Business fraud comes in many forms, and sometimes that fraud is hard to detect. It may only be after years of fraudulent activity and hundreds of thousands of dollars of losses that federal regulatory or investigatory agencies become aware of an individual’s or business’s misconduct. Other times, it may be a whistleblower who draws attention to financial matters and raises questions about a business’s practices.
Occasionally, fraud is so widespread in one area or has such a profound effect on the public that a federal crackdown ensues. For example, there is currently a lot of focus on detecting a specific type of fraud related to financial relief programs started in 2020. The Paycheck Protection Program (PPP) aimed to help people keep their jobs and continue paying their bills, but it was rife with issues.
Experts estimate that a shocking 10% of the total funds distributed through the PPP were diverted due to fraud and theft. Given that federal authorities allocated $800 billion in relief funds, the total fraud cost the government, and therefore taxpayers, $80 billion. These estimates do not include fraud related to special unemployment benefits offered at the same time. There is now a massive Justice Department effort to find and prosecute PPP fraud as a result of these findings.
What does this mean for businesses?
Any business owner or executive who applied for or received PPP funds could be subject to scrutiny from federal investigators. In some cases, an appropriate use of the program might trigger prosecution because of the intense and heavy-handed approach to enforcement.
Organizations that may have had to let workers go after accepting PPP funds or that ended up dissolving may be at particularly high risk of prosecution. Additionally, any owners or executives who made large purchases in recent years are more likely to be subject to intense scrutiny. Early prosecutions have uncovered cases where individual fraudsters bought multiple vehicles with PPP funds, as well as others who purchased mansions and paid for upscale vacations.
With so much money on the table and so much attention being paid to the level of fraud that affected the PPP program, the chance of investigators assuming the worst is noteworthy. Maintaining adequate records of company operations and getting the right support early in the investigation process could make a major difference for those worried about prosecution due to the receipt of PPP funds.