17th June 2021
Two Arrested in PPP Fraud Scheme
A man from New York and a woman from Oklahoma have been arrested for allegedly obtaining a Paycheck Protection Program (PPP) loan under false pretenses and laundering nearly $1 million, US officials announced on June 11, 2021.
According to the Department of Justice, Adam Arena, a resident of Buffalo, New York, resurrected his defunct business, ADA Auto Group, in May 2020 and conspired with Amanda Gloria of Oklahoma to submit a false PPP loan application in the amount of approximately $954,000. The loan application, which authorities say Gloria helped to process, allegedly included fake tax forms and payroll reports for 2019 and 2020 and falsely certified that the business had been in operation on February 15, 2020 — a requirement to receive funds from the PPP program.
Upon receiving the funds, Arena reportedly made a series of high-value transactions, including the purchase of two cars, and mailed a check for just over $24,000 to a business account controlled by Gloria. Gloria, prosecutors allege, almost immediately went on a shopping spree and spent the money on a series of personal expenses, such as spa services, clothes, and dining out.
Arena and Gloria, who made their first appearances in court last week, are each facing conspiracy and bank fraud charges, as well as charges of engaging in monetary transactions with criminally derived proceeds. If convicted, the maximum penalties range from 10 to 30 years in prison for each charge.
This case is just one of several to pop up since the PPP program and other government assistance programs were authorized in early 2020. Though intended to help businesses and individuals weather the economic fallout from the actions taken to combat the COVID-19 pandemic, the programs have also created plenty of opportunities for fraud. Indeed, as of late March, the Department of Justice confirmed it had charged at least 120 defendants with PPP fraud and said most of them had “misappropriated loan proceeds for prohibited purposes, such as the purchase of houses, cars, jewelry, and other luxury items.” Additionally, the law firm Arnall Golden Gregory has documented over 20 separate cases of PPP fraud that the Department of Justice announced taking action on in April and May 2021 alone.
Yet, while many cases so far seem focused on identifying and prosecuting the individuals who have exploited these programs, government officials have also started to scrutinize the role financial institutions may have played. In late May, the House Select Subcommittee on the Coronavirus Crisis announced an investigation into four fintechs and partner banks — Kabbage, Inc., BlueVine, Cross River Bank, and Celtic Bank — due to their connection to a high number of fraudulent PPP loans. As more cases emerge, other financial institutions’ due diligence and fraud protection practices may also be called into question.