Lessons from a $1.2 Million Paycheck Protection Fraud Scheme

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, introduced in March 2020, aims to help people facing financial losses from the COVID-19 pandemic. ­­In December 2020, the CARES act was expanded to include the Paycheck Protection Program (PPP), an initiative that offers loans to businesses struggling during COVID-19. On February 16, 2021, the Associated Press reported a major fraud case in which a Minnesota man attempted to wrongfully claim $1.2 million in PPP funds.

Lies Galore

Donald Trosin, the admitted perpetrator of this fraud scheme, pled guilty to charges of major fraud and money laundering conspiracy. Trosin admitted to submitting more than 20 loan applications to the Small Business Administration, in an effort to receive PPP funds and Economic Injury Disaster Loan funds.

Trosin’s scheme involved applying for loans (both in his name and in others’) and claiming his business had 120 employees and more than $5 million in payroll expenses. These lies were, in fact, part of a much larger lie—Trosin did not run a business at all, let alone one with $5 million in payroll expenses. Upon receiving the funds, Trosin attempted to wire the money to different people across state lines.

While emergency relief fraud is extremely common, especially with the recent influx of fraudulent unemployment claims, this case is particularly interesting. The scale and breadth of this scheme – involving multiple banks, a recent government relief initiative, and a fully fabricated business – make it notable and somewhat unique.

Fraudsters are out in force attempting to take advantage of pandemic relief efforts. With even the government struggling to manage fraud, insurers and businesses can benefit greatly from the support and expertise of forensic accounting firms like SDC CPAs. With the expertise, extensive knowledge, and experience of companies like SDC CPAS, catching and proving fraud is within reach.

 

 

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