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

The Economic Injury Disaster Loan (EIDL) was a product of legislation by the Federal Government and is being administered by the Small Business Administration (SBA). Despite this administrative and legal background and context, any experienced COVID-19 fraud lawyer will tell you as follows: The EIDL is by no means immune from theft, fraud, or the misappropriation of funding by those who are looking to take advantage of the situation, or those who simply neglect to understand and appreciate the various requirements and legal safeguards put in place. Many different New York Penal Law crimes are applicable to theft in this context and you could expect an arrest and possible indictment for associated wrongdoing for offenses including Grand Larceny, Forgery, and Offering a False Instrument for Filing. Law enforcement, including the District Attorneys of Manhattan, Brooklyn, Queens, Bronx, Westchester, Rockland, or any county throughout the state for that matter, will surely pursue prosecutions and convictions against those who they believe have stolen or unlawfully obtained money from this unique and novel funding source. Whether you are talking to theft defense attorney, judges, prosecutors or police, you are sure to hear that the an arrest or indictment involving the EIDL or any relief program in New York State is an extremely serious matter and the consequences can be dire.

This EIDL program being offered by the SBA is a low-interest, fixed rate loan with a maximum disbursement of $2 million dollars for businesses with 500 employees or fewer. The amount of funding loaned out under this program is only allowed to be used to pay immediate expenses during the COVID-19 epidemic including payroll, accounts payable, and certain other debts. In addition, the SBA is permitted to immediately advance up toa maximum of $10,000 of the eventual total loan amount within just three days of the submission of the application to allow for some amount of immediate financial relief. This kind of an advance can be used for the same sorts of expenses - payroll, sick leave, changes in productions costs, and other obligations. Lastly, it is likely that the borrower will not have to make any payments whatsoever for up to a year from the disbursement date. If a particular application was denied, the applicant may still be eligible to receive a $10,000 grant with no repayment obligation whatsoever.

There are many different criminal offenses that can be charged against those who are believed to have abused or misused or defrauded this program or other related financial relief programs administered by the SBA. The most obvious of these potential charges would likely include Grand Larceny, Forgery and Offering a False Instrument for Filing. These particular offenses are all criminal. As such, if you are convicted by plea or after trial, you will be branded with an indelible criminal record, not to mention you will face incarceration, probation and/or other penalties. In addition, you should recognize that almost all scenarios that arise in the current context of COVID-19 and coronavirus misappropriations of monies will be charged as felonies. In practical terms, this means that the offense or offenses would be punishable by multiple years in state prison. In essence, these various potential violations ultimately boil down to filing a document with a public agency that contains false information (Offering a False Instrument for Filing), theft of money with a total value in excess of $1,000 that occurred as a result of this kind of fraudulent submission or otherwise (Grand Larceny), and/or the modification of forging of these kinds of documents that might be submitted in connection with an application to the SBA for this kind of financial relief (Forgery).

The range of possible and potential sentences or penalties for each of these kinds of crimes depends in large part on the degree of offense for which a person is found guilty. 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, as well as probation, fines or community service. On the other hand, 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 four years in state prison, or five years of probation as well as other sanctions. The greater degrees of Grand Larceny become increasingly sever, especially when the amount of money at issue is very high. Grand Larceny in the Third Degree, Penal Law 155.35, for example, is a class “D” felony punishable by up to seven years in state prison. Even more serious, if the theft exceeds $50,000 or $1 million, the associated Grand Larceny convictions carry potential sentences as great as fifteen years and twenty-five years in state prison respectively. Forgery in the Second Degree, Penal Law 170.10, like most of the aforementioned offenses, is also a felony with an associated sentence of up to four years incarceration. As is now plain to anyone, these potential sentences can be incredibly severe, and prosecutors will surely be more proactive and assertive in seeking out harsher penalties and punishment due to the present context in which these kinds of alleged frauds are committed.

It’s fairly easy to understand how one might run afoul of the law in this context and find yourself accused of theft and fraud in connection with an SBA Economic Injury Disaster Loan or Loan Advance during and even well after the COVID-19 epidemic. Anyone, including a business owner, can find themselves desperate to feed their family in the current climate, or keep their employees paid and secure. A person in this situation can simply make a mistake in the paperwork or decide that a small adjustment to their books is justified if some small technicality would prevent them from qualifying that seems unjust or unfair. A perfectly reasonable and good person could find themselves in this scenario and make this kind of decision, but nevertheless find themselves on the wrong side of the law and staring down a potential state prison sentence. To be clear, these serious crimes, and if discovered by law enforcement or a local prosecutor’s office, criminal charges will be filed. Regardless of whether the unlawful conduct is blatant or discreet, modifying paperwork to change salaries, manipulating documents, or even creating fictious employees to increase financial relief would quite clearly constitute any one of the above criminal offenses.

Rather than making a bad situation worse, and even potentially irredeemable, it’s critical to consult with a knowledgeable and experienced criminal lawyer to fully appreciate the potential consequences of taking advantage of these kinds of disaster relief funding programs. Keep in mind, just because you are being investigated, arrested, or even indicted, a supposed fraudulent scheme might be nothing more than a simple misunderstanding, but establishing that lack of criminality might not be such an easy task.

During these novel times, many people have no doubt experienced financial hardship, including this nation’s and this state’s small business owner. It has negatively impacted many people’s work and livelihood in incredible ways, as well as the well-being of those people’s families and loved ones. Whether you've seen your income reduced, or had to shut the doors on your business, the financial harm of the COVID-19 emergency is immense.

No matter what the allegations of theft are, whether a felony or misdemeanor, a criminal conviction can – and absolutely will - have long-lasting and irretrievable impacts on you, your family and your business. With all that at stake, it is crucial to take advantage of the experience, knowledge and advocacy of the criminal defense team and former Manhattan prosecutors at Saland Law. Let us fight for you and your rights so that you are not left with a Scarlett Letter for the rest of your days.

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