PPP Loan Fraud

The Paycheck Protection Program (PPP) was launched in April 2020 as part of the Cares Act to provide a lifeline for businesses struggling to pay employees due to the fallout of the COVID-19 pandemic.

The program set up forgivable loans for small businesses and eventually distributed the funds, at least in large part, via web-based financial technology companies. This included fintech companies such as Kabbage and BlueVine Capital, as well as banks and nonbank lenders including Cross River Bank, Celtic Bank, and Ready Capital.

As much as it helped many businesses, the speedy implementation made the program a target for fraud. Investigations have revealed that a substantial amount of money distributed via the program went to ineligible recipients. Some businesses eligible to receive money used it improperly. The US Department of Justice (DOJ) continues to investigate reports and fraud and has already filed charges in several cases.

What are the Examples of Fraud?

The investigations uncovered several types of fraud. For example, some of the companies that applied for loans were non-existent or dormant. One Texas business received approval for a $3 million loan without a website, social media presence, or valid business address. Another Arkansas business received $2 million for a business that wasn’t in good standing with the secretary of state.

Note that not all of the borrowers linked to fraud broke the rules of the PPP program. Many weren’t even accused of wrong-doing. Many of the businesses even complied with SBA directives regarding the loans.

Instead, borrowers took advantage of the opportunity fast-tracking funds provided. The goal was to get the money distributed as quickly as possible, for good reason. But the program had flaws.

To achieve this, the Department of the Treasury and the Small Business Administration (SBA) expanded the program to allow fintech companies to help with distribution.

Fintech Companies Took Over Approval and Distribution

Originally, only the largest banks working with existing companies were handling distribution, but this made it difficult for small businesses to get the funds they needed. This was especially true due to limited timeframes or collecting the funds before they ran out.

But this wasn’t the case with the second round once the fintech companies stepped in. They handled most of the second round. In some cases, as was the case with Kabbage, these companies had never handled SBA loans.

The vast majority (more than 75%) of loans handled through Kabbage were approved without human review of applications. Many loan applications took no more than four hours to receive approval.

Under normal circumstances – not in a world facing a pandemic drastically affecting businesses – firms automating their underwriting and approval process would be on the hook for any losses. But in this case, with SBA-guaranteed PPP loans, taxpayers will likely foot the bill for fraud.

But despite the flaws in the program, some borrowers were charged with fraud. So far, the cases brought by the Justice Department include millions in fraud allegations. The SBA said it isn’t holding lenders or banks accountable, but as more information comes to light, investigations have begun.

To read more about the investigation, check out this article from Bloomberg.

DOJ Investigations Into PPP Loan Fraud Underway

Recently, the DOJ has begun aggressively targeting businesses and individuals suspected of submitted fraudulent applications and using funds illegally.

So far, charges include:

• Creation of shell companies
• Falsifying payroll information
• Using loans for lavish personal expenses
• Attempting to obtain multiple loans

If a DOJ investigation reveals evidence of fraud, businesses and individuals could face charges including:

• Aggravated identity theft
• Bank fraud
• Attempt and conspiracy
• Wire fraud
• Tax evasion
• And more

If you believe the DOJ is targeting your business or plans to investigate you personally for PPP loan fraud, you need to contact an attorney. To learn more about the available defenses or to discuss your situation with an attorney, contact David Lindsey to schedule a free consultation.

Unemployment Insurance Fraud

Unemployment insurance, also called UI or just unemployment, is a program that helps out-of-work Americans. Over the last several months since the COVID-19 pandemic began, millions of Americans have filed for unemployment through their state programs. This has resulted in an uptick in accusations of unemployment insurance fraud.

Unemployment insurance programs across the country have undergone changes during this time. Changes vary from state to state. For example, some increased the amount paid to recipients. Others loosened the requirement to conduct a job search while utilizing benefits. You can find nformation about changes to Colorado’s unemployment benefits here.

During this time, many UI programs experienced overwhelm. There were many people in need of benefits who did not receive them. Others had to wait an extended time before receiving them. State officials link the problems to the massive increase in demand for benefits. Additionally, outdated computer systems and inadequate staff to process requests played a role.

There were also cases in which state officials claimed that unemployment insurance fraud was to blame for the inefficiencies and confusion. Fraudulent unemployment claims did increase during this time. But that doesn’t mean everyone accused of fraud intentionally did something wrong.

What Should You Know If Accused of Unemployment Insurance Fraud?

The majority of fraud claims are linked to false statements or misrepresentations of a case. The goal of fraud is to collect unemployment when they do not qualify for the benefit.

There are several ways in which this can occur, including:

• Not reporting employment: If you find a job while collecting unemployment, you are responsible for reporting the income from that job.
• Submitting false information or a false identity: You are responsible for providing true and accurate information to your state’s unemployment office. This includes your identity, as well as details about your work situation.
• Failing to meet job search requirements: In most states, you must be actively looking for employment to qualify for unemployment benefits. However, they waived this requirement during the COVID-19 pandemic. Most people were expected to return their previous jobs once businesses began reopening.

Employers can also face accusations of fraud. Most cases of unemployment insurance fraud committed by employers are related to misclassifying workers, not reporting wages, or providing false information about employees that disqualify them for unemployment benefits.

What are Your Defense Options When Accused of Unemployment Insurance Fraud?

Every case is different. It’s important to discuss your options with your criminal defense attorney and choose the beset defense for your case. The most commonly used defenses include a lack of criminal intent and a lack of evidence.

It’s impossible to commit unemployment fraud accidentally. Making a mistake when you apply for unemployment is not a crime. Although mistakes can lead to accusations of a crime. The prosecution will need to show that you intentionally tried to misrepresent yourself or conceal information. This requires proof. So even if you did intentionally try to get away with fraud, the prosecution must have evidence of your actions to win its case against you.

What Penalties Do You Face If Prosecuted for UI Fraud?

If you are found guilty of UI fraud, you could be subject to both criminal and civil penalties. Laws regarding penalties vary from state to state, but you should expect any of the following penalties if the prosecution proves its case against you:

• Requirement to repay the benefits you collected on unemployment
• Jail time that varies based on your circumstances and your state laws
• Probation time
• Fines in addition to repayment requirements

If you have been accused of unemployment insurance fraud in Colorado or you believe someone suspects you committed fraud by collecting unemployment benefits, you need to speak to an attorney. A conviction for UI fraud can lead to serious penalties and have a severe effect on your future. To speak to someone about your situation, contact David Lindsey at 303.228.2270.

The FTC estimates that approximately 9 million Americans are victims of identity theft every year. Many do not even realize there is a problem until they are rejected for a loan or they review their credit report. More information about protecting yourself from identity theft is available here.

Accidental Identity Theft

Unfortunately, in addition to these many instances of legitimate identity theft, there are also times when accusations of identity theft are made against a person who had no intention of the breaking the law.

For instance, if your credit history is less than appealing and a friend suggests you to apply for credit in his or her name, you are breaking the law despite having permission. In addition to submitting a fraudulent credit application, your friend could also turn on you and accuse you of identity theft. This is highly likely if he or she is facing charges for willingly participating in the fraud.

In any instance an opportunity arises to use someone else’s identity, even if he or she has given you permission to do so, do not do it. Charges for committing fraud or identity theft do not require the so-called willing victim of the crime to report you or be unaware of your actions. Essentially, a defense of “but my friend said it was fine” will not carry much weight in the courtroom.

Likewise, if you gain information to the personal information of someone by accident, follow the appropriate steps for correcting the security breach. For instance, if you receive personal mail for someone who no longer lives at your residence, return the mail to the USPS.

Avoiding accusations of identity theft can be just as challenging as avoiding being victimized, depending on your circumstances. If you have been falsely accused of stealing someone’s personal information or you are in a situation that could result in accusations of a crime, you need to speak to an attorney familiar with identity theft. Contact David Lindsey, Denver criminal law attorney.

Doctors who have spent years abusing the Medicare system and overcharging patients could soon get a wake u call. The Obama administration has made changes that will likely put an end to years of abuse and reveal how much money individual doctors treating Medicare patients receive.

Dealing with Medicare Abuses

Unfortunately, even after doctors are offered extensive education for using the Medicare system ethically, some continue to take advantage of it. According to a recent story in the New York Times, habitual abusers will now be referred to Daniel R. Levinson, the inspector general at the Department of Health and Human Services. These long-term offenders could face civil fines and lose access to Medicare and other federal health problems.

It is estimated that at least $6 billion per year in improper payments are made under Medicare’s physician fee schedule, but some believe that estimate could be low. In most cases, the problem arises when doctors bill for items and services that are not considered medically necessary.

Levinson stated that investigators should focus on doctors with consistently high Medicare billings. He stated there are about 300 doctors that receive upwards of $3 million per year in Medicare payments and about a third of these are being questioned about their billing practices. Though high payments do not always indicate a problem with fraud or improper payments, officials believe this is a good place to begin their investigation.

Critics of the plans to investigate believe it is an attempt by the administration to exclude doctors from federal health care programs. Some are concerned that services that might appear medically unnecessary might actually mean a patient’s condition was not properly documented and the loss of a treatment could be detrimental to his or her health.

Release of Data

There is also debate over how helpful or hurtful it might be to release federal data concerning Medicare payments to individual doctors. The administration eliminated a policy that broadly prohibited this data release and stated they might release the information because of FOIA requests. Data will likely be evaluated and released on a case by case basis.

Those in favor of releasing the data believe it to be a good tool for consumers, researchers, and those looking for problems with Medicare billing. The data has been private since a 1979 court ruling stating that disclosure would violate the Privacy Act. Today, experts believe the need to view this data and recognize abuse is far more important than privacy concerns. However, some believe access to raw data could create a distorted picture of a situation and fail to demonstrate exactly how the funds are distributed, especially in the most expensive medical situations, such as oncology.

Medicare issues are as varied as the people enrolled in the system. It is complex and for many, quite confusing. If you suspect you are under investigation for Medicare fraud or you have been contacted by someone concerning a Medicare billing issues, call David Lindsey at 303.228.2270

In a 9-2 decision, California’s 9th Circuit Court of Appeals has ruled that prosecutors are too broadly applying the 1984 Computer Fraud and Abuse Act in going after someone who violates employer computer policies or a website’s terms of service; the majority upheld the decision of San Francisco U.S. District Court judge in the government’s case against David Nosal, a former employee at an executive search firm who allegedly asked colleagues to access a confidential database to get information for his new business.

The CFAA statute was passed by the U.S. Congress in 1986, and was intended to address federal computer-related offenses such as hacking. It has been amended repeatedly in an effort to keep up with advances in technology and security, most recently, as part of the Patriot Act and the Identity Theft Enforcement and Restitution Act.

Writing for the majority, Chief Judge Alex Kozinski said, “The government’s construction of the statute would expand its scope far beyond computer hacking to criminalize any unauthorized use of information obtained from a computer. This would make criminals of large groups of people who would have little reason to suspect they are committing a federal crime.” The majority is following the 9th Circuits controlling case, LVRC Holdings LLC v. Brekka, and holds that “exceeds authorized access” as defined by the CFAA is limited to violations of restrictions on access to information, and not restrictions on its use.

The two dissenting judges point out that the statute requires “intent to defraud”, and that intent was clearly present. “This case has nothing to do with playing sudoku, checking email, fibbing on dating sites, or any of the other activities that the majority rightly values,” Judge Barry Silverman wrote, with Judge Richard Tallman joining. “It has everything to do with stealing an employer’s valuable information to set up a competing business with the purloined data, siphoned away from the victim, knowing such access and use were prohibited in the defendants’ employment contracts.”

There are other laws the government can use to prosecute someone who steals confidential information; interpreting the CFAA too broadly essentially leaves individuals at the mercy of a local prosecutor. And while the opinion breaks from 5th and 11th Circuit Court decisions in similar cases, it remains to be seen whether prosecutors will seek high court review.

The Wyoming State Legislature has approved a bill intended to target insurance fraud by allowing law enforcement to speak to insurance companies without first getting a subpoena. It also allows insurers to communicate more openly with law enforcement, giving them immunity when dealing with law enforcement agencies.

https://www.mdavidlindsey.com/Practice-Areas/Fraud-Crimes.shtml

A more broadly worded version of the bill that included a “whistle-blower” provision was scrapped in favor of this narrower version because of what Rep. Kermit Brown (R-Laramie) called constitutional concerns. The 2011 version of the bill would have provided civil immunity for anyone who gave information about insurance fraud or unfair trade practices, which would have presented potential problems. This version, which Brown called “the most succinct version we considered”, is limited in scope only to communications between insurers and law enforcement. Because law enforcement does not need to demonstrate probable cause and obtain a subpoena, the insurance industry feels that schemes will be far easier to detect and prosecute.

Wyoming was one of only four states without such a provision on the books. The previous law provided protection only to the Wyoming State Insurance Commissioner in order to speak with insurers about suspected cases of fraud. All other communication was barred.

https://www.mdavidlindsey.com/Attorney-Bio/

According to the Property Casualty Insurers Association of America (PCI), insurance fraud costs the average American family between $400 and $700 a year in order to cover these losses. Just last month, the New York Police Department made several dozen arrests in an auto insurance scheme; the crime ring is alleged to have stolen nearly $300 million by exploiting a loophole in the state law which allows both drivers and passengers to receive benefits of up to $50,000 per person for injuries incurred in an auto accident.