans qualified for full loan forgiveness if, during the covered period following the loan disbursement, the business maintained employee and compensation levels, and the loan proceeds were spent on payroll costs and other eligible expenses. At least 60% of the proceeds must have been spent on payroll costs.
EIDL
The EIDL program was created to support small businesses as they recovered from the pandemic.
EIDL loan funds were intended to be used for working capital and other standard operating expenses. The loans were not forgivable and were required to be repaid.
EIDL advance funds were awarded to existing Covid-19 EIDL applicants who met certain criteria. The advances were like grants, but without the typical U.S. government grant requirements. Most importantly, EIDL advances did not need to be repaid.
As with the ERC program, the lure of free money has proved irresistible to many—including those who have intentionally taken advantage of the programs when they were not eligible.
Facts
Arlen G. Encarnacion, of Perth Amboy, New Jersey, previously pleaded guilty in federal court to a two-count information charging him with conspiracy to commit wire fraud and money laundering.
Wire fraud involves wire communication sent across state lines to promote or commit fraud. Money laundering refers to financial transactions in which criminals attempt to disguise the proceeds, sources or nature of their illicit activities.
As part of the fraud, Arlen submitted 11 fraudulent PPP loan applications and three fraudulent EIDL applications on behalf of purported businesses. His co-conspirators, Jacquelyn Pena and Kent Encarnacion, separately pleaded guilty on Aug. 8, 2023, to informations charging each of them with conspiracy to commit wire fraud and money laundering. They were each sentenced to probation.
According to court documents, Kent Encarnacion helped submit one fraudulent PPP application, and Pena helped submit three fraudulent PPP applications. Each application contained false representations, including bogus federal tax return documentation and fabricated information about the number of employees and wages paid.
Based on these alleged misrepresentations, lenders, Federal Home Loan Bank members, and the Small Business Administration (SBA) provided the purported businesses with approximately $2.1 million in Covid-19 funds.
From the total, Arlen received approximately $1.69 million, Kent Encarnacion approximately $156,000, and Jacquelyn Pena approximately $335,000. The defendants then transferred a substantial portion of the proceeds for Jacquelyn Pena’s purchase of real estate, while Arlen used the money to purchase a luxury Lamborghini SUV (prices for a Lamborghini Urus start at $241,843).
Government Response
“This defendant fraudulently obtained funds earmarked for struggling Americans who needed financial relief during the COVID 19 pandemic,” U.S. Attorney Sellinger said. “Today’s sentence demonstrates that those who used the pandemic to illegally enrich themselves will be held accountable. My office will continue to bring to justice individuals who have engaged in COVID-related fraud.”
“IRS Criminal Investigation (CI) and our law enforcement partners are committed to investigating and prosecuting those who engage in acts of COVID-related fraud,” said Tammy Tomlins, Special Agent in Charge of Newark Field Office. “Today, Mr. Encarnacion was held accountable for fraudulently obtaining over $2.1 million in federal Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loans (EIDL). His conscious decision to participate in this illicit scheme has cost him his freedom.”
“Brazen schemes have callously defrauded COVID-19 relief programs and caused undue financial harm to both hardworking Americans and businesses alike,” Christopher A. Nielsen, Inspector in Charge, U.S. Postal Inspection Service, Philadelphia Division, said. “Today’s sentencing illustrates that Postal Inspectors will continue its efforts to identify and hold accountable, those individuals who steal pandemic funds to fulfill their own greed.”
In addition to the 33 months in prison, Judge Castner sentenced Encarnacion to three years of supervised release and ordered restitution of $2.18 million.
Report Fraud
The government encourages anyone with information about allegations of attempted Covid-19 fraud to report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or by using the NCDF Web Complaint Form.
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Copyright for syndicated content belongs to the linked Source : Forbes – https://www.forbes.com/sites/kellyphillipserb/2024/02/22/man-sentenced-to-prison-for-role-in-covid-19-fraud-schemes-totaling-over-21-million