The COVID-19 pandemic was a difficult time for small business owners. In an effort to help entrepreneurs survive these economically difficult times, the government offered various financial incentives. Some were in the form of tax incentives, others loans. One example is the COVID-19 Economic Injury Disaster Loans (EIDL).
The EIDL helped small businesses, renters, and homeowners in areas affected by the pandemic. Businesses owners could apply for this form of financial relief by providing information about their operations and the impact of the pandemic to the Small Business Administration (SBA). The business owner would affirm that all information provided was true and the SBA would review and determine eligibility.
Like many programs at that time, the information to help guide business owners through this process was limited. Many were doing their best to fill out these forms accurately, but mistakes were made. In some cases, the government views these mistakes as more than just a simple error — it believes that the mistake constitutes fraud. In these situations, the government will pursue criminal charges. A recent case provides an example, with three important lessons for all who took part in the EIDL program.
#1: The government will investigate EIDL applications
The government can and will review the details within the applications for this EIDL program. In a recent case, the government claims a business owner intentionally provided false information to fraudulently receive these funds. The government states it has evidence that information regarding the gross revenue and cost of goods was false and led to over one million in ill gotten gains.
#2: Misinformation could lead to criminal penalties
If the government can gather evidence of wrongdoing, it will move forward with criminal charges. These can lead to serious penalties, including potential financial penalties and imprisonment. The government will look for false or misleading information when deciding whether to build a case.
#3: EIDL fraud can lead to additional criminal charges
Allegations of mistakes on the EIDL application are just the beginning. The government will review all facts of the case to see if other criminal penalties are possible. In the case noted above, the government pursued criminal charges for wire fraud in connection to the fraudulent application to the EIDL program. Upon review of the evidence, the court agreed with the government. The court sentenced to six years and nine months imprisonment for this and a second related COVID-19 fraud case.
This is one of many examples of how the government remains aggressive in its attempts to investigate and prosecute small business owners it believes have attempted to thwart their tax obligations. Those who find themselves under investigation are wise to take the matter seriously. The attorneys at Goldburd McCone have experience with EIDL issues and can help advocate for your interests, better ensuring the most favorable outcome possible.