Don't Mess With Taxes

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In July 2021, the U.S. Department of Justice (DoJ) had charged 22 individuals in connection with an allegedly fraudulent Paycheck Protection Program (PPP) loan scheme that sought to defraud the federal government of $11.1 million.

On Thursday, Feb. 15, two Georgians who were charged three years ago were convicted for their roles in the scheme.

A 42-year-old Decatur man was convicted by a federal jury of bank fraud, wire fraud, conspiracy to commit bank fraud and wire fraud, making false statements to a federally insured financial institution, and money laundering in connection with 14 loan PPP applications.

That jury also convicted a 55-year-old Tucker woman of two counts of money laundering in connection with laundering the proceeds of a PPP loan.

Fake applications, tax forms: Court documents and evidence presented at trial showed that between April and August 2020, the Decatur man and co-conspirators submitted, or assisted in the submission of, PPP loan applications on behalf of 14 businesses seeking loans of approximately $800,000 for each company.

In the loan applications, the co-conspirators certified that each applicant business was in operation on Feb. 15, 2020, and had employees for whom it paid salaries and payroll taxes or that it paid independent contractors. They also falsely asserted that the federal COVID-19 relief funds would be used to retain workers and maintain payroll or to make mortgage interest payments, lease payments, and utility payments.

Prosecutors showed that the co-conspirators falsely reported that each business had approximately 60 employees and approximately $300,000 in average monthly payroll expenses. To support these payroll figures, each business' loan application was accompanied by an Internal Revenue Service Form 941, which employers use to report payroll taxes. In reality, said federal officials, each Form 941 was fraudulent.

After the falsely obtained PPP money was deposited into the businesses' accounts, the defendants laundered some of the funds through a series of transactions to disguise the origins of the funds and how the funds were spent.

In the charging document, federal investigators — which included Federal Bureau of Investigation (FBI), Small Business Administration Office of Inspector General, and IRS Criminal Investigation agents — said that the PPP scheme participants used the coronavirus pandemic loan proceeds to purchase luxury goods, including expensive vehicles.

A sentencing date has not been set for either of the PPP schemers convicted this week. When that does happen, the DoJ notes that each person faces a maximum penalty of 20 years in prison on each of the wire fraud and money laundering charges.

The bank fraud and false statement to a federally insured bank convictions each carry a potential maximum penalty of 30 years in prison.

Special COVID crime fighters: Several of the original 22 defendants pleaded guilty to their roles in the fraudulent PPP scheme.

The charges against all of those accused of participating in the PPP fraud came from the work of COVID-19 Fraud Enforcement Task Force members. The special investigatory group was created in May 2021 to marshal the resources of the Justice Department and its partner crime-fighting agencies across the U.S. government.

Tax Felon Friday: COVID-19 might have abated, but the criminal enterprises related to the virus continue. That's why the Department of Justice is still investigating, and accepting tips from the public, possible COVID-related crimes.

DoJ officials urge us all to remain on COVID fraud alert. The scams include vaccine fraud schemes, medical testing and treatment cons, and false virus-related tax relief offerings.

If you think you are a victim of a scam or attempted fraud involving COVID-19, report it by calling the Justice Department's National Center for Disaster Fraud (NCDF) hotline toll-free at (866) 720-5721. You also can report it online using the NCDF Web Complaint Form.

If you want to catch up on all sorts of tax miscreants, the ol' blogs' special Tax Felon Friday page is a good place to start.

And if you want more tax crime posts, including those published before I gave them special end-of-week feature recognition, you can peruse the (what else) tax crimes category. You'll find this post at the top of that collection right now, so just scroll down for more.

You also might find these items of interest:

• IRS welcomes voluntary disclosure of dubious ERC claims 
• IRS halts ERC claims, warns businesses about scam promoters
• COVID federal fraud sweep recovers $836 million, produces 371 criminal charges

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