According to data from the Transactional Records Access Clearinghouse (TRAC), criminal referrals from the Small Business Administration for fraud rose 727% from 2019, driven by a global pandemic and a relief package that opened the door for fraudulent applications for relief. Texas had the highest amount of criminal case referrals related to fraudulent applications to the Paycheck Protection Program.
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In 2019, just 11 cases were filed, compared to the nearly 100 filed in 2020.
In Houston, prosecutors accused at least eight people of filing more than 80 fake applications for aid, totaling more than $16 million.
In that case, the suspects were accused of buying luxury items including Porsches and Lamborghinis.
READ MORE: Lamborghini and Porsche vehicles seized in $16M PPP fraud case in Houston
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Texas cases account for one in five of all the cases filed. Georgia is second for total cases with 15% of all cases. Florida accounts for 12%, Illinois with 8% and California with 8%. Those five states make up 63% of all cases from around the country.
"Just what proportion of recent referrals reflect alleged fraud under the CARES Act is uncertain since specific details of these referrals will only become public once prosecutions actually are filed," said an analysis done by TRAC and posted to its website. "But the timing of this upsurge in referrals as well as details on cases already being filed suggest that alleged fraud in applications for COVID relief was a major driving force."
Just this week, the Small Business Administration issued a statement saying it is working to increase compliance checks early in the process to help prevent fraud, while trying to ensure that real applicants are able to navigate the process without a lot of red tape.
The CARES Act, passed early last year, included a provision for the PPP program, which was designed to help keep businesses afloat while COVID-19 shut business down across the country.