NY Coronavirus Relief Fraud & Crimes: SBA Economic Injury Disaster Loans

Enacted by the Federal Government and administered by the Small Business Administration, the Economic Injury Disaster Loan, or EIDL, is not immune from theft, fraud, or the stealing and misappropriation of monies. Whether by way of Grand Larceny, Forgery, Offering a False Instrument for Filing, among other criminal offenses, the District Attorneys of Manhattan, Brooklyn, Queens, Bronx, Westchester, Rockland – any county for that matter - will prosecute those who allegedly steal these funds. From fraud defense lawyers to judges of the criminal court and prosecutors to the NYPD, FBI or other law enforcement agencies, there should be no doubt about the gravity of an arrest or indictment involving the EIDL or any relief program in New York State.

This program, or product, offered by the U.S. Small Business Administration, is a low-interest, fixed rate loan up to $2 million dollars for businesses and nonprofits with 500 or fewer employees. The amounts loaned out under this program can only be used to pay immediate expenses during the coronavirus emergency such as payroll, bills and accounts payable, and fixed debts. Additionally, the SBA can immediately advance up to $10,000 of the total loan amount within three days of the application being filed. This advance can similarly be used for payroll, sick leave, changes in productions costs, and business obligations. Finally, the borrower may not even have to start repayment for a year. If a person or small business had their application denied, they can still be eligible to receive a $10,000 grant that does not have to be repaid at all.

There are numerous different crimes that may be chargeable to those who abuse this program or similar financial relief programs administered by the federal government. The most readily apparent criminal charges that would likely apply include Grand Larceny, Forgery and Offering a False Instrument for Filing. These are all criminal offense that, if you are convicted, would result in a record of the indelible variety. Compounding this reality, misdemeanors these crimes are not. Instead, each of these offenses would be must or would likely be charged as felonies punishable by time in state prison. Essentially, these infractions, to describe them generously, boil down to submitting a written instrument with a public office that contains false information (Offering a False Instrument for Filing), the theft of money greater than $1,000 or even in excess of $1 million that occurred as a result of such a submission (Grand Larceny), and the altering or forging of documents that would be submitted along with such a fraudulent application to the SBA.

The range of sentencing possibilities for each of these particular crimes depends on the degree with which you are convicted. Offering a False Instrument for Filing in the Second Degree, Penal Law 175.30, is a class “A” misdemeanor punishable by one year in the local jail, such as Rikers Island, probation, fines or community service. Contrarily, Offering a False Instrument for Filing in the First Degree, Penal Law 175.35, is a class “E” felony, which is punishable by up to one and one third to four years in state prison, as well as a longer period of probation and other sanctions. The higher degrees of Grand Larceny go even further up the chain of severity, especially when the amount of theft is relatively high. Grand Larceny in the Third Degree, Penal Law 155.35, is a class “D” felony punishable by up to two and one third to seven years in state prison, assuming it is your first felony conviction. Even worse, if the theft exceeds $50,000 or $1 million respectively, the associated Grand Larceny offenses carry sentences as great as five to fifteen and eight and a third to twenty-five years imprisonment. As you – or anyone - can see, these punishments and penalties are incredibly severe, and prosecutors will no doubt be more aggressive in seeking out greater sentences due to the circumstances under which these frauds were allegedly committed.

It’s relatively easy to see how you might run afoul of the law and find yourself in “hot water” related to an application for SBA Economic Injury Disaster Loans and Loan Advances during the coronavirus pandemic. A small business owner may be desperate to put food on the table, or keep their employees on the payroll, and either simply make a mistake in the paperwork, or decide that a small adjustment to their books is warranted where some small technicality would prevent them from qualifying. Such an example would be having just a few too many employees to apply for relief. While a reasonable person may feel justified in doing this kind of thing to help and protect their family and their employees, make no mistake, this can and will be charged as a serious crime if discovered by law enforcement or a local District Attorney’s office. Remember, whether blatant or discreet, altering salaries, doctoring paperwork, or even creating fictious employees to increase benefits would violate each or many of the above offenses.

Before making a bad situation not merely worse, but potentially devastating, it’s important to consult with a criminal lawyer to fully understand an appreciate the potential ramifications of utilizing these kinds of disaster relief programs. Remember, merely because you are investigated, arrested, or even indicted, an alleged fraudulent scheme may be nothing more than a complete misunderstanding.

During the unprecedented COVID-19 epidemic, many people have seen their business and livelihood affected in an extreme way, not to mention the lives and wellbeing of their friends, colleagues and employees. Whether you've seen your business slow to a crawl, or even shutdown, the economic impacts of the Coronavirus pandemic are hard to understate. If you’ve been contacted by the NYPD or other law enforcement agency and find yourself being investigated, arrested or indicted for your utilization of these SBA programs, remaining stagnant or failing to implement the best strategies to protect yourself will undoubtedly be detrimental to your future in ways you may not yet fully comprehend.

No matter whether the allegation of fraud relates to an application for an SBA Economic Injury Disaster Loan and Loan Advance is being charged against you as a misdemeanor or a felony, it can have a permanent and crippling affect on your business, life and family. With so much at risk, know that experience, knowledge and advocacy is your best defense and guide. You may have been knocked down, but brush off your knees, stand up and let Saland Law’s fraud defense lawyers and former Manhattan prosecutors be the best avenue to clear your name.

Call the New York theft lawyers and former Manhattan prosecutors at 212.312.7129 or contact us online today.