The Paycheck Protection Program (PPP) is designed to provide incentive for small businesses to keep their employees working during the COVID-19 pandemic. The coronavirus has caused an unprecedented halt to many small businesses deemed non-essential, or to small businesses considered essential but who are seeing a loss in revenue due to shelter-in-place orders.
The Paycheck Protection Program, administered through the Small Business Administration, allows qualifying businesses, veterans organizations, tribal businesses, and non-profit organizations to obtain a loan where the principal balance is fully forgiven if the funds are used for specific purposes:
- ¥ At least 60% of the loan must be used for payroll;
- ¥ interest on mortgages;
- ¥ rent;
- ¥ and utilities.
The loan covers up to 24 weeks of payroll costs or until December 31, 2020, whichever is earlier. If the funds are used appropriately and in accordance with the Paycheck Protection Program, only the interest accrued on the loan needs to be paid back.
What if PPP Funds aren’t used appropriately?
As Love & Hip Hop: Atlanta star Maurice Fayne “Arkansas Mo” found out on Wednesday, May 13, 2020, you can be arrested and face federal criminal charges like bank fraud and others.
B95 reports that Fayne allegedly submitted a PPP loan application on behalf of his company, Flame Trucking, in the amount of $3,725,500.00 alleging it would be used to retain workers and for other business expenses. The loan was reportedly funded in the amount of $2,045,800.00.
In a statement, the U.S. Attorney’s Office for the Northern District of Georgia alleges that Fayne used PPP funds to purchase $85,000.00 in jewelry including a Rolex watch, diamond bracelet, and a 5.73 carat diamond ring for himself. Fayne also allegedly purchased a Rolls Royce. It’s alleged Fayne also used the money to make loan payments and to pay child support.
Fayne denies the allegations.
Paycheck Protection Program Helps Small Businesses
The Paycheck Protection Program established by the CARES Act authorizes up to $349 billion dollars towards job retention and certain other business expenses.
As of May 8, 2020, more than 4.1 million PPP loans have been approved. Most of these loans have been for $150,000.00 and under according the SBA Loan Reports. The overall average loan size for the first wave of approved PPP loans was $206,000.00 and $73,000.00 for the second wave of PPP loans.
Not every business has taken out smaller loans. Based on approvals through May 8, 2020, 89,245 loans have been taken out for $1,000,000.00 or more.
In California, there have been 489,770 PPP loans approved with a total of $ 69,215,924,449.00 financed. With more than $69 billion dollars financed in California alone, investigations into expenditures of loaned funds like the inquiry Maurice Fayne experienced are anticipated to increase.
Former federal prosecutor, Kevin P. Rooney anticipates that additional investigations are already underway: “Federal and state law enforcement agencies are already investigating suspected misuse of PPP funds and also reviewing some PPP applications and approvals. Those investigations will continue for several years.”
Not only is it likely that investigations into PPP loan fraud increase, but investigations into other types of fraud related to COVID-19 are also likely to increase.