What Happened to Everyone Who Used PPP Loans to Buy Ferraris and Lamborghinis?
During the pandemic, the Paycheck Protection Program (PPP) offered loans to small businesses to help cover payroll and other employment costs. Many approved people for these PPP loans used them as intended, but a large group also used them for luxury items like Ferrari and Lamborghini sports cars. PPP loan fraud convictions are ongoing, but let’s check in on some of the first folks who got caught.
What is a PPP loan, and how does it work?
PPP loans were set up through the Department of the Treasury to help businesses make payroll for up to eight weeks. Recipients could use the funds to pay interest on mortgages, rent, and utilities, the Department of the Treasury says. The DOT obviously set up the program for legitimate reasons, but many applications were fraudulent in nature.
The Department of Justice and the Attorney General established the COVID-19 Fraud Enforcement Task Force to track down those fraudulent applications. One of the individuals who benefited from a $5 million COVID relief loan was Mustafa Qadiri. He submitted false paperwork to three banks for four fake companies to receive funds. With those funds, he bought a Bentley, Ferrari, and Lamborghini.
In May 2012, Qadiri became one of the first people charged with PPP loan fraud. The U.S. Attorney’s Office confiscated his cars, including a red 2011 Ferrari 458 Italia, a black 2018 Lamborghini Aventador S, and a black Bentley Continental GT. They also took $2 million from his bank accounts.
How is a PPP loan considered fraud?
In most cases, the guilty party created or doctored documents to give false information. This led to large sums of money awarded to people and companies that sometimes didn’t exist. In the case of Qadiri, he was charged with (and pleaded guilty to) one count each of bank fraud, aggravated identity theft, and money laundering. United States District Judge Josephine L. Staton gave him a $20,000 fine and $2,861,050 in restitution in February of this year. He will spend 54 months in federal prison for the loan fraud.
In another case, an individual named Rafael Martinez used the Paycheck Protection Program for approval as a lender for the U.S. Small Business Administration (SBA). He collected more than $71 in lender fees by helping secure fraudulent PPP loans. On top of that, he also filed for a PPP loan for his own business, MBE, for which he received $283,764.
Martinez said he had 15 employees and $119,390 in payroll for MBE when, in reality, he paid no more than $25,000 to four employees over the years. He submitted fake tax documents and forged the signature of someone who supposedly helped prepare those taxes.
This PPP loan fraud ended with $71 million in restitution
Eventually, MBE received $100 million to help fund PPP loans. Martinez turned around and used this as collateral to borrow more money through the Paycheck Protection Program Liquidity Facility and the Federal Reserve. That totaled up to about $832 million that MBE used to give more than 36,000 businesses PPP loans. In turn, the company earned about $71 million in fees.
He bought a $10 million condo in the Dominican Republic and a $3.5 million home in New Jersey. Martinez purchased several luxury cars, including a 2017 Ferrari 488 Spider, a 2018 Porsche 911 Turbo, and a 1962 Mercedes Benz 190. Once caught, Martinez forfeited $44,546,712.94, both properties, all the cars, and paid $71,711,893.07 in restitution. There was also a $100 special assessment fee. He received a sentence of 54 months in prison and three years of supervised release.
While the wheels of justice turn slowly, it appears they are turning. A long list of cases and court documents appear on the DOJ link above.