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 obtained an SBA 7(a) loan for $324,000 to buy a small business and its facility. The business and real estate had an appraisal value of $318,000 at the time of purchase. The business ultimately failed but the participating lender abandoned the business equipment and real estate collateral even though it had valid security liens. As a result, the lender recouped nearly nothing from the pledged collateral, leaving the business owners liable for the deficiency balance. The SBA paid the lender the 7(a) guaranty money and was assigned ownership of the debt, including the right to collect. However, the clients never received the SBA Official 60-Day Notice and were denied the opportunity to negotiate an Offer in Compromise (OIC) or a Workout directly with the SBA before being transferred to Treasury's Bureau of Fiscal Service, which added an additional $80,000 in collection fees. Treasury garnished and offset the clients' wages, federal salary and social security benefits. When the clients tried to negotiate with Treasury by themselves, they were offered an unaffordable repayment plan which would have caused severe financial hardship. Clients subsequently hired the Firm to litigate an Appeals Petition before the SBA Office & Hearings Appeals (OHA) challenging the legal enforceability and amount of the debt. The Firm successfully negotiated a term OIC that was approved by the SBA Office of General Counsel, saving the clients approximately $205,000.
Our firm successfully facilitated the SBA settlement of a COVID-19 Economic Injury Disaster Loan (EIDL) for Train With Jodi Inc. The borrower received an SBA disaster loan of $150,000, but due to the severe economic impact of the COVID-19 pandemic, the business was unable to recover.
Despite the borrower’s efforts to maintain operations, shutdowns and restrictions significantly reduced the customer base and revenue, making continued operations unsustainable. After a thorough business closure review, we negotiated with the SBA, securing a resolution where the borrower paid only $6,015 to release the collateral, with no further financial liability.
This case demonstrates how businesses affected by the pandemic can navigate SBA loan settlements effectively. If your business is struggling with an SBA EIDL loan, we specialize in SBA offer in compromise (SBA OIC) solutions to help close outstanding debts while minimizing financial burden.
SBA Settlement: COVID-19 EIDL Resolved with Collateral Release
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, 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.
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.