COVID Frauds of the Week: Fraudulently Claiming PPP Loans
This week, DOJ took action against two large alleged frauds on the Paycheck Protection Program. In Hawaii and North Carolina, individuals were charged with fraudulently claiming loans from the critical relief program.
In North Carolina, Tristan Pan found himself charged with wire and bank fraud, plus unlawful monetary transactions, for an alleged scheme to get bogus PPP loans. He allegedly cooked up a series of applications for entities like “Khaleesi” and “The Night’s Watch” and made false claims about their employee and payroll expenses, supported by allegedly falsified documents and tax returns. But the would-be Littlefinger failed to fully deceive the authorities, securing only $1.7 million of the $6.1 million he had sought across fourteen applications. According to DOJ, they have successfully recovered some of the funds.
In a similar story, a Hawaii man was arrested and charged with multiple counts of bank fraud and money laundering for an alleged scam that netted him $12.8 million in PPP funds. Martin Kao, the CEO of a real company not inspired by George R.R. Martin, nevertheless contrived to land himself in jail by allegedly lying to secure massive PPP loans. According to DOJ’s press release, Kao is alleged to have inflated the number of employees of his company and to have lied about whether they had received other PPP funds. When the money came in for the non-existent employees, Kao allegedly diverted a portion of it to his own accounts, siphoning off over $2 million for his own personal use.
As these charges demonstrate, DOJ is keeping a close watch on fraud on PPP loans, as it should. Massive government spending with a premium on speed rather than scrutiny tends to produce massive fraud. As experience with other, similar programs has shown, whistleblowers will be critical in tipping off government enforcers to the biggest scams and in providing the key evidence that could make some of the biggest cases to come out of this program.
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