We have written extensively about fraud in the Paycheck Protection Program (PPP). See prior stories here and here. Now, the U.S. Attorney’s Office for the Western District of Virginia is launching a special taskforce for COVID-19 fraud.
As detailed in a front-page story on the March 31, 2022 edition of the Roanoke Times, federal authorities in Western Virginia launched a new partnership with the Washington, D.C. based Special Inspector for Pandemic Recovery.[1]
Under the partnership, the US Attorney’s Office for the Western District of Virginia will designate two assistant U.S. attorneys to serve as direct points of contact to streamline case intake and prosecution.[2] In addition, a criminal paralegal position and a forensic audit support system will be established. The special inspector’s office will assist in those efforts and refer any investigation it opens to a Roanoke-based prosecution office with a jurisdiction that extends to the Lynchburg area, north to Winchester, and into far Southwest Virginia.[3]
The Justice Department’s efforts to combat COVID-19 fraud schemes include:
PPP Fraud
The cases involve a range of conduct, from individual business owners who inflate their payroll expenses to serial fraudsters who revive dormant corporations and purchase shell companies.[4] Most defendants misappropriate loan proceeds for prohibited purposes, such as for the purchase of homes, cars, jewelry, and other luxury items.
Economic Injury Disaster (EIDL) Fraud
These cases involve fraud against the EIDL program, which was designed to provide loans to small businesses, agricultural, and non-profit entities. Fraudsters target the program by applying for EIDL advances and loans on behalf of ineligible newly created, shell, or non-existent businesses, and diverting the funds for illicit purposes.[5]
Unemployment Insurance (UI) Fraud
Due to the COVID-19 pandemic, more than $860 billion in federal funds have been appropriated for UI benefits through September 2021.[6] Early investigation and analysis indicate international organized criminal groups have targeted these funds by using stolen identities to file for UI benefits.
The US Attorney’s Office details other types of COVID-19 fraud here.
COVID-19 Fraud Exists in Southwest Virginia
The work of the US Attorney’s Office and others demonstrate the pervasiveness of COVID-19 fraud in Southwest Virginia.
In Abingdon, more than 30 people were charged in an ongoing investigation of a scheme to illegally obtain about $1.5 million in unemployment benefits.[7] The plot was hatched at a time when people who lost their jobs in the midst of the pandemic were entitled to $600 a week from the federal government in addition to state aid.
Authorities say the scheme involved gathering personal information from individuals – including inmates in jails and prisons – and submitting it to the Virginia Employment Commission, knowing the applicants were not eligible for benefits.[8]
Farren Gaddis Ricketts of Jonesville, identified by prosecutors as the head of the conspiracy, was sentenced late last year to 10 years in prison and ordered to pay restitution. Ricketts, 31, created a business entity called “Ricketts Advisory LLC,” which she advertised as a financial services company that helped with filing pandemic unemployment claims, according to court documents. In addition to receiving unemployment benefits herself, Ricketts charged fees to over 120 of her co-conspirator “clients” for the service of filing their fraudulent claims.
Under the False Claims Act, whistleblowers may be entitled to a significant portion of the government’s recovery for federal funds fraudulently obtained under COVID-19 programs. Should you be aware of such conduct, please reach out to the attorneys at Frith & Ellerman Law Firm.
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[1] Hammack, Laurence, Legal Fight Against COVID-19 Related Fraud Launched in Western Virginia. Roanoke Times (Mar. 31, 2022). Available at https://roanoke.com/news/local/legal-fight-against-covid-19-related-fraud-launched-in-western-virginia/article_3d711ebc-b113-11ec-a054-bf68b991afb6.html.
[2] Id.
[3] Id.
[4] Press Release, U.S. Dep’t of Justice, Justice Department Takes Action Against COVID-19 Fraud (Mar. 26, 2021). Available at https://www.justice.gov/opa/pr/justice-department-takes-action-against-covid-19-fraud.
[5] Id.
[6] Id.
[7] See Note 1.
[8] Id.