Indian-American businessman charged with COVID-19 relief fraud

An Indian-American owner of several information technology companies in the Chicago area has been charged with COVID-19 relief fraud running into USD400,000, federal prosecutors have said. Rahul Shah (51) has been charged in a criminal complaint filed in the Northern District of Illinois with bank fraud and making false statements to a financial institution. An initial appearance in US District Court in Chicago has not yet been scheduled.

According to the complaint, Shah filed a bank loan application that fraudulently sought more than USD400,000 in a forgivable Paycheck Protection Program loan guaranteed by the Small Business Administration under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. In support of the loan application, Shah allegedly caused to be submitted to the lender several false and fraudulent IRS documents, including IRS Forms 1099-MISC representing that the company made payments to several individuals who later confirmed to federal investigators that they had not received such payments, it said.

In addition, Shah allegedly signed and caused to be submitted to the lender what purported to be IRS Forms 941 representing his company's quarterly payroll expenses for 2019. A comparison between the documents submitted to the lender and the company's IRS filings revealed that Shah's company reported significantly lower payroll expenses to the IRS, the complaint states. The bank fraud and false statement charges are each punishable by up to 30 years in federal prison.

"The Paycheck Protection Program was designed as a lifeline for small businesses struggling to survive the COVID-19 pandemic," said US Attorney John Lausch. The CARES Act was enacted on March 29, 2020, to provide emergency financial assistance to the millions of Americans suffering from the economic effects caused by the COVID-19 pandemic.

One source of relief provided by the CARES Act was the authorisation of up to USD349 billion in forgivable loans to small businesses for job retention and certain other expenses, through the PPP. In April 2020, Congress authorised over USD300 billion in additional PPP funding. The PPP allows qualifying small businesses and other organisations to receive loans with a maturity of two years and an interest rate of one per cent. PPP loan proceeds must be used by businesses on payroll costs, interest on mortgages, rent, and utilities. The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within 24 weeks of receipt and use at least 60 per cent of the forgiven amount for payroll..

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