When I started this series, I swore to myself I wouldn’t cover PPP fraud. I’m going to break that promise here. The Paycheck Protection Program (PPP) was a covid emergency loan package for businesses. It came with a series of options to borrow money tied to a few major expenses like rent and payroll. The loans were issued by a participating bank, guaranteed by the federal government, and eligible for forgiveness by the federal government if certain conditions were met.
I swore I wouldn’t cover it because it is such a specific event in time and place that it’s not a recurring risk going forward. Also there was so much PPP related fraud being prosecuted that we could do stories every day. But I think there is a lesson in here, mostly, don’t do bank fraud.
On a personal level I helped a small church navigate getting a PPP loan and I reviewed the documents for the business my wife works for. Both loans were ultimately approved and forgiven, so I’ve seen the process.
Anton Matthews applied for a PPP loan claiming to run a food truck with $103k in gross revenue for 2020. He was granted a loan and managed to actually collect almost $50k in fraudulent loans. The paperwork required for these loans was fairly significant, but there wasn’t much verification of that documentation at the point of the loan. The documentation is being used now to identify and prosecute potential frauds.
There was one big problem with Matthew’s application. He was in jail from November 2016 through October of 2020 and then under home confinement until March of 2021. None of those scenarios are conducive to running a food truck in 202O. Matthew was found out and indicted.
Matthew’s original jail sentence was for distributing crack cocaine. On the day of his indictment in this case, he was also indicted on new cocaine trafficking charges. Fortunately for Matthew, he’s been charged with wire fraud in this case. I say fortunately because defrauding a bank in the U.S. carries a maximum sentence of 30 years in prison.
In this series we covered Kevin Co and his theft of $4.8 million. He was also indicted for fraudulent PPP loans of $500k while awaiting sentencing for this theft of almost five million dollars.
This wasn’t a real corporate fraud. There wasn’t a real company, or a real food truck. But there was real temptation for a lot of small business owners to fudge the PPP numbers for a bigger loan. Part of the allure was that they probably wouldn’t have to pay it back. More money could save the business. They could avoid bankruptcy. Maybe. But it’s surprisingly easy to cross the fraud line for the “right” reasons. This is still the rationalization of the fraudster. It’s also much harder to get back across once you’ve passed that line.