Security & Fraud

DOJ: Texas Man Allegedly Claimed Employees To Net $5M In PPP Funds

Department of Justice

A Texas man is facing charges of filing fraudulent loan applications seeking more than $5 million in forgivable loans from the Small Business Administration’s (SBA) Paycheck Protection Program (PPP), according to the U.S. Department of Justice.

Samuel Yates allegedly sought millions of dollars from two banks by claiming to have more than 400 employees when no employees worked for his purported businesses. He is charged with wire and bank fraud, and making false statements to lenders and the SBA.

“This defendant allegedly sought to steal millions of dollars in loans intended to aid legitimate small businesses grappling with the economic effects of COVID-19,” said Brian A. Benczkowski, an assistant attorney general in the Justice Department’s Criminal Division, in a statement. “The department and our law enforcement partners will use all the tools at our disposal to investigate and prosecute frauds against the Paycheck Protection Program.”

In an application to the first lender, Yates allegedly asked for $5 million in PPP loan proceeds by claiming to have 400 employees with an average monthly payroll of $2 million, according to court documents in the U.S. District Court in Texarkana. In the second application, Yates said he employed 100 individuals and obtained a $500,000 loan.

With each application, Yates submitted a list of faux employees he obtained from an online name generator and submitted forged tax documents with each application, investigators said.

The $2.2 trillion Coronavirus Aid, Relief, & Economic Security (CARES) Act was authorized in March to provide emergency financial assistance to taxpayers who are suffering the economic effects caused by the COVID-19 pandemic.

The PPP provided up to $349 billion in forgivable loans to small- to medium-sized businesses (SMBs) for job retention and certain other expenses. Last month, Congress authorized a second round of funding for more $300 billion.

The PPP allows qualifying companies to receive loans with a maturity of two years and an interest rate of 1 percent. PPP loan proceeds must be used by businesses on payroll costs, interest on mortgages, rent and utilities. But the loan is forgiven if businesses spend the proceeds on these expenses within eight weeks of receipt and use at least 75 percent for payroll.

“Any time the government provides large amounts of money to the public there are people who will try to cheat the system,” said U.S. Attorney Joseph D. Brown of the Eastern District of Texas, in a statement. “We encourage lenders to be very careful, and to report suspicious applications. It is a priority of the Department of Justice to deter and prosecute this type of fraud.”

Neither Yates nor his attorney could immediately be reached for comment.

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