In a recent case of fraud, a Nevada resident, Karen Chapon, pleaded guilty to fraudulently seeking over $1 million in loans through the COVID-19 Paycheck Protection Program (PPP). Chapon, also known as Karen Hannafious, submitted six fraudulent loan applications to multiple financial institutions for her companies, making false statements about their business operations and payroll expenses. She also used false documents, including fake federal tax filings, to support the loan applications. As part of the scheme, Chapon falsely claimed that she had not been convicted of a felony in the past five years, despite having pleaded guilty to felony fraud offenses in 2016. In total, she received four loans amounting to approximately $596,931 and used the fraudulently obtained funds for personal expenses, including purchasing a Mercedes-Benz SUV. Chapon has pleaded guilty to one count of bank fraud and is facing a maximum penalty of 30 years in prison, a fine, restitution, and a term of supervised release. Sentencing is scheduled for November 29, 2023. This case highlights the ongoing efforts to combat fraud related to the COVID-19 pandemic and the consequences individuals may face for exploiting relief programs.
U.S. Department of Justice
The U.S. Department of Justice (DOJ) is a federal government agency responsible for enforcing the laws of the United States and ensuring the fair and impartial administration of justice. The DOJ is headed by the Attorney General, who is the chief law enforcement officer of the federal government. The department is organized into various divisions and offices that carry out its mission and provide services to the public.
About The Attorney General
The Attorney General is the head of the U.S. Department of Justice and serves as the chief law enforcement officer of the federal government. The Attorney General is responsible for representing the United States in legal matters, providing legal advice to the President and other government agencies, and overseeing the enforcement of federal laws. The current Attorney General is appointed by the President and confirmed by the Senate.
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Budget & Performance History
As a federal agency, the DOJ receives funding from Congress to carry out its mission and operations. The department’s budget is determined through the congressional appropriations process and is used to support its various programs and initiatives. The budget and performance history provides information on the department’s financial resources and how it has allocated those resources over time.
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Information for Victims in Large Cases
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Nevada Resident Pleads Guilty To COVID-19 Fraud Scheme
On Wednesday, August 30, 2023, the U.S. Attorney’s Office for the District of Nevada announced that a Nevada resident had pleaded guilty to a COVID-19 fraud scheme. Karen Chapon, also known as Karen Hannafious, pleaded guilty to fraudulently seeking over $1 million in COVID-19 Paycheck Protection Program (PPP) loans.
Details of the Fraud Scheme
According to court documents, Chapon submitted six fraudulent PPP loan applications to three financial institutions for her companies. From April 2020 to July 2020, Chapon made multiple false statements about her companies’ business operations and payroll expenses, and submitted false documents to support the loan applications, including false federal tax filings. Chapon falsely stated that she had not been convicted of a felony in the past five years, despite pleading guilty to felony fraud offenses in 2016. She received four loans totaling approximately $596,931, which she used for her own benefit, including the purchase of a Mercedes Benz SUV.
Chapon pleaded guilty to one count of bank fraud. U.S. District Judge James C. Mahan scheduled sentencing for November 29, 2023. Chapon faces a maximum statutory penalty of 30 years in prison, a five-year term of supervised release, restitution, and a fine. The sentencing will take into account the U.S. Sentencing Guidelines and other statutory factors.
Overview of the CARES Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act is a federal law enacted on March 29, 2020. It was designed to provide emergency financial assistance to individuals and businesses affected by the COVID-19 pandemic. One source of relief provided by the CARES Act is the Paycheck Protection Program (PPP), which authorized forgivable loans to small businesses for job retention and certain other expenses.
Emergency Financial Assistance for COVID-19 Impact
The CARES Act aimed to provide financial relief to individuals and businesses that were impacted by the economic effects of the COVID-19 pandemic. The act recognized the need for immediate assistance to mitigate the financial hardships faced by millions of Americans.
PPP as a Relief Program
The Paycheck Protection Program (PPP) was established under the CARES Act to provide forgivable loans to small businesses and organizations. These loans were intended to help businesses retain employees and cover certain expenses, such as payroll costs, rent, utilities, and interest on mortgages.
Additional Funding Authorization
In April 2020, Congress authorized over $300 billion in additional funding for the PPP, recognizing the ongoing need for financial support for small businesses. This additional funding helped meet the high demand for the program and provided further assistance to businesses affected by the pandemic.
Purpose and Conditions of the PPP
The Paycheck Protection Program (PPP) was designed to provide financial support to small businesses and organizations that were adversely affected by the COVID-19 pandemic. The program aimed to help businesses retain employees and cover essential expenses during this challenging time.
Eligibility for Small Businesses and Organizations
The PPP was available to small businesses with fewer than 500 employees, as well as certain nonprofit organizations, self-employed individuals, and independent contractors. The program aimed to provide relief to businesses of various sizes and sectors.
Loan Terms and Interest Rate
PPP loans had a maturity of two years and an interest rate of one percent. These favorable terms were intended to make the loans accessible and affordable for small businesses and organizations in need of financial support.
Approved Uses of Loan Proceeds
PPP loan proceeds were primarily intended to be used for payroll costs, including wages, salaries, and employee benefits. The loans could also be used for rent, utilities, and interest on mortgages, allowing businesses to cover essential expenses and maintain their operations.
To qualify for loan forgiveness, businesses were required to use at least a certain percentage of the loan proceeds towards payroll expenses within a specified time period. This provision aimed to ensure that businesses prioritized employee retention and compensation, promoting economic stability during the pandemic.
Announcement by Law Enforcement Agencies
Law enforcement agencies, including the Department of Justice (DOJ), the Federal Bureau of Investigation (FBI), the Treasury Inspector General for Tax Administration (TIGTA), and the U.S. Small Business Administration Office of Inspector General (SBA-OIG), played critical roles in investigating and prosecuting COVID-19 related fraud cases.
Roles of Justice Department, FBI, TIGTA, and SBA-OIG
The Department of Justice, in coordination with the FBI, TIGTA, and SBA-OIG, worked together to investigate and prosecute individuals and organizations involved in COVID-19 related fraud schemes. These agencies collaborated to detect fraudulent activities, gather evidence, and bring offenders to justice.
Investigation and Prosecution Efforts
Law enforcement agencies conducted thorough investigations into instances of fraud, collecting evidence, conducting interviews, and analyzing financial records. They worked closely with federal prosecutors to build strong cases and ensure that those responsible for fraud were held accountable.
COVID-19 Fraud Enforcement Task Force
To enhance coordination and prevention efforts against COVID-19 related fraud, the Attorney General established the COVID-19 Fraud Enforcement Task Force. This task force brought together resources from various government agencies to combat and prevent pandemic-related fraud.
Establishment and Objectives
The COVID-19 Fraud Enforcement Task Force was established in May 2021 to marshal the resources of the Department of Justice and other agencies across the government. The task force aimed to enhance efforts in investigating and prosecuting domestic and international criminal actors involved in pandemic-related fraud schemes.
Enhanced Coordination and Prevention Efforts
The task force strengthened coordination among government agencies responsible for administering relief programs and combating fraud. It facilitated the sharing of information, resources, and best practices to enhance detection and prevention efforts.
Reporting Fraud Allegations
The public was encouraged to report allegations of attempted fraud involving COVID-19 to the Department of Justice’s National Center for Disaster Fraud Hotline or via the NCDF Web Complaint Form. These reporting mechanisms helped law enforcement and regulatory agencies identify fraudulent actors, investigate their schemes, and bring them to justice.
In conclusion, the U.S. Department of Justice plays a vital role in enforcing the law, ensuring justice, and protecting the rights of individuals and businesses. It provides a range of resources and information to the public, supports victims of crime, and collaborates with law enforcement agencies to investigate and prosecute fraud. The recent COVID-19 fraud scheme case in Nevada serves as a reminder of the department’s commitment to upholding the law and holding offenders accountable. Through programs like the Paycheck Protection Program, the DOJ aims to provide financial assistance and relief to those affected by the pandemic, while also taking robust measures to prevent and combat fraud.