Miami, FL | February 12, 2021 – Stumphauzer, Foslid, Sloman, Ross, and Kolaya’s Michael Nadler was quoted in a Daily Business Review article on the anticipated influx of fraud litigation related to the federal government’s second round of Paycheck Protection Program lending.
Miami Litigators Expect Influx of PPP Fraud Cases as Second Round of Lending Begins
By Michael A. Mora | February 12, 2021
(L to R) Brian H. Bieber, GrayRobinson shareholder and Michael Nadler, Stumphauzer Foslid Sloman Ross & Kolaya. (Photos: Courtesy Photo)
The federal government has kicked off its second round of the Paycheck Protection Program to distribute about $284 billion in loans to small business applicants.
And Brian H. Bieber, a shareholder at GrayRobinson in Miami who specializes in criminal and civil white-collar defense litigation, said an influx of PPP fraud litigation will likely soon enter the courtroom as trials and grand juries are starting to open up after months of coronavirus closures.
“You can certainly bank on the government not having employed full-proof safeguards to this very well-intentioned loan program,” Bieber said. “Unscrupulous individuals will do their best to and will succeed in taking advantage of the system.”
The PPP is the U.S. government’s small business program created under the Coronavirus Aid, Relief, and Economic Security Act to help these companies or nonprofit organizations continue to pay their workers despite the economic devastation caused by the COVID-19 pandemic. Generally, the applicant must have 500 or fewer workers and must certify that “current economic uncertainty makes this loan request necessary” to support continuing operations.
But, this latest capital disbursement comes off the last round in which the Department of Justice arrested hundreds of people it accused of fraud and reached some plea agreements to lessen the load on the courts, Bieber said. That included the recent arrests of two Florida men who were accused of scoring millions of PPP loan money for their businesses and instead diverting these forgivable loans to buy expensive luxury vehicles.
That includes Don Cisternino of Bradenton, whom the DOJ alleged used a portion of $7.2 million of funds for his consulting business for personal purchases, including a $251,000 Mercedes-Benz. And David T. Hines of Miami, who avoided trial by pleading guilty on Wednesday to diverting a portion of the $3.9 million loan for his financial businesses to buy a $318,000 Lamborghini, according to the department.
Now, Bieber, who is not involved in these cases, said these cases will show how judges in Florida and across the country will rule.
“The vast majority are people who were predisposed to committing fraud saw a hole in this system like a fullback with an open field of 70 yards in front of him running for a touchdown,” Bieber said. “But it will be on a case-by-case basis. And certain cases, depending upon how flamboyant the post-fraud conduct was, will drive what judges do.”
Michael Nadler, a partner at Stumphauzer Foslid Sloman Ross & Kolaya in Miami and a former federal prosecutor for almost a decade in the Southern District of Florida, said authorities likely find these cases either in a report or follow-up. So far, he surmised that the arrests so far are just a “drop in the bucket.”
“A person will call up and say, ‘David Tyler Hines just bought a Lamborghini Hurricane and I know he got a PPP loan,’” Nadler said. “DOJ has a task force on this and are probably keeping tabs on the worst offenders. As the task force and the prosecutors become more sophisticated, identifying these types of fraud will become easier.”
Nadler said the attorneys who should be most aware of the potential pitfalls of the latest round of PPP money are the ones who have clients utilizing these funds. It is an opportunity to provide advice — other than the obvious of not committing fraud — on how to manage these funds.
When the U.S. Congress originally set up the program, at least 75% of the capital infusion had to go to payroll expense while no more than 25% could go toward utilities, mortgage interest or rent, in order for the loan to be forgiven. That amount has since been adjusted.
“Use the money for how it was intended to and have procedures in place to ensure that if the money is filtered down to use in other means, you are abiding by the terms,” Nadler said. “The U.S. government is providing a loan that is potentially 100% forgivable to keep you and your employees in business. That’s a gift. It may be taxpayer money, but it is a gift.”
The article is available on the following link: https://www.law.com/dailybusinessreview/2021/02/12/miami-litigators-expect-influx-of-ppp-fraud-cases-as-second-round-of-lending-begins/
About Stumphauzer Foslid Sloman Ross & Kolaya, PLLC
Stumphauzer Foslid Sloman Ross & Kolaya, PLLC (SFS) is a boutique full-service litigation firm based in Miami, Florida, that focuses on civil litigation, government regulatory enforcement matters, white collar criminal litigation, internal investigations, and whistleblower suits. The SFS lawyers litigate large, high-stakes or bet-the-company cases, but its attorneys take immense pride in their ability to efficiently handle disputes of all sizes. The firm is comprised of former BigLaw partners and high-ranking federal prosecutors, including the former chair of the Miami litigation practice of one of the largest law firms in the world and the United States Attorney for the Southern District of Florida. Colleagues, clients, and legal observers recognize the SFS lawyers as experts and leaders in their respective fields of practice. The firm and its lawyers have been recognized in Chambers & Partners, The Legal 500 United States, The Best Lawyers in America, Florida Super Lawyers, Florida’s Legal Elite, and U.S. News – Best Lawyers. For more information, visit http://www.sfslaw.com.