Learn about deception in SBA loans and how it led to charges Covid 19 Disaster Relief Fraud.
About the Author:
My name is Joshua McCarty. I am a Freelance Videographer. I make films to bring awareness to
important subjects that occur within the world. In 2007 I was incarcerated because I thought I was
smarter than the people I was trying to deceive. This thinking caused me to go to prison for six years. I
spent those six years rebuilding myself mentally and started to develop healthier thinking habits. Since
my release, I have graduated from college with an Associate’s Degree in Human Resource Management
and will be furthering my education.
- Participants will be able to:
- Describe specific elements of fraud.
- Explain the jury proceeding process.
- Describe penalties for forging documents.
- Understand the purpose behind SBA loans.
- Educate people on how one mistake can lead to prison time.
Entrepreneurs and owners of small businesses.
SBA Loan, COVID, Relief, Security, Payment Protection Program, Disaster Fraud.
Current State of the Industry:
The coronavirus has negatively affected businesses and the economy. COVID has spread throughout the world like a plague. This virus has damaged the health and finances of many Americans. The government created a relief program to assist small businesses by loaning them capital called the Payroll Protection program (PPP). The loan exists for business purposes, to help them stay afloat during these tumultuous times. The government has introduced application guidelines that must be met in order to receive these funds. Unfortunately, there are small business owners who attempt to fraudulently apply for the loans. The business owners use false information on loan applications in hopes of getting approved. Their greed and deceit may come from fear of having to close the doors to the company due to lack of revenue. Other times their greed is just that, greed. They do not understand the legal consequences that can come from deception and fraud.
Future State of the Industry:
Business leaders and employees should have a clear understanding for the purpose of government loans. They should understand the guidelines that are set in place and make an educated decision whether they meet the criteria for the loan. Understanding the requirements to be approved for the Paycheck Protection Program is essential. The federal government designed the Small Business Administration loan to help small businesses that have been adversely impacted by COVID-19. Recognizing the result that can come from manipulating records on the SBA application can deter business owners from making wrong decisions. These decisions can cause government investigations that can lead to forfeiture of personal freedom and expensive fines. In fact, the federal government has brought numerous cases with unusual speed pertaining to fraudulent PPP loans in order to make a point and dissuade others.
An Engineer in Texas deceived the government with false information to receive SBA loans. He made fraudulent claims stating that his company employed over 250 workers and that the loan would be used to pay for the employee’s wages. The defendant also claimed that he owned and operated separate businesses. He would use those illegitimate businesses to falsify reports claiming the needs for loans. After thorough investigation the government discovered that the defendant operated no company and charged him with fraud and making false claims on SBA loan applications.
Shashank Rai worked as an Engineer in Beaumont, Texas. Rai attempted to take advantage of the vulnerabilities the world is currently facing through deception. The coronavirus (commonly referred to as COVID-19) outbreak started around December 2019. COVID is an acute respiratory syndrome that currently has no cure.
This novel virus caused a pandemic across America, which ultimately led to the deaths of many. Jobs were lost due to forced business shutdowns and the unemployment rate skyrocketed. Many people did not leave their homes in fear of catching the virus. People were not spending money which greatly impacted companies thus slowing down the flow of money in the economy. Small businesses were impacted greatly because of this newfound virus.
Due to this economic change, the Government and SBA created a Paycheck Protection Program. Business owners could apply for loans to prevent closing based on eligibility factors. The loans were meant to aid businesses to keep them afloat by providing funds to pay their employees.
After the introduction of the PPP loans, there have been many attempts to deceive the SBA through application misrepresentation. Rai attempted to lie and cheat the system by applying for loans for businesses that did not exist. Rai claimed that he employed over 250 people and needed the resources to keep up with the $4 million monthly payroll. Rai applied for two loans totaling $13 million.
The Texas Workforce Commission became aware of these loans. The Commission gave investigators information claiming they had no records of Rai’s businesses. There was no revenue documented for the two businesses Rai claimed on his applications. This initiated an investigation by the Justice Department. After investigation, it was determined that Rai was guilty of wire and bank fraud. Rai is currently awaiting sentencing.
According to the information presented in the press release, Shashank Rai decided to deceive the SBA for business loans. Rai knew about the resource’s businesses could receive due to the COVID-19 pandemic. The SBA has a finite amount of money to lend to small businesses. Once the funds are depleted there is no way for other businesses to receive assistance. Knowing this, Rai should have let business owners who were in need get the relief funds. Instead, Rai let his greed consume him. This caused Rai to make a poor decision which will jeopardize his freedom.
Rai applied for million-dollar loans on two separate applications. The loans he applied for were for businesses that were nonexistent. The Texas Workforce Commission saw there were no financial tracings for payroll deductions or wages. The government entities became aware of this and investigation ensued.
The CARES Act has provided financial resources to many Americans because of the corona outbreak. In the CARES Act, money was provided to small businesses to prevent employee layoffs. Since the Act has been introduced there have been many attempts to wrongfully apply for these loans. Many people saw these loans as an opportunity to get “easy money” not knowing the ramifications of their actions.
As a result of this failed attempted scheme, Rai pled guilty to fraud charges. He now awaits sentencing for white-collar violations that may result in relinquishment of his freedom.
The Fraud department of the SBA was created to make sure applicants abide by guidelines. Whenever capital is involved, scam artists and thieves are in proximity. To lower the odds of being targeted the government has many ways of determining whether a business is legitimate.
Shashank Rai’s cunning decision making revealed complete disregard for his fellow man. Rai did not care about the limited resources that were available. He decided to capitalize on the opportunity to apply for funds that were designated for businesses that were impacted due to coronavirus.
Dishonesty to acquire unearned capital can lead to lengthy prison time and harsh fines. Rai failed to make proper decisions and now he will spend time in prison thinking about those choices that ultimately caused his downfall.
Compliance programs can help inform individuals on the consequences of their actions. Compliance programs can help prevent federal prison time and expensive fines by ensuring people know how to follow certain guidelines.