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The Justice Department has filed its first case against two individuals following the start of its inquiry into the Small Business Administration's (SBA) paycheck protection program (PPP). Investigations into whether the program was protected against fraud or if banks did not process PPP loans on a first-come, first-serve basis as the SBA had advertised have begun to pop up after the program reopened late last month.

Federal officials charged two men with making numerous false claims in multiple loan applications. One man made false claims in a loan application for more than $438,500, stating that he would use the money to pay for dozens of employees at three restaurants. However, officials stated in the charges that two of the establishments weren’t open at the time of the pandemic and the other was not found to be associated with the individual.

The second individual applied for a $105,381 loan to pay seven full-time employees at a company he owned, but the DOJ reported no tax records existed showing any wages paid and several of the listed employees interviewed by FBI agents said they did not work for the company.

Both men discussed the fraud schemes via email and were charged yesterday “by way of a federal criminal complaint with conspiracy to make false statements to influence the SBA and conspiracy to commit bank fraud,” specified the DOJ in a press release.

NAFCU will continue to monitor the litigation landscape related to the PPP, and advocate for more guidance and resources for credit unions. Learn more about recent PPP developments, and access the association's PPP FAQs for more information.