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PPP and ERC Fraud: Recent Examples of IRS CI Investigations in 2023

Offshore Account Update

Posted on July 17, 2023 |

With the U.S. Small Business Administration’s Office of Inspector General finding that at least 17 percent of all Paycheck Protection Program (PPP) loans were fraudulent and the New York Times calling the Employee Retention Credit a “magnet for fraud,” IRS Criminal Investigation (IRS CI) is aggressively targeting fraud under both of these COVID-19 relief programs. While these programs are no longer available (although businesses can retroactively claim the ERC until 2025), IRS CI is looking back at individuals’ and businesses’ PPP and ERC applications—and pursuing criminal fraud charges when warranted.

Recent Examples of PPP and ERC Fraud Investigations

In pursuing PPP and ERC fraud investigations, IRS CI is examining all aspects of individuals’ and businesses’ program-related activities. This includes examining taxpayers’ PPP loan applications, PPP loan forgiveness certifications and ERC claims. While many of IRS CI’s investigations are targeting taxpayers that fraudulently obtained PPP loans and ERC refunds, IRS CI is targeting unsuccessful applicants as well.

To illustrate, here are three recent examples:

1. Man Arrested for Allegedly Claiming $65 Million in Fraudulent COVID-19 Tax Credits

In May 2023, IRS CI announced the arrest of a man who is accused of claiming more than $65 million in fraudulent tax credits, including Employee Retention Credits. According to an IRS CI press release, the man successfully obtained more than $2.7 in fraudulent refunds, which he used to cover personal expenses. He is being charged with 17 counts of making false claims to the IRS, with each count carrying up to a five-year federal prison sentence.

2. Woman Convicted of Seeking $10 Million in Fraudulent PPP Loans

In June 2023, IRS CI announced the conviction of a woman who was found guilty of obtaining $10 million in fraudulent PPP loans. As reported by IRS CI, the woman falsely claimed more than $4.7 million in monthly payroll for a company that had no employees. The jury’s verdict includes convictions for making false statements designed to influence a bank, money laundering, and contempt.

3. Multiple Defendants Plead Guilty to PPP Loan Fraud Scheme

In July 2023, IRS CI announced the latest guilty pleas in an ongoing investigation involving an alleged scheme to submit multiple fraudulent PPP loan applications in exchange for a 25-percent success fee. According to IRS CI, two of the defendants would submit fraudulent loan applications and supporting documentation and then instruct the others “how to make it appear that the PPP loans were being paid out to employees when in reality the money was transferred back to the defendants.”

As you can see from these examples, IRS CI is targeting a broad range of charges related to both PPP and ERC fraud. Given the extraordinary volume of fraud under the PPP and ERC, it is unlikely that these efforts will end anytime soon. For those who have concerns about facing scrutiny in relation to their PPP loans or ERC refunds, it is important to speak with experienced defense counsel promptly.

Are You Under Investigation for PPP or ERC Fraud in New Jersey?

Are you under investigation (or do you have concerns about facing an investigation) for PPP or ERC fraud in New Jersey? If so, we encourage you to contact us promptly for more information. Call 201-842-7696 or contact us confidentially online to request an appointment with attorney Kevin E. Thorn, Managing Partner of Thorn Law Group.

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