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Three Individuals are facing federal charges for allegedly fraudulently obtaining more than $2.4 million in small business loans as part of the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief and Economic Security (CARES) Act.
Charges for PPP Loan Fraud
According to court documents the three individuals Khadijah Chapman, 58, of Atlanta; Daniel Labrum, 41, of South Jordan, Utah; and Eric O’Neil, 57, of Bethel, Connecticut, are charged with fraudulently obtaining PPP loans for fictitious businesses in 2021. The PPP loans were guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The loans were meant to provide a direct incentive for small businesses to retain their workforce and hire back any employees that were laid off as a result of the ongoing COVID-19 crisis.
More Than $2.4 Million in Relief Loans
The defendants, along with others, allegedly falsified information and submitted fraudulent documents to collectively obtain over $2.4 million in relief funding guaranteed by the SBA under the CARES Act for small businesses struggling with the economic impact of COVID-19.
According to allegations raised in the federal indictment, Chapman and O’Neil are each charged with one count of bank fraud. Labrum is charged with five counts of bank fraud and one count of engaging in monetary transactions with criminally derived proceeds for their roles in the scheme.
If found guilty Chapman, Labrum, and O’Neil each may face a maximum penalty of 30 years in prison for each count of bank fraud. Labrum additionally faces a maximum of 10 years in prison for engaging in monetary transactions with criminally derived proceeds.
In May 2022, SBA’s Office of Inspector General (OIG) published a report on more than 70,000 loans totaling over $4.6 billion in potentially fraudulent PPP loans. To clamp down on increasing cases of PPP fraud, the Biden Administration in March appointed a special prosecutor on PPP Fraud.
The move complements preexisting measures to go after fraudsters at the state and federal levels. The measures have helped in indicting more individuals and businesses to the more than 1,000 criminal cases and over 200 civil investigations across 1,800 individuals and entities involving billions of dollars in suspected fraud since May 2021.
The Paycheck Protection Program
The Paycheck Protection Program provided by the Federal government offered support to small businesses for them to pay their employees after companies were forced to shut down during the pandemic. The program authorized $659 billion in forgivable loans to be distributed to small businesses across the country for job retention and certain other eligible business expenses, including interest on mortgages, rent and utilities.
Last week President Biden signed into law two bills H.R. 7334 and H.R. 7352 would establish a ten-year statute of limitations for prosecutions related to fraud related to the Paycheck Protection Program (PPP) and COVID-19 Economic Injury Disaster Loan (EIDL).