Prosecution of fraud cases related to Paycheck Protection Program (PPP) loans continues to be the focus of law enforcement, with federal authorities recently reporting guilty pleas in a $10 million deception, and in a fraud to illicitly use funds from a loan to purchase (among other things) a $318,000 2020 Lamborghini sports car.
According to releases from the Federal Deposit Insurance Corp.’s (FDIC) Office of the Inspector General (OIG), Shashank Rai, 30, of Beaumont, Texas, pleaded guilty Feb. 9 to one count of making false statements to a bank. He was charged on May 13, 2020, the agency said, with violations of wire fraud, bank fraud, false statements to a financial institution, and false statements to the SBA.
The OIG said the guilty plea by Rai, an engineer, was related to charges that he filed fraudulent bank loan applications seeking more than $10 million in forgivable loans through the PPP. The loans are guaranteed by the Small Business Administration (SBA).
According to the U.S. Justice Department, as part of his guilty plea, Rai admitted he sought millions of dollars in forgivable loans guaranteed by the SBA from two different banks by claiming to have 250 employees earning wages. In fact, no employees worked for his purported business, Justice said in a release.
“Rai made two fraudulent claims to two different lenders for loans guaranteed by the SBA for COVID-19 relief through the Paycheck Protection Program (PPP),” the release stated. “In the application submitted to the first lender, Rai sought $10 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of $4 million. In the second application, Rai sought approximately $3 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of approximately $1.2 million.”
In the other case, involving the purchase of a sports car using PPP funds allegedly acquired fraudulently, the OIG said David T. Hines, 29, of Miami (at the time of his arrest) pleaded guilty Feb. 10 to one count of wire fraud that the agency said led to him fraudulently obtain approximately $3.9 million in PPP loans – which he used, partly, to buy the Lamborghini for himself.
As part of his guilty plea, the OIG said, Hines admitted that he fraudulently sought millions of dollars in PPP loans through applications to an insured financial institution on behalf of different companies. Hines caused to be submitted, the OIG said, fraudulent loan applications that made numerous false and misleading statements about the companies’ respective payroll expenses.
According to the FDIC’s OIG, since the introduction of the PPP the Justice Department has prosecuted more than 100 defendants in more than 70 criminal cases related to fraudulent use of the program. More than $60 million in cash proceeds derived from fraudulently obtained PPP funds, as well as numerous real estate properties and luxury items purchased with such proceeds, have been seized in the prosecutions, the agency said.