After providing emergency loans to approximately ten million businesses, the government is now investigating fraud at both a civil and criminal level. The False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act will provide regulators with a conduit to file civil suits against companies who knowingly present a false or fraudulent claim. 

Since the implementation of the Paycheck Protection Program, approximately $80 billion or 10 percent of the funds allocated to the program have allegedly been stolen by fraudsters. While the exact amount is unknown, various agencies have estimates up to $100 billion, and prosecutors are saying it may possibly be the largest fraud in the history of the United States.

The initial program was designed for rapid disbursement of funds with negligible checks and balances. While it was meant to quickly alleviate COVID-19 related issues, this vulnerability was a clear invitation to fraudsters. Many businesses provided promissory notes agreeing to spend the funds on business-related expenses before turning around and spending it on houses and sports cars. On March 29, 2022, a federal jury convicted a California man for submitting 27 PPP fraudulent loan applications to four banks in a $27 million scheme.

To avoid potential fraud, companies should maintain detailed records on how their PPP funds were used. The documentation should be clear, concise, and easily retrievable if they are selected for review by the regulators. While the government’s initial examinations are expected to be driven by whistleblower complaints, it would be wise to prepare for random audits in the future.