In 2020, Congress pushed through the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act—called the CARES Act—to provide economic assistance for American workers, families, small businesses, and industries.
The CARES Act included several programs intended to address economic damages caused by the pandemic, including individual payments for families, extended unemployment assistance, and provided for small business relief, including the Employee Retention Credit (ERC), Paycheck Protection Program (PPP), and emergency loans including Economic Injury Disaster Loans (EIDL).
Unfortunately, some of those programs proved irresistible to criminals. Since then, IRS-Criminal Investigation (CI) has investigated 1,644 COVID-related tax and money laundering cases potentially totaling $8.9 billion, with well over half that amount coming from cases opened in the last year.
PPP Loans
PPP loans were designed to help small businesses keep their workers on payroll during the pandemic. While loans were obtained from various lenders, they were guaranteed through the Small Business Administration (SBA) under the CARES Act. PPP loans help fund payroll costs, including benefits, and are used to pay for, among other things, mortgage interest, rent, utilities, and worker protection costs related to the pandemic. And quite favorably, borrowers who met specific criteria were eligible for loan forgiveness.
Initially, Congress authorized up to $349 billion in forgivable loans as part of the program. Congress subsequently authorized over $300 billion in additional PPP funding.
EIDL
The EIDL program was created to support small businesses as they recovered from the pandemic. EIDL loan funds were intended to be used for working capital and other standard operating expenses. The loans were not forgivable and were required to be repaid.
EIDL advance funds were awarded to existing EIDL applicants who met specific criteria. The advances were like grants but without the typical U.S. government grant requirements. Most importantly, EIDL advances did not need to be repaid.
Fraud
As of February 29, 2024, 795 people have been indicted for their alleged COVID-related crimes, and 373 individuals have been sentenced to an average of 34 months in federal prison. During the last four years, CI has obtained a 98.5% conviction rate in prosecuting those fraud cases.
“The work by IRS Criminal Investigation provides a vital role in protecting against fraud and serves a key part in the agency’s wider efforts to ensure fairness in the nation’s tax system,” said IRS Commissioner Danny Werfel. “Protecting taxpayers against fraud in pandemic-era programs is just one example of the important role that CI plays in the law enforcement community. A healthy budget for the IRS helps us get the job done, and the work of CI provides a critical safety net to protect the nation against fraud.”
CI expects that work to continue, thanks to additional funding the IRS received through the Inflation Reduction Act.
“In the last year alone, we have opened nearly 700 new COVID fraud investigations that collectively add up to $5 billion in potential fraud,” said CI Chief Guy Ficco. “While COVID may no longer be top of mind to the average American when they wake up, the fraud committed through these different programs is very much top of mind to CI. Our special agents continue to seek out fraudsters who stole money from government loan programs for their personal gain.”
Recent Cases
Two recent cases resulted in years-long prison sentences for the accused.
In March of 2024, Rami Saab, also known as Rami Hasan, was sentenced by U.S. District Judge Gary R. Brown to 10 years in prison for his role as the mastermind of a conspiracy to fraudulently obtain COVID-related relief loans. Saab must also pay restitution worth approximately $9.6 million.
According to court documents, between May 2020 and May 2021, Saab and a network of co-conspirators fraudulently applied for more than $32 million in PPP and EIDL loans on behalf of shell corporations they controlled. As a result, the SBA and private banks granted at least 20 of those applications, resulting in the disbursement to Saab and his co-conspirators of more than $9.6 million in funds they were not entitled to receive. Then, Saab and his co-conspirators laundered the fraud proceeds, withdrawing large portions in cash and transferring sums to associates overseas in Turkey and elsewhere.
Saab pleaded guilty in July 2023 to conspiracy to commit wire fraud, stemming from his operation of a yearlong scheme to defraud banks and the SBA of millions of dollars worth of small business loans under the PPP and EIDL.
Also, in March of 2024, Terrence L. Pounds was sentenced to 94 months in prison and ordered to pay more than $4.2 million to the SBA after being convicted of conspiracy to commit wire fraud, wire fraud, and money laundering. Pounds and his co-defendants were accused of running a scheme to obtain COVID-related loans under false pretenses, often claiming the loans were for nonprofit, faith-based organizations. Pounds obtained millions of dollars in loans.
According to court documents, from March 2020 through December 2020, Pounds and his co-defendants devised a scheme to obtain SBA-financed loans from the EIDL program and the PPP under false pretenses. Pounds, who was accused of being the leader of the conspiracy, arranged for others to provide him with their personal identifying information, which he then used to apply for EIDL loans in their names, collectively seeking more than $9.5 million in EIDL funds, with each application generally seeking approximately $150,000. Based on those applications, the SBA approved and paid roughly $3.7 million in EIDL loans. Pounds and his co-conspirators also submitted numerous fraudulent PPP loan applications, many of which were approved, raising the total of funds obtained by fraud to more than $4.2 million.
Pounds used some of the money he made from this scheme—from loans he received directly and payments received from others—to purchase a 2021 Chevrolet Tahoe, a 2021 Kia Telluride, a 2020 Hyundai Elantra, and a 2020 BMW X4. Investigators seized those vehicles, and Pounds eventually agreed to forfeit them.
More Information CI encourages the public to share information regarding known or suspected fraud tied to the CARES Act by contacting their local CI field office. Contact information for each CI field office can be found in the division’s annual report.
It’s the sixth-largest law enforcement agency in the U.S. and is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations like tax fraud, narcotics trafficking, money laundering, public corruption, healthcare fraud, and identity theft. While other federal agencies also have investigative jurisdiction for money laundering and some bank secrecy act violations, the IRS is the only federal agency that can investigate potential criminal violations of the tax code. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.
