COVID-19 Relief Fraud: PPP & EIDL Loans Under Heightened Investigation & Prosecution Contact us today.
Book a Consultation CallDerrick Worrell, 48, pleaded guilty to charges of money laundering and organizing a scheme to defraud $50,000 or more in connection with certain SBA COVID Loans authorized for disbursement under the CARES Act.
Mr. Worrell was imposed a mitigated sentence of 10 years, which could be reduced to under 6 years if Worrell complies with the terms of his plea agreement. To qualify for the reduced sentence, Worrell has been ordered to turn himself in to the court to avoid any further legal violations.
Worrell was among 6 individuals arrested for allegedly stealing over $3 million from the SBA COVID-19 Loan Program, enacted in 2020 under the CARES Act – which was designed to provide economic relief to small businesses actually affected by the COVID-19 pandemic.
During the course of investigation, it was discovered that Worrell secured an SBA COVID Loan disbursed in the amount of $491,000 for his company with 26 employees and a monthly payroll of $184,000. Worrell also paid $52,000 in wages, taxes and payroll fees while using the remainder of the SBA COVID Loan for his own personal expenses - approximately $254,000 or 52% of the loan, which included rental cars, groceries, and online shopping – all of which were apparently flagged as misuse of COVID relief funds.
Understand Your Risk
This case serves as a reminder of the severe consequences of exploiting the COVID PPP & EIDL Loan Program.
With the recent uptick by the SBA of conducting COVID PPP & EIDL non-compliance audits and business closure reviews where borrowers are required to produce financial statements, tax returns, bank and credit card statements in response to an Information Document Request, there is a paper trail and treasure trove of information that could be used against you and land you in trouble if allegations of ineligibility, false certification and/or misuse of proceeds can be proven.
If you obtained COVID PPP or EIDL funds for your small business and think you could find yourself in the crosshairs of an investigation and potential prosecution of false certification, misuse of proceeds or other financial mischief, then you should consult with qualified legal counsel to help assess your situation.
Government authorities have been encouraging the public to report suspicious activity related to pandemic relief funds, and with the extended 10-year statute of limitations to investigate COVID PPP & EIDL Loan fraud, there is ample time for enhanced scrutiny and possible prosecution ranging from civil penalties to criminal allegations.
Establishing a robust compliance strategy is crucial in preparing for an SBA non-compliance audits or business closure reviews. Begin by reviewing your business practices against SBA guidelines to pinpoint any potential areas of non-compliance. Regular internal audits can help you identify and rectify discrepancies before they become problematic. Furthermore, consulting with professionals specializing in SBA loans can provide insights into maintaining compliant financial records. Remember, being proactive in compliance can significantly mitigate risks during an audit or investigation.
Strategies
Engaging legal counsel experienced in SBA regulations should be a priority if faced with an SBA non-compliance audits or business closure reviews. An attorney can help you navigate the complexities of the non-compliance audit or business closure review process, advise on your legal rights, and represent your interests. They can also assist in developing a strategy for responding to inquiries and defending against potential findings of non-compliance. Moreover, if the non-compliance audits or business closure reviews reveal significant issues, your attorney can guide you through the steps for pursuing options.
Navigating an SBA non-compliance audit or business closure review doesn't have to be an overwhelming ordeal. By understanding the process, prioritizing compliance, enlisting legal support, and taking action post-audit, you can mitigate the impacts of such scrutiny on your business or you - as a owner/officer. If you're facing an SBA audit or have concerns about your business's compliance with SBA regulations, contact Protect Law Group today. Our team is dedicated to guiding small business owners through financial challenges and ensuring their rights are protected.
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Clients borrowed and personally guaranteed an SBA 7(a) loan. Clients defaulted on the SBA loan and were sued in federal district court for breach of contract. The SBA lender demanded the Client pledge several personal real estate properties as collateral to reinstate and secure the defaulted SBA loan. We were subsequently hired to intervene and aggressively defend the lawsuit. After several months of litigation, our attorneys negotiated a reinstatement of the SBA loan and a structured workout that did not involve any liens against the Client's personal real estate holdings.
Our firm successfully assisted a client in closing an SBA Disaster Loan tied to a COVID-19 Economic Injury Disaster Loan (EIDL). The borrower obtained an EIDL loan of $153,800, but due to the prolonged economic impact of the COVID-19 pandemic, the business was unable to recover and ultimately closed.
As part of the business closure review and audit, we worked closely with the SBA to negotiate a resolution. The borrower was required to pay only $1,625 to release the remaining collateral, effectively closing the matter without further financial liability for the owner/officer.
This case highlights the importance of strategic negotiations when dealing with SBA settlements, particularly for businesses that have shut down due to unforeseen economic challenges. If you or your business are struggling with SBA loan debt, we focus on SBA Offer in Compromise (SBA OIC) solutions to help settle outstanding obligations efficiently.
Clients personally guaranteed an SBA 7(a) loan that was referred to the Department of Treasury for collection. Treasury claimed our clients owed over $220,000 once it added its statutory collection fees and interest. We were able to negotiate a significant reduction of the total claimed amount from $220,000 to $119,000, saving the clients over $100,000 by arguing for a waiver of the statutory 28%-30% administrative fees and costs.
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