Federal government announces first case of coronavirus loan fraud
Federal prosecutors have announced the first case of fraud under a loan program that Congress recently created to help small businesses keep their employees during the coronavirus pandemic.
The Justice Department on Tuesday announced the arrest of two Rhode Island and Massachusetts businessmen for fraudulently seeking more than $ 500,000 in forgivable loans for dozens of people they did not employ .
The loans, guaranteed by the Small Business Administration, are offered by community banks and other financial institutions to small businesses affected by the pandemic. The SBA’s paycheck protection program was created in late March under the CARES Act, a $ 2.2 trillion coronavirus recovery program.
Law enforcement officials say no employees worked at the four companies run by David Staveley of Massachusetts and David Butziger of Rhode Island.
“It is unacceptable that anyone attempting to steal a program intended to help hard-working Americans continue to be paid so that they can feed their families and pay part of their bills,” said US Attorney Aaron L. Weisman for the District of Rhode Island. said in a statement.
Staveley and Butziger have been charged with conspiracy to make false statements to influence the SBA and to commit bank fraud.
Congress allocated nearly $ 350 billion in small business loans for the program, but the program quickly ran out of funds as hundreds of thousands of small businesses applied for loans of up to $ 10 million. Last month, Congress approved an additional package, setting aside an additional $ 310 billion for the program.
Financial fraud experts have warned that the scale of the aid program and the speed with which it has been implemented threaten to create a perfect storm for fraud and abuse on a scale never seen before.
Experts say the case announced on Tuesday signals what lies ahead and that billions of dollars are likely at risk as fraudulent companies attempt to rip off the government.
To avoid waste and abuse, Congress has created three overlapping oversight bodies, while the Justice Department is focusing on coronavirus-related fraud, laying charges in several cases in recent weeks.
In loan applications asking for more than $ 438,000, Staveley claimed he had dozens of employees at three restaurants he owned. Investigators found that two of the restaurants were not open before the pandemic and that Staveley did not own the third restaurant.
Butziger requested more than $ 100,000 in his application, claiming he had seven full-time employees at an unincorporated business. Investigators learned that none of the seven worked at the company.
Fortunately, we were able to stop them before taxpayers were defrauded, but today’s arrests should serve as a warning to others that the FBI and our law enforcement partners will aggressively attack them. bad actors like them who are using the COVID-19 pandemic as a possibility to commit fraud, ”said Special Agent in Charge Joseph R. Bonavolonta of the FBI Field Office in Boston.