Justice Department Spotting Signs Of Fraud In Small Business Bailout

Department of Justice investigators are already seeing indications of fraud in applications for the mammoth taxpayer coronavirus bailout for small businesses, an official told Bloomberg.

Assistant Attorney General Brian Benczkowski, who runs the department’s criminal division, said investigators have spotted troubling signs in applications for the Paycheck Protection Program — both approved and declined. 

“There are unfortunately businesses that are sending in loan applications for large amounts of money that are overstating their payroll costs, overstating the number of employees they’ve had, overstating the nature of their business,” Benczkowski told Bloomberg. 

“Whenever there’s a trillion dollars out on the street that quickly, the fraudsters are going to come out of the woodwork in an attempt to get access to that money,” he added.

Potential fraud adds another problem to a bailout already plagued with controversy. Many of the stimulus payouts have been soaked up by well-heeled corporations, depriving struggling small businesses of aid. 

Recipients of the taxpayer funds have included restaurant chains and hundreds of other publicly traded corporations that grabbed hundreds of millions of dollars, while actual small businesses were left out as the first round of funds were quickly depleted. 

The loans become grants if recipients use the money for certain expenditures, such as wages and rent. Approval depends on a certification by borrowers that they’re eligible for the money to save banks time investigating applications.

The Trump administration has asked businesses that don’t need the money to return it. Treasury Secretary Steve Mnuchin said Tuesday that large corporations should apologize for taking taxpayer aid intended for small businesses.

“The owners should be apologizing that they took this, not just giving the money back,” Mnuchin said.

Some publicly traded companies — including Shake Shack and AutoNation, the nation’s largest car dealership chain — have agreed to return the money.

The Payment Protection Program, administered by the Small Business Administration, is part of the $2.2 trillion economic stimulus package called the CARES Act to support businesses and workers during the pandemic.

A second round of payouts is now available. But the loophole allowing major companies — including hotel and restaurant chains — is still open. 

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