Top Massachusetts Federal Prosecutor Warns of Escalating PPP Fraud Prosecutions

Federal authorities are ramping up fraud investigations into COVID-19 relief programs, with Massachusetts emerging as a key battleground in the nationwide crackdown. U.S. Attorney Leah B. Foley has warned that recent prosecutions represent just “the tip of the iceberg,” signaling intensified scrutiny for companies, lenders, and individuals who received pandemic-related government funds.

The Department of Justice has significantly expanded its enforcement infrastructure, creating a new Fraud Enforcement Division and reorganizing its Criminal Fraud Section to focus specifically on protecting taxpayer funds from misuse. This enhanced approach has strong bipartisan support and comes with substantial new resources, including advanced data analytics capabilities.

Massachusetts has become particularly active in this enforcement landscape. Foley has appointed a dedicated fraud coordinator to enhance investigations and strengthen coordination between federal and state agencies. The U.S. Attorney’s Office has aggressively pursued both civil False Claims Act cases and criminal prosecutions against alleged fraudsters.

Civil enforcement has targeted companies for Paycheck Protection Program (PPP) eligibility violations, including exceeding size standards and misapplying affiliation rules for second-draw loans. Investigators are scrutinizing cases where businesses falsified payroll information, inflated loan amounts, improperly certified economic necessity, misused loan proceeds, or submitted fraudulent documentation for loan forgiveness.

On the criminal side, prosecutors have focused on schemes involving stolen mail checks, false unemployment claims, fraudulent PPP applications for non-existent businesses, and fraud against rental assistance programs. These cases typically combine traditional fraud theories with program-specific allegations.

The next wave of enforcement is expected to cast a wider net beyond obvious identity theft rings. Companies that relied on narrow headcount calculations to qualify for relief funds should expect heightened scrutiny, especially regarding second-draw PPP loans that had stricter eligibility thresholds.

Lenders and financial gatekeepers are also increasingly in investigators’ crosshairs. The DOJ is examining whether financial institutions maintained appropriate underwriting standards, compliance controls, and fraud detection measures during the pandemic. Those found lacking adequate controls or ignoring red flags may face civil or criminal exposure.

Companies with foreign ties represent another enforcement priority. Given the current administration’s “America First” stance, the DOJ’s Fraud Section is focusing on foreign actors and cross-border misconduct. PPP borrowers with foreign affiliates, overseas operations, or cross-border financial flows face increased likelihood of questions about their eligibility and use of funds.

A notable trend across these investigations is their broad scope – they extend far beyond stereotypical fraudsters to include otherwise legitimate corporate borrowers, nonprofits, executives, accountants, and lenders. Massachusetts court dockets already reflect this reality through a mix of civil actions and criminal prosecutions.

The government’s investigative approach leverages cutting-edge technology and inter-agency coordination. Investigators now employ cloud-based data fusion, AI-enabled tools, and advanced analytics to detect anomalies across billing and benefits data. Multi-agency task forces combine federal, state, and local resources to track funds and connect benefits misuse to business operations.

Many potential targets may be under review long before they realize it. White-collar investigations can take years to develop, with extended statutes of limitations giving prosecutors ample time to build cases methodically. The absence of immediate contact from authorities doesn’t indicate diminished risk.

Legal experts emphasize that early engagement with experienced counsel is critical for anyone with potential exposure. Attorneys can assess eligibility questions, structure privileged internal reviews, guide remedial efforts, and evaluate whether voluntary self-disclosure would be beneficial.

Current DOJ policy rewards timely disclosure, cooperation, and remediation. Federal prosecutors in Massachusetts have credited proactive efforts in recent civil resolutions, with the Department highlighting streamlined outcomes for companies demonstrating robust cooperation and corrective action.

With expanded whistleblower incentive programs increasing the likelihood that concerns will go directly to authorities, prompt internal responses have become even more crucial. Pre-indictment resolutions are generally more achievable, as prosecutors remain more receptive to negotiated settlements before formal charges are filed.

As this enforcement initiative continues to expand, companies that misapplied PPP eligibility criteria, gatekeepers with deficient controls, and entities with foreign connections should assume investigators are actively examining their cases, even if they haven’t yet been contacted by authorities.